As the Nov. 8 elections in Myanmar come closer, multinationals need to start thinking about how critical this will be for their businesses moving forward. Myanmar continues to be one of the most under-penetrated markets for all multinationals in the region due to political instability, lack of financing, poor infrastructure, lack of talent and low per capita income. Considering that all these things will take time to change, it’s critical to have a holistic view on how and why this market may matter in your South-East Asia portfolio.

1. Teasing opportunity vs. Actual opportunity: When the US sanctions were removed, Myanmar did receive a lot of attention from FSG’s clients, both B2C and B2B, as it seemed things would change soon. Most clients had unrealistic expectations in terms of pace of reforms, which led to Myanmar slowly losing its steam. From 2013 up to now, the broad thinking has been to “hurry in order to slow”, essentially to have a toehold in order to evaluate later if the real growth will be sustained. Now the anticipation is such that the base for future opportunities will be set up somewhere between 2016 and 2017, and multinationals must plan for it.

2. Navigate through the skewed consumer and industrial base: In 2012, only 9 percent of Myanmar’s population was in the middle and affluent class (out of 51mn), and it will grow to 15 percent (of 60mn) by 2020. The industrial base is comprised of more than 99 percent SMEs, increasing the complexity of finding scale and worthwhile opportunity for multinationals. In all business plans, FSG recommends that clients clearly map out their customer segmentation in order to have clear expectations. Some encouraging news is the financial infrastructure improvement with ICBC and ANZ opening branches (among seven other players) in 2015; hence, the adoption among the consumer class will certainly go up. The upswing in per capita income will be slow and steady for Myanmar.

3. Asian multinationals have already taken the first step: Many Japanese firms have been investing heavily in Myanmar and most of the FDI in Myanmar has been from Asia itself. Investments in Thilawa SEZ Industrial base is just an example of how optimistic some Asian multinationals are about the future potential of Myanmar. Kubota has recently planned to open an assembly plant in Myanmar in order to capitalize on delayed entry from western multinationals.

4. Organizational investments will continue to increase: Talent issues, lack of hungry and sophisticated channel partners and regulatory uncertainty will continue to be the biggest issues in the next few years. One lesson we have learned is not to take agreements as commitments. What the masses in Myanmar don’t know, they don’t know. Hence the investment in training distributors, offering favorable and non-monetary financial terms, will be very critical. An example of this investment is Telenor, a Norwegian telecommunications group opened a training academy in Myanmar where it offers employees product knowledge and technical training they need to deliver on the company’s ambitious business plan for Myanmar. Telenor is contributing to the development of the country while establishing itself as an employer of choice for ambitious Myanmar workers.

5. Evolution of go-to-market models is happening: Historically, most of FSG’s clients have adopted the practice of having a rep office for Myanmar, with many also having their Thailand GM manage the business as part of the Thailand cluster. Slowly, we do expect the businesses to evaluate the option of having a local Myanmar distributor or a multinational distributor for long-term success. Engaging a Myanmar distributor is still a good option for companies that want to take a hands-on approach and start building their business now for the long term. Multinational distributors are the best option for companies that want to maximize their reach in the market while minimizing investment. This is especially true with the backdrop of the new foreign investment law that came into place

6. Signposts to watch: Nov. 8 is a crucial day not only to how the candidates will fair but more critically to how the transfer of power will take place on Mar. 31 of 2016, which is the official date for the new President to come into power. FSG recommends that multinationals watch for Q2/Q3 2016 to witness the details of the reform agenda, which the ruling party will put in place. We do expect reforms across healthcare, agriculture and the industrial sector to be agreed upon, but the execution isn’t going to be easy.

Overall, we do think a period of uncertainty will persist in Myanmar and multinationals need to monitor the movements effectively to ensure they aren’t losing the market or its benefits in the long run. The market definitely offers opportunities, but cautious and realistic expectations will be necessary for the final frontier to play an important role in your South-East Asia portfolio.

For our latest updates and insights, FSG clients can visit the client portal. Not a client? Contact us to learn more.