U Ko Ko Gyi, Group Managing Director, Capital Diamond Star Group, on facilitating trade and investment: Interview

U Ko Ko Gyi, Group Managing Director, Capital Diamond Star Group

Interview: U Ko Ko Gyi

In your opinion, what steps could the government take to encourage greater foreign direct investment (FDI) in manufacturing?

U KO KO GYI: The new investment law is a step in the right direction. We have one of the most liberal investment policies in place, but it is more a matter of implementation, particularly given that our government has capacity constraints. Institutional changes need to take place with, for example, the Myanmar Investment Commission (MIC), as it still does not function as a single window.

Often you submit a proposal, then you have to go around different sectors to get a no-objection letter, then you have to go through the regional governments to get the no-objection letter. The proposal process is quite lengthy and inefficient. I see no issues with the policy – it is more the implementation than anything else.

There needs to be a streamlining of MIC approval in order to avoid delays on the FDI front. In terms of manufacturing, there have been some delays, as you have to get a registration certificate, which often causes a significant delay to production. These nuts and bolts need to be taken care of.

Aside from those, we need to close the infrastructure gap. Currently, Myanmar has extremely high logistics costs, partly due to the quality of roads, lack of electricity and limited soft infrastructure, such as the banking industry.

Logistics costs take the biggest bite when you move around commodities. For example, in terms of freight charges, we spend roughly $20-30 per tonne on shipping wheat from Australia to Yangon, and then another $35-40 shipping from Yangon to Mandalay, only 350 miles away.

So when moving these low-value commodity items it is possible to realise how bad the logistics infrastructure is. It is not quite as noticeable for high-value products, but these are serious areas that need to be addressed to improve the trade capabilities of the country.

What are the growth prospects of the fast- moving consumer goods (FMCG) industry now that the period of economic isolation has ended?

KO KO GYI: Before 2010 the FMCG segment faced numerous challenges, one of which was the highly restrictive trade policy. As a result, if you wanted to trade and distribute, you had to rely on illegal trade. Another issue was caused by sanctions and a lack of confidence, which hindered FDI.

After sanctions began to ease during 2011 the government began to liberalise the trade policy and previously illegally imported items began to be traded legally, which caused an uptick in trade flows. Similarly, on the investment side, there was an upsurge in FDI activity.

A few notable players include the firms Coca-Cola and Pepsi, as well as a number of well-known beer companies from around the world. Likewise, local FMCG players signed joint-venture agreements with international brands.

Those are the major changes that have been caused by the liberalisation of trade policy and the easing of sanctions, which have resulted in increased imports and trading opportunities, and have given the consumer more variety.

In addition, a lot of investment in interesting areas, such as food manufacturing, health care products, and personal care or home care products, is helping take the FMCG segment to the next level. A lot of investment has not only been in brand building, but also in manufacturing itself.

In our case, we are currently investing heavily in establishing new manufacturing facilities, and I am sure that is also the case with other brands.

This trend started in 2011, and I am certain that it will continue under the new government.

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The Report: Myanmar 2017

Industry & Retail chapter from The Report: Myanmar 2017

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