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1/18/2019

Myanmar - What to Watch 2019

1. Myanmar's new age of retail

Regulatory reform together with steady middle class growth has been encouraging investment and expansion in the retail sector, and consumer behavior has gradually shifted to reflect economic growth and urbanization, with e-commerce also now slowly emerging. Consumers in urban areas increasingly turn to shop at modern trade channels in their daily lives due to convenience stores’ reputation for quality and better services. Greater mobile penetration also means consumers are becoming more connected to the internet, and the younger generation are beginning to experiment with e-commerce. 


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Myanmar's middle class continues to grow, driving up spending

Myanmar’s middle class population will reach 19 million by 2030, from just 2.5 million in 2010. Consumer spending could triple from USD 35 billion to USD 100 billion by 2030. Increasingly, this will mean that spending will diversify from being spent solely on basic needs to being spent on lifestyle and leisure. 

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Consumer behavior is also changing, transformed by technological development

The aforementioned factors are driving change in the behavior of consumers, particularly in the younger generation and those in higher income brackets, both of whom are expected to be the groups to drive consumer spending forward in the Myanmar market. 

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Why target these segments? The young generation are voracious consumers, less careful to spend. Although they have lower purchasing power, they gladly try new products. High income earners including expats working in Myanmar have more disposable income and are more likely to spend on maintaining their lifestyle. Still, Myanmar consumers are still very price sensitive and consider value-for-money as a top criteria for purchasing products. Tapping the Myanmar market, therefore, will require careful study to understand the preference and purchasing power of local consumers.

2. Manufacturing upgrade setting the foundation for growth

Compared to a few years ago, the industrial sector now contributes more to Myanmar’s GDP, while the agriculture and service sectors’ share contracted. Manufacturing also received the most investment, would help to build a sound foundation for the economy’s industry in the future. China has continued to invest heavily, while new sources of funds such as the US and Japan have also begun to invest more. This indicates that foreign investors see the country’s future potential.

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Local production capability is improving due to steady investment

Industry grew rapidly at 8.9% in 2017, as investment led to expanded manufacturing. Strong growth in particular is seen in the garments and food processing sectors. However, uncertainties regarding unrest in the North and future policies for the coming year have led to an overall slowdown in investment in 2018.
Nonetheless, the garment sector in particular has seen continuous growth in FDI inflow for the past few years, particularly in downstream production due to Myanmar’s low labor cost. With trade privileges and a labor force that is becoming more skilled from experience producing for global names, Myanmar has potential to become the region’s new garment hub for re-exporting and has a lot of room to grow further. 

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The food processing industry also has strong potential due to Myanmar’s abundant agricultural resources. However, the lack of high-tech equipment and know-how means a lot of the produce is lost during processing. Thus, there are opportunities for those with the right technology, expertise and sufficient capital to invest and produce higher value-added goods and take advantage of Myanmar’s trade privileges.

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More opportunities at home also means exporting is no longer the only goal

Apart from being a production hub for exports, changes in demographics also means the domestic market cannot be ignored. Myanmar’s middle income class will continue to grow in number and earn more income. This will lead to an evolution in demand that will give rise to new needs for new types of products. Business expansion and entrance of foreign firms also means more expats. These people will demand higher quality and more sophisticated products. Businesses whose goods have been able to penetrate the market through trade could also consider investing in domestic production to scale up. 

Opportunities for businesses

Low labor cost, abundant natural resources and need for technology and know-how means opportunities for investment in relatively labor-intensive sectors with good export prospects such as food processing and garments. At the same time, the process of urbanization and growing middle class income means local consumers will have new demand for different types of consumer products to suit their changing lifestyle in the future.
 
Strong growth potential given the right foundation.

Myanmar is equipped both geographically and demographically to see strong economic growth. Its position at the heart of ASEAN and large population with growing income has made it a target for both global companies and businesses from the region looking to capture its growth potential. However, despite its clear long-term potential, its short to medium term growth prospects rests on the government to build an environment conducive to growth and development. It is also yet unclear how the EU plans to proceed regarding Myanmar’s GSP status, the withdrawal of which will have a negative impact on certain manufacturing sectors. Nevertheless, the plan to reform is in place. Given clear government directions and supportive policies, there are undoubtedly a lot of opportunities to be captured in Myanmar. 



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