Starting Up in Myanmar

In a world simply drowning in debt, the most egregious debt ever recorded in the worlds history in fact, we find ourselves with a unique situation where previously backward broken shell shocked countries such as Myanmar have one element of risk which we can eliminate from our risk profile when assessing opportunities.

Many of you know we’ve been keeping an eye on Myanmar for some time, having previously written about the country here and here.

Today we’d like to bring to you an excellent primer on Myanmar and its emerging start-up scene from our partner site Emerging Frontiers. It is the most comprehensive overview of the Burmese start-up ecosystem so far and hence a must-read for intrepid frontier markets investors and entrepreneurs alike. Enjoy!

– Chris

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Despite being ranked as dead last in a World Bank survey on the ease of doing business, a new report by Harald Friedl and Ruben D’Hauwers on Myanmar’s start-up scene portrays a community that might be intimate but certainly isn’t fledgling.

Myanmar’s economy is among the fastest growing economies in the world, experiencing just under eight percent annual growth in 2014, with growth expected to be keeping pace in 2015. Myanmar’s growth is outpacing its neighbors, with Malaysia experiencing under five percent economic growth and Vietnam’s economy growing at over five percent. If it achieves its full potential, a McKinsey report estimates that the Myanmar economy can grow from just $45 billion in 2010 to more than $200 billion by 2030.

Driving this growth is Myanmar’s rapid transition from a deeply isolated pariah state to one that is becoming increasingly integrated in the international community’s political and economic mechanisms. This market of 60 million people is blessed with bountiful natural resources including natural gas deposits, untapped hydropower sources, minerals, forestry, and plentiful arable land. As part of this transition process, the country has adopted new laws and avenues to attract foreign investment such as the November 2012 foreign investment law and the establishment of a stock exchange.

As the report notes, just three years ago internet penetration rates hovered around one percent while today it’s between 10 and 25 percent. The government is aiming to connect over two-thirds of the population to the internet over the next few years. Similarly, just several years ago cell phones were unaffordable to average Myanmarans, with SIM cards costing over $2000 due to intensive government control. Today, the same SIM cards cost just $1.50.

To service this rapid growth Myanmar’s start-up community has seen about 100 tech-based entrepreneurs/start ups, and around 500 Myanmar language apps developing around communities and incubators in Yangoon at DevLab, IdeaBox, and Project Hub Yangoon.

The report on Myanmar’s start-up scene is based off interviews with 60 industry insiders exploring recent developments and analyses the hurdles start-ups face to provide a state of the industry perspective. It identifies five key problem areas causing trouble for Myanmar’s start-ups: tech infrastructure, cultural hurdles, human resources, access to finance and the country’s legal and regulatory environment.

Obtaining capital is a key struggle for these start-ups even with the new foreign investment law, Myanmar start-ups struggle to obtain foreign capital due to arcane government laws that prevent foreigners from being shareholders in startups, instead requiring them to apply to embark on “joint ventures”. These joint ventures require high minimum capital requirements and remittance payments.

The report also notes that the Myanmar government can do much more to reduce red tape facing start ups. “It will be key to provide a stable legal framework and working conditions for the sector to become a motor for innovation and growth in Myanmar,” the report notes.

Despite the struggles that start-ups face in Myanmar, the growing and rapidly changing market remains a dynamic place of opportunity. For those interested in the Myanmar market and its nascent startup scene, this report is a must read.

“This is Burma and it is unlike any land you know about.” – Rudyard Kipling, Letters From the East

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This Post Has 2 Comments

  1. Peter Darley

    https://www.capitalistexploits.at
    Hi,
    Were it not for zerohedge, I would never have found you.
    I am enjoying your posts—each has significant points.
    Economists I enjoy reading are Martin Hutchinson, Tim Worstall, Satyajit Das, Ben O’Neill, Gonzalo Lira, Andy Sutton, Steven Hanke.
    You are right, of course, in that ‘democracy’ is not necessary for prosperity. All that is necessary is for people to be left alone. People mutter about ‘rights’ to this or to that, but there is only one fundamental human right—the right to live your life as you choose. The only restriction is that everyone has it.
    In fact, there is little democracy today. What is the real difference between Demopublicans and Republicrats? Between Labour and Conservative? Between Social Democrats and Christian Democrats? All politics is about is the desire of some people to have power over others.
    That freak congregation of the Founding Fathers had the right philosophy—no person in the world can be trusted with absolute power. I say ‘freak,’ because what were the odds of such a number of like-minded people gathering together in the same place at the same time? Most had personal experience of despotic rule in the countries from which they came.
    Yet 20th-century presidents have continuously fought to extend their power. For example, what is the constitutional basis for ‘executive orders?’ I cannot find any, yet almost every 20th-century president has tried to become a king.
    Unfortunately, far too many people look for someone else to run their miserable lives. I call it the ‘slave mentality.’
    Here are some of my conclusions from a study of economics, history and philosophy since I retired in 2008:
    Rome: I do not think that the reason for its eventual collapse has ever been pinpointed. My theories are:
    Welfare state: the number of idle useless humans eventually overwhelmed the capacity of the producers to feed them.
    Political exhaustion: the ruling class eventually became exhausted (in-breeding?). Since there were probably more slaves than citizens, in-breeding became more prevalent, as the number of suitable mates was limited. While it was possible for someone to upgrade from slavery to citizenship, it was rare and usually happened through the military. Whilst, as is the way with humans, some males of the ruling class spilt their seed on slaves. Children from such actions were usually slaves.
    The people living at the time had no sense that they were living through the ‘end days’ of the Empire. A quotation from Ernest Hemingway has recently been exhumed: ‘A collapse happens slowly, then suddenly.’
    One consequence of the collapse of the Roman Empire was a thousand years of the ‘Dark Ages,’ where much of what the Romans knew was slowly obliterated and forgotten. We would be foolish to think that it cannot happen again—the Malthusians are always among us (most recently the ‘climate change’ crowd).
    If it happens again, the major consequence will be a massive de-population, most probably by mass starvation. It has been well said that all 20th-century famines were man-made (Stalin ±20 million; Mao ±30 million; Ethiopia (who knows how many) and all occurred in ‘socialist’ (read ‘fascist’) societies. Aren’t all so-called democratic governments today fascist if ‘fascism’ can be defined as a combination of government and business to screw the ordinary guy?
    Industrial Revolution: for one main reason, this could only have happened in England. For that reason, go back to 19th-century economic historians such as Thomas Tooke and Thorold Rogers. Reading their books, it became plain to me that the crucial difference in England, as opposed to all othe European countries of the time, started with Magna Carta and the forcible removal of some power from the King to the Barons.
    Let us assume that the population of England was mostly rural, since the main pre-occupation was agriculture—wheat for bread, barley for beer and oats to feed the horses. Most of the land was carved up into estates, owned by this Baron, that Duke, that Bishop and so on. The masses lived in village-type communities on those estates—owing allegiance to whoever the liege lord was.
    The crucial difference is that the villeins were eventually allowed to use an acre or so for their own personal crops (or cow, or chickens etc.). This happened nowhere else in Europe (especially France, and we know how that ended!). To my mind, this was the first step in the emancipation of the masses, which would lead to the Industrial Revolution 400-500 years later. It allowed for some freedom of action, small as it was.
    (As an aside, I recently met someone from my home county, Lincolnshire, who was brought up in Horncastle, although she is of German origin. She said that those one-acre demarcations can still be seen today, as the plots were cambered for water control).
    Welfare, such as it was, was entirely a private affair, supplied by the landowner. Living as the people did, in small villages, no one could get away with lead-swinging or slacking—peer pressure was just too intense. Compare that with today—welfare is mostly de-personalised; you don’t know who in Akron is eating your tax. If you don’t know, you can’t do anything about it.
    One thought about the Industrial Revolution occurred recently—surely the inexorable progress of the Revolution must lead to diminishing demand for human muscle power. This is why we will never see ‘full employment,’ as we knew it in the 1950’s and 1960’s, again. One further thought—the full employment we saw then was largely due to rebuilding after WWII.
    To go back to mediæval England—once the land has been prepared and the seed sown, what do you do for the next five/six months, until harvest? Sure, there is a little desultory weeding, maintenance of tools and buildings etc., but that was not ‘full employment.’
    I know enough about basic economics that consumption can never precede production. Politicians and government focus on consumers, because that is what they mostly are. And they can stir up sufficient envy amongst the populace that the populace forget, do not know and do not want to know.
    I am aware, of course, that the foundation of the world’s (not only the US’) prosperity was laid during the period between the end of the Civil War and the outbreak of WWI i.e. ~1865-1914. This was achieved, as far as I can tell, without inflation and at a time when government was almost invisible.
    Why are today’s politicians so terrified of deflation or no-inflation?
    ‘The rich’: leaving aside the question of how riches are obtained, what can they do with it? They can only eat so much food; they can only drive one car at a time; they can only live in one place at a time (all of which produce jobs for other people). All they can do with the rest is to invest in the economy, supporting everyone else’s jobs. There is no other choice.
    Today’s ‘bread and circuses’ is football—to divert the masses’ attention from their miserable lives.
    You will enjoy reading Thomas Tooke and Thorold Rogers.
    There is as much science to economics as there is to astrology.

    Regards
    Peter Darley

    1. Chris MacIntosh

      Hi Peter,
      Thank you for the kind words and the extensive information. Your points are well taken and thanks for the book referral. Clearly you are a keen student of history which I believe invaluable when attempting to understand this world we live in. Travel has been easily my biggest educator, that together with an intense curiosity about how and why things function the way they do.

      Thanks for joining our little corner of cyberspace here.

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