(For the Japanese version of this article)

IIST Study Mission on SME & SEZ Promotion in Vietnam and Myanmar (FY2009) [December 6-13, 2009]

IIST Study Mission on SME & SEZ Promotion in Vietnam and Myanmar (FY2009)

Outline


As economic links within the Association of Southeast Asian Nations (ASEAN) and East Asia develop and the roles of the Mekong Region expand, expectations of assistance and cooperation from Japan are increasing as well. Under these circumstances, IIST dispatched a survey mission to Vietnam and Myanmar with the main objectives of understanding the present situation and needs of the SMEs in that region, studying possibilities for the entry of Japanese SMEs in the future, and also building a network with counterparts. In addition, IIST aimed to use the outcome of the study as a reference for the effective planning of the 4th CLMV Young Leadership Program, which is scheduled to be held in the fiscal 2010.

Organized by: Institute for International Studies and Training (IIST)
Dates: December 6 (Sunday) - 13 (Sunday), 2009
Place: Vietnam (Hanoi), Myanmar (Yangon)

Participants


(1)Expert in the field of small and medium enterprises (SME):
-1. Mr. Tatsuya Hoshino, International Business Advisor,
Organization for Small and Medium Enterprises and Regional
Innovation, Japan (SMRJ) and Research Director, Vietnam
Economic Research Institute

2)Secretariat
-1. Mr. Koichiro Akatsu, Managing Director, IIST (mission leader)
-2. Mr. Shuichi Harima, Human Resource Development Department, IIST


Overview


The mission members held discussions with senior government officials and representatives of business organizations in Vietnam (Hanoi) and Myanmar (Yangon). They also exchanged opinions with the management of Japanese companies operating in those two countries to understand the local investment environment, the current problems, and needs of SMEs located there. In Myanmar, the mission held a seminar conducted by Mr. Hoshino in an attempt to promote understanding of a special economic zone (SEZ). The seminar attracted senior officials of related government organizations, people from Chambers of Commerce and Industry, local company managers, among others, and a lively question-and-answer session was held.

The mission also visited such places as the Yen Phong Industrial Zone outside Hanoi and the Mingaladon Industrial Park outskirt of Yangon, gathering information from the companies managing these industrial parks, the managers of Japanese companies operating there. The discussions with them centered around such issues as the latest trends of companies entering Vietnam and Myanmar and the investment environment and economic conditions. In addition, the mission visited several Japanese companies in differing industries and held interviews and discussions with them on the actual problems encountered at the time of starting up, and problems concerning management. Furthermore, the mission paid a courtesy call to the Japanese ambassador in Myanmar and held discussions with key persons such as the secretaries in charge of economic affairs at the Japanese Embassies in the two countries, representatives from the Japan External Trade Organization (JETRO), and the managers of Japanese companies in various industries that are operating locally, thereby deepening its understanding of the problems involved in attracting SME, the latest economic trends and issues.

In Vietnam, economy has expanded rapidly in recent years, especially in urban areas, and the number of cars has increased sharply in the last two or three years. Regarding Vietnamese SME, a new Government Ordinance No. 59 was promulgated in 2009, whereby state-run enterprises and private companies that until then had been categorized separately, were integrated and defined as “SME,” Regarding government policies for SME, however, a good environment has yet been established. Concerted efforts by various government offices need to be established. As the elimination of tariffs by the AFTA (ASEAN Free Trade Area) looms, it will likely remain difficult for manufacturing industries that have already established production sites in the neighboring countries to find comparative advantage in Vietnam. The Vietnamese government might not have a sense of urgency. In upcoming congress of the ruling Communist Party in 2011, public attention is now focusing on reappointment of current president and prime minister. But most observers seem to think that there will be no dramatic change that affects the investment environment. Recently, a year after the Lehman Shock, renewed investment by South Korean companies, especially centered on the construction industry, has been striking in the urban areas of Hanoi and Ho Chi Minh.

In Myanmar, since there are restrictions on exports and imports under the present military regime, the fact that foreign currency virtually cannot be taken out of the country is one of the major reason for investors to hesitate to set up new operations there. There are also restrictions on the management of foreign currency. For example, materials can only be imported within a quota of foreign currency acquired through exports from Myanmar (import dollars). Companies operating in Myanmar at present are forced to respond through various means, but given the state of import substitution industries, they face a tough situation, and withdrawals are likely to continue in foreseeable future, too. Regarding imports and exports, there is a license system, and it is necessary to obtain permission every time from the relevant government office in the capital of Naypyidaw. The application procedures are extremely complicated and time-consuming. Managers have to devote a lot of energy to these matters. In addition, taxation on consignment-based manufacturing is high at around 10% of sales, not profits, and the related legislation sometime change suddenly as well. While its low cost labor may be attractive, there are many things that managers have to be aware. Since AFTA’s tariff elimination will begin in 2015, the issue from now on will be how Myanmar presents its advantages in the region. However, the key in measuring Myanmar’s country risk is the fact that decision making in the administration and the military junta are not necessarily linked The situation is not easy for those considering an investment in Myanmar. At present, investors’ attention is focusing on the general election that is supposed to be held around the end of 2010.

Meanwhile, the emerging economies of China, South Korea, Thailand, and elsewhere are eager to enter this region, and some observers say that Japan is a little slow off the mark. It can be expected that not only those Japanese companies newly advancing overseas but also the ones, mainly in the manufacturing industries, that already have operations in the neighboring emerging economies in the region will explore optimization within the region in the development of their production centers. Therefore, as for Japan, by strategically utilizing official development assistance (ODA) and other means, it will be important to enhance the investment environments that meet the needs of companies setting up operations. In addition, it is hoped that related public and private organizations will engage in coordination and information sharing, and the IIST will endeavor to extend any possible contributions in this respect.

The mission had the following three objectives: (1) to understand the present state and issues of Japanese SME entering these two countries; (2) to hold an awareness-raising seminar in Myanmar to promote understanding toward the introduction of an SEZ; and (3) to conduct a follow-up on the CLMV Young Leadership Program implemented in the current fiscal year and build a network in preparation for the next such program scheduled to be implemented in fiscal 2010.

Regarding the first objective of understanding the present state and issues of Japanese SME entering these two countries, IIST intends to contribute to the wide utilization and sharing of information by compiling a report on the mission and distributing it to related parties. Regarding the second objective, the seminar conducted by Mr. Hoshino was highly acclaimed and included a lively question-and-answer session. Some participants expressed concerns about competition between foreign companies and local companies if an SEZ were introduced. The benefits was pointed out that through the transfer of technology could also be seen as a chance to raise the level of Myanmar’s industry. In addition, by the end of the seminar participants also appreciated that, among other things, the introduction of an SEZ is an essential measure to boost Myanmar’s comparative advantage vis-a-vis surrounding countries in preparation for the elimination of tariffs in the region. Regarding the third objective of network building, the mission visited the head of the Small and Medium Enterprise Promotion Center of the Vietnam Chamber of Commerce and Industry (VCCI) and the vice-president of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) in charge of the promotion of SME, who had invited Japan under the CLMV Young Leadership Program in 2009, and held discussions with them. In addition, the IIST’s network with people and key organizations in both countries was further strengthened through the visits and the seminar.

In view of the economic sanctions imposed by the United States, it is arguable to have formal intergovernmental exchange with Myanmar. However, it is highly meaningful for the IIST, as an active private organization, to have fulfilled a complementary role in accordance with Japan’s trade policy.


At the Enterprises Development Agency (ASMED) in Hanoi

At the Enterprises Development Agency (ASMED) in Hanoi

At the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi

At the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi


At the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) in Yangon

At the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) in Yangon

SEZ seminar in Yangon

SEZ seminar in Yangon


Closing ceremony of the SEZ seminar in Yangon

Closing ceremony of the SEZ seminar in Yangon

Sewing plant of Famoso Clothing Co. in Mingaladon Industrial Park outside Yangon

Sewing plant of Famoso Clothing Co. in Mingaladon Industrial Park outside Yangon



International Exchange Dept.



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