Manufacturing is the sector with probably the highest potential returns for investors and it has garnered a lot of attention. Myanmar still has cheaper labor than virtually any other country in the world, so despite its infrastructure shortcomings, it remains attractive to labor intensive industries.
Advantages of Manufacturing in Myanmar
In two words: location and labor. Local salaries for factory workers average about 60,000-80,000 Kyat (US$ 70-95) per month in Yangon and usually less in other parts of the country. In addition to these relatively low salaries, many manufacturing businesses have found Myanmar workers to be diligent and competent.
Myanmar’s location speaks for itself – right between two of the biggest emerging markets in the world. For companies looking for a manufacturing base in Asia, Yangon offers a strategic port – access to Asia without having to go through the Malacca Straits.
Disadvantages of manufacturing in Myanmar
An important aspect to consider when deciding whether or not to open a manufacturing enterprise in Myanmar, is the cost of running a backup generator. The electrical grid in Myanmar is still underdeveloped, which means that power could go out at any time during the workday – crippling your operations. Therefore every factory and manufacturing enterprise in Myanmar has a generator. The usage of this generator will vary from year to year, depending on the government’s ability to provide electricity, but it can often be a large operating expense. It is essential that manufacturing businesses include the cost of running these generators into their financial analysis. Virtually all generators run on diesel, which is imported into Myanmar, so looking at the price of diesel and the number of hours you plan to run the generator will help you to calculate these costs.
Another disadvantage of manufacturing in Myanmar is its unclear regulatory framework and outdated legal system. Many manufacturing businesses are not sure as to what exactly they can and cannot do, which leads to confusion and hassles. While the Parliament has started to tackle some of these issues, and having the Constitution as a guide helps – investors will need to take extra precautions to make sure that they understand the prevailing laws clearly. Also having an idea of what industries are likely to be regulated or outlawed in the future will help potential investors avoid making the mistake of putting their money into a beleaguered industry.