Small and Medium Enterprise promotion policy in Myanmar

Country Report Union of Myanmar

Prepared by:

MYO AUNG THAN

13-28 August 2009,Korea

Part-1

Overview of Economy and SMEs

Country Profile

Part-1

Located in south-eastern Asia, bordering the Andaman Sea and the Bay of Bengal, between India, Bangladesh, China, Laos and Thailand. The economic system has been changed from centrally-planned economy system into marketoriented system since 1988. The economic structure is mainly featured by agricultural produces, especially rice, cereals crops and beans, with supplements of natural resources like petroleum, natural gas and forest products. Education in Myanmar has been well developed, about 83.1% (in 1995) of population are educated.

economic Environment

Part-1

Total Area

: 676,577 km2

Population
Labor Force GDP

: 55 millions (2009 est.)

: 27.8 millions (59% of population) : 12,254.6 billion kyats (2006 est.)

GDP growth rate

Structure of GDP

: 13.2% (2006 est.)

Agriculture

: 40%

Industry
Services

: 20%
: 40%

Organization

Part-1

The Directorate of Industrial Supervision and Inspection (DISI) is the service rendering organization under the Ministry of Industry (1). With the head office at Nay Pyi Taw, it has fifteen regional offices residing in capital cities of seven states and seven divisions . Function DISI is mainly responsible to promote, encourage and foster the private industrial enterprises , by identifying and responding to their needs and business requirements and supervise and inspect private industrial enterprises

Economic Policy

Part-1

The Government has been formulating and implementing national development plan to attain all-round development of national economy in accordance with four economic objectives:

Four Economic Objectives

1. Development of Agricultural as the base and all-round development of other sectors of the economy as well. 2. Proper evolution of the market-oriented economic system. 3. Development of economy inviting participation in terms of technical knowhow and investments from sources inside the country and abroad. 4. The Initiative to shape the national economy must be kept in the hands of the State and the National People.

Major Industries

Part-1

Industry

Contribution to GDP (bn. kyats)

% of GDP

(1) Agricultural Sector (2) Manufacturing Sector

1,843 532

40% 11%

(3) Live Stock & Fisheries

Sector

445

10%

Industrial Policy

Part-1

The main aim of Industrial Policy was to develop Myanmar as an industrialized and developed country. Hence, the MIDC was formed in 1995 and laid down the following objectives for industrial development.

Industrial Development Objectives

1. To develop the industrial sector basing the agriculture. 2. To enhance the quantity and quality of industrial products. 3. To increase the production of new types of machinery and equipments. 4. To produce industrial machineries and equipments.

5. To create suitable conditions for changing over to an industrialized state.

Comparative Advantage
Rich and diverse Natural Resources:

Part-1

Total area
Land area Water Irrigated land area Coastline Electricity production

: 678,500 sq km
: 657,740 sq km : 20,760 sq km : 18,700 sq km (2003) : 1,930 km : 6.31 billion kWh (2004)

Well-educated Human Resources:

Educated population Labor force

: 83.1% of the population (1995) : 28.49 million (2006 est.)

Major Export-Import Goods

Export Goods
1. Natural Gas 2. Garment 3. Timber

Part-1

Import Goods
1. Petroleum products 2. Machinery products 3. Steel and construction materials

4. Jade
5. Hard-wood 6. Beans 7. Mining and Minerals 8. Prawn 9. Fish 10. Green Peas

4. Plastic raw materials

5. Edible oil 6. Ship and accessories 7. Pharmaceuticals 8. Vehicles and accessories 9. Steel and accessories 10. Telecommunication equipments

Political Regime

Part-1

Administration

Myanmar is divided into 7 administrative divisions and 7 states. The administrative divisions, mainly populated by the majority, Bamar, include:
1. 2. 3. 4. 5. 6. 7.

Meanwhile, the states mostly inhabited by minorities of various ethnic groups are:
1. 2.

Ayeyarwady, Bago, Magway, Mandalay,

Chin, Kachin,

3.
4. 5. 6. 7.

Kayin @ karen,
Kayah, Mon, Rakhine and

Sagaing,
Tanintharyi and Yangon

Shan.

Part-2

Status of SME in Myanmar

Current Status of SMEs

Part-2

Definition of SME
Size Cottage No. of Workers <10 Capital Invested (kyats) Power Usage (HP) -

Small
Medium Large

10-50
51-100 >100

1 million
1-5 million >5 million

3-25
26-50 >50

Note: Cottage industry means a small scale production, repair, maintenance and service industry by members of a family or by engaging workers or collectively.

Current Status of SMEs

Part-2

Number of SMEs. Size No. of Industries 33,442 6,744 3,601 43,787 No. of Workers employed 438,523 Annual Production (million kyats) 1260057

Small Medium Large Total

(March 2009)

Current Status of SMEs

Part-2
(March 2009)

Type of SMEs.
Business Type Food Garment Living Consumer goods House-hold goods Literature Raw materials Minerals & Mining Agricultural machines Industrial machines Motor vehicle production Electrical Products General workshops Total Small 22883 1,340 2,237 409 119 188 350 1,220 38 179 61 11 4,407 33,442 (76.37%) Medium 3,834 368 512 363 65 74 226 316 28 74 28 16 840 6,744 (15.4%) Large 1,861 251 435 281 109 21 94 158 14 30 122 40 185 3,601 (8.22%)

Total 2,8578 1,959 3,184 1,053 293 283 670 1,694 80 283 211 67 5,432 43,787 (100%)

Current Status of SMEs

Part-2 Part-1

Growth of SME Size Small Medium Large Total 2004 33,863 6,359 3,213 43,435 2005 33,456 6,430 3,438 43,324 2006 33,455 6,479 3,462 43,396 2007 33,455 6,494 3,472 43,421 2008 33,442 6,744 3,601 43,787

Requirements for SMEs development

Part-2

The requirements to development are as follows; (a) Infrastructure (b) Capital Investment (c) Industries and Machineries (d) Human Resources (e) Technology and Skill Development (f) Fiscal policies and Financial Institutions (g) Financial Supporting (h) Innovation and Quality Control (i) Marketing (j) International and Regional Cooperation (k) Hi-tech Electronic Communication and Information Technology

Part-3

Programs for SME support in Myanmar

SME Promotion Policy

Policy Guidelines:

Part-3

To assist the development of economy with more suitable income distribution. To complement and support large-scale industries through a network of industrial linkages. To produce high quality and value-added products.

Laws

Part-3

Following laws are to encourage, promote and foster the establishment of private SMEs.

Laws

Private Industrial Enterprise Law Promotion of Cottage Industries Law Myanmar Citizen Investment Law

1990 1991 1994

Institutions for SME Development

Committee for Industrial Development (CID) headed by Prime Minister

Part-3

Myanma Industrial Development Committee (MIDC) headed by Minister for Ministry of Industry (1)

Myanma Industrial Development Working Committee (MIDWC) headed by Minister for Ministry of Industry (2)

(10) Sub-Committees headed by Deputy Ministers for related Ministries

Industrial Zone Supervisory and Management Committees headed by regional district authorities

SME Promotions

Part-3

Promotion Activities: Since the formation of MIDC, it has been actively taking steps for private industrial development by:

Establishing industrial zones, Holding industrial exhibitions, seminars and workshops, and Setting up the Myanmar Industrial Development Bank for granting industrial loans to private enterprises.

Business Registration

Part-3

Myanmar Citizen Investment Law, MCIL (1994)

With a view to promote investment of Myanmar citizen and to provide equal treatment as foreign investors by granting them the right to enjoy to tax incentives, the MCIL was promulgated on 31st March 1994 and its procedures were prescribed on 3rd August 1994.

Partnership Act (1932), Myanmar Company Act (1914) Company limited by shares is required to register. There are two types of companies, private limited company and public limited company. The number of shareholders must be at least seven. The company, after registration, must apply for a Certificate of Commencement of Business.

Trade Regulations

Part-3

Trade Regulations

Since 1988, Myanmar citizens were allowed to register as exporters, importers and business representatives. Registered exporters and importers are permitted to engage in foreign trade according to the rules and regulations prescribed by the Ministry of Commerce.
Myanmar was a founder member of the General Agreement of Tariff and Trade (GATT) and member of World Trade Organization (WTO). Hence, Myanmars external trade practices are generally governed by WTO trading principles.

Tax

Part-3

Income Tax

An enterprise operating under Myanmar Companies Act is liable to 30% income tax.
Divided and profits received are not treated as part of the total income and exempted from tax.

Commercial Tax The commercial tax is levied according to the schedules in the law, which is ranging from 5% to 25% depending on the nature of goods. Some specific commodities are charged from 30% to 200%, such as cigarette, liquor, etc.

Trade Regulations

Part-3

Border Trade

To develop and strengthen the bilateral trade relations with five neighboring countries, namely Thai, Laos, China, Bangladesh, India, by using border trade as a mechanism for trade expansion.
The Ministry of Commerce has established the Department of Border Trade in August 1996. The department is providing one-stop services for border trade matters in collaboration with various departments concerned.

Business Development Services (BDS)

Part-3

Current Situation of BDS (Government) Following Sub-committees are formed under MIDC to aid the SMEs in their respective industries: 1. Farm Machinery & Equipment Production Sub-committee 2. Standardization Sub-committee 3. Industrial Law Drafting Sub-committee 4. Small & Medium Industry Development Sub-committee 5. Industrial Information & Publication Sub-committee 6. Human Resource Development Sub-committee 7. Motor Vehicle Production Development Sub-committee 8. Iron & Steel Production Development Sub-committee 9. Research & Development Sub-committee 10. Rubber Product Development Sub-committee

Business Development Services (BDS)

Part-3

Current Situation of BDS (NGO)

Industrial Associations are formed and affiliated with Union of Myanmar Federation of Chamber of Commerce and Industry (UMFCCI), such as:
1. Myanmar Rice Millers Association (MRMA) 2. Myanmar Industries Association (MIA)

3. Myanmar Computer Industry Association (MCIA)

4. Myanmar Garment Manufacturers Association (MGMA) 5. Myanmar Plastic Industries Association (MPIA)

Business Development Services (BDS)

Part-3

Activities and Services of BDS (NGO)

Activities and services of Myanmar Industries Association (MIA) are:
1. Consultancy services in project formulation and implementation. 2. Conducting seminars, workshops and trainings on topics of commercial. industrial and managerial interests.

3. Publication and distribution of industrial information bulletins and newsletters.

4. Organizing members company to participate in local and overseas trade fairs and exhibition. 5. Organizing and making arrangement for the exchange of information and views among local and foreign industrialists.

Business Development Services (BDS) contd.

Part-3

Activities and Services of BDS (NGO)

6. Organizing and arranging business opportunities networking between local and foreign enterprises.
7. Organizing and making arrangements for factory visits, study tours and sending business mission overseas.

8. Acting as representative of the members companies in advising government in matters affecting businesses and the economy.
9. Facilitating networking through a variety of Chambers/Associations activities.

Business Development Services (BDS)

Part-3

SME Financing

The present initiatives in SME financing are carried out by private banks and Government banks, such as:

Myanmar Industrial Development Bank (Government) Myanmar Economic Bank (Government) Myanmar Live Stock & Fisheries Bank (Government) Myanmar Private Banks (Private)

End of Presentation

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