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Myanmar: In ASEAN’s fastest-growing market, SME development barred by obstacles
Local small and medium-sized enterprises (SMEs) in ASEAN’s fastest-growing market are unable to develop and grow because they are bogged down by a slew of bureaucratic and administrative difficulties, business leaders and politicians said.
Local businesses in Myanmar have been suffering from challenges such as lack of access to capital and intellectual property (IP) protection and burdensome tax and monetary policies. These issues need to be tackled with the support of the government and related institutions, they said.
“SMEs are the foundation of the country’s economic development. Therefore, they must be given support in terms of financial access and product quality protection,” U Khin Maung Cho of the Ministry of Industry said.
Insufficient funds
The largest barrier to doing business as an SME in Myanmar is the lack of access to loans and high interest rates, said Yangon Chief Minister U Phyo Min Thein.
“The banks are just at the stage of sitting in the office and waiting for loan applications. We studied SMEs in Germany. They went all the way down to the ward level and tried to extend loans to businesses there.”
“Banks understand the details such as which types of businesses are profitable and safe to extend loans to and what opportunities and risks exist if businesses undergo changes, “U Phyo Min Thein said. But in Myanmar, SMEs and banks don’t have a close working relationship, he added.
The main reason why many SMEs’ are unable to obtain loans is high interest rates, which are as high as 13 percent in Myanmar. “The monetary policy of the Central Bank of Myanmar needs to be revised to reduce interest rates,” said Dr Zayar Nyunt, CEO of the SME Development Bank.
However, deposit rates in Myanmar have typically been high to account for the country’s high levels of inflation. As such, “the deposit interest rates cannot be reduced. But without changing deposit interest rates, loan interest rates cannot be lowered,” he said.
IP rights
Meanwhile, no classifications have been made yet for entrepreneurship and the economy is missing out on growth opportunities, said Dr Pyaeson Kywe, director of Entrepreneurs Association.
Notably, there are no business classifications for the multitude of opportunities, such as software development, that are emerging as Myanmar latches on to new technologies, digital applications and the Internet.
“There are many difficulties and impediments to starting a variety of promising businesses and I wish the government could resolve them,” she said.
Intellectual property rights will have to be urgently enacted. “Entrepreneurship is very important for Myanmar businesses and for locally made products to be marketed on an international scale. Innovation must be encouraged. But encouragement by words alone will not do. We must register and acknowledge entrepreneurs and to arm them with proper IP rights,” U Khin Maung Cho explained.
As Myanmar has no organisation or institutions for standardisation, Myanmar products are at a disadvantage regardless of their quality, member of the Board of Directors of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) U Aye Han said.
“Specific product standards need to be stipulated in Myanmar. Then, certificates should be issued. Only then will there be more opportunities for local products in the export market,” U Aye Han said.
Tax inhibitions
Advance taxes and the lack of deduction allowance for business losses are also big obstacles in the way of SMEs. For example, taxes are imposed on SMEs even before operations have started and even if losses are incurred in the first few years of business.
The good news is State Counsellor Daw Aung Suu Kyi during the National League for Democracy’s one-year anniversary on July 27 said her government will handle and supervise the growth and development of the economy.
Meanwhile, an SME development strategy is also under arrangement by the private sector development committee led by Vice President U Myint Swe.
For now though, Myanmar’s SMEs will have to be patient.
Source: http://www.mmtimes.com/index.php/business/27291-in-asean-s-fastest-growing-market-sme-development-barred-by-obstacles.html