Japanese manufacturers still shun Myanmar

 

Despite their keenness to invest in the manufacturing sector and create jobs, Japanese companies are able to choose only the service sector due to difficulties in acquiring land, Masaki Takahara, executive managing director of JETRO (Yangon), said at a recent seminar.

At the seminar on trade and Investment relations between Myanmar and Japan held at the Ministry of Commerce, Yangon, on October 10, Takahara said there was interest in investing in production facilities like garment factories as Myanmar has the lowest wage rate in Asean. 

“When we opened here in May 2012, there were 53 Japanese companies in Myanmar,” said Takahara. “At the end of 2013, and in 2014, the number increased to 185. This is a huge improvement. But the companies that want to engage in production are very few - only about 10 out of 185. The rest are engaged in banking, housing, trading, law firms, accounting services, and advising firms. Those interested in production opt for garment factories. Because of the low wages for the workers, the garment factories make a lot of profit. Myanmar is a target country for Japanese companies. Though there are many industrial zones in Yangon, most Japan companies try to find land in the Mingaladon Industrial Zone. Out of 10, six are there now. The industrial zone is developed by a private owner,” Takahara said.

“Although it started in 1998, only a few invested there. This industrial zone has already included an electricity system, sanitation system and water distribution system,” Takahara added. “In government-developed industrial zones, these have to be done by ourselves. For Japanese companies, it is hard for them to move from here to somewhere else. Within the past two and a half years, many production companies from Japan came to Myanmar. They wanted to start their business here but they could not find land, they told me. When I said there are lands left in Mingaladon Industrial Zone, which are good for production, they replied that all of them have already been sold out in February 2012. We went and met the Administration Committee and told them that we want a place for our production facility. They only told us that they had already sold them. This is the reason very few Japanese manufacturers are coming to Myanmar for production,” he explained.

Although many firms that need a sizeable labour force aim to invest in developing countries because of the low wage rate, Japanese firms have opted to be in the service sector in Myanmar, he added.

Among the few Japanese manufacturing firms in Myanmar is Komatsu Manufacturing Co Ltd. In July, the Myanmar Investment Commission (MIC), which is in charge of foreign investment inflows, approved Komatsu Manufacturing’splan to manufacture electricity generators in Mandalay. Earlier this month, trading house Marubeni also announced the partnership with Thailand's state-owned oil company, PTT, along with the Electricity Generating Authority of Thailand to build a US$3.2 billion-worth 2-million-kilowatt coal-fired power plant. 

Due to low wage, Myanmar has been targeted as a main destination for Japanese investment due to stagnant growth at home. Seen as a measure to support the relocation of Japanese businesses is the active roles of Japanese banks in the country.

Three Japanese banks - Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp and Mizuho Bank – won three out of nine banking licenses awarded to foreign banks. They were among 25 applicants from 12 countries and regions vying for the licenses. With three licenses, Japan was the biggest winner.