The rise of business opportunities in Mandalay, Myanmar
In terms of population size, Myanmar is a medium-sized ASEAN country with ample supply of young labor. It has now become another production base in Southeast Asia and is receiving more and more attention.
Although Yangon is still the focus of foreign direct investment, overseas investors are paying more and more attention to other cities in Myanmar, especially in many core regional cities such as Mandalay. According to Myanmar's 2010-2030 National Comprehensive Development Plan (National Comprehensive Development Plan 2010-2030), Mandalay is another growth pole of the country.
Mandalay is the capital of Mandalay Province and a major economic hub in the north-central region of Myanmar. For the fiscal year ended March 2017, Mandalay Province accounted for 11.4% of the country's GDP, only after Yangon Province (22%) and Sagaing Province (11.6%).
Mandalay enjoys geographical advantages to become a trading hub
Mandalay is located in the center of Myanmar and has a major highway running through it, leading from the Chinese border to Yangon, making it a thriving trading hub. This road is an important trade route for Myanmar. Agricultural products, jade and gems are all exported to neighboring countries through this road. Imported manufactured products mainly from China are also imported through this route.
The Ayeyarwady River is the most important commercial river in Myanmar, which runs from north to south. Located on the east bank of the river, Mandalay is connected to major cities such as Yangon and Bagan by virtue of a well-connected river network. Small boats roam around and carry passengers and cargo. As a result, Mandalay has become the main distribution center for the country's domestic market.
As a trade and logistics hub, Mandalay has determined to further promote industrialization in order to promote development and strengthen its relationship with the four major economic corridors of the Greater Mekong Subregion (ie, the Northern Corridor, Western Corridor, and Western Corridor). "East-West Corridor" (East-West Corridor) and "Southern Corridor" (Southern Corridor, see below for details) economic integration. These four major economic corridors connect Myanmar with many ASEAN countries in the Indochina Peninsula, including Thailand, Laos, Cambodia and Vietnam, and also connect different regions within Myanmar.
The Bangladesh-China-India-Myanmar Economic Corridor brings opportunities to Mandalay
In addition to cooperating with ASEAN countries along the Greater Mekong Economic Corridor, Myanmar has also entrusted Mandalay with important tasks for the development of the Bangladesh-China-India-Myanmar Economic Corridor. China's "One Belt, One Road" initiative proposes to build this corridor to connect Kolkata in India with Kunming in China (K2K for short). Dhaka in Bangladesh and Mandalay in Myanmar are both key nodes along the K2K highway. In the Bangladesh-China-India-Myanmar Economic Corridor, the infrastructure will be improved and multiple industrial zones will be built along the way, so Mandalay is bound to benefit from it.
At present, most infrastructure and logistics companies in Mandalay focus on the local market and face many challenges in providing services that meet international standards. In addition to roads and power supply facilities, the engineering projects of the economic corridor also include the construction of multiple industrial cities along the way. Therefore, overseas service providers with relevant technology and expertise should be able to operate in Myanmar in the fields of infrastructure construction and project management. The market finds endless opportunities.
Therefore, Myanmar companies can form partners with international companies to promote knowledge sharing and technology transfer; in the long run, the overall competitiveness of Mandalay's trade and logistics industry will increase.
Business opportunities in the light industry, as well as in the agricultural and food processing industries
In terms of industrial production, most of the manufacturers that set up factories in Mandalay Province are engaged in agricultural products/food processing, machinery manufacturing, and the production of limited types of consumer goods. The cost of land in Mandalay is cheaper than Yangon. In addition to the potential to further develop the trade and logistics industry, it also has the opportunity to develop light industrial manufacturing.
Recently, the Myanmar Investment Commission (Myanmar Investment Commission) issued a survey report[2], pointing out that Mandalay’s investment climate is ideal. Because market demand has increased unabated, infrastructure has been improved and government services have improved.
Although the investigation report pointed out that Mandalay has great potential for development, it also believes that the local government is facing problems with imperfect organizational system and infrastructure, which may slow down its development. In order to enhance the competitiveness of Mandalay, especially in the mid-term, the survey report made several recommendations, such as improving the disrepaired transportation infrastructure, and increasing the supply of electricity and available land.
In order to attract foreign investment, the new government headed by President U Ting Kyaw also promised to further open up the Myanmar market after a number of reform measures introduced by former President U Thein Sein. However, it will take some time for Mandalay to gradually increase its economic strength. Prior to this, investors who intend to go to Mandalay to explore business opportunities must carefully weigh the pros and cons.
Improve infrastructure
Mandalay's advantageous geographical location and unique advantages facilitate its development as a major regional logistics hub. However, Myanmar's national transportation infrastructure must undergo major upgrades. According to the 2016 World Bank's "Logistics Performance Index" (LPI), Myanmar ranks 113th among 160 countries and regions, lagging behind other ASEAN countries. In terms of infrastructure quality, Myanmar ranks 105th. Infrastructure quality is one of the indicators used to calculate rankings, involving trade and transportation infrastructure such as ports, railways and information technology.
It is undeniable that Myanmar’s poor transportation infrastructure, especially poor road quality and insufficient port facilities, have become major obstacles to business. Yangon's road and traffic conditions are obviously better than Mandalay. The paved roads in Mandalay are relatively small in proportion, but there are many unpaved roads or even dirt roads. On a typical dry and windy day, the dust is blowing and obstructing the view.
However, Mandalay is paving a number of new roads, and there are also some completed new roads, including some roads to the new airport. However, most of the local road facilities are very backward and urgently need to be upgraded to improve the country’s logistics effectiveness.
In fact, most foreign investors are still focusing on Yangon and its surrounding areas, and the infrastructure in these areas is relatively advanced. This shows that investors have concerns about Mandalay’s transportation infrastructure and other shortcomings. .
Having said that, the Mandalay government has also admitted that it is necessary to modernize the currently backward transportation network to keep pace with the country's rapid development. Many infrastructure projects are underway, and in the long run, it is expected to improve the overall business environment in Mandalay.
As the Mandalay government launches more infrastructure projects, the country's infrastructure and logistics sectors will bring rich business opportunities to foreign investors. The following chapters describe some of the latest development projects in Mandalay, so that investors have a clearer understanding of the local investment prospects.
Transport infrastructure-roads
Myanmar's economy continues to grow. The total number of registered cars has increased from less than 1 million in 2004 to more than 5 million in 2014, and the demand for roads has increased sharply. However, according to the Asian Development Outlook 2016 (Asian Development Outlook) of the Asian Development Bank, only 40% of roads in Myanmar are paved and at least 60% of highways need repairs.
In order to improve the land transportation network and promote national and regional integration, many major roads in Myanmar are undergoing expansion or upgrading projects. For example, the Mandalay-Muse Highway is the main route for border trade between Myanmar’s Shan State and China. Since 2012, the border trade between the two countries has become more frequent. The daily flow of trucks is estimated to be about 1,500 vehicles. Highways are often congested and accidents are frequent.
In order to alleviate traffic congestion and improve traffic safety, the authorities announced in early 2016 that Oriental Highway Company, a former subsidiary of Asia World Group, would invest US$300 million to convert the two-lane Mandah The Le-Musie highway was widened to 4-lane traffic, and asphalt pavement was paved. Eastern Expressway Company signed a build-operate-transfer (BOT) model agreement with the Myanmar government to manage the road. In addition, two 16-kilometer sections of the Yangon-Mandalay Highway will be upgraded and upgraded, and the Road Transportation Administration Department in Mandalay will also launch a 100-day project, including repairs to Mandalay. Roads and bridges in the province.
Transportation infrastructure-railway
Myanmar's railway network extends in all directions, with a total length of approximately 6,000 kilometers, connecting major cities in the country. The Yangon-Mandalay railway line is one of the busiest railway lines in the country. Many goods imported from China are shipped to the freight station in Mandalay, and then transferred to Yangon by rail. Like the road system, Myanmar's railway investment is also severely insufficient. Therefore, the 622-kilometer route from Yangon to Mandalay takes 16 hours to complete the journey.
In order to update the old railway system, the Myanmar government plans to invest US$2.2 billion to start the railway upgrading project in 2017. The entire plan is divided into three phases and is expected to be completed in 2025. By then, the travel time from Yangon to Mandalay can be shortened. To 8 hours.
Transport infrastructure-port
Given that the throughput of container terminals is expected to increase day by day, a new river port called Semeikhon Port (Semeikhon Port) is being built in the area. It is located along the Irrawaddy River 70 kilometers away from Mandalay. It is operated by Mandalay Myotha. The Industrial Development Public Co (MMID) company is responsible for the construction. In addition, a Myotha Industrial Park project covering an area of about 4,400 hectares is being built nearby, which is also being built by the same company.
The Semekon River Port covers an area of 152 hectares and the wharf is 1.5 kilometers long. It will be constructed in several stages. The first phase of the project plans to build a floating berth with barges and cranes. Whether in the rainy or dry seasons, even if the river and port have different water depths, cargo can be loaded and unloaded. According to reports, after the completion of the first phase of the project, the handling capacity of the river port terminal for general cargo, containers and ro-ro cargo is estimated to reach 200,000 metric tons.
Transport infrastructure-air transport
In terms of air transportation, Mandalay Province has two airports. Among them, Mandalay International Airport is one of only three international airports in the country, and the other two are located in Yangon and the capital Naypyidaw. Currently, Mandalay has many international and domestic airlines. Myanmar National Airlines (Myanmar National Airlines) is Myanmar's national airline with a wide range of routes, ranking first in the country. Since December 2015, the airline has opened direct flights from Yangon to Hong Kong, but has not yet provided direct flights from Mandalay to Hong Kong.
The increasing frequency of commercial activities in Myanmar has driven the demand for aviation services to rise steadily. To this end, Mandalay International Airport will invest US$13.5 million to carry out an upgrade project, and use the city’s existing road and river transportation network to promote trade links with other regions. The plan aims to increase the annual passenger capacity of the airport from the current 3 million to 15 million. In addition, the airport will increase its cargo handling capacity in three stages, from 4,000 metric tons in the first stage to 12,000 metric tons in the third stage. In addition to international construction contracts, Hong Kong companies with extensive experience in airport management can also benefit from this airport expansion plan.
In addition to transportation infrastructure, the lack of reliable power supply is also a local shortcoming that hinders investors from investing in Mandalay. Many business people and government officials revealed in an interview with the Research Department of this Bureau that compared with two or three years ago, the electricity supply situation has improved. It is worth noting that, according to Mandalay Electricity Supply Corporation, about 30% of the 4,780 villages in Mandalay Province are still not connected to the public grid.
In order to increase power supply, the Myanmar government and the Singapore-listed company Sembcorp Group signed an agreement in 2015 to build a gas-fired power plant with a capacity of 225 MW in Mandalay, with a total investment of US$300 million.
In order to reduce its dependence on hydropower, the Myanmar government signed an agreement with ACO Investment Group of the United States in 2014 to invest US$480 million to build two solar power plants in Mandalay Province. The above-mentioned plans will provide a more stable power supply for Mandalay Province.
Land Supply-Mandalay's Industrial Park
If manufacturers want to invest in Mandalay, apart from taking into account the level of infrastructure development, they must also consider whether it is easy to find a place to build a factory in the local area, and the problem of labor supply cannot be ignored. Mandalay is an inland city located in the center of the country, attracting workers from neighboring provinces to work there, and its population ranks second in Myanmar. In the short to medium term, the labor supply is abundant.
Although the cost of land in Mandalay is generally lower than that of Yangon, the country's largest commercial hub, there are only a few industrial areas in the area. At present, Mandalay Province has 3 industrial zones, namely Mandalay Industrial Zone, Myingyan Industrial Zone and Meiktila Industrial Zone.
The Mandalay Industrial Zone is located in the downtown area of Mandalay. More than 1,000 factories operate in the zone, specializing in the production of consumer goods and household goods, agricultural products and machinery. There are also some companies that export wood products in the industrial zone. The main markets include France, Italy, Japan, China and Thailand.
In the Mandalay Industrial Zone, most factories are owned by local investors or joint ventures with companies in Southeast Asian countries such as Singapore or Thailand. The Mandalay Industrial Zone Management Committee stated that the industrial zone will be
A number of upgrades and renovation plans, including improving infrastructure and developing human resources, are used to attract foreign direct investment.
In addition to the three existing industrial zones, the Mandalay City Government and MMID have formed a joint venture company to develop the Mandalay Miuda Industrial Park. Mandalay Miuda Industrial Park is about 58 kilometers and 45 kilometers away from Mandalay City and Mandalay International Airport, respectively.
According to MMID, this brand new industrial park will be developed in three phases: the first phase will be from 2013 to 2017, the second phase will be from 2017 to 2022, and the third phase will be from 2022 to 2025. The industrial park will include different land for the development of industry, warehousing and logistics, housing, road transportation and commercial facilities, and will focus on five target industries (see the table below). Mandalay Miuda Industrial Park will become a new industrial and logistics hub in north-central Myanmar, enhancing Mandalay's overall competitiveness in the future.
Under the leadership of the new government headed by President Wu Ting-kyu, Myanmar's economy has regained its vitality. Mandalay is expected to become an economic hub in the north-central part of the country, creating numerous opportunities in trade, light manufacturing, and logistics. At the same time, Myanmar’s infrastructure is outdated and urgently needs to be upgraded. The local government has taken practical measures to invite private companies to participate in infrastructure development projects to solve related problems and create a source of business opportunities for related service companies. Nevertheless, if Hong Kong businessmen intend to set their sights on areas outside of Yangon to explore business opportunities in Mandalay first, they must carefully weigh the pros and cons.