Beyond China: Is Burma a New Frontier Market?
Global outsourcing enables organizations to compete at the best levels of efficiency and effectiveness (Ball, Geringer, & Minor, 2009). Over the past few decades, China has been a major hub for outsourcing goods and services. However, as China produced more and more goods and services, it became more industrialized and the labor rates started to increase. Now, organizations are searching for new frontiers in which to outsource. One nation that some global organizations are considering is Burma. Infrastructure in Burma is limited and there has been a history of economic and political unrest (“Background note”, 2011). This paper will discuss the potential aspects and the limitations of outsourcing to Burma and whether Burma is ready for outsourcing. Although the military government officially changed the nation’s name to Myanmar in 1989, the democratic opposition to the military government recognizes the name to be Burma (Howard, 2012). For reasons of partiality to the Democratic Party in Burma, and the fact that the United States still recognizes the country’s name as Burma, this paper will utilize the name Burma. This paper will address the endeavors of Aung San Suu Kyi, the leader of the National League for Democracy (NLD), and will conclude by considering whether outsourcing to Burma is advantageous to organizations in foreign nations (Wilson, 2012).
China has long since been the hub of outsourcing operations for many organizations in developed nations. Upon entering the international markets, many organizations moved manufacturing and supplier activities outside domestic arenas (Ball et al., 2009). Global organizations have invested, built, developed, and maintained monumental manufacturing facilities, transportation infrastructure, packaging and handling procedures, and information systems in China to increase profits (Ball et al., 2009). As global competition increased, organizations chose to do business in China to benefit from low labor rates, lower taxes for subsidiaries, inexpensive materials, lax environmental regulations, and more efficient methods of operations. Organizations around the world have experienced the benefits of outsourcing to China, enabling China to emerge from its status as a developing nation to a New Industrializing Country (NIC) (Ball et al., 2009). As China emerged from the poverty of the past, a new middle class surfaced, resulting in increased labor rates and operating costs to outsourcing organizations.
Now that outsourcing in China no longer provides maximum profits, organizations are looking for other developing nations that will benefit them with cost efficiency. Of the many nations being considered, Burma is high on the list (Wilson, 2012). Located in Southeast Asia and situated on the Andaman Sea, Burma has a rich culture and an abundance of natural resources (Howard, 2012). Extraction and processing of these natural resources requires technology and capital that Burma lacks, but welcomes from developed nations. Global organizations are expressing interest in tapping into these natural resources in the future as sanctions (the result of a military junta takeover in 1962) are slowly being removed against Burma from western nations (Nehru, 2012). Since the parliamentary by-elections of April 1, 2012, the military government in Burma is beginning a new movement towards democracy and a free market system. Although there has been long-standing political unrest in Burma between the military junta and the pro-democracy movement, a major turning point occurred after the 2012 by-elections when a democratic majority was elected to Parliament. This change of power induced the onset of new moves by the ruling military government towards reforms (Choudhury, 2012). The outcome of the by-elections has prompted several nations to lift sanctions against Burma and to consider investing in the telecommunications industry, energy industry, securities market, and in education (McNulty, 2012). A newly seated Member in Parliament in Burma and leader of the NLD, Aung San Suu Kyi, is petitioning developed nations to invest in Burma for ethical reasons to promote jobs and to help Burma become a more prosperous nation (“Aung San Suu Kyi”, 2012). Should the government continue to align policies with the appeals of the NLD, Burma could become the new frontier market for outsourcing.
Introduction to Burma
Burma has been officially known as the Republic of the Union of Myanmar since 1989. However, Aung San Suu Kyi, the NLD, the United States, and the United Kingdom recognize the country’s name to be Burma (Howard, 2012). Burma borders the Andaman Sea and the Bay of Bengal (United States Department of State, 2011). The countries that surround Burma are China, India, Thailand, Bangladesh, and Laos, which can be seen on the map in Appendix A (Howard, 2012). The terrain of Burma includes central lowlands outlined by steep and rugged highlands. The climate consists of rainy, cloudy and hot humid summers. Heavy tropical rainfalls are frequent during the summer months with temperatures ranging from 80°F to 85°F. During the winter, rainfall is mild and temperatures range from 68°F to 77°F with lower humidity levels and sporadic drought throughout the nation. There are three monsoon seasons during the year (Howard, 2012.). The chief leader of Burma is President Thein Sein. The former capital, Rangoon, was officially replaced by the new capital, Naypyitaw, in 2005. Naypyitaw means “abode of kings” (“Myanmar’s new capital”, 2011). The geographical area of Burma is 678,500 sq km. with a population of over 54,584,560 and a 1.07% population growth rate (Central Intelligence Agency, 2012). The majority of the population is Burmese, who consist of 53.99 million people (Central Intelligence Agency, 2012). The major language is Burmese and the major religion is Buddhism with very small percentages of other religions (United States Department of State, 2011). The Burmese are a friendly and extroverted people who practice various religious rituals. According to Burmese etiquette, emotion is not to be shown in public and anger should not be displayed (Howard, 2012). Although the military regime has created several annual holidays and festivals to promote socialistic recognition, most of the Burmese, especially those who strive for a true democracy, prefer to celebrate the older festivals associated with Buddhism and their agriculture (Howard, 2012). Natural resources in Burma include sapphires, jade, pearls, rubies, wood, textiles, agricultural goods, metals, oil, hydropower, and natural gas. The natural resources of metal include tin, antimony, zinc, copper, tungsten, and lead (Central Intelligence Agency, 2012).
The history of Burma records dynastic rule since 1044 A.D. until the British conquered Burma in 1885. The final dynasty was ruled by the Konbaung, and the last king of the Konbaung was King Thibaw, who fell from power at the beginning of three wars with the British in 1824 (Howard, 2012). At the start of World War II, the Burmese nationalists, led by General Aung San, united with the Japanese to force the British out of Burma; however, the Burmese Army recanted and aligned with the British to fight against the Japanese in 1945 (United States Department of State, 2011). After the war, General Aung San stipulated to the British the need for complete economic freedom from Britain. The British Government consented to his stipulations and a constitution of independence for Burma was granted in 1948. Unfortunately, General Aung San was assassinated by political rivals before the constitution became effective. The vision and passion of General Aung San was to promote and strive to develop a peaceful free Burma that was independent and prosperous (United States Department of State, 2011). The Burmese enjoyed a democratic nation under a parliament during the period of the constitution from 1948 until 1962. However, there was a great deal of internal conflict that arose due to differences between political and ethnic groups in Burma. The democratic rule began to dissipate in 1958 when the Prime Minister U Nu allowed military rule over Burma in hopes that order might be established in the nation. In 1962, General Ne Win brought an end to democracy by creating a harsh military junta rule (United States Department of State, 2011). This new socialism destroyed the free market system and the business environment in Burma. For the next several years, there were student demonstrations at universities opposing the tyrannical rule of the military junta, but the government declared martial law and killed many students and their supporters. As the military government continued to squelch and destroy the Burmese economy, a large student-led demonstration ensued in 1988 as a call to action for change (Howard, 2012). As a result of the protest, the government suspended the constitution, declared martial law, and massacred thousands of students. Many more thousands of students were forced to flee the country (United States Department of State, 2011). During the demonstration, General Aung San’s daughter, Aung San Suu Kyi, assumed the leadership role of the democratic opposition. Her famous political speeches promoted her father’s philosophy of democracy in Burma. Aung San Suu Kyi was put under house arrest where she remained for almost twenty years (Turnell, 2011). In the 1990 general elections, the government supposedly allowed free voting at the elections. The NLD party won 392 out of 485 seats in parliament; however, the military government refused to honor the results and imprisoned many political opponents. The military government changed its name to the State Peace and Development Council (SPDC), but the autocracy retained the goal to repress democracy. Although the military rule remained the same, the government allowed some investment and trade in Burma from 1990 to 1992. In 1992, however, the government completely seized power over all political and economic entities. Aung San Suu Kyi was awarded the Nobel Peace Prize in 1991 during the time she was under house arrest (Greene, 2012). In 2007, monks led another demonstration protesting harsh autocratic rule in Burma. The government imprisoned, beat, tortured, and killed thousands of monks and other protestors (Turnell, 2011). In 2008, the regime developed a new constitution that seemed to support democracy, but did not allow amendments or debates. The regime dictated a multi-party vote on the constitution which was government-controlled (United States Department of State, 2011). On the surface, the new laws supposedly allowed a free market to stimulate the economy; but the military power remained unchanged (Turnell, 2011). In 2010, the leader of Burma, General Than Shwe, passed power over Burma to President Thein Sein. During the 2010 general elections, the military government enforced a referendum designed to protect the ruling government’s outcome in the elections. Although the government claimed to have won the elections by 92.48%, the members of the NLD considered it severely flawed and boycotted voting in the elections. The figures were considered to hold no credibility by the NLD (United States Department of State, 2011). In 2010, the government released Aung San Suu Kyi from house arrest because of pressures from the United Nations concerning human rights issues. Aung San Suu Kyi began making political speeches throughout Burma in support for the people, and in 2012, she made a belated acceptance speech in Norway for her 1991 Nobel Peace Prize award (Hookway, 2012). Due to vacant seats in parliament, Burma held by-elections on April 1, 2012. Aung San Suu Kyi and the NLD won 43 out of the 45 parliamentary seats in the legislature (Hermine, 2012).
The 2012 by-elections covered 37 seats in the lower house, 6 seats in the upper house, and 2 seats in two regional areas. The NLD won all 37 seats in the lower house, 4 seats in the upper house, and both regional seats. Although these by-elections only covered 8% of the total Burmese legislatures, and the democratic victory consists of only 6.4% of total legislature, the overwhelming majority of the democratic votes surprised the military government of Burma (Hermine, 2012). This may seem like a small step toward progress as a whole, but the government is finally allowing the development of a free market society as President Thein Sein and the NLD start to develop more collaborative communication sessions (Nehru, 2012). President Thein Sein is promising to reform various laws concerning foreign investment, trade, human rights, education, and other economic issues (Nehru, 2012). If Thein Sein adheres to his new policies of democracy, Burma will become a rich environment for investment.
Human Development in Burma
From 1853 to 1878, the British implemented a secular education system which prospered in Burma until 1962. Both men and women attained a relatively high level of literacy. Since 1962, the military regime has controlled the education system in Burma and restricted the material taught in schools and universities (“Myanmar”, 2012). After the military repression of the student demonstration in 1988, the government closed down many universities, thereby limiting the availability of education in Burma (Howard, 2012). Languages other than Burmese are not allowed to be taught in schools. Although there are currently 45 universities and colleges and 154 technical schools, higher education has declined since 1962. Today, most children drop out of school before the fifth grade. Currently, 89.9% of Burmese adults are literate (United States Department of State, 2011). The Australian education project, AusAID, has a goal to influence Burmese children to remain in primary schools and to provide them with a valuable education (“Burma education aid”, 2012). Australia is providing $80 million in aid over a four year period to improve education in Burma (“Burma education aid”, 2012). With such a high rate of literacy among adults and endeavors to reform education for children, investors will benefit from an educated work force in Burma.
Public health in Burma is among the worst in the world. The infant mortality rate is 79.84 deaths out of every 1000 births. Life expectancy for the Burmese is 62.91 for males, and 67.71 for females (Central Intelligence Agency, 2012). Although the Burmese have historically practiced traditional health care according to the Buddhist religion, this is a dying practice of medicine (Howard, 2012). At the same time, nontraditional health care is deteriorating as the government allocates less than 2% of total government spending on health care (United States Department of State, 2011). There are only 0.6 hospital beds per 1000 people and 0.457 doctors per 1000 people in Burma (Central Intelligence Agency, 2012). Health problems are severe throughout the country. For example, diseases and intravenous drug use are becoming rampant. Tap water is contaminated throughout a large part of Burma, forcing the people to rely on ground water for drinking. The inadequacy of the sewer system in Rangoon caused an overflow of human waste which contaminated the ground water, and caused mass sickness among the Burmese (Turnell, 2011). In 2009, many people suffered from an outbreak of diarrhea in the poorer sections. As a result, the Medical Assistance to Travelers Health Advisory for Myanmar stated that water used for any purpose is to be boiled (Asia Trade Hub, 2012.). Health care is a part of the new reform agenda was introduced after the 2012 by-elections.
The living conditions in the new capital of Naypyitaw compared to the rest of Burma clearly demonstrate that the government has the capability to provide proper living conditions for the Burmese. Government officials, their families, and oligarchs who have favor with the government live in the new capital. In Naypyitaw, there is a clean potable water system, an electrification system that provides electricity 24 hours per day, pristine paved roads, a new airport, and a new rail way to the capital; however, the remainder of Burma is left with one of the lowest standards of living world-wide (Turnell, 2011). With the new changes promised in 2012, Aung San Suu Kyi stated that immediate attention is needed to address power generation, water quality, public transportation, and general infrastructure in order to better human development in Burma (Nehru, 2012).
Most Burmese live in rural areas which are densely populated. The architecture in Burma imitates the colonial heritage of Burma and Buddhist temples. Houses are made of bamboo and hardwood with thatched roofs made of leafed grass or palm fronds, tiles, wooden shingles, or zinc sheets (Howard, 2012). Home owners entertain guests on verandas in front of their houses and use the center of their homes for the family living area. The Burmese buy food from local markets unless food is home-grown by families. Rice, raw salad, fruit, soup, fish, eggs, turmeric and chili are some common foods eaten (Howard, 2012). Extended families live and work together with domestic responsibilities. Agriculture is the main occupation in Burma with rice being the chief product (Howard, 2012). Although many families live in traditional homes, some are very poor and need aid to enable them to exist with adequate standards of living. Better living conditions for all Burmese people will provide a healthier and happier work force in Burma.
Tourism in Burma
With the positive potential for democratic reform resulting from the 2012 by-elections, countries such as the European Union (EU), Australia, and recently, the United States (Rubenfeld, 2012), are starting to lift sanctions against Burma which, in turn, may cause an influx of visitors to the area (Buncombe, 2012). Tourism in Burma is increasing for the first time since the military seized power in 1992; however, the tourism infrastructure must be upgraded to handle the future influx of visitors. Although the annual count of tourists in Burma is equal to less than one week of tourist activity in Thailand, people are showing increased interest in what Burma has to offer. Western hotel businesses may reenter the competition in Burma by opening subsidiaries in existing locations which will be renovated or completely rebuilt (Montlake, 2012). Some of the areas that are attractive to tourists are the temples, Inle Lake, markets, and the white beaches of the Andaman Sea and the Bay of Bengal. Chaungtha Beach provides guesthouses, restaurants, and souvenir shops. Currently, tourism is fairly sparse in Burma due to travel restrictions and poor infrastructure that enable travelers to visit just a few locations (Howard, 2012).
Economic Environment in Burma
Organizations that are considering moving business operations to Burma must perform analyses of the political and economic environments (McNulty, 2012). Land ownership, commercial enterprises, and manufacturing businesses are controlled by the military government. The government has tried to limit imports with the majority of imports originating from China (Turnell, 2011). Large organizations and financial institutions are controlled and owned by the government, which leaves private industry to only small businesses. Industrial production in Burma is centered on local consumption. These local plants “produce textiles, footwear, wood processing, mining, the production of construction materials, pharmaceuticals, and fertilizer manufacturing” (Howard, 2012, para. 13). Goods that are exported from Burma include timber, rice, beans, pulses, fish, garments, and gems. In the past, Burma exported large quantities of timber; however, because the methods of timber exportation were environmentally hazardous and unrestricted, timber is now exported from China and India. Although Burma has an abundance of natural resources, the government is not fully capable of extracting and processing most of them due to inadequate technology and capital. There is a large amount of illegal exportation of narcotics, timber, and gems (Howard, 2012). “Burma is the World’s third largest supplier of opium and heroin” and increasingly, amphetamines (United States Department of State, 2011, para. 6). Burma’s position on the Transparency International Corruption Perceptions Index is 1.5, which indicates that it is among the most corrupt nations in the world. In developing nations, there is a correlation between those nations that are listed near the bottom of the Corruption Perception Index and those listed low on the Human Development Index (United Nations Development Programme, 2011). These issues must be dealt with, if Burma is going to be ready for outsourcing. Along with the recent formal lifting of sanctions on Burma by the United States, there is still a concern over transparency issues with the Burmese government (Rubenfeld, 2012).
The financial system in Burma includes government-owned banks, insurance programs, and private banks (Asia Trade Hub, 2012). The fiscal year in Burma is from April 1 to March 31. The Burmese currency is the Kyat. Although the government has created multiple exchange rates in Burma, according to the statistics from 2011, the exchange rate between Burma and the United States was Ks 815 to $1 (Central Intelligence Agency, 2012). By comparison, 1 Chinese Yuan equals Ks 138.23 (Central Intelligence Agency, 2012). The Central Bank of Myanmar has authority over financial institutions in handling reserve activities. The Myanmar Foreign Trade Bank carries out trade and non-trade foreign exchange activities, and has authority to perform commercial activities to finance export trades. Foreign Direct Investment (FDI) and foreign investment decreased in the 1990s when the government seized the free market system under the military leadership of General Than Shwe (Asia Trade Hub, 2012). Burma’s GDP per capita in 2011 was $1,300. By comparison, the GDP per capita in China was $2,425.47, and $37,527.35 in the United States (Central Intelligence Agency, 2012).
Although the United States imposed several sanctions against Burma from 2003 to 2008 including travel, investment, and trade, the United States is currently lifting those sanctions (Rubenfeld, 2012). Burma has commercial ties with Thailand and India, but the strongest connection in trade lies with China (United States Department of State, 2011). China is funding debt relief for Burma, providing economic development grants and soft loans for certain infrastructure, and supplying munitions for the military (Turnell, 2011). Burma also has military ties with India and North Korea, which concerns the United States on the issue of whether Burma is violating its international obligations and transparency laws. The United Nations (UN) still has concerns with human rights in Burma (United States Department of State, 2011). Burma is a member of the Association of Southeast Asian Nations (ASEAN). During the 1990’s, Burma hosted ministerial meetings, conferences, and became a member of the World Trade Organization (Howard, 2012). Since the release of Aung San Suu Kyi, the government claims to have increased economic growth in forming alliances with neighboring countries by way of reforming its centrally planned economy into a market system (Hermine, 2012). These reforms, if fully implemented, should enable Burma to become a frontier market. On July 11, 2012, the President of the United States announced that the United States eased sanctions against Burma to enable American organizations to invest in Burma as a strong support for the political reform of the 2012 by-elections (Rubenfeld, 2012).
Trade in Burma
Turnell points out that the military government in Burma took control over private sectors, and much of the trade and enterprise was performed by oligarchs within the military government. These oligarchs had government connections with the nation’s movement of trade and enterprise by pledging patriotism and loyalty to the government (2011). The revenues gained from exportation of the gas and oil through pipelines connecting Burma’s gas fields in the Bay of Bengal to China’s Yunnan Province will be deposited in the central banking system and utilized to buy defense weaponry and military equipment (Turnell, 2011). However, with the new reforms promised by Thein Sein, more government revenues will hopefully be utilized for economic growth and human development throughout Burma (Nehru, 2012).
Burma’s neighboring nations have transitioned to more free market economic methods via international trade participation and by securing good trade relations with foreign nations. In Burma, the government has been pressured by the United Nations to relieve autocratic military rule to mimic other ASEAN nations (Turnell, 2011). For example, by dramatically raising prices of Internet and mobile phones usage, the government stifles the flow of information (Howard, 2012). Before the 2012 by-election reforms were introduced, pressures from other Southeast Asian nations to open more trade with foreign nations did not have much effect on the Burmese government. What substantiated the autocratic strength of the military government even after 50 years? Turnell (2011) points out that Burma’s strongest trade activities, funding, and military support come from China. China, an authoritarian government, is willing to aid Burma in building up the military and applies no pressure to the Burmese government to support a free market system. China has also defended the military regime of Burma at the United Nations Security Council. As a deterrent to a Chinese veto, the Security Council has refused to address the issues about Burma (Turnell, 2011). However, with the new democratic victory in parliament in 2012, many developed nations are looking for positive changes in the trade industry to take place as the Burmese government enables investment (Hermine, 2012). If future outsourcing is to be successful in Burma, the government must strengthen the private sector (Buncombe, 2012).
If the government and the NLD work together to develop strategic actions to foster foreign investment in Burma, global businesses may lay the groundwork for financial and market infrastructure. This will enable Burma to compete with other developing nations in exporting goods and services to developed nations (Nehru, 2012). However, some investors may be skeptical about the removal of the military blockages over free market investment and business ownership. The blockages may appear to be removed on the surface, but are the changes concrete? For example, international business proprietors who think they may own 100% of businesses in Burma without having to secure a local partner are finding that these companies are owned under the former foreign investment laws that existed before the 2012 by-elections (“Asia: Myanmar: what’s actually changed”, 2012). Also, foreigners who want to renew land-leasing agreements are finding that those agreements are subject to leasing laws under the pre-by-election investment laws as well. Land must be leased either from the state or from private owners who rent from the state. This land-leasing law presents problems for contracts that do not allow sub-letting. Another change that may not be helpful to investors is the new 5-year tax exemption plan. Investors must investigate which tax is exempt and whether the exemption provides advantages for investment activities. For example, the investment laws require a profit tax as well as a sales tax. Another concern for investors pertains to repatriation, as investors are not sure whether they may take their company profits to their home countries (“Asia: Myanmar: what’s actually changed”, 2012). An additional financial issue for investors is the multiple exchange rates. Burma presently has more than one exchange rate issued by the government, a situation that causes confusion in business relations and trade. The government in Burma has announced plans to streamline the currency exchange rate under the new reforms (McNulty, 2012).
During the 2012 World Economic Forum, President Thein Sein vowed that the implementation of new economic reforms would “triple its per-capita economic output by the end of 2016” (Hookway, 2012, para. 2); however, Aung San Suu Kyi warned foreign investors that currently, “Burma’s courts remain too weak to implement laws and the government is not transparent” (Nehru, 2012, para. 5). Although Aung Sang Suu Kyi has addressed several issues that need to be reformed in Burma, Nehru states that Suu Kyi did not present proper strategic plans of implementation (2012). The government of Burma and the NLD must come to agreements with the implementation process of acquiring investment and aid from other nations before Burma will be ready for outsourcing.
Physical Infrastructure in Burma
Natural Gas and Oil Pipelines to China
The Burmese government is constructing a monumental project to export natural gas and oil to China (Turnell, 2011). Much of Burma’s export income results from the project. The “2,800 km natural gas pipeline will pump 12 billion cubic meters of natural gas annually to Nanning, where it will be used to generate electricity to the southwestern China” (Shwe Gas Movement, 2011, para. 11). Also, a 1,100 km oil pipeline will ship about 22 million tons of oil annually to Kunming. The exportation of natural gas and oil will continue to increase as off shore production occurs. The construction of the pipelines is projected to be completed in 2013 (Turnell, 2011).
In the Shwe Gas Movement report, the author discusses the ramifications of the construction of pipelines in Burma (2011). Due to the construction encroaching onto private properties, an uprising has ensued among fishing communities and farms. Homes and farms are being destroyed and many people are losing their livelihoods. The government has confiscated properties along the pipeline right-of-way, leaving people homeless and jobless. The government promises jobs to those who have lost livelihoods, but the only jobs to be found are very low-paying, temporary, and life-threatening. Many people have had to migrate to Thailand in order to work to support their families. The Burmese government has shown no sympathy nor indicated any plans to compensate the displaced people. Abuse of human rights has been reported by workers on the pipelines. The route of the pipelines can be seen in Appendix B. (Shwe Gas Movement, 2011). Burma must correct these issues of human rights concerning pipeline construction, reforms of the working conditions, and compensation to those who have lost personal properties and livelihoods.
Airports in Burma
Of the 77 airports in Burma, only 37 have paved runways. The main International Airport is in Rangoon. The airport serves 2.2 million passengers per year (Asia Trade Hub, 2012). Myanma Airways is a government owned national airline; however, Myanma Airways is known to have very poor safety records (Asia Trade Hub, 2012). Air China, China Airlines, China Eastern Airlines, China Southern Airlines, Indian Airlines, and the Thai Airways International are the airlines that utilize the airport in Rangoon. The flights include routes to Bangkok, Beijing, Chiang Mai, Guangzhou, Kuala Lumpru, Singapore, and Taipei (Asia Trade Hub, 2012). There are no U.S. or E.U. airlines or air freight companies serving Burma. Airports in Burma must meet global standards of safety, technology, and infrastructure before they are able to transport goods for global business.
Roads and Highways in Burma
The most widely-used mode of transportation in logistics is road transportation. Organizations that outsource to foreign nations depend on trucks and other vehicles to transport goods to destinations or to other transportation modes during shipments (Asia Trade Hub, 2012). This report describes and gives data about the road systems in Burma. Of the 27,000 km of roads in Burma, only 3,200 km are paved. Most roads are in very poor condition and lighting on roads is inadequate. According to statistics from 2007, 11 Union Highways that include 3,946 km, connect to a total of 80 other highways. The highways include 15,208 km that run north and south, and 9,160 km that run east and west. The highway that is in the best condition in Burma is the Yangon-Pyay Highway. Although only a two-lane road, it is smooth compared to other roads. The most important highway in Rangoon is the Yangon-Mandalay Highway, which is considered to be in very poor condition. The Western Union Highway is the worst highway in Burma. Located on the bank of the Irrawaddy River, the quality of Western Union Highway is rated between very poor to extremely poor. The road is made of stone and dirt in various areas. The Burma Road has had the most renovations of all the highways, because it handles a great deal of transportation between Burma and China for trade (Asia Trade Hub, 2012).
Railways in Burma
Data about the railways in Burma are discussed in the report “Myanmar railways” (Asia Trade Hub, 2012). Railways have been in operation in Burma since 1896. The center of railway operations is located in Rangoon. Burma employs 5,031 km of railway. Myanmar Railways (MR) is owned by the military government and is the central route in Burma. There are 858 stations along the railways that run north and south with some lines running east and west. The military government also owns Yangon Circular Railway, which is a commuter railway. Railways in Burma are, for the most part, in poor condition. Tracks are flooded during monsoon seasons. Speeds of the trains, running at only 24 km per hour at most, are hampered due to the poor quality of the tracks and the state of the bridges. According to the statistics from 2011, MR utilized 389 locomotives and 4673 railway coaches. (Asia Trade Hub, 2012) Rail transportation is one of the most important modes of shipping goods. The rail system in Burma will be an essential factor when global organizations initiate outsourcing there.
Ports in Burma
The government-owned ports in Burma are controlled by the Myanmar Port Authority (MPA) and managed by the Ministry of Transport (Asia Trade Hub, 2012). The Port of Yangon is the major port in Burma and transports 90% of exports and imports. The Port of Yangon is positioned Latitude 16. 47°N and Longitude 96. 15°E on the Yangon River. The tidal range is about 19.3 feet during the spring and 8.4 feet at high tide. The Yangon River runs 4 to 6 knots during the spring. The Yangon Port handles vessels that are 167 m LOA, 9m Draft, and 15000 DWT, and Thilawa Port handles vessels that are 200 m LOA, 9m Draft, and 20000 DWT. Although there is good potential for international organizations to utilize the ports for trade, substantial additions to the ports will be necessary for Burma to become a major partner in global trade.
Energy in Burma
The report, “Myanmar oil and gas” describes the prospective and traditional sources of energy in Burma (Asia Trade Hub, 2012). Sources of energy in Burma include hydropower, geothermal energy, oil, coal, and natural gas. There are 16 major coal deposits in Burma. The use of coal for energy has been a minor option due to insufficient funding for extraction. Coal is primarily used as a source of energy for the steel industry and cement plants.
Traditional forms of energy have been fuel, wood, charcoal, and biomass. Due to the military government giving energy production priority to the central demand, production of electricity has been produced using commercial methods rather than traditional methods. Energy sources from hydropower have accounted for a large percentage of the energy consumption in Burma in the past. If Burma opens up trade and empowers the private sector, the demand for energy will grow exponentially. Natural gas is the most abundant form of energy produced; however, the Burmese government is exporting almost all of its natural gas resources to China (Asia Trade Hub, 2012). Currently, coal, hydropower, and natural gas are the best methods of energy to support the needs of outsourcing. If Burma is to support mass production and transportation, processing energy on large scales must be utilized proficiently and effectively. With the expectations for new economic growth from external and internal forces, alternate energy sources may be needed to handle future capacity. Burma is considering nuclear energy. Nuclear energy is very costly and entails harsh environmental processing. Burma will need technical aid and extensive capital to build and maintain nuclear energy. Another potential source of energy in the stage of research is wind energy. Like nuclear energy, the construction of wind turbines requires excessive capital and technology. The only part of the country that will be able to use wind energy is the west end off the coastline of Burma (Asia Trade Hub, 2012).
Telecommunications in Burma
Burma has a very sparse telecommunications system. Due to government control, tight restrictions over mobile and landline phone systems and the Internet stifle the production of telecommunications (Asia Trade Hub, 2012). The government charges residents exorbitant prices to discourage interest in purchasing modes of communications. For example, there were only 604,700 landline telephones in Burma as in 2009, and the number of mobile phones came to 594,000 (Asia Trade Hub, 2012). Only minimal telecommunications requirements are met for business and government activities currently (Central Intelligence Agency, 2012). As far as domestic requirements, the system provides service to less than one communication mode per person (Central Intelligence Agency, 2012). The Internet usage in Burma is very limited because the government fears that the flow of information will foster free thinking in opposition to the autocratic rule (Asia Trade Hub, 2012). As with mobile phones, the expense to install the Internet is so cost prohibitive that very few individuals purchase Internet installation. The Internet providers for Burma are Myanmar Teleport, Information Technology Central Services, and Myanmar Post and Telecommunication (Asia Trade Hub, 2012). The Internet country code is .mm. According to 2010 statistics, only 400,000 users of the Internet were identified in Burma (Asia Trade Hub, 2012). Of the ten television stations, nine are government-controlled and highly censored. The one democratic television station is stationed out of Norway. Of the three radio stations in Burma, two are government-controlled and highly censored. The democratic radio station is stationed out of Norway and is a short wave broadcast (Central Intelligence Agency, 2012). Burma will certainly be required to ease up on information restrictions and further develop the telecommunications industry to handle all aspects of global business.
Recent Investment Interest in Burma
There are a few organizations and national agencies that are considering investment and the development of infrastructure in Burma. GE ASEAN executive Stuart Dean, stated that GE is interested in providing power generator equipment to Burma. GE ASEAN is communicating with the government of Burma with the intentions of providing portable gas turbines (Wiriyabunditkul, 2012).
Honda Motor Company is interested in opening a motorcycle plant in Burma. This manufacturing facility will be a groundbreaking accomplishment for outsourcing in Burma. If circumstances permit, Hiroshi Kobayashi, president and chief executive of Asian Honda Motor, states that there may be a consideration in the future for a plant in Burma (Wiriyabunditkul, 2012).
The Tokyo Stock Exchange (TSE) and Daiwa Securities Group Inc. have confirmed discussions with the Central Bank of Burma “to establish a stock market by 2015” (Inagaki, 2012, para. 1). Plans are underway for the signing of a memorandum of agreement among the TSE, Daiwa, and the Central Bank of Burma. The establishment of a securities market in Burma has been initiated to promote a market-oriented economy in Burma and strengthen the private sector (Inagaki, 2012). In 1996 Diawa made a previous attempt to establish a stock exchange in Burma. Myanmar Securities Exchange Center was a joint venture with Daiwa Institute of Research and the government-owned Myanmar Economic Bank. The market was weak and unsuccessful for the most part (Inagaki, 2012). With success this time, the securities market in Burma will launch major possibilities for Burma to be a prime player for international business.
The nation of Australia is investing $80 million in primary education in Burma to slow the drop-out rate of elementary students. The four-year plan will provide training for teachers, textbooks for students, and food aid in remote areas (“Burma education aid”, 2012). With a current high literacy rate among the adults in Burma, reform in the education system will enable a more capable work force to fill upper level positions in Burma. Australia is lifting travel and financial sanctions as well to encourage the democracy movement in Burma (“Burma education aid”, 2012).
The CEO of Malayan Banking from Malaysia is very interested in “applying for a banking license in Myanmar” (Ng, 2012, para.1). He feels optimistic about opening a branch in Burma (Ng, 2012). If Malayan Banking moves forward to open a bank in Burma, the organization will be valuable in enabling the outsourcing of services.
Is Burma Ready for Outsourcing?
With the many decades of political and civil unrest in the past, how can investors be confident in Burma? General Aung San wanted independence from British rule before the breakout of World War II; he wanted an economically sound Burma that had the structure to stand on its own. Unfortunately, General Aung San’s vision was demolished when the Burmese military seized power in 1962 (Howard, 2012). Since that time, when General Ne Win declared leadership as the “Burmese way to socialism” (Hermine, 2012, para. 2), the military rule has proven to be extremely corrupt, exploitative of the people, destructive to human lives, and wasteful. However, the NLD has stood for peace and freedom in opposition to the military junta rule (Turnell, 2011). Although promises in the past have been made, no concrete measures for change were acted upon until 2012. Following in her father’s footsteps, Aung San Suu Kyi assumed the leadership position of the NLD in opposition to the military junta (Hermine, 2012). She has stood for, suffered for, and become a voice for democracy in Burma. After being released from15 years under house arrest, she has been instrumental in the gradual release of the many other political prisoners after 2011 (Hermine, 2012). She has recently toured throughout the world, requesting developed nations to invest in Burma so that it will become an independent nation (“Aung San Suu Kyi,” 2012). In her speech before the International Labor Organization (ILO) in June of 2012, Aung San Suu Kyi appealed to foreign nations to give aid to and invest in Burma to promote a better future for the Burmese and to provide jobs for the unemployed. In her speech, Suu Kyi stated “What I would like to see for our country is democracy-friendly development growth. I would like to call for aid that would strengthen the democratization process by prompting social and economic progress that is beneficial to political reform” (International Labor Organization, 2012, para. 3). It seems that her leadership may foster a free market society in Burma (“Aung San Suu Kyi”, 2012). For one such as Aung San Suu Kyi, who has known Burma at a time when democracy and independence in her country was progressing, it must be a pivotal time of triumph to be closer to living that experience once again. She hopes to finally see her father’s passion for his nation become reality.
For the first time in many decades, negotiations between the United States and Europe with Burma are possible for business operations (Hookway, 2012). For example, in the past, voting in Burma was unfair, the human rights deplorable, there was a government-controlled judicial system, and political liberties were almost nonexistent (Hermine, 2012). With the NLD victory in parliament at the 2012 by-elections, these issues will be addressed through new strategic planning by the democratic parliament and the government, as well as with help from other nations (Nehru, 2012). Developed nations and the ASEAN nations are gaining confidence to invest and trade with a more transparent Burma (Greene, 2012).
In the wake of China moving from being a developing nation to an NIC, global organizations that once benefited in terms of profits by outsourcing to China are now paying higher wages and operations costs. Organizations are searching for new frontiers in which to invest and outsource (Ball, et al., 2009). Burma has had a history of autocratic rule by the military government, which has stifled foreign relations and investments. The Burmese have been oppressed and have suffered very poor living standards due to the abuse of human rights (Turnell, 2011). Corruption and lack of transparency have been standard within the government. However, the decades have witnessed sporadic actions from the democratic opposition working to denounce the junta rule and return Burma to a democratic nation with a system of free enterprise (Howard, 2012). Two prominent voices of leadership that have stood in opposition to autocracy have been General Aung San and his daughter, Aung San Suu Kyi (Turnell, 2011). Suu Kyi has relentlessly appealed to the government, western nations, and the various ethnic states in Burma to join her endeavors to develop and promote a democratic and prosperous Burma (Nehru, 2012). There are hopes that, in time, the government will build a much better infrastructure in Burma, abide by international transparency laws, open friendly trade with foreign nations, and reverse all negative human rights issues in the land (Hookway, 2012). If the democratic constitution is put into action, investors and global organizations may help Burma become a more industrialized nation. In the words of Aung San Suu Kyi, “Please encourage your governments, your businesses, your workers to build the kind of society that will build the future of our country” (Greene, 2012, para. 21). Burma is on the cusp of a golden age of renewal and expansion. Burma will be ready for outsourcing only if President Thein Sein and the NLD continue to work together to enable Burma to be a new frontier market.
Map of Burma
The route of the Burmese natural gas and oil pipelines to China
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|Luana Waits obtained her BS degree from Athens State University in the program of Logistics and Supply Chain Management in Fall, 2012. Upon graduation, she obtained a position of Master Production Scheduler with Izzy+ in Florence, AL through the Athens State University Career Development Program. She is currently enrolled in the MBA program with a concentration in Enterprise Resource Planning (ERP) and SAP at the University of North Alabama (UNA). Luana is married to a mechanical engineer. The two enjoy hiking and canoeing and have volunteered in homing, adopting, and working with Retired Racing Greyhounds.|