Myanmar, Republic of the Union of: Interview with U Kaung Htet Aung and U Ye Wint Aung

U Kaung Htet Aung and U Ye Wint Aung

Directors (Star Light Group)

U Kaung Htet Aung and U Ye Wint Aung

It was 21 years ago, in 1997, when Myanmar became a member of the Association of Southeast Asian Nations (ASEAN). However, today, Myanmar is the second country in the organization with the lowest GDP per capita. How can Myanmar catch up with the ASEAN countries economically speaking?

U Kaung Htet Aung: First, the backbone of economic growth is a strong financial system. However, this is one of the most undeveloped sectors at the moment in Myanmar. The interest rate is one of the main things that people have to deal with to do business; the annual interest rate is 13%, similar, if not higher, than the other ASEAN members. However, access to loans is easier in other countries. The banks are not really to be blamed for such a system, but instead of looking at business opportunities, they look at the collateral of the potential clients, which basically are lands or properties, and usually overvalued. Therefore, a priority to bring the economic activity up is to strengthen the financial system. The Central Bank, in this sense, needs the support of the government, as today there is a lack of cooperation and a group of knowledgeable professionals to lead it.

U Ye Wint Aung: The English saying, “the earliest bird gets the worm”, does not really apply here in Myanmar; it would rather be “the second mouse gets the cheese”. It can be a bit sad to see how some people try first and then suffer criticism from the others. First, it happened when everyone got into the car import business: it went way above infrastructure capabilities and the outcome was a chaotic situation. The second phenomenon was the condominium construction that provoked an oversupply of these residential complexes. It is the same circle of people always acquiring land and properties, as there is not a big enough middle class with the purchasing power to get into those properties.

Myanmar, however, as it is being developed after other countries in the region, can analyse neighboring examples to avoid mistakes and follow the right path. The 4G network is a good example of that, which in Myanmar is one of the fastest growing services in the world because we were able to use advanced technology.

From the 1960’s until the 21st century Myanmar was one of the most isolated countries in the world. However, in 2011 the country started to open up and the recent change of government guarantees that the country will follow this path. These historical circumstances make Myanmar a frontier market. What are the main opportunities that international investors can find in Myanmar?

U Kaung Htet Aung: Finding the right partner is the first step to benefit from investment opportunities in Myanmar, as a few actors monopolize a diversified range of markets. When it comes to the different sectors, finances are a promising field for international investors. There is a lack of competitors and foreign banks are now allowed to operate here and, although they cannot directly provide loans, the partnerships with local entities can be very profitable. Hopefully, in the future more competitors will arrive bringing down interest rates and making business more affordable for the people at the same time that transparency in the sector increases.

U Kaung Htet Aung: Logistics is another main sector due to be developed in the coming years and we are already carrying out projects in this field, such as the logistics center built up in partnership between Star Light and Damco. As mentioned before, trust is key to doing business here, and this collaboration is a perfect example of a foreign investor operating in the long term with a local partner. The arrival of other international companies evidences the opportunities in the logistics sector.

U Ye Wint Aung: The insufficient supply of electricity is one major issue in Myanmar, but there is an opportunity in this field as the country has the perfect conditions to develop. As the country is positioned in an optimal location for solar energy, this is one of the market international investors should target . Even though they have not arrived yet to work in this sector, they are indeed interested in doing so.

In this process of opening toward the international markets, Star Light Company aims to position itself as a company of reference in Myanmar. What makes you the perfect partner, the partner of choice, for international investors?

U Ye Wint Aung: We are not looking for clients, but for partners. We want to build stable relationships that lead us to share opportunities rather than just implementing a project. Once the contract is signed, we forget the word “I” and think always of “us”; what we can do together and how we can improve. Our partners’ problems became ours and vice versa. Like in any other country, but especially a frontier market, it is fundamental to find a partner with deep knowledge and expertise about the local system; we combine their international background with our generations of experience in Myanmar.

U Kaung Htet Aung: Trust is the main component, especially in a country like Myanmar that has been closed and isolated for decades and still lacks transparency. Star Light, however, is not involved in any political issues: we are a family company that takes care of and respects partners and customers. We have experience with international investors, such as Damco in logistics, Nestle in food and beverage, and we have built infrastructure and facilities up to their standards. They put their trust in us, and we look forward to working with them for decades. As an international investor, when you engage with a company in such terms there is a huge level of trust involved.

U Kaung Htet Aung: Our relationship with the British International School was born this way; we used to have one of our offices in Yangon in a prime location, and they were looking for a place to build their new school. We offered them our four-story building and 5,000 square meters of available space, an agreement that led to a trustworthy relationship that remains today. They went from 30 students to over 500 students enrolled in their education programs, which again made them run out of space. Right now, we are building a new campus for them that is able to house 1,200 students. For Star Light, it is the perfect example of partnership, as we are looking to grow together. One of our core values is that the partners define the level of achievement.

In fact, the improvement of the education system in Myanmar is one of the challenges for the country. Can you explain to our readers the main projects that you are carrying out in the field of education?

U Ye Wint Aung: The new campus of the British International School is due to be inaugurated this year in 2018 and we are their asset partners. Three years ago we built a preschool for them which is a relatively small building for primary education activities. The new campus for 1,200 students is a tailor-made project to meet their international academic standard requirements.

U Kaung Htet Aung: Aside from this international school, we are also developing a local project with International Language and Business Centre (ILBC) in Yangon. We have been partners for a few years and they trusted us to carry out their campus expansion. The new compound in Yangon will host up to 3,000 students in the first phase, and 2,000 more in the second one. In this case, we target middle-class students, one of the main needs in Myanmar.

U Ye Wint Aung: There are two sectors in the school business. Star Light as a Property Management and a Construction company, usually only take care of the development and the assets of the school. For CSR Star Light has been building schools in remote places throughout the country as a lot of the locals cannot travel miles to go to schools. We believe that more educated people will lead to a developed and safe society.

In November last year, the new logistics center in East Dagon (Yangon) was inaugurated. It was a partnership between Damco, a Danish company, and Star Light Group. Can you tell us more about the history behind this project and the main contribution of your company?

U Kaung Htet Aung: Without the right network is very difficult to operate in Myanmar, where the business community is reduced and closed. That is another reason why foreign investors need to find the right partner. We started to work with Damco thanks to a referral from a close business associate, with whom we worked before. They were in need of a warehouse facility built to international standards and we completed negotiations and signing in only two months. We worked shoulder to shoulder with the Country Manager of Damco, Mr. Samuel Conroy, a great professional who was eager to move quickly and succeed with the project in Myanmar. He believed that it was possible to implement the project in such a short time, and we delivered. Due to our experience in construction, they trusted us when we guaranteed that we were going to get it done by the tight deadline, and so we did. Communication and delivering on promises generated trust between us.

U Ye Wint Aung: The differential point of the facilities that we built for Damco was quality; we followed their requirements in detail, from the technical components to the office facilities. This is what sets us apart from other companies in Myanmar. We also did the same with the food and beverage factories, including, Nestle, and a garment factory for a well-known Chinese company.

As you have mentioned, Myanmar is particularly challenging for business newcomers. What are the main concerns that your international partners have expressed to you?

U Kaung Htet Aung: Regulations. When we build factories, there is a building certificate that we have to receive to have the authorization to move forward, but in Myanmar, that process could take months or even years and sometimes you never get it. As an international company, it is necessary for them to get all the approvals and all the permits and certificates (fire safety certificate, building compliance certificate, etc.). So if Myanmar can stabilise on laws and regulations, the business climate will be more attractive for both local and foreign investors.

U Ye Wint Aung: There is an extra step foreign invested companies must go through. Finding the right local partner is the hardest step for a lot of our clients but if they get the right one, these steps can be easily surpassed.

How can Myanmar encourage the development of technology and international standard procedures?

U Kaung Htet Aung: Technology seems to lag behind in Myanmar because of the lack of technical resources and access to education. For example, Myanmar’s economy is highly dependent on agriculture. In this sector, the reason we import so many goods is that raw materials and production are both expensive. Without mass production or economies of scale, Myanmar is a country that depends mainly on manual labor (farming etc.) which becomes costly. Concerning technologies, the fact that importing finished goods, such as tractors for the agriculture sector, combined with the lack of a skilled workforce, restrains this technological development where funds are allocated to importing these value-added goods than spending on research and development. So the development of our skilled workforce depends on a better education system in order to use better methods in their respective fields of work.

The lack of human resources is one of the greatest challenges that Myanmar faces today. Most of the business people that we have interviewed explain the difficulty in finding skilled professionals. How can you improve human resources in Myanmar to train future business leaders?

U Ye Wint Aung: Let me give you an example of how we attract and retain talent in our group. At Star Light we are very lucky and proud to say that most of our staff has been working here for more than 10 years, and some closer to 15 years. First of all, we have to say that our employees are well paid, since salary is one of the top factors that our employees express as important; secondly, we organize incentives, so we try to create a positive atmosphere where they are happy to come to work, and we feel that they are not only colleagues but friends, they are sharing more than just a job. Star Light is now a big company but still a family company and we have done this by improving the quality of the working atmosphere. Every month, there is a meeting where we can listen to our employees in order to know how they are feeling and what we can improve. Every Saturday is a half-day and our employees don’t have to wear a uniform, they bring their own food or sometimes we offer lunch for them. Even during their free time, our employees talk about their work and how to do a better job. That sense of belonging is really essential to the Star Light culture and we do our best to support our talent.

U Kaung Htet Aung: We also train the young professionals by sending them to workshops and conventions. They are very excited about it and thanks to that we understand what kind of person they are and put them into the right position. We know that the best results will come if they have passion in what they are doing for us. As Myanmar is a collectivist culture, we try our best to include everyone in discussions, even though they may have different job responsibilities. In this manner, everyone stays connected and everyone feels that they are supporting Star Light’s core values and vision.

HBR Readers include the top decision makers and business leaders around the world. As a conclusion to this interview, what is the final message that you would like to transmit to them?

U Kaung Htet Aung: Lately, a lot of media have portrayed Myanmar badly because of the Rakhine issue. But Myanmar has not only this issue; readers need to know that investment opportunities exist and are increasing. We need more magazines like HBR to educate people and show investors how to invest in this country, with the right partner. You will skip steps and your partner will share with you everything you need to know about the market and the local customs. Do not judge a book by its cover; Myanmar is a complicated country and you need time and guidance, to understand it completely.

U Ye Wint Aung: Working in Myanmar can be hard especially for a foreigner. Having the right local partner help speed up the process. Star Light is always looking for new partnerships and opportunities.

"Finding the right partner is the first step to benefit from investment opportunities in Myanmar"