Myanmar, Republic of the Union of: Interview with Mr. Kiwi Aliwarga

Mr. Kiwi Aliwarga

CEO (UMG Group)

Mr. Kiwi Aliwarga

On the ease of doing business rankings 2017, Myanmar ranked the lowest among the ASEAN countries. As an example, while Malaysia ranked 23, Myanmar was relegated to the 170 position out of 190 countries. What are the priorities to improve the business climate?

I do not really agree with the criteria used to elaborate the ranking. My feeling is that, for example, Vietnam is a more difficult country in which to do business, yet it ranks higher. The government has done a lot to improve the investment climate and the ease of doing business. The main problem is the understanding of the laws passed by the government and many people do not understand the procedures they must follow. Therefore, the issue is not the law itself, but the interpretation of it by the business people.

The second problem is that the market is not big enough. Despite Myanmar’s population of 50 million, in terms of purchasing power the numbers are actually much lower; less than 5 million have real acquisition power. It does not mean that the others cannot buy, but that they only have access to a different kind of market.

The priority of the NLD government is the pacification of the country as a prior step to economic growth. Some business people say that pacification and economic stability are two things that should be addressed simultaneously. What is your assessment of the economic situation in Myanmar since the new government took office?

The economic policy of the government is right, but sometimes there are problems in the execution. Myanmar still has a lot of potential, but sometimes people cannot collaborate in the implementation of the policies that would create a benefit from this potential. I think we have capable people and I can feel the hope in Myanmar. Hope is important, and economic measurement should come from the confidence that the business people have in the country right now. And we are indeed confident; after 40 or 50 years under military rule we see investment coming and the country opening up, but it will take more time. Hurry is not positive when it comes to nation building and we need to go step by step.

Myanmar has historically based its economy on agriculture; today the agricultural sector represents 41% of the country’s GDP according to the Government. You were one of the first companies providing heavy machinery and you have become the largest distributor of this kind of product in Myanmar. How would you describe the industrial development of Myanmar since the late 90’s and what are the next steps that the country should take to boost the industrial sector?

From the late 1990’s until today we have been in the infrastructure building mode. We have not yet reached the standards of our neighboring countries and we still need to invest more in transport infrastructure. Moreover, there is a lot of work to do in telecommunications and power as well, as we still have a long way to go before we see growth in the real economy and consumption going up.

Myanmar keeps basing its economy on low-cost production; growth today is associated with construction, agriculture and manufacturing, sectors that here are based on a low-cost labor force but do not add value. How can the country invest and promote an industry that produces value added?

The creation of added value is directly related to the education system, and again in this field, the country needs time, as we have nearly a 30 to 40-year gap. The generations that are now between 15 and 45 years old did not have access to proper education and as a result, it is difficult to find talent in Myanmar. We are not ready yet to base our economy on this kind of industry; first, we need time to set up the priorities and work accordingly.

One of the main challenges that Myanmar is facing is to educate people and provide them the skills that the labor market requires, as well as a change of the mindset now that the country is opening internationally after decades of isolation. You founded UMG College in 2013; why did you decide to get into the education sector and what are the core values of this college?

We have been in this business for 20 years and we always face difficulties finding talent so we decided in 2003 to create our own training center. We train our people on a daily basis and we believe in knowledge-sharing. First, we provide the skills, but knowledge without a place to apply it is useless. In the classroom the students acquire this knowledge and then we provide them the platform to become skillful professionals.

For 30 years, leadership and initiative were not just discouraged in Myanmar, but penalized. During all this time people were just taking orders, this is a gap that we have to overcome and we are just in the second or third year of the process. The next generations already have insights about data and other resources and they are being educated differently. On the other hand, the problem with them is that the same as the technology works fast, they expect to be promoted within five to six months, and if it does not happen they leave, which is another mindset that we have to modify.

Myanmar has great potential in the hospitality and tourism sector. You have been involved in several projects to develop and operate hotels and resorts. What are your future plans in this sector and how can Myanmar compete with its neighbors in this field?

I think in this sector Myanmar can really shine; we have remarkable locations and a good young generation that are focused on this industry. If we take into consideration leisure opportunities, food, hotels and low-cost transport we can channel this opportunity. As we have identified this opportunity, we prioritize this industry, as well as international businesses.

UMG is not only a pioneer in heavy machinery production. When nobody was willing to partner with a machinery company to get into the food sector, you built your food industry, Win Food and successfully introduced a new snack into the market. Why does a machinery company decide to operate in the food sector and what are the keys behind this success?

We saw a lack of healthy food in Myanmar. If the food industry only focuses on profitability they tend to worsen the quality of the products every day. Of course, there is a demand for cheap products, but that is not the best solution for human health. Second, Myanmar has an abundance of agriculture resources, but not many people turn that agriculture output into factory-made products. Based on that understanding we started the food industry.

Myanmar is a rich country in natural resources and UMG, through First Resources and its affiliates currently runs mining operations. However, mineral extraction entails several risks, especially for a country that is still dealing with important socioeconomic challenges. How can Myanmar combine mining with environmental protection while ensuring that the wealth is well-distributed among the population?

The truth is that it is just impossible; sustainable mining is a marketing gimmick concept. When you take something from the ground you cannot put it back as the original piece, it is just impossible. You can create confusion or a diversion, but reality is not like that. In this case, I will very much agree with the policy of the current government even though we are in this business. In the past, 70% of revenue came from mining, but we say that the government’s decision to regulate this industry is the right direction. Myanmar has to move from the resources industry into agriculture and tourism industry. This industry will be around, but you cannot allow mining that is destroying people’s livelihoods by provoking floods or environmental damage.

When you created this company you established the goal of making UMG a billion-dollar company by 2020. How are you going to achieve this goal?

Definitely we will. We are already halfway there, so I think we are on the right path and that growth will not come only from Myanmar, but also from other investments.

You are a business leader who has experienced many different stages in Myanmar’s history. Today, the country is carrying out a liberalization process and an opening to the global economy. What is your vision for the future of Myanmar?

I do not put too much emphasis on the macroeconomics, the size of the GDP or the income of the country. I will put more emphasis on people’s livelihood, which is not only economic. I refer here to religion, better relationships, environment, education. Therefore, we have to take a look more at the healthy balance, and not talk exclusively about the economy.

Too much stress on people makes countries collapse, and the government is elected every five years, which makes it temporary. Each of us has the responsibility to improve the people’s livelihood so they can eat, enjoy life and do what they believe in order to be happy.