Myanmar, Republic of the Union of: Interview with U Wai Phyo

U Wai Phyo

Managing Director (Yathar Cho)

U Wai Phyo

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

The index is actually a combination of a dozen factors that combined give the final figure. Myanmar actually hasn’t really done a good job in dissecting each sector and trying to understand how to improve. And it is not necessary to tackle simultaneously all the factors of the ranking; as an example, Cambodia is one of the top countries for garment production because that is their largest industry, and they are even better than the US or any other developed country, but they may be lower than them in other aspects.

Coming back to Myanmar, the number one criteria for the ease of doing business ranking is the ease of setting up a company, and this country needs to improve a lot in this sense. In order to do so, the country requires more stable regulations that are easier to understand, and the new Companies Law recently passed by Parliament is a good step in this regard. The new Investment Law combines the Foreign Investment Law with the Myanmar Citizen Investment Law, which means that any company that comes into or operates in Myanmar is treated the same as a local company.

The next thing that needs to be done is to tackle infrastructure, especially electricity. It has been an endless discussion in Myanmar, but due to the massive amounts of investment required on both the generation and distribution side, it is taking longer than it should.

The last one would be human resources, which entails two branches: a reform on education to encourage a more productive future generation and a solution to the massive labor shortage of skilled professionals, especially mid-level and top-level managers.

It was 20 years ago, in 1997, when Myanmar became a member of the Association of Southeast Asian Nations. However, today, Myanmar is the second country in the organization with the lowest GDP per capita (around 6.000 USD, when the average is double). How can Myanmar catch up with its partners economically and socially speaking?

First, the country needs to generate jobs to increase the income of the overall population, and second, for Myanmar to catch up in terms of GDP, there must be a structural change: the export mix of the country is too dependent on commodities, which by their very nature, are in danger of commoditization.

This means that you supply the same product with the price as the basic differentiator. The way to get the country out of that is to implement a phase of industrialization, value addition and an export driven economy. Without industrial capability, even agricultural products remain in commodity states instead of transforming to value-added states.

Last year Myanmar took one step more toward international integration with the lifting of US sanctions. Despite recent criticism of the government, in our interviews, business people and politicians agree that Myanmar has the potential to play an important role in the region thanks, for example, to its geographical position. How can Myanmar boost its international presence and how can business people contribute to this effort?

Myanmar’s reputation has not been very positive in the past few months because of the problems in Rakhine State, but efforts are being made to find the most pragmatic solution and move forward. The boosting of Myanmar's presence in the international community has to be achieved not by moral authority, but through the economy as all powerful countries have done in their regions before. Economic growth is what ensures a stable international presence of countries like China, Japan or South Korea in the case of Asia.

Instant noodles were first introduced into the country about 40 years ago and the market was historically dominated by foreign imports. You took over Yathar Cho Industry Ltd. in 1999 and today you have nearly 65% of the instant noodle market share. What was the situation of the industry in terms of competitiveness and demand in the late 90’s and what has been its evolution until today?

Instant noodles in Myanmar are a growing market: in the past 20 years we registered an annual growth rate above 12%, a really healthy increase for any industry, and I am convinced that we are set to grow much more. Compared to the ASEAN average consumption per capita, Myanmar is the lowest in comparison with other countries. Concretely, consumption in Thailand, with 50 packages of noodles per person a year, is four times higher than in Myanmar, where it goes from 10 to 12 packages. This shows massive room for growth.

But having said that, 20 years ago there were just two players; a Malaysian brand and us. Then the market leader from Thailand entered, but we have managed to establish our own position and our brand is still number one in Myanmar. Of course, there are ups and downs, and when a new company enters the market it generates some fluctuations in the market, but what really matters is the performance in the long run. There are different factors to bear in mind in addition to the price, such as distribution and logistics, and we do not compete in price, in fact, we are the most expensive brand, but our quality makes us the market leader.

“Quality first” is the core value of Yathar Cho. However, market opinion when you started was that Thai products were of a higher quality than yours. Technology and innovation have guaranteed the high quality of your product and have helped you to become the market leader. What is the main technology and innovation that you have implemented and what was the impact on the quality of the noodles?

The best investment that I have done to guarantee innovation is in my staff, my team. We invested in a full-fledged R&D team; we invested in a microbiological lab, in ISO, HACCP, GMP, and relevant third-party certifications. We have evolved in the way we worked, but it does not mean anything if your team does not evolve with you.

From the consumer’s perspective, instant noodles are a product that may be relatively indistinguishable according to brand. What are the main differences between brands and how can you set your product apart from the competitors?

Consumer experience is paramount for us. There is a basic quality equal to all competitors, as we all comply with the safety regulations and the standards are the same for all of us. Our difference is the quality that we add. In the food industry the product has to appeal to the senses; the sight, the smell, the visual perception… and of course the taste. Those are our differentiating factors and what makes the customer search for our brand.

The same rules apply in terms of marketing; the customer chooses to always go back to his experience. For example, when you are selecting something to buy, you rely on your sense of sight.  We decided to design one of our brands in black and it stood out as a big black space on the shelves that instantly drew the customers in.

Myanmar faces unfair competition with smuggled products from other countries. This is a common complaint among business people. How does this illegal trade affect the noodles industry and how do you survive in this context?

It massively affects our market: we operate in Myanmar following the regulations and paying taxes. On the other hand, some actors that introduce products in the country pay neither duties nor taxes. This damages the market and the competitiveness, the prices become volatile because they sell at any price, and the government also suffers because tax revenue vanishes: a lose-lose situation. And of course, unlike us, the smuggled products do not go through any testing or quality control.

The measures to solve this problem are relatively simple, the government has to step in and tackle it in two ways: from both supply and demand perspectives. From the supply side, with tighter control and strict border regulation. On the demand side, ensuring payment of applicable taxes and establishing a registration process for importers.

The way we survive and succeed is simple: “quality first”. We provide experiences that the illegal competitors cannot offer and we do the marketing that they do not.

Many companies in Myanmar are family businesses. Today, we can see how the first generation is retiring and the second generation is taking over. Both generations have lived in substantially different historical circumstances in Myanmar. What are the main differences that you see between the previous generation of business people and your own?

A lot of the younger generation are Western-trained, so they have been to the US or the UK, they have more international experience, and therefore a different style of doing business. They strive to integrate Myanmar into the global supply chain and to diversify the economy rather than just relying on China or Japan. Unlike them, the previous generation was mostly Chinese who built up massive companies from zero. Today, because of language and education, the older generation is not comfortable with the West and is more Asia-centric. The young generation, on the other hand, is coming up with more diverse ideas in how they approach business.

Another issue is that the newer generations seem to be more receptive towards modern management, whether it is in quality, governance, marketing, banking or other things. It has to be the generation that takes the step of investing abroad like, for example, Thai companies have already done.

Yathar Cho is carrying out an education plan for rural and disadvantaged children through technology. Can you elaborate on this subject?

We looked at the rural areas because most of them do not have schools and, even those that do, suffer a lack of proper and well-prepared teachers. The senior professors stay in Yangon, while the junior teachers are sent to remote areas without hardship compensation. Other times, the children have no choice but homeschooling with non-proficient parents in terms of education, or monastic education, where they get a religious formation but lack a basic knowledge of science or critical thinking. It is a cycle that reinforces itself.

The project that we envision is based on providing online education: a high-level teacher connected to the rural areas with TV screens and efficient high-speed internet connectivity, supported by junior teachers or assistants on the ground, giving online lessons. A pre-recorded session does not have the same impact as real-time interaction, and with this method a teacher can reach, instead 50 students, even 1,000. It would also solve the problem of the little villages that do not have enough children to gather them by age groups to form a class. This way you could create virtual classes with children from all over the country.

As we cannot have every student in private school education, this program has to be a national education project for us to integrate into the national curriculum and go to national colleges, that is why we are collaborating with the Ministry of Education.

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

I would like to see Myanmar as a regional food supplier, because 60% of the country’s economy is still based on agriculture, and we have a lot of room for growth. The first step is to increase the yield per acre, which would automatically raise output numbers massively. Once output has grown, the industry steps in to convert the raw product into value-added goods. Therefore, Myanmar can be a food supplier and an industrial hub, but it can also be a logistics and transit trade center, the Western gateway to the ASEAN. It does not have to do it in an extremely complex way, but rather with a pragmatic strategy that would generate an impact for most of the people.

Depending on how we can carve out our market position, Myanmar will be in a great strategic place; a country of 53 million people with access to 40% of the world’s population, a relatively young population and a technology introduction that, as it has been already tested in other countries, does not have to go through the entire evolution cycle.