German interests to grow despite a few barriers

Khine Kyaw
Myanmar Eleven
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From left, Laura Ahrens, Jens Knoke, Philipp Hoffmann and Monika Staerk /EMG

Trade and investment with Germany and other European countries have high chances of growth if Myanmar can improve the investment climate and strengthen the private sector, a German official said. Laura Ahrens, German Embassy's counsellor and head of the economic and commercial section, said last week that electricity shortages, infrastructure, regulatory framework and lack of skilled labour are the main barriers to potential German investments.

"Everybody complains about the same issues. At the moment, at the end of the dry season, you all know that there are a lot of power cuts. Electricity is a major issue for many investors and also infrastructure in general. Roads, power, access, procedures, and regulations, which are sometimes a bit bureaucratic, are big issues here, as Myanmar is still in the list of the least-developed countries," she said.

Ahrens on Friday attended an event to launch the German Myanmar Business Chamber (GMBC) as a platform of dialogue with local businesses and the government, with German companies seeking a greater presence in the country.

Ahrens added that Myanmar's isolation for many decades has led to not many young people getting access to international education. She said it is sometimes very difficult to find people who can communicate well in English and the nation's education level is comparatively low.

"But we hope we will see improvements in all these issues. We have seen a lot of improvements in the last three years. I think there are not many countries in the world that have changed as much as Myanmar has in the last three years. I am very optimistic that the reform process will go on and the situation in the country will improve both for German companies and especially for Myanmar people and society," she said.

Last year, the 60th anniversary of bilateral relations was marked.

According to Germany's Federal Foreign Office, in 2013, German exports to Myanmar were worth just under 127 million euros, compared with 105 million euros in 2012 and 61 million euros in 2011. In 2013, German imports from Myanmar stood at nearly 56 million euros, compared with 45 million euros in 2012. Despite the small volume of trade, Germany is Myanmar's principal trading partner in the European Union.

Germany's main imports from Myanmar are garments, while its principal exports to Myanmar are machinery, data-processing equipment, electrical and optical goods, chemical products, motor vehicles and vehicle parts and pharmaceutical products. German firms targeting Myanmar's growing consumer and industrial market include global leaders such as Bayer, BASF, Bosch, Henkel, Siemens and ThyssenKrupp.

Jens Knoke, the founding president of GMBC and general manager of Henkel Myanmar, told Myanmar Eleven that the chamber also seeks to establish a dialogue with the Myanmar government on economic frameworks.

"We aim to promote German business activities with Myanmar's private sector and government agencies and business opportunities in Myanmar with the German business community. We also want to support both German corporate activities and Myanmar's private sector development," he said.

With support from the Delegation of German Industry and Commerce, the chamber will facilitate the transfer of knowledge and practical experiences, and promote responsible and sustainable business practices.

Monika Staerk, GMBC's executive director, said that the chamber now has more than 50 members and expects to rise to 300 members over the next three years.

"We have 40 Germany-based companies registered in Myanmar. Thirty of them are already the founding members of the chamber. We have a number of big companies that are preparing for presence on the ground," she said.

Members are based in Myanmar as well as Singapore, Thailand, and elsewhere.

"I expect a really significant number of newcomers here. It will depend on the number of German businesses that increase their contacts from other Asian countries and more German exporters/importers."

German companies' interests in the country are relatively small, as they reached out to Myanmar only after sanctions were lifted in 2012. According to Staerk, most of them are involved in energy, infrastructure, industrial products, services, manufacturing, supplying consumer goods and pharmaceutical products, developing sustainable supply chain, like chemicals, agro-chemicals, and agro-business. There are also a number of firms that are active in the garments sector, either with their own production or working closely with their local suppliers.

More German firms are considering investing in automotive supply and construction supply. Currently, there are only five joint ventures with local firms but the number is expected to grow soon, thanks to the booming economy.

"Germany has a strong basis in manufacturing - a sector which needs to develop more strongly in Myanmar," said Knoke.

Knoke said that foreign direct investment is very important but it is just one part of investments that create economic growth. He said the investment in capacity building is much-needed for Myanmar.

"We, Henkel, did not build our own factory here. We help local companies upgrade themselves in terms of production capability, education of their workforce. This kind of non-financial investment is very important to the community. If I would be a Myanmar citizen or having a Myanmar company, it is even more important," he said.

"If Henkel and other German firms build their own factory in Myanmar, the FDI will grow but they will be direct competitors to local companies. And the local firms will have big problems… We do not destroy local competitors. This is for both sides - for Henkel and local contract manufacturers."

Staerk admitted that German investment in Myanmar is relatively low.

"It will not be very huge investment approach but it will be a long-term process. It is better to start small and develop in a sustainable way," said Staerk.

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