Despite being ranked as dead last in a World Bank survey on the ease of doing business, a new report by Harald Friedl and Ruben D’Hauwers on Myanmar’s start-up scene portrays a community that might be intimate but certainly isn’t fledgling.
Myanmar’s economy is among the fastest growing economies in the world, experiencing just under eight percent annual growth in 2014, with growth expected to be keeping pace in 2015. Myanmar’s growth is outpacing its neighbors, with Malaysia experiencing under five percent economic growth and Vietnam’s economy growing at over five percent. If it achieves its full potential, a McKinsey report estimates that the Myanmar economy can grow from just $45 billion in 2010 to more than $200 billion by 2030.
Driving this growth is Myanmar’s rapid transition from a deeply isolated pariah state to one that is becoming increasingly integrated in the international community’s political and economic mechanisms. This market of 60 million people is blessed with bountiful natural resources including natural gas deposits, untapped hydropower sources, minerals, forestry, and plentiful arable land. As part of this transition process, the country has adopted new laws and avenues to attract foreign investment such as the November 2012 foreign investment law and the establishment of a stock exchange.
As the report notes, just three years ago internet penetration rates hovered around one percent while today it’s between 10 and 25 percent. The government is aiming to connect over two-thirds of the population to the internet over the next few years. Similarly, just several years ago cell phones were unaffordable to average Myanmarans, with SIM cards costing over $2000 due to intensive government control. Today, the same SIM cards cost just $1.50.
To service this rapid growth Myanmar’s start-up community has seen about 100 tech-based entrepreneurs/start ups, and around 500 Myanmar language apps developing around communities and incubators in Yangoon at DevLab, IdeaBox, and Project Hub Yangoon.
The report on Myanmar’s start-up scene is based off interviews with 60 industry insiders exploring recent developments and analyses the hurdles start-ups face to provide a state of the industry perspective. It identifies five key problem areas causing trouble for Myanmar’s start-ups: tech infrastructure, cultural hurdles, human resources, access to finance and the country’s legal and regulatory environment.
Obtaining capital is a key struggle for these start-ups even with the new foreign investment law, Myanmar start-ups struggle to obtain foreign capital due to arcane government laws that prevent foreigners from being shareholders in startups, instead requiring them to apply to embark on “joint ventures”. These joint ventures require high minimum capital requirements and remittance payments.
The report also notes that the Myanmar government can do much more to reduce red tape facing start ups. “It will be key to provide a stable legal framework and working conditions for the sector to become a motor for innovation and growth in Myanmar,” the report notes.
Despite the struggles that start-ups face in Myanmar, the growing and rapidly changing market remains a dynamic place of opportunity. For those interested in the Myanmar market and its nascent startup scene, this report is a must read.