Singapore's early movers going strong

Security officer Myo Min (centre), 35, watching bellboy Wai Yan Tun (left), 21, transfer luggage at the Parkroyal Yangon.
Security officer Myo Min (centre), 35, watching bellboy Wai Yan Tun (left), 21, transfer luggage at the Parkroyal Yangon.PHOTO: TIFFANY GOH

Having made their mark in Myanmar long before the country's recent opening up, these pioneers face challenges from a wave of new investors. By Fiona Lam

Four employees of corporate law firm Kelvin Chia Yangon huddle in a small hotel room. It has been turned into a simple office equipped with old desktop computers and a table to receive clients.

In the toilet are neat stacks of work files and folders, flanked by rolls of toilet paper as well as dishes and cutlery used by the staff for lunch.

The four employees - two lawyers, a paralegal and an accountant - have little privacy at their work desks in the cramped space.

That was back in 1995 during the early days of the Myanmar arm of Singapore law firm Kelvin Chia Partnership. Back then, office logistical problems, such as unstable and expensive telecommunications, drove its four-man team to work out of a hotel room, said director Cheah Swee Gim.

Besides, the cheap hotel room rates of about US$500 (S$700) a month meant that the team paid only "minimal rent", Ms Cheah said half-jokingly.

SHORTAGE OF TALENT

Whether I recruited in 1995 or in 2012, the skillsets were still the same.

MS CHEAH SWEE GIM, director of the Yangon office of Singapore commercial law firm Kelvin Chia Partnership, on the Myanmar people's lack of global exposure

Kelvin Chia Partnership is an example of a Singapore company that made its foray into Myanmar long before it opened up. Since 2011, direct investments from Singapore have surged, making it the third-largest investor with US$10.2 billion of foreign direct investment as of June, according to government figures.

Today, Kelvin Chia Yangon has 60 employees. The firm ventured into Myanmar because the Singapore market was getting more competitive, and the type of deal work in an emerging market - such as big agricultural projects - was more "exciting", Ms Cheah said.

Other Singapore first-movers in the Myanmar market include Super Group. The instant food and beverage manufacturer introduced Coffeemix to Myanmar consumers after it established an exclusive distributorship with its Myanmar partner in the early 1990s.

Today, Super has a market share of about 39 to 45 per cent in Myanmar, where its products and billboards are ubiquitous. Super Coffeemix sachets are used even at Lo Ta Ya, a traditional teahouse famous in Yangon among Burmese people for its breakfast.

EARLY YEARS

One of the biggest obstacles for pioneer companies in the early years was the inadequate infrastructure.

Luxury hotel Parkroyal Yangon had generators on back-up because the utility supply was not consistent, said Mr Neo Soon Hup, chief financial officer and head of business development at Pan Pacific Hotels Group.

The Singapore-based group went to Myanmar in 2001 when it acquired Hotel Sofitel Plaza Yangon, which it later rebranded in 2003 as Parkroyal Yangon.

For shipping and logistics pioneer Phee Group of Companies, coming up with creative ways to tackle poor infrastructure was all in a day's work. The group represents major global shipping lines, including NYK Line and ZimLine. It found that delivering heavy machinery, such as major rig equipment, was a constant challenge due to ageing bridges and bad roads. So the company had to strengthen the bridges that could not withstand its 30-tonne cargo.

During the monsoon season, flooded roads would also force the group to improvise by chartering tugboats to transport the cargo by barge instead, using the storm-swollen inland waterways.

"It was difficult, but we're very satisfied when we found a solution and delivered all our goods intact with no damage," said managing director Ben Phee, who founded the group in 1993.

Although Myanmar's infrastructure has improved significantly since then, some basic issues remain. Internet speeds are still slow and buildings take several years to be built. So it continues to be difficult to find good office space at reasonable rental rates, Ms Cheah said.

Another hurdle was the limited skillset of Myanmar nationals, which meant employers often had to train hires from scratch.

Phee Group, for instance, had to teach its staff basic office skills, such as how to hold meetings and draw up proposals.

Unfortunately, the situation has not changed much since the 1990s, because the Myanmar people have been unable to get international or commercial exposure, Ms Cheah said. "So whether I recruited in 1995 or in 2012, the skillsets were still the same," she added.

The shortage of skilled human resources also led to Singapore companies poaching talent from one another, Ms Cheah said.

Some veteran businesses, such as RVi Group, experienced more industry-specific problems.

RVi, which ventured into Myanmar in 1996 and provides publication services, had been distributing its newspapers using motorcycles - until the authorities made an overnight decision in 1999 to ban motorcycles.

The group then switched to bicycles. But a month later, even cycling was suddenly restricted in certain areas - forcing the firm to use cars instead, which drove up costs.

RVi chief executive Argus Ang said matter-of-factly: "Every time there's a change in rules or regulations, we have to adapt." The group also provides education and professional development services.

The 2003 sanctions imposed by the United States also dealt a blow to some Singapore businesses, including Phee Group. In response, the group increased its Myanmar team size and assured its employees it would expand to other markets, such as Asia, instead of letting staff go.

For Parkroyal Yangon, the sanctions led to doing business in cash. For a long time, foreign-issued credit cards were not allowed in Myanmar, which required the hotel to "maintain extra vigilance and security" when managing its cash transactions, Mr Neo said.

COMPETITION HOTS UP

Being early movers, the Singapore companies encountered little competition in Myanmar in the initial years. Back then, total imports and exports and the number of containers were "very small" - about a tenth of today's volume, Mr Phee said.

At the same time, activity in the general business sphere was low. Parkroyal Yangon tackled difficult industry conditions at the time of its entry, with low visitor arrivals and consequently low demand for hotel rooms. "Myanmar was a developing economy which exercised tightly controlled trading and interaction with foreign countries," said Mr Neo.

Competition-wise, it is a whole different story today. New entrants are clamouring to grab a piece of the Myanmar pie, but the old-timers are undeterred.

Wages in every industry have doubled and land cost and rental have surged more than five times in the last three years, Mr Phee said. Phee Group is counting on its established performance record to differentiate it from new service providers. The group's second warehouse will be completed next year and it has set its sights on expanding to Indonesia and Malaysia.

Kelvin Chia Yangon's Ms Cheah no longer sees her company as a foreign law firm, but a local law firm with international expertise. "And, notwithstanding the international competition, in every jurisdiction there is always room for a very strong local law firm," she said, with confidence.

To Mr Ng Ooi Hooi, Keppel Land's president of regional investments, the increasing hotel supply is challenging hoteliers to offer premium products and services for the rising number of savvy guests. Keppel Land established two hotels under the Sedona brand in Yangon and Mandalay in 1993. The five-star Sedona Hotel Yangon has just been revamped and a 29-storey wing extension is being added.

Similarly, Parkroyal Yangon recently completed a multimillion-dollar refurbishment. To cater to the growing number of extended-stay travellers, the hotel has converted part of its room inventory into one-bedroom serviced suites.

With the general election scheduled for this month, some businesses are taking a wait-and-see approach.

Separately, companies are eyeing possible changes in Myanmar's laws, including a new Bill on investments and the updating of the century-old Companies Act.

In any case, the Myanmar market remains hungry for information and thirsty for something new, said RVi's Mr Ang, who is also president of the Singapore Association of Myanmar.

He added: "So if you have the right business proposition, this is the place to come to."

A version of this article appeared in the print edition of The Sunday Times on November 01, 2015, with the headline 'Singapore's early movers going strong'. Print Edition | Subscribe