Focus on ASEAN – Malaysia and Myanmar

| March 14, 2018

Malaysia and Myanmar, formerly known as Burma, have taken very different paths in recent history, and are the focus of today’s post on Australian business opportunities in ASEAN.

Malaysia

Malaysia is an advanced middle-income nation with aspirations to be a high-income state. Analysts place it in the ‘demographic sweet spot where a young, growing population demanding greater product choice, better quality and higher standards of service.

Malaysia is therefore an ideal test market for Australian companies entering ASEAN. It has a skilled multilingual workforce, advanced infrastructure and logistics networks, similar regulatory and administrative standards to Australia, and a central location within Southeast Asia’s high-growth markets.

Approximately 300 Australian SMEs are already present on the ground in Malaysia, while 3,800 are doing business with the market. International expertise is highly sought after in the country to drive greater industry output, productivity and private sector involvement and Australian companies are well positioned to assist Malaysia to achieve its industrial and urban development ambitions.

Opportunities for Australian companies in infrastructure and smart cities are particularly bright.  Over 80 per cent of Malaysia’s population is expected to live in urban centres by 2020, one of the highest urbanisation rates in ASEAN. Such growth pressures will require the full suite of infrastructure development equipment and services, including public transport systems, design and engineering expertise, systems integration and green technology.

Australian companies have a strong track record in smart and green technologies to develop globally competitive infrastructure and deliver transport technology solutions to facilitate mobility.

Healthcare and wellness is another growth sector.  Private investment and spending in the healthcare sector is expected to reach US$20 billion by 2020 and, after Singapore, Malaysia spends more on healthcare than any other ASEAN country. An increasingly affluent and ageing population has developed an interest in health awareness, wellbeing and preventive care and this will create opportunities for Australian medical, health and complementary products, services and expertise.

Malaysia’s multiethnic population drives demand for a variety of fresh and processed foods, ingredients, beverages and Halal-friendly products. Food and agribusiness therefore offers opportunities for high value Australian exports as consumption has shifted significantly in recent years from staple commodities towards higher-value imported items.

As with other nations in the region, Malaysia’s digital economy is booming.  Online retail sales are expected to grow seven-fold to US$6 billion by 2020, driven by sustained income growth.

Malaysia’s growing connectivity is reflected in mobile penetration rates of more than 144 per cent – meaning there are almost one and a half mobile phones for every person. There is therefore high demand for technologies that can bring Malaysia’s 1.1 million registered businesses into the digital economy. As the banking sector consolidates, opportunities are emerging in banking technology, platforms and mobile applications and so financial and insurance products is another promising area.

Malaysia is a world leader in Islamic finance, creating opportunities for Australian firms to expand customer bases and tap into Sharia-compliant financial services, products and expertise in a US$2 trillion financial market.

Education is a strength for Australia in the entire region, and Malaysia is no exception to this rule.  Australia is a leading overseas study destination for Malaysians, and education is a pillar of the bilateral relationship. Aspirational parents continue to seek better education opportunities for their children, including through international study or pursuing Australian qualifications in Malaysia.

Resources and energy is another Australian bulwark and the energy sector will continue to be an important contributor to Malaysia’s economy, despite a reduced focus on field exploration. Cost efficient Australian firms can share their expertise of working in challenging environments, including marginal and deep-sea fields, as well remote area maintenance and operations.

Innovative technology and cost-saving services will be increasingly attractive to the oil and gas industry in Malaysia as well as value chains operating within ASEAN. Australian mining equipment, technology and services companies are well established in Malaysia. An expected focus on environmental issues may lead to opportunities for Australian expertise in that field.

Myanmar

Long closed to the outside world under a repressive and secretive military junta, Myanmar has seen strong economic growth since embarking on political and economic reforms in 2011. Although it remains one of the poorest and least developed countries in the region, Myanmar offers significant long-term potential through its proximity to developing markets and it has strong growth in national income, a youthful population eager to study and learn and an extensive resource base.

Myanmar’s business landscape is changing, just as its jungles are being razed for palm plantations. Construction cranes vie with the tall spires of Buddhist temples across the commercial capital of Yangon as new hotels, offices and shopping centre developments get underway.

More and more foreign investors are making the most of Myanmar’s competitive advantages through export-orientated factories in special economic zones and ventures to deliver increasingly sophisticated goods and services to its population. Domestic companies are also diversifying their business activities, venturing into a wide range of activities across property, manufacturing, tourism, finance and energy.

Australian trade with Myanmar has grown steadily over the past five years, with wheat exports and education services leading the way. Australian investment is concentrated in energy, financial services, construction, and consultancy services and around 30 to 40 Australian firms now operate in Myanmar.

Myanmar is improving education outcomes, particularly technical and vocational training, where significant skills gaps exist in many industries. Few Myanmar students study outside the country compared to other Asian countries but these numbers will only increase over time. The potential to increase the number of long-term students in Australia or studying an Australian qualification in the region is therefore promising.

Resources and energy are another area of rich potential which foreign firms have fixed their eyes upon.   Myanmar’s extensive natural resources include oil and gas reserves, minerals, forests and fish stocks and recent mining legislation reforms have led to growing international investment in the country as it slowly opens up again to the outside world.

Premium food and beverages are another growing market and opportunities exist to supply processed and packaged premium Australian food and wine. With new restaurants opening regularly in the capital city and other urban centres, Australia can build market share in the retail and food service sectors through targeted food promotions at hotels, restaurants, retail supermarkets and local trade shows.

Given its favourable climate and geography, Myanmar has the potential to become a major agricultural producer and exporter. Opportunities are emerging in dairy and aquaculture technology, as well as livestock farming, for Australian technology and expertise to assist with lifting productivity.

Despite this brightening trade picture, Australian firms need to be aware of ongoing risks as the country transitions into a more open and modern economy.  These problems can include outdated investment regulations; underdeveloped transport, water and electricity infrastructure; and an underdeveloped financial sector with difficulties accessing finance. Meanwhile, levels of transparency and accountability, while improving, are still among the lowest in the world.

Mindful of these risks, Australian firms with a long-term view are set to benefit in sectors that complement Australian capabilities.

For more information, see the ASEAN Now report from Australia Unlimited from which this data was derived.

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