Apple Expansion into Myanmar Essay

Tags: apple central bank foreign direct investment gdp investment myanmar smartphones

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Global Economic Conditions



Apple operates in over 100 countries already, but there are still some markets available for the company. The one that has been chosen for the next international expansion in Myanmar. Apple already has a presence in most other Southeast Asian countries, but Myanmar has only recently become a democracy. It is a poor country, but relatively large, and is starting to see some strong economic growth. Foreign companies are starting to make their market entry. The trends for Myanmar are all quite recent. Five years ago there was little economic activity in the country, regular brownouts and a military junta. Today, there are signs of economic life. Moreover, where five years ago there was almost no broadband and it was prohibitively expensive, broadband in the country has been rolled out to most populated areas and is affordable.



Myanmar's economic story is mostly internal, but there is some influence of global economic conditions. The opening of this market has started to encourage foreign companies to enter, and like Apple there are many new entrants that already have strong presences in other SE Asian nations, so a move into Myanmar is easy to manage from a corporate office in, say, Bangkok or Singapore, using just a satellite office in Yangon.



The current economic statistics for Myanmar are as follows, gathered from the CIA World Factbook. The country's overall GDP is $330.9 billion, ranked 54th in the world. The GDP per capita, however, is $6300, which ranks 163rd in the world. However, the GDP growth rates are as follows:



Year

2015

2016

2017



GDP

290.8

308.6

330.9



GDP Growth Rate

7

6.1

7.2



Myanmar has the 7th-fastest growing economy in the world. There is little doubt that the vast majority of the country remains poor, with 70% of the workforce engaged in agriculture, but that actually helps Apple, because it can focus market entry solely on the key cities on Yangon, Mandalay and Naypyidaw. One estimate has the economic growth rate in Yangon at 11.17% per annum beginning in 2008, which is much stronger than in the country in general (Fox & Verrucci, 2017). GDP per capita is growing at roughly the same rate as the GDP overall.



The World Bank is working actively with the new government of Myanmar to bring about economic reforms, and sustained medium-term GDP growth of 7.1% is projected by that institution (World Bank, 2017). Given how far behind Myanmar is compared with other countries in the region, there is plenty of reason for optimism. The growth pattern in Myanmar will likely mirror that of other SE Asian countries, focused on key urban areas that will see strong sustained economic growth, and rural areas that will be focused more on eliminating overt poverty. But for Apple, this still means that there is good opportunity, especially in Yangon, to build a market as more people are able to afford the company's products.



In terms of other economic indicators, there are a few things worth noting. First, inflation has stabilized. Economic stability can often be an issue in emerging markets, but a stable economy is generally a positive sign for sustained growth. The kyat is a fully floating currency and the country still has stable inflation, which is a positive sign. The unemployment rate is 4% and stable, but also meaningless since most people don't earn enough from their employment to afford Apple products. More important is actually indicators regarding foreign direct investment, which is a more accurate indicator of how many Burmese will increase their wealth to the point where they are part of Apple's target market. FDI has varied over the past few years, which would be considered the economic transition period, ranging from months with $31 million to $2.3 billion (TradingEconomics, 2017). This indicates that the country's FDI picture is still small, and somewhat dependent on major projects that bring in a large sum of money in a short period of time. The largest source of FDI is the People's Republic of China. The four biggest areas are garments, agriculture, construction and tourism (Gelb, Calabrese & Tang, 2017).

Type of Economy



Myanmar is a nascent democracy, with a nascent capitalist economy. There are many issues facing the country in terms of economic structure. While the central government is working with the World Bank to open the economy, the previous military regime exerted strong control over almost all aspects of the country's economy.

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The process of opening up has really only been going on since 2013. That said, the telecommunications sector is open for foreign competition, which has spurred a wave of investment. There are no particular restrictions on smartphone providers, either, and the government appears committed to continuing this trend.



That said, Myanmar is not especially gifted with natural resources, and there are very few educational institutions. As such, neither the country itself nor its people are especially prepared to be competitive on the global scale. Most of the economic opportunity that exits in Myanmar specifically arises from the ongoing efforts to open up the markets. As each industry opens, there will be foreign investment that will help sustain GDP growth. So for Apple, the keys to Myanmar as a market will be related to the pace of detangling central government influence on the economy, and the form of investment that is brought into the country. Myanmar's move to a capitalist economy needs to be done right, but also quickly, in order for the country to realize the sustained growth that has been predicted for it.

Competitive Landscape



Even in Yangon, which is by far the wealthiest area of the country, the market for high-end consumer electronics is relatively small. The rollout of affordable broadband has led to an explosion in the number of smartphones, however. By 2015, Myanmar was listed as the fourth-fastest growing market in the world for smartphones, in an Ericsson survey (Trautwein, 2015). The country added over 5 million smartphone subscribes in 2015, or 6% of the world's total new subscribers, according to that study. This growth began in 2013 when the government removed restrictions on foreign investment in the telecom sector. Since then, players like Norway's Telenor and Qatar's Ooredoo have built out networks and by 2016, an estimated 90% of the country had signed up for cellphone service, from almost nobody prior to 2013 (Heijman, 2017)

The majority of the market is comprised of cheap smartphones, selling for prices as low as $20 (Heijmans, 2017). Old Samsungs are about as luxury as it gets in this market. China's low-end manufacturers like Huawei are the major players in the Burmese market at present. Consumers seeking Apple products or recent Samsungs typically must acquire them in another country. That said, Samsung does sell its phones in the country, so anybody with the money can acquire a new one, even if that market is relatively small. Apple does not have retail distribution in Myanmar.



No competitors produce in Myanmar, but that's because almost all of the world's smartphones are made in China anyway. China is a major trading partner for Myanmar. Because of the fact that Apple produces its phones in China, which borders Myanmar and is the country's largest trading partner (CIA World Factbook, 2018), there is zero chance that Apple would entertain production in Myanmar; the expansion will be sales only, just like in every other country for Apple.

Central Bank



The Burmese central bank plays the typical role of a central bank. It is responsible for ensuring the monetary stability of the country, and for regulating the banking industry. The central bank has been in place since independence. It governs the country's financial and securities markets as well (Yukate, 2014). There are two major roles that would be of interest to Apple. The first is the governance of monetary policy. To date, the central bank has done a fairly good job in recent years of managing the country's economy, allowing for growth without triggering inflationary pressures, and doing so with a floating currency. The performance of the central bank on the monetary policy front has been admirable.



The modernization of the country's banking sector is the other key area that should interest Apple. Consumer banking is nascent, and at this point mainly comprised of a number of major conglomerates in the country. Regulation of the banking industry, in a way that will allow innovation and modernization to flourish, will be critical. Most Burmese do not have bank accounts, let alone credit cards, both of which would definitely help Apple out quite a bit. In that sense, there is definitely work for the central bank to do, although at this point there is no indication that the central bank is doing anything wrong. It is simply….....

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References

Anderson, K. (2016) Myanmar in transition: Higher ed a likely priority for NLD-led government. World Education News and Review. Retrieved February 24, 2018 from https://wenr.wes.org/2016/03/myanmar-in-transition-higher-ed-a-likely-priority-for-the-nld-led-government

CIA World Factbook (2018) Burma. Central Intelligence Agency. Retrieved February 24, 2018 from https://www.cia.gov/library/publications/the-world-factbook/geos/bm.html

Fox, S. & Verrucci, E. (2017). Estimate GDP growth in Yangon using nightlights data. International Growth Centre. Retrieved February 24, 2018 from https://www.theigc.org/publication/estimating-gdp-growth-yangon-nightlights/

Fund for Peace (2018). 2017 Fragile States Index. Fund for Peace Retrieved February 24, 2018 from http://fundforpeace.org/fsi/

Gelb, S., Calabrese, L. & Tang, X. (2017) Foreign direct investment and economic transformation in Myanmar. Overseas Development Institute. Retrieved February 24, 2018 from https://www.odi.org/publications/10774-foreign-direct-investment-and-economic-transformation-myanmar

Heijman, P. (2017). The unprecedented explosion of smartphones in Myanmar. Bloomberg BusinessWeek. Retrieved February 24, 2018 from https://www.bloomberg.com/news/features/2017-07-10/the-unprecedented-explosion-of-smartphones-in-myanmar

TradingEconomics (2017). Myanmar foreign direct investment. TradingEconomics. Retrieved February 24, 2018 from https://tradingeconomics.com/myanmar/foreign-direct-investment

Transparency International (2018) 2017 Corruptions Perceptions Index. Transparency International. Retrieved February 24, 2018 from https://www.transparency.org/news/feature/corruption_perceptions_index_2017#resources

Trautwein, C. (2015) Myanmar named fourth fastest-growing mobile market in the world by Ericsson. Myanmar Times. Retrieved February 24, 2018 from https://www.mmtimes.com/business/technology/17727-myanmar-named-fourth-fastest-growing-mobile-market-in-the-world-by-ericsson.html

World Bank (2017). Myanmar overview. World Bank. Retrieved February 24, 2018 from http://www.worldbank.org/en/country/myanmar/overview

Yukate, C. (2014) Getting to know the Central Bank of Myanmar. Myanmar Business Today. Retrieved February 24, 2018 from https://www.mmbiztoday.com/articles/getting-know-central-bank-myanmar

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