In Monywa, ‘market economy’ leaves some businesses behind
March 21 - 27, 2011
A vendor at a market stall in Monywa in July 2010. Flour millers in the town accuse their larger competitors of manipulating the wheat price to squeeze them out of the market. Pic: Christopher Davy
SITUATED on the Chindwin River, about 100 kilometres (60 miles) from the confluence with the Ayeyarwady, Monywa has for most of its history been a trading town. Until recently that trade was confined mostly to the production and transportation of locally made goods, with little competition from foreign imports.
For the most part the town’s industries are still protected by trade barriers. However, the prospect of the removal of these barriers and greater competition from foreign producers – particularly after the ASEAN Free Trade Area (AFTA) comes into effect in 2015 – has many business owners here concerned about their long-term survival.
“We know we will face more competition from our neighbours and signatories to the AFTA agreement,” said U Tun Tun Oo, an edible oil producer.
His concerns were echoed by the other business owners The Myanmar Times interviewed on a visit to Monywa last month.
Many are taking computer and English-language classes organised by the management committee of the Monywa Industrial Zone, hoping these skills will put them in a better position to either face down competition from India, China and ASEAN member states or engage in joint ventures with companies from these countries.
About 20 businessmen are attending the first courses, scheduled to end next month, and the committee is also arranging to translate some business texts with the help of the Monywa University of Economics.
For businesses in Monywa, there are already some illustrative examples that show what happens to those unprepared for increased competition from foreign businesses that have better technology, more access to investment and produce goods on a much greater scale.
“The trend in our country is to reduce the state’s involvement in business and move towards an open market,” said U Tun Tun Oo.
For more than a century, Monywa was the centre of Myanmar’s blanket industry, meeting more than 80 percent of the country’s blanket needs.
“We don’t know how these [imported] blankets are made. We don’t even know exactly what raw materials are used,” said U Khin Maung Win, president of Textile Business Sub Group of the Monywa Industrial Zone.
Out of more than 100 spinning mills that were operating in the industrial zone here half a decade ago, just seven remain, producing recycled blankets from fabric offcuts sourced from local garment factories.
Producers say the death knell for the industry occurred well before the cheap imports arrived. Most of the blanket businesses were established two generations ago, and transitioned from manual spinning to mechanical spinning in the market economy of the post-independence era. However, the subsequent socialist period saw Myanmar’s industries sheltered from the global economy – and the competition that would have forced them to improve productivity.
“We weren’t exposed to the new technologies that were being used in other countries’ textile industries,” said U Khin Maung Win. “So we didn’t realise there was any need to make major changes to how we do things. With only local competitors, we could run our business with existing technologies and make a relatively successful go of it.
“But when cheap imports arrived we found the gap in terms of technology and investment was much bigger than we ever knew … we were in need of new technology in every step of making blankets – spinning, dyeing, printing and everything else.”
But consumers have little nostalgia for the locally made blankets that have largely disappeared from the country’s markets.
“I use imported blankets. They are colourful, light, and soft and also look better. Thanks to [imports] we can have good blankets at a cheap price. Our local producers can’t make anything as good as this,” said Daw San San, 43, from Yangon’s Hlaing Tharyar township.
While technology, or a lack of it, has decimated the town’s blanket industry, Monywa’s flour millers claim they are being hurt by the questionable market practices of larger flour millers, particularly those with access to foreign markets.
“Local flour producers have to rely on locally grown wheat. When local wheat costs more than imported wheat, how can our businesses survive? We do not have the connections – or the capital – to import wheat,” one miller said. “[The large local flour millers] mass produce flour, using much bigger machines than us, so they can reduce milling costs as well.”
Out of the 24 mills that were operating in the Monywa Industrial Zone last year, just 10 remained in February.
The larger mills survived because they had the capital to invest in modern milling machines – which reduce production costs – and to buy enough wheat at harvest season – when the price is lowest – to store for year-round consumption and avoid any market manipulation.
“Using the advantage of higher capacity machinery, some millers could produce cheaper flour than the other local mills. Their aim is probably to be able to compete with the bigger millers from Yangon and Mandalay. But this behaviour hurts the smaller millers in the Monywa Industrial Zone,” one local businessman said, before adding: “It’s the hottest topic of discussion in the business community here at the moment.”
A similar rationalisation is also taking place in Monywa’s automobile manufacturing sector. Perhaps wary of the troubles afflicting other local industries, the 42 partners in the “Chindwin Star” car manufacturing company have streamlined their workshops into two larger factories.
One group of 20 partners will continue to assemble cars in Monywa under the brand name “Thiha Tun”. The existing resources from their workshops will be combined into a single, more efficient factory, said U Min Zaw, the owner of Min Zaw car production and an investor in Thiha Tun.
“We are now collecting K10 million from each partner. That is just for purchasing new machinery. The total investment we are targeting is K2000 million,” U Min Zaw said, adding that members of the consortium are planning to visit China to study car production.
Another thirteen producers seem to have bigger ambitions. They have purchased 23 acres in Sagaing Industrial Zone, at a cost of K650 million, and are establishing an assembling factory.
“We aim to finish the factory in June and estimate it will cost another K1300 million. We are still choosing a name for our company,” said the group’s secretary, U Ko Ko Myat.
The factories have been established according to the guidelines of the Ministry of Industry 1, which oversees domestic car manufacturing. But their ambition is to establish themselves as a viable joint venture partner for investors from India, China or an ASEAN member state.
“Of course we will accept foreign investment. We are preparing ourselves for it,” said U Ko Ko Myat.
U Min Zaw said the Thiha Tun enterprise in Monywa was established “at least partly” to attract foreign investment.
“If and when an opportunity arises to establish a joint venture with a foreign partner, we will definitely join them,” U Min Zaw said, before adding: “Even now I’m learning English so I can deal with foreign businessmen.”