SME Development and Management in Myanmar

Small and Medium sized Enterprises (SMEs) play an essential role in the economic development of Southeast Asian countries. Generally, the SME sector accounts for more than 90% of all firms as well as the biggest employment source contributing for over three quarters of the workforce especially for the women and the young. As such, the SME sector will remain the back bone of most of the economies in the region for some time. Supportive measures and encouragement for SME development is therefore urgently needed at both the sub-regional and national level. As such, an SME development strategy can be regarded as one of the pillars of a developing country’s national development strategy.

In Myanmar, SMEs contribute to about 90% of total enterprises and about 70% of the total work force is employed in SMEs. Although SMEs dominate every sector of the economy, supportive policy measures are still lacking in Myanmar. The status of SMEs in Myanmar among South East Asian countries is relatively low due to its low productivity, shortage of capital, outdated technology and poor market access. Moreover, there are no laws in Myanmar that pertain to SMEs.

Although SMEs can be found in every sector of the country, their legal status and statistics are available only in the manufacturing sector accounting for more than 40,000 firms and 92% of total domestic firm in Myanmar.

Among the SMEs in Myanmar, food-processing industries account more than 60% of total firms, which largely operate based on “learning by doing” in production as well as marketing. Food-processing companies include rice mills, oil mills, powdering machines, sugar mills, bean & pulses processors, ice factories and confectionaries, which make up about 90% of food-processing industries. In addition to this, rice mills make up half the number of food processing firms in Myanmar. As Myanmar adopted market oriented system in 1988 and encouraged privatization, the private manufacturing firm increased three fold during 1988/89 to 2011/12.

SMEs of Myanmar can be basically classified as the following: (1) Traditional SMEs; (2) Import substituted SMEs (Active SMEs); (3) Agricultural and resource based export oriented SMEs (Modern SMEs). That said, most of Myanmar’s SMEs are traditional SMEs, which constitute more than 80% of the total number. Import substituted SMEs are mostly concerned with food and beverage, household utilities, plastic goods, basic electronic goods etc. They are located in the main cities and account for probably less than 10% of the total. A few export oriented industries like  modern rice mills, bean & pulses processing, fish and prawn processing, wood-based factories and garment factories have emerged recently in Yangon  and Mandalay under market oriented system.

As such, SMEs development in Myanmar is mainly concerned with the transformation of traditional SMEs into active SMEs and then eventually into modern SMEs. SMEs in Myanmar still face various problems such as lack of financing, low level of technologies, and unequal playing field with Foreign Direct Investment firms[1].

Myanmar desperately needs to solve all these problems in order to gain SMEs development. And in-depth study on how Myanmar can overcome these barriers and effective policy recommendations for ways to maximize the growth of SMEs is urgently needed.