Jean Loi’s bold steps in Myanmar promise to position VDB Loi ahead of the game
From the ground up: that is the message to multinationals scouring Myanmar’s investment climate for a go signal. Word of the country’s reforms after more than 20 years of isolation has spread and international corporations standing on the outside have put their ears against Myanmar’s teak door.
The corporate view from within is more complex, says VDB Loi managing partner and owner Jean Loi, whose legal and tax advisory firm launched in Myanmar in July. Amid the media storm that has surrounded the so-called opening of Myanmar and the loosening of US and EU sanctions, few deals have been inked. Those who have made it to Yangon are telling the story of molding a business environment from a ball of clay.
“We’re doing everything from scratch,” Loi says at the firm’s flagship office in Phnom Penh. That means integrating a local legal and tax team based in Yangon. It means standing poised to take in rapid-fire changes in regulatory code and cultivating contacts with the policy makers steering reform.
Loi says the company is the first international tax and legal consultant with its feet on the ground in the nation, a step that could bring it to the forefront of the industry there. In the rest of the region, VDB Loi will compete with more established tax firms such as DFDL and PricewaterhouseCoopers, where it will look to carve out a specialised niche. In Myanmar, however, VDB Loi’s early foray could give it an advantage.
Myanmar’s legal and tax environment will not be easily navigated. The country is experiencing a windfall of reform. Business regulation should look considerably different in a year’s time.
On April 1, a series of tax reforms came into effect, to a degree demonstrating the Ministry of Finance and Revenue’s commitment to reshaping outdated regulation. The reforms lowered income tax rates for salaries earned in local currency and, most significantly, created flat rates on some corporate tax. Many of the codes had been untouched since 1990 or 1988.
It is an existential moment for the firm, which officially opened its doors in Phnom Penh only a few months earlier. VDB Loi is taking root in Myanmar with hopes of helping other companies do exactly the same. The lessons learnt now will be fodder for future consulting insight.
Infrastructure in many areas of the country is abysmal. Power outages constrict productivity even in the country’s economic hubs. Office space is going for about $50 per square metre in Yangon, a price most multinationals will find incredibly high for the quality of the facilities. Myanmar has only two blocks of proper office space, leaving companies little choice but to operate out of villas and apartments, according to Loi.
Human resources has been one of VBD Loi’s biggest challenges thus far in Myanmar. Isolation has left the workforce stuck in its ways, Loi says. Stimulating a change in work ethic will take time and local staff will simply fall short of international standards.
Surprisingly enough, establishing an office in Yangon has not been any more challenging than setting up in Cambodia, Laos or Vietnam. This runs contrary to the image of Myanmar as the land of corrupt barriers and red tape. The country was ranked 180 out of 182 countries on Transparency International’s Corruption Perceptions Index in 2011, making it one of the most crooked business environments in the world.
In a sense, Myanmar is ahead of the game. When Loi arrived in Cambodia in 2002, the investment process required about six months of approvals, piles of documents and a thumbprint on every page. Stamps are being put to documents faster in Myanmar. Government approvals come on a much more discretionary basis due to a dearth of regulation, Loi says. A company can be set up in two months.
“It’s about your business case… The officer in charge needs to give you approval. That’s why you really need some good connections with the ministers to understand how this works.” In August, Loi took a meet-and-greet trip to Naypyidaw, Myanmar’s new and somewhat deserted capital, to help better the government relations that will be key to the company’s success.
While Myanmar will be integral to VDB Loi’s presence in the region, much of the company’s business will be in Cambodia, Indonesia, Laos, Singapore and Vietnam. The company formed early this year after a surprise breakaway from DFDL and will emphasise tax consulting, whereas regional competitors tend to be heavy on legal expertise. VDB Loi will look to make a mark on the industry in the region, Loi says. “We were not going to do this from a little villa down the road. We’re going to make this big.”
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