Australian Organization to Myanmar - Essay Example

Establishing an Existing Australian Organization to Myanmar 0 Introduction VVRS Australia PTY ltd is a global commodity trader that deals in the importation and exportation of a variety of edible stuff. Its focus is the agricultural products. The organizations interest is in the international market capital goods being wheat sugar and barley. Some of the products that VVRS trade are selling of Australian barley, wheat, legumes, dairy products, lentils, oats, beans, peas, and the company also buy the same products. Most of these products are agricultural products that require preservation to reach the market when still fresh. The trade also requires marketing skills to enable one sell the products internationally (vvrs.australia.com, products, 1). Manufacturing VVRS is a manufacture, Trading Company, distributor and wholesaler; most of their products go through manufacturing before selling. Some products are packed and sold for processing in their destined markets, for example, wheat sold to Myanmar packaged into containers or sacks before exportation. Some wheat exports are in pasta form. VVRS Australia commits itself to providing quality service to its customers. The company’s priority is the customers. Ensuring that they enjoy the services provided by the company. The company also values time that their products take in order to reach customers. This report will cover try and cover all Australia as a business spot for both foreign and local investors. It will cover the political environment legal environment economic environment socio-cultural environment technology; lastly, we shall look at a SWOT analysis. The report aims analysing Australia as a potential investing country. 2.0 Political Environment 2.1 Government Stability The Myanmar government major focus is maintaining of economic and political stability, according to the Myanmar times in 2011 the Myanmar government had undergone some changes. The process of Initiating reforms was already in operation. The determination of this government to adopt a new political system is evident. This was the report in a U.N meeting in May (staff Writers, political will, 16-22). The Myanmar government was under the rule of a military regime until recently in October 2010 when it carried out its first election in 20years.the commencement of parliament in 2011 saw the election of Gen. Thein Sein as their prime minister. 2.2 Government Contribution The government provides laws that govern the foreign relations, trade defence. The Myanmar government has good economic relations with its neighbours. In order to attract serious foreign investments’ a significant improvement in economic governance, business climate, and political situation is expected (asiainfo.org, government contribution,1-2) 2.3 Analysis The political environment does affect an organization. For instance, VVRS Australia has international markets; in case of political instability, the company may end-up losing its markets probably due to inflation that may hit the country. Foreign investors may withdraw from investing in the country (Battersby and Byrn, international trade, 28). 3.0 Legal Environment 3.1 Regulatory Framework Most legal regulations encircle import and export controls, transfer pricing, regulation on corrupt practices, the Myanmar system foundation are on the concepts of the rule of law. (department of foreign affairs and trade.gov, legal system, 4). 3.2 Business laws The customs department is responsible for all imported products such as tobacco alcohol and petroleum products, whereas the tax department handles the locally manufactured products. This categorization aims at easing business transactions in the department of trade and for the investors (Customs.gov, excise moves to tax, 2). The addition of this department eases function of the tax department it also allows for the detection of counter freight programs smuggled into the country. 3.3 Labour laws There are many laws aimed at protecting the worker. A company wishing to recruit workers applies to the prescribed form to the township labour office. The office then lists the candidates with the qualifications. In private enterprise, salary is negotiation between employer and employee. Employees are further entitled to leaves and holidays. 3.4 Taxation laws According to the Myanmar treasury department, the Myanmar tax laws are simple and straightforward, foreigners non-residents usually pay 40% capital gain when working on Myanmar based projects. For a foreign national working on a state financed project the income, taxrate is 20%. The capitals gain tax calculated in three different ways indexation method, discount method and the third the investor bases his capital returns on the basic formula of profit less cost (Myanmar treasury, future tax system, 120). 3.5 Analysis Knowledge of the legal environment is something that a company needs to be aware of this allows for ease in running the business by conforming to the laws of a country. It avoids any conflicts that may arise from ignorance. 4.0 Economic Environment Myanmar is among the poorest countries in Southeast Asia. The economy is in a bad condition due to years of stagnation, mismanagement and isolation, the tradingeconomics.com reports of the country’s rich natural resource and the strong agricultural base. Rice is the major crop grown and it covers 60% of the country’s cultivated land (Myanmar,1). 4.1 Interest rates Myanmar’s lending interest rates were at 17% in 2008 according to World Bank (tradingeconomics.com, interest rates, 1). 4.2 Inflation Rates Inflation rate in Myanmar was at 7.87% as of 2010. Inflation rates are a rise in price measured against a standard level of purchasing power. Best measure of inflation is the consumer price (trading economic.com, inflation rates, 2). 4.3 Currency exchange rate Myanmar lacks an open currency market. Therefore, the best approach of changing money into Myanmar kyat is through black market money exchangers found in Myanmar. 4.4 Economy of Myanmar Myanmar is a transitional economy with a low GDP and a high poverty level. 4.5 Economic Trend of Australia The growth of communications technology increased openness of Myanmar to trade. It has improved the economy of Myanmar over the years. The geographic position of Myanmar has significantly contributed to the economic growth. Export and imports of gods and services has improved over the years. This is due to the improved infrastructure that allows for ease in movement of goods and services (Trends in economy, 22). 4.6 Tax policy Myanmars’ personal income tax raises 37% of revenue this has a close relationship with transfer payment system. Transfer system focuses on the need to pay whereas tax system focuses on the strength to pay. General tax system focuses on rising of revenue. The key areas include personal income tax, business income focused on supporting economic growth, economic rents from natural resources and private consumption (Treasury.gov, Tax Review). 4.7 Analysis The manufacturing company needs to have an idea of all the areas that affecting business, for instance knowledge on the interest rates will enable the investors know when invest in the country. Knowledge on inflation rates will allow the company to adjust the prices of its products. 5.0 Socio-cultural Environment Socio-cultural Environment tying the laws a country these can be ruinous for business. 5.1 Hofstedes Cultural Environment Hofstedes Dimension Management implication High Individualism: Australia reflects a high degree of individualism. This is common in the daily lives of Australian when travelling or doing business Collectivism: society in Thailand is collectivist. There exists a long-term commitment to the member group. In Australia recruitment is on a talent basis, promotion determination is on individual performance. Thailand’s recruitment is on family/ in –crowd connections. Promotion is based on seniority, age. Power Distance: Australia has a low PDI indicating a greater equality at the societal level. In Thailand, the high level of PDI indicates a high level of inequality in terms of power and wealth in the society. This PDI level in Australia is suitable for cooperative interaction. It gives the country a stable cultural environment that is suitable for attracting investors. A centralised decision making suites this society. Uncertainty Avoidance: In Australia, there is a low uncertainty avoidance this is mainly for the unstructured and unpredictable. In Thailand, high uncertainty avoidance indicates society’s low tolerance for uncertainty. Australia reflects a risk taking society. Requires a participative leadership style Thailand is a risk averse society. An autocratic leadership will work best. Masculinity Australia has a high masculinity. It aims at achievement, success. In Thailand, a low masculinity indicates a society with low assertiveness and competitiveness. In Australia, it implies a nation dedicated to its company and serious in its commitment to work. For Thailand, the society interest is in the welfare benefits of their work. Australia has a long-term orientation the country focus on the future, and it has greater value for prudence and perseverance. Thailand has a short-term orientation mainly concerned with present and the past. For Australia, business focuses on long-term growth. Training concentrates on developing skills and loyalty. In Thailand, this implies promotion depends on existing skills contribution. Business aims at fast and measurable payback. 5.2 Analysis The Hofstedes’ cultural dimension shows Australia as the most potential country for investing. It also is flexible and can do business with any state. 6.0 Technological Environment 6.1Technology Infrastructure Technological infrastructure affects the designing of the products. Myanmar is not that bad when it comes to embracing if technology. The society has highly employed technology in the business area production, marketing. 6.2 Communication Network Information and technology is a key determinant of economic growth, continuous expansion of communication network is vital in order to keep up with world standards. The state-owned telephone service provider MPT dominates Myanmar’s telecommunication sector. Myanmar’s mobile market has shown a growth by 140% in the last three years (Press wire, communication, 1). 6.3 Logistics’ Network Myanmar’s advance in transport makes travelling, the exchange of ideas easier. Myanmar round the world logistic Co, LTD plays the role of total logistics provider. This company has a strong network of international companies that reliable overseas supplier and buyer can be outsourced for local importers and exporters. Among the means of transport for goods include air, ship for international products and rail road for local products (MRTW. Logisticnetwork,1). 6.4 Analysis Battersby and Byrn conclude that a developed infrastructure boosts the economics of the country by promoting its growth and providing a favourable environment for the success of the businesses (“international trade,” 25). 7.0 SWOT Analysis 7.1 Strengths Myanmar has large fertile lands that are ideal for farming. 60% of agricultural land has rice plantation covering it (Myamar.gov, about Myanmar, 1). Myanmar has attractive tax exemptions; it has a deep-sea port (OIP, “strengths,”24). 7.2 Weaknesses Myanmar military regime is a weakness it is clear that the regime is made of a corrupt drug trafficking leaders. Myanmar has unstable electricity supply, lack of sufficient skilled labour, and restrictive government procedures (OIP, “weakness,”26). 7.3 Opportunities Myanmar has a strategic geographical location it is a land bridge between middle east and southeast Asia which are two biggest population countries(OIP, “opportunities”.27) 7.4 Threats Myanmar faces competition with neighbouring countries. Myanmar faces U.S and E.U sanctions; there is the risk of massive migration of people with skilled labour due to high attractiveness in the neighbouring countries. Many of the neighbouring countries dump their products in Myanmar (Oxford investment Program, “threats,”26). 8.0 Recommendations The government of Myanmar should invest in building of infrastructure such as installing electricity. They should also invest in educating the nation to get a population with skilled labour. The government should find attractive offers that will prevent the migration of skilled labour to neighbouring countries. Furthermore, the Myanmar government should put laws in pace that prevent other countries from dumping their products into Myanmar. In the case, of expansion to Myanmar, It would be a brilliant idea to open up a manufacturing division in the region. This is to maintain Myanmar as its market and gather first hand information on this market. The expansion would be beneficial in strengthening the relationship of the two countries. Achieving the expansion will also allow VVRS access to the two neighbouring countries bordering Myanmar. 9.0 Bibliographies Battersby, Robert Ewingand Bryn. “Maesuring Recent Trends in Australias Economic Remoteness.” International Trade in Goods and Services, 2003: 21-31. Itim International. Itiminternational.com. http://www.geert hofstede.com/hofstede_australia.shtml (accessed November 1, 2011). MWRT. “Sourcing the reliable International Suppliers and Buyers.” Myanmar Round the world Logistic CO LTD, 2010: 1-20. Myanmar Bureau of Statistics. TradingEconomics.com. september 2011. http://www.tradingeconomics.com/myanmar/interest-rate (accessed November 1, 2011). Oxford Investment Program. Business Plan 2010 for Developing a new SEZ in Myanmar to Attract Overseas Investors, 2010:1-40 Presswire. “Research and Markets:Myanmar-Telecoms, Mobile,and Internet.” Green Technology News. 2 November 2011. http://green.tmcnet.com/news/2011/11/02/5899973.htm (accessed November 3, 2011). Staff Writers. “Govt has Political Will for Reform, Advisers Tell Nambiar.” The Myanmartimes.com. May 2011. http://www.mmtimes.com/2011/news/575/news57501.html (accessed November 3, 2011). Treasury. “Myanmar Future Tax System.” Report of the treasury, Attorney Generals Department, 2009. VVRS AUSTRALIA. “About VVRS.” VVRS Australia. 2010. http://vvrsaustralia.com.au/index.php?option=com_content&view=article&id=45&Itemi =29 (accessed November 1, 2011). Read More