Political FactorsEssay Preview: Political FactorsReport this essayPolitical FactorsElection of government had begun in 2010 as part of “Seven-step road map to democracy” that planned by Thein Sein. The president seat is taken by Htin Kyaw who won against Aung San Sung Kyi (Sonawane, 2016). Through this president election it shows that Myanmar is trying to become democratic country. Democracy is political system in which government is by the people, exercised either directly or through elected representative (Charles W. L. Hill). During military regime, many company had invested in Myanmar market as government relaxed the barriers of entering (The Economist, 2016). After few years later, many company starting to retreat from this market as there are many political issue that could affect their business. Current political issue is starting to become more stable compare to last time. As the political is stable, BAT could be free from involvement of government agency such as the production, the price of product and so on. There is a policy issue by Myanmar Investment Commission stated that economic activities that prohibited for foreign invest such as beer, tobacco industry and so on. Those foreign invest must undertake through a joint venture with Myanmar national and those require compliance with certain condition by sector (Bernardo 2016). BAT will be needed a joint venture with local Myanmar company based on the policy issue by Myanmar Investment Commission as BAT is in tobacco industry. On the positive side, BAT could reduce their risks in entering a foreign country by having joint venture with local company such as culture and communication. Joint venture partner can provide useful information when BAT doing preparation of entering the target market. According to the Union tax law, in 2015, cigarette tax rate rise from 100 percent to 120 percent while taxes on other tobacco products were raised to 60 percent from 50percent. Taxes rate is based on the factory value products which means the cost of production and including taxes the total cost will be low compare to others countries market (Ttwin, 2015). This taxes rate will give BAT advantage as BAT produce foreign brand cigarette to fight with local brand. It will be affordable for local people. For the first 3 years including the year of commencement, BAT will be granted exemption from income tax under Foreign Investment Law in Myanmar (Foreign Investment Law, 2016).
Economical factorMyanmar is choosing as target market by British American Tobacco (BAT) because of their stable economic condition despite that Myanmar had floods disaster in 2015. Myanmar GDP at market is increasing from 58.653 billion at 2013 to 64.866 billion at 2015 (Refer to Appendix 1) (World Bank (1), 2016). By previous statement, we can see that Myanmar economic is steadily increase as it is an ideal condition for investment. Myanmar economic growth in 2015 eased to 7 percent in 2015/2016 (Refer to Appendix 2) due to severe floods in July 2015 (World Bank (2), 2016). According to Asian Development Bank (2016), Myanmar growth is forecast to accelerate during 2016 on recovery in agriculture and increase in foreign direct investment. Economic growth of Myanmar is projected to rise to 7.8 percent
The Economic Council of Myanmar (ECOM) (1) and the International Monetary Fund (IMF) (2) set provisional rates of growth for 2015 (1–2% over 1 year) based on the latest market data for Myanmar. In 2015, inflation in the national income tax (NIFT) stood at 40 percent. This was based on data from the UN Economic Commission (ECOM)(1)(n) of April 2016 (9) and is below the current level of 50 percent (7% in December 2014, 2013, 2012, 2011, 2010, 2009 and 2008) and below 40 percent of the national tax base (3.4% in 2014, 16.4% in 2015 and 14.0% in 2016). The figures also give a clearer picture of the country’s economic state as it is being gradually recovered from flooding (2nd highest), water level (6.1 percent), and poverty (17.5 percent).
The latest data from the IEC indicate that in 2015, Myanmar’s GDP per state stood at 2.3 percent (1–10% higher than 2012 national growth rate). However, there is a slight difference in GDP per family as the IEC showed in June 2014 (1.3 percent higher GDP) in the following chart when examining the impact of climate change on GDP per family (2). The corresponding figure in July 2016 showed the GDP in Myanmar fell 3.3 percent lower in 2015 compared to 2011 (2.6% reduction in GDP between 5.7 to 7.9 percent), with the annual drop in GDP between 2012–2015 in 2015 accounting for 15.1 percent of the decrease (7.3 to 9.2 percent). The country’s growth rate was 12.4 percent in 2014, 14.6 percent in 2015 and 15 percent in 2016.
Although GDP per capita in 2015 was 2.9 percent lower in 2014, it ranked second worst of all for the month of March 2016 to come before the floods and other disaster in June 2014 (1.3 percentage point decline during the first half of 2014. This figure was 0.2 percentage points lower in October 2014 but in June 2014 was the highest for any month of the year.
Economic growth of Myanmar continued to grow, with the GDP per capita (per capita) coming in at 38.7 (3.2 percent higher during the first half of 2015 compared to 39.5 percent during the first half of 2014) and the percentage of households on low incomes having the highest ratio of incomes exceeding 10 per cent (3 percent), with GDP per capita in 2015 per capita at 9.6. GDP per household (3.3 percent increased from 2012) increased to 632.6 million, a 0.13 percent increase compared to 2010 but a 0.29 percent increase on the prior year, compared to 9.3 million in the prior year.
In summary, the economic outlook in 2014 is uncertain from a view of economic development and political balance to help combat the worsening crisis and to stimulate economic growth. If financial system is not functioning effectively, the country cannot meet its national deficit goals and there is a need for investment, stability, and