Could Coca-Cola put fizz into manufacturing in Burma?
- 5 June 2013
- From the section Business
Coca-Cola is opening not one but two plants in Burma in the coming year. This is after a more than 60-year absence after the country entered military rule in 1962.
Coca-Cola sees potential in selling to Burma even though it is the poorest country in Asia. Average income is below $1,000 a year, which is lower than even North Korea, according to the best estimates by the OECD and others. Measurement is an issue of course, but Burma isn't industrialised, a key factor in raising incomes.
But, it is a sizeable country with the 26th largest population in the world, according to the World Bank. It is nearly three times larger than that other closed Asian country, North Korea. This is why Burma's opening up has attracted such interest.
However, it was only two years ago that Aung San Suu Kyi was under house arrest and there were 9pm curfews. Now, businesses, like the giant Coca-Cola, are pouring into the last large Asian economy to open up.
Time is right
Coca-Cola is counting on the political and economic reforms continuing.
I went along to the opening of its factory outside of Rangoon and spoke to the company's chief executive, Muhtar Kent.
He emphasised that Coca-Cola views Burma as a market worth investing in because of its size, and that the time was right to return since he expects the opening up process to continue. Interestingly, he was also not very concerned about poor infrastructure, which is not uncommon in developing countries.
The return of multinational corporations that have the cash to invest and create jobs as well as partner with local firms could aid Burma's industrialisation process. The country, though, would need to make the most of the capital and skills on offer to ensure that they benefitted.
In the case of Coca-Cola, setting up the factory with a local partner is a step in that direction. The economic evidence points to joint ventures as being the most likely way to generate positive spillovers for the host country.
For the sake of the bulk of the Burmese people who are seeking a better life through economic development, industrialisation is key and that can be helped by multinationals - if their investments are managed appropriately.