Political Factors

Political Factors

Election 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 factor

Myanmar 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

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