Unilever Plans Second Plant in Burma With First Barely Open

By Jared Ferrie 6 June 2013

NAYPYIDAW — Anglo-Dutch consumer goods giant Unilever has drawn up plans for a second factory in Burma, an executive said on Thursday, showing its confidence in the newly emerging market even before production starts at its first plant there.

International companies are lining up to enter Burma now that Western countries have lifted or suspended sanctions following the end of nearly half a century of military rule in 2011.

Coca-Cola Co said on Tuesday that it had begun bottling in the Southeast Asian country for the first time in more than 60 years and Unilever said the same day it was opening its first factory since its operations were nationalized in 1965.

“We’ll open up a second one later this year,” Bauke Rouwers, chairman of Unilever Thai Trading, told Reuters on the sidelines of the World Economic Forum being held in Burma’s capital, Naypyidaw, in recognition of the dramatic reforms under way.

After re-entering the country three years ago, Unilever already supplies 100,000 outlets with hygiene products including shampoo and toothpaste as well as the chicken seasoning powder that it will make at its new factory.

Production is due to start in a few weeks, with a number of the Burma nationals currently working in its factory in Thailand returning home to work at the plant in the commercial capital, Rangoon.

The company says it will invest 500 million euros (US$654 million) in Burma over the next decade.

Peter Ter Kulve, president of its Southeast Asia and Australia region, said the money will be spent recruiting and training staff, building up a distribution system, expanding its manufacturing base and marketing the brand.

“Eventually it is going to be an affluent country,” he said. “They have resources, people, agricultural land, oil and gas, a lot of tourism.”

Capital Abuzz

The World Economic Forum is the biggest event ever seen in Naypyidaw, a new capital that was built from scratch by the former junta a decade ago.

The city is buzzing with business people, foreign officials and academics, debating how to develop the economy and ensure all its people benefit after decades of isolation.

“There has been quick change, good momentum. Now it has to be sustained,” said Heang Chhor, a senior partner with the McKinsey Global Institute.

In a report at the end of May, consultancy McKinsey forecast that Burma’s economy could more than quadruple from $45 billion in 2010 to $200 billion in 2030.

The number of consumers with “discretionary spending potential” could grow from 2.5 million of Burma’s 60 million population to 19 million, it said.

Economic growth would be driven mainly by agriculture, mining and energy, infrastructure development and manufacturing.

Heang Chhor said manufacturing was the most important of those and could grow from about 15 percent to one third of the economy, creating 6 million jobs, as manufacturers move in from China and other Asian countries, attracted by low labor costs.

But the report warned that Burma desperately needed to increase the productivity of its workforce.

A worker in Burma “adds only $1,500 of economic value in a year of work, around 70 percent less than the average of seven other Asian economies” including Thailand, China and Indonesia.

Other analysts caution that democracy is still fragile and the military remains a force both in politics and the economy.

But Unilever’s Ter Kulve said he was not worried about the possibility his company might be nationalized once again. “We believe the country has embraced being an open trading partner of the world,” he said.