little guy goes big

An imaginary business expansion adventure for capitalists to read before bed…

James Connaughton, 04/03/2018

– The Know Nothing Digest staff writer of the month for March 2018.

Abstract

This report summarizes Courier Wizard, LLC’s exploration of the benefits and detriments of expanded services in 2018 to include the global export of regionally supplied goods involved in the development, manufacture and distribution of consumer healthcare, various prescription and personal health care products.  Multimarket segments we hope to serve are groups in Hong Kong, Guangzhou, Beijing, Taiwan and more recently to create a sister firm operating in Myanmar and Vietnam.  Our hope is to utilize the expert export facilitators at firms such as FDCG, to realize Courier Wizard’s market expansion goals.  Feng Da Consultancy Group is a British owned firm based in London, Fuzhou and Shanghai and is dedicated to helping foreign businesses sell to, or source from China and the surrounding regions.  This is in addition to our recent M&A with The United Laboratories International Holdings Limited, also operating in the region.  Our goal is to have multiple options in our supply and distribution network, which also have a proven track record in the emerging markets of Vietnam and Myanmar.

 

Proposal Discussion

Regional expansions have allowed us to enter the Myanmar and Vietnam healthcare markets through the creation of a sister firm to Courier Wizard.  This is to be accomplished through resources and contacts obtained through the strategic alliance with The United Laboratories International Holdings Limited, a proposal initiated and previously entered into by Director Vanhorn, of the United States office of operations in 2017.  A subsequent offer of a merger and acquisition was accepted upon successful initial operations in Guangzhou, Guangdong, China by The United Laboratories International Holdings Limited.   This has in turn lead to the creation of a proposed sister firm to Courier Wizard operating in the ASEAN economic development regions.

 

Courier Wizard’s new Vietnam and Myanmar multinational firm has been proposed to be centrally operated in either Hue City, Vietnam or in Yangon, Myanmar.

Hue City, Vietnam, currently has at its disposal laboratory space made available by the Carlo Urbani Centre.  This medical facility has been created in Vietnam through a grant from the Italian government.  The operations location in Myanmar is as yet to be fully determined, but there is a medical tradeshow occurring in Yangon later this year that representatives from Courier Wizard intend to investigate for suitable locations for our sister firm. Regional stability in the Myanmar region is in serious question after hundreds of thousands of Rohingya-Muslims have been forced to flee Myanmar in the face of religious persecution, creating additional human suffering in an area of the world that is no stranger social upheaval.

 

The concerns surrounding expansion into Myanmar can be obvious considering Nobel Peace Laureate and Myanmar state counsellor Aung San Suu Kyi endorsed the military crackdown that enflamed the humanitarian crisis in the country.  In spite of the political uncertainty, there is also an obvious need for investment in the reliable supply and distribution of viable medical equipment in the region (Vaessen, 2017.)

 

Courier Wizard’s desire to help in the humanitarian crisis in Myanmar aside, we have also looked into aiding in the growing infrastructure in cities across Vietnam.  The expansion into this region lacks immediate threats of violence to regional political stability that could harm our firm’s people and operations.   Vietnam was like Myanmar, once a region of economic uncertainty; yet improvement of managerial skills of government officials and compromising of ideological factors began the development of the agricultural and industrial sectors.

 

The level of extreme poverty has dropped dramatically in Vietnam since reforms put in place in 1986 and now Vietnam has one of the Pacific Rim’s fastest growing economies, and is a one-party Communist state. It intends on being considered a developed nation by the year 2020, just like China considers itself one now.

 

The goal of the Socialist Republic of Vietnam is to double the middle class by the year 2020 as well.  The income distribution is indeed distorted by all accounts, yet according to reports from McKinsey & Company, there is great indication that at least 75% of China’s population will also reach middle class by 2022.  This would mean a middle class the size of the entire population of the United States, in comparison (Euromonitor, 2017.)

 

Returning to the option of initiating operations in these regions we look at the currently established foreign direct investment medical facility, the Carlo Urbani Centre.  The Carlo Urbani Centre has focused on the testing of extremely dangerous respiratory disease viruses since its inception in March of 2009.   Treatments there have been initiated for causes of severe acute respiratory syndrome. Research has been carried out to combat tuberculosis and avian flu. There is some concern here at our firm, Courier Wizard, that the Italian government’s perceived ties to the Catholic church may invoke feelings of discontent with the Socialist Republic of Vietnam.  It has been demonstrated that to get decent employment in the Italian government it is important to be a good catholic.

 

Italy’s leadership, formerly ll Popolo della Libertà (the People of Fredom) Pdl and now Forza Italia, are both headed or strongly influenced by Silvio Berlusconi who is intertwined with Catholicism (BBC, 2012.) The Catholic church has often been silent on the matter of mafia activity and government corruption. Silvio Berlusconi was convicted himself of having sex with an underage prostitute in 2013.  Members still in power of Berlusconi’s party are open supporters of the Vatican and belong to a Roman Catholic sect known as Communion and Liberation.  These individuals see no difficulty in considering themselves good Catholics and public servants despite the actions of their party leader and this could anger an already overtly hostile Vietnam government, should the Italian government perceive to interfere inappropriately with their foreign direct investment activities in Vietnam (Roe, 2012.)

 

In recent years property has been seized by the socialist republic government however from private Christian citizens and although no laboratory we have set to work with has been targeted, we do have obvious considerations about our newly discussed sister firm set to operate in Vietnam.  Our concerns stem from the medical facility developer which stems from the Italian government.  The Italian government is seeking only of course to use the opportunity of Vietnamese citizens being required to travel outside the country to obtain healthcare and obtain healthcare devices as a reason for foreign direct investment in the infrastructure of Vietnam’s healthcare system.

Should the Socialist Republic of Vietnam decide that the Italian government’s FDI in the healthcare sector is a threat to the country’s tribal culture and identity or the power it allocates to the Party; it is likely that all politically outspoken entrepreneurs can expect to have their investments in the region readily confiscated by government agencies. Historically Christian communities in Vietnam have experienced religious and social freedom.  This being said, politically vocal Catholics have been targeted and arrested by the government as recently as 2017 (Open Door USA, 2018.)

 

The Socialist Republic of Vietnam has taken land away from developers for the country’s financial gain.  Many who flee the country for asylum in neighboring countries have been sent back to Vietnam.  The creation of state-owned entities from foreign firms creates a real moral hazard that can leave the people of that country without outside support from the international community should the country suffer regional disaster.

 

Institutional conditions in both Myanmar and Vietnam seem favorable considering the environment of openness to foreign direct investment from the United States at the moment.  This is seen as a sign of faith in not only the United States but in the global expansion of corporate governance throughout Southeast Asia and the Pacific Rim.  The Association of Southeast Asian Nations (ASEAN) was established in 1967 to facilitate ease of foreign trade in the region (ASEAN, 2017.)  Member states are Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. There is a long history of what is now termed as foreign direct investment in the region, with some foreign companies’ investments dating back to the 1800s.  FDI remained high in 2016 in spite of the 20% decline to under USD 97 Million.

 

The European Union is the largest investor group in FDI and MNEs in the ASEAN states, with more than 9,000 firms in operation.  Korean firms have established a significant presence in the region not only through production and manufacturing but through investing and expanding into other service industries such as distribution and construction.  Samsung made an investment into Vietnam’s biggest aviation logistics company due to the fast-growing logistics market in Vietnam.

 

Market seeking FDI investments from firms like German owned Bayer started operations in Vietnam in the mid-1990s.  Unlocking economic development by concentrating economic infrastructure development and public goods production in various areas and expanding from there has been the most successful strategy employed in the ASEAN bloc.  Growing demand and economic growth in the regions have encouraged the development of more zones of growth at strategic locations in strategic countries in the regional economic union.  Growth begats growth.

 

Currently two types of economic zones are being promoted in Myanmar, Industrial parks and industrial infrastructure development zones known as Special Economic Zones.  The industrial infrastructure development zones (known as SEZs) are being developed in line with national objectives such as generation of employment, promotion of investment and trade industrial development.  There are three currently approved SEZs in Myanmar located at areas of maritime access for ease of distribution.  There is the Dawei SEZ in the Taninthayi region, the Kyauk Phyu SEZ in the Rakhine State and the Thilawa SEZ in the Yangon region.  Courier Wizard’s first choice for entering the Myanmar market was the Yangon region in the Thilawa SEZ.  The Thilawa region offers private investor opportunities and government joint ventures as well.

 

Such special opportunities exist in Myanmar’s SEZs in part because of a Myanmar Special Economic Zone Law passed in 2014 that stipulates various incentives for foreign MNEs and domestic firms approved to operate in the SEZs.  There is an offer of a 5 year tax exemption on income created in the SEZs from sales within Myanmar, 50% investment relief for 5 years and 50% for an additional reinvestment of income earned with in 1 year of it being earned.  Exports in the Free Zone qualify for 7 years of tax exemptions along with the aforementioned 50% investment relief and 50% for additional reinvestment of income earned and then reinvested within 1 year of creation.

 

There are additional income tax exemptions for dividend payouts based on profits accrued locally for which taxes have been paid. There is an import tax exemption on the import of raw materials, machinery and spare parts, construction material and even motor vehicles used for construction purposes.  Myanmar has guaranteed asset protection that recognizes profits and property rights will be protected and the government has guaranteed that assets will not become nationalized.

 

Special Economic Zones are established to typically to specifically attract foreign direct investment.  Most SEZ countries designate areas where goods may be landed, handled, reconfigured or manufactured and re-exported with being subjected to Customs Duties.  This is the case just described in Myanmar.  The development involves public investment in basic infrastructure.  The Socialist Republic of Vietnam also regards such economic zones as tools to achieve regional economic development goals and additionally provide government opportunities for policy experimentation. Vietnam currently has over 325 such registered industrial parks as of year-end 2016.  This economic growth has been spurred on by a growing demand for SEZs and such industrial park facilities by foreign and domestic investors (ASEAN, 2017.)

 

Most economic development zones in Vietnam are located in the vicinity of Ho Chi Minh City or of Hanoi’s Red River Basin. Hue City is a coastal city located comparatively between Ho Chi Minh City in southern Vietnam and Hanoi in the north.  The investment opportunities afforded Courier Wizard by the developing economic zones created by the governments of Vietnam and Myanmar are conducive to industry based competition of the medial supply sectors in both countries (Peng, 2009.) Courier Wizard hopes to successfully expand in the ASEANs through a traditional cost leadership strategy and a focus strategy based on serving the particular needs of these underserved market segments.  Industry boundaries appear clearly identified and institutional conditions are very readily primed for economic development.  Opportunities for domestic employment in both areas due to our sister firm’s investment in the region will be a benefit for both the Vietnam and Myanmar populations.  This foreign direct investment should help to further stabilize the political situation in Myanmar and to further integrate the Socialist Republic of Vietnam into the practices of generally accepted accounting practices.  The global acceptance and protection of these principles leads to the further recognition of property rights, which in turn grants more focus on the universal protection of human rights.

Closing thoughts

While safety considerations for firm employees is a serious issue for expansion into Myanmar due to the military-sponsored religious-persecution humanitarian crisis in that country; expansion of the availability of modern medical care devices could help to foster a much-needed sense of business-as-usual normality.  Citizens can have opportunities for employment in a growing economy and differences of religion can become less of a focus when humans have a job.  The furthering of the successes of the people of the country of Vietnam can never make up for the imported horrors of the war that tore that region apart half a century ago.  The advancement of civil law and the personal securities it brings included with the safety that economic progress breeds among a people are the strategy behind the expansion of our firm into the ASEANs and the creation of our merger and acquisitions activities.  By improving the health of one country and its respiratory care capabilities, we improve the respiratory health of the world.  While war and corruption still threaten our earth, the ability to breathe easier will foster the will to breathe easier.

 

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