SMI has continued to improve significantly EBITDA levels of profitability in FY2019 and positioned ourselves firmly as consumer-centered business in Myanmar. Our focus on consumers and international travelers has intensified over the last twelve months and these areas will be core to our future growth. We have maintained tight discipline on overheads and improved our underlying gross margins.
According to the Ministry of Hotels and Tourism of Myanmar, the country received over 3.55 million foreign tourists in 2018, a 3.15% increase over the 3.44 million in 2017.
This focus on the international traveler as well as the local consumer and therefore the growth of tourism fits well with the announced government policy to promote tourism, which have attracted premium hotel brands such as Wyndham Hotel Group and Marriott International to enter the hospitality market in Myanmar. The current number of hotel rooms in the country will almost double from just over 6,000 to just under 12,000 once those under construction and those permitted are complete. This is despite a reduction in FDI directed at communications and transport.
Notably, SMI’s duty-free business has benefited from the closure of the old international terminal which has diverted passengers to main terminal where our duty-free business is located. In addition, the mix of visitors to Myanmar has improved with visa free travel extended beyond ASEAN to Japan and Korea, while Chinese travelers can apply for visa upon arrival.
We continue to expand our relationship with the major Mall and Real Estate developers in Yangon to create differentiated retail experience and offerings with our comprehensive portfolio of well-known brands in the international retail and F&B industry, and work with our overseas business partners in the retail and F&B sectors.
We now have responsibility for over 800 staff in Myanmar and we are intensifying our efforts to broaden their work place skills, introduce international business practices as well as to bring onboard returning Myanmar nationals who want to participate in the growth of their domestic economy.
The overall economic environment has evolved, possibly less favourably or less quickly than might have been hoped and yet there are grounds for cautious optimism. Myanmar as a member of ASEAN is well placed to benefit from increased intra-regional trade and movement of capital. Whilst Myanmar is not a member, the creation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) should boost regional economies in Southeast Asia and there are a number of investment initiatives in Myanmar which are linked to the Belt and Road Initiative in Myanmar which are linked to the Belt and Road Initiative (“BRI”) of the People’s Republic of China (“PRC”).
It has been noted, in the Oxford Business Group’s Myanmar Report (2019) that the economy strengthened in 2018 as a result of a recovery in commodity prices ranging from agriculture through to Oil and Gas. The GDP is still growing by at least 6% a year, and would grow faster if improvements in the power supply can be realized. Myanmar’s reclassification as a lower-middle income country is a confirmation of rising wealth levels among the population of more than 50 million. We will look at the opportunities offered by the new Myanmar Companies Law to further integrate with our local Business partners.
Therefore, whilst there are headwinds for the Myanmar economy, we believe that the increasing sophistication of the urban consumer, the rapid growth and penetration of mobile communications and the recovery of Asian led tourism augurs well for SMI’s future growth.
The underlying improved performance of our core businesses in FY2019 gives us strong confidence for the next financial year; we see very limited need for capital investments going forward and our 3 core business pillars are poised to further expand and entrench our business presence in Myanmar. we look forward to delivering the next chapter in our growth story.
President and Chief Executive Officer