Myanmar expecting FDI surge

 

  Myanmar expecting FDI surge

  PRIVATE SECTOR EXPECTS NLD’S ELECTION WIN TO BRING IN MORE FOREIGN INVESTMENT

 

 

 

In an exclusive interview with The Nation last week, Maung Maung Lay, a vice president of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), said this was a political manifesto – all political parties are pro-business.

“We expect responsible and ethical business companies to bear with us. It’s a win-win strategy for [all of] us. Only then can we catch up evenly in the regional context,” he said.

Maung Maung Lay acknowledged that the election was at the centre of international attention.

He was elated that the poll had gone smoothly and said the private sector was prepared to tell the new government – likely to be formed and announced on April 1 – what it needs to do to support further economic development.

Much of it relies on the regulations that pose difficulties in doing business. Though Myanmar’s World Bank ranking for “ease of doing business” has moved up 10 places from 177, he is convinced that other countries will also do more to move up the ladder.

He said that while the situation had improved tremendously in the past five years, most of it was just superficial.

In the past year, SIM cards have become more affordable, and vehicles can be imported. The foreign-exchange market has been improved, while export-import bottlenecks have been cleared, he said.

While the regulatory environment had improved, he said the bureaucracy remained constrained as the “skills are not there”.

“That said, the optimism is there among international investors,” he said, adding that the UMFCCI had recently signed a memorandum of understanding with the American Chamber of Commerce, which indicates an expected rise in the number of American companies investing in Myanmar.

Meanwhile, he also expects more investment from companies in the European Union and Australia, following the visits of consultants, lawyers, banks and insurance companies to Myanmar.

“I didn’t expect to see a KFC restaurant here. Before, when we wanted to eat it, we had to go to Thailand or Singapore,” he said.

Maung Maung Lay also sees the need to re-energise local small and medium-sized enterprises (SMEs), which are the backbone of the economy.

This would require an investment in developing workers, something that has been missing for decades.

Liberalisation of the banking sector, meanwhile, was seen as somewhat satisfactory, but more needed to be done as domestic interest rates were still higher than in some neighbouring countries, he said.

Interest rates in Myanmar averaged 10.09 per cent from 2011 until 2015, more than double the 4-per-cent rate offered to Thai SMEs under the soft-loan scheme.

The agricultural sector could also be improved if land utilisation were improved, he said, adding that rather than facing land grabs, farmers should be allocated loans to improve their crops. 

 

Over-reliance on natural-resource exports. 

Maung Maung Lay voiced concern that Myanmar’s main export income derived from natural resources, and that their depletion could therefore hurt everyone.

The country also needed a social safety net for its workers, while labour protection should be enhanced, he said.

“All of these things will take time, as we have been behind the ‘Bamboo Curtain’ for some time,” he said.

With more than 30,000 members and 70 affiliated associations, the UMFCCI has taken note of the huge demand among foreign companies to form joint ventures with local companies.

To rely less on natural-resource exports, the manufacturing sector must be strengthened, and local firms were open for foreign partners, the federation vice president said. 

“Once we were the duckling maiden. Now, we are the darling.”

But he is not convinced that the anticipated revolution in the country’s manufacturing sector will kick off in the very near future. 

That, in turn, means that migrant workers in Thailand – estimated to number about three million – won’t return to their homeland unless the Kingdom starts forced repatriation.

“The return of labour? That will not happen abruptly,” he stressed.

One reason for the delayed boom in the manufacturing sector is slow progress in the development of Myanmar’s special economic zones (SEZs), particularly in Dawei and Kyaukphyu.

Contributing to the slowness is the economic slowdown in China and elsewhere, which has discourages new investment by those nations’ companies. However, he is convinced that the Kyaukphyu SEZ development contract will be awarded to a Chinese company, as China’s gas pipeline starts there.

However, foreign investment would eventually flow into Myanmar because Aung San Suu Kyi’s National League for Democracy won last week’s election, Maung Maung Lay said.

“Political stability is one of the main factors [that foreign investors consider],” he added.

He also hinted that the new government would need to strike a careful balance between the country’s economic development and the impact of foreign investment. FDI inflows were good, but they could widen the income gap, he said, and that may derail the democratisation process.

He was also concerned about the US dollar/kyat exchange rate, now that the central bank has insufficient foreign reserves to stabilise the market.

Meanwhile, the Asean Economic Community, which will come into being at the end of this year, also poses a big challenge. Maung Maung Lay noted that despite certain weaknesses, Myanmar must embrace AEC integration, though some sectors would be negatively affected. 

“People think that we are no match [for other Asean members]. But if we protect ourselves, we won’t grow. We should be open and learn from others. We can’t be an isolated place,” he said.