Myanmar is stepping up its efforts to attract foreign investment and boost economic development.
Myanmar is stepping up its efforts to attract foreign investment and boost economic development.
They have launched a diplomatic offensive to improve their international image, although the problems in Rakhine have overshadowed the government’s appeal to western companies. “Myanmar is now definitely open for business,” the new chairman of the Myanmar Investment Commission (MIC), U Thaung Thun told Business Review after addressing a group of foreign businessmen in Yangon recently.
“Measures to make doing business easier in Myanmar, to attract investment and reduce bureaucratic delays have recently been put into place,” he added. This is a point the State Counsellor, Daw Aung San Suu Kyi also made when she addressed an international audience of academics, business people and students in Singapore in August, encouraging investors to explore the country’s investment possibilities.
“I would like to invite our friends to join us on our journey. Our journey is not a simple one; it is an adventure into our unknown future,” she said. “We have many challenges to face, many weaknesses that we must address, but we have confidence, confidence in the ability and the capacity of our people to grow into these challenges.”
The government is relaunching its drive to boost economic development. With elections some two years away, government ministers understand the political future of the country is on the line. A series of organisational changes have been rolled out that are intended to revitalise the government’s economic plans and implement a comprehensive strategy.
This is partly in response to the business community’s increasing frustration with the lack of government direction and policies. For months Myanmar’s business people have been complaining that the government has not shown any leadership, its economic policies direction, and there was an absence of new initiatives on the horizon -- amid general economic stagnation, and plummeting business confidence.
In the eyes of the Myanmar business community, one of the problems hitherto has been the government’s preoccupation with the peace process and constitutional reform.
“The government -- led by State Counsellor Daw Aung San Suu Kyi -has prioritised the peace process at the expense of economic reforms,” said U Zaw Naing, head of the local company, Mandalay Technologies. But the two are not mutually exclusive he said, and should be delivered in tandem.
“On top of that, the business community feels that the government does not have enough competent leaders in the area of economic policies,” he added.
The most important change has been the appointment of a new finance minister, U Soe Win in May. He is determined to revitalise the government’s economic policies and ensure their effective implementation, according to government insiders. Although he has only been in his job for a little over three months, there are significant signs that with him at the helm, that the government is committed to boost economic growth.
The economic committee structure that oversees policy and coordinates government initiatives has been revamped. The State Counsellor Daw Aung San Suu Kyi, is now clearly committed to addressing the country’s economic needs. She has taken over as chairman of the country’s top economic
policy committee: the National Economic Coordinating Committee (NECC), which combines economic ministers, Central Bankers, and members of the National League for Democracy’s economic committee.
At the same time, this committee has been strengthened and elevated to the pinnacle of the government’s economic policy-making. With the State Counsellor as Chairman, this group has added political authority. It is meant to help formulate economic policy and coordinate the government’s implementation of economic policy initiatives and strategy.
One of those is the new Companies Law that came into affect two months ago. The government hopes this will help kick-start their efforts to attract foreign investment. The law, which more than two years to finalise, will eliminate layers of bureaucracy and streamline the company registration process, creating greater investment opportunities, especially for foreign businesses. Under the new law foreign investors will also be permitted trade on the Yangon Stock Exchange (YSX), but officials have cautioned that more time will be needed before this is fully implemented.
“It’s a game changer,” said U Aung Naing Oo, Director General of the Directorate of Investment and Company Administration (DICA). “It will support the momentum of economic growth and provide a major impetus for foreign investment, by making it much easier for foreign investors,” he told Business Review.
Under the law, foreign investors can invest in Myanmar companies, and secure up to a 35% stake in the local firm, opening up enormous potential for foreign participation. “More foreign investment is likely to be attracted as international investors will be able to consider alternative financial deals, and not be restricted to forming joint ventures,” said Dr Maung Maung Lay, Vice President of the national employers group, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).
Registration and regulations are all to be simplified and the bureaucracy involved streamlined. “Everything is being done online: it’s a clear and simple process that significantly reduces the regulatory burden and compliance costs on companies,” said U Aung Naing Oo. It also introduces a level playing field for both local and foreign companies, he added.
“This is a positive step in the eyes of international investors as there will be more reliable information available,” said Ms Vicky Bowman, Director of the Myanmar Centre for Responsible Business. “It’s a solid law, a well-drafted law and a well-translated law,” she told Business Review. The main weakness is not in the law itself but whether it is effectively implemented and enforced, and the ability of companies to live up to the ambitions of the law, she reflected.
The Myanmar Investment Commission (MIC) has also been restructured, and new members added, precipitated by the resignation of the former Finance Minister, U Kyaw Win – who used to chair it. It approves all investment applications, especially for joint ventures, and spearheads the government’s efforts to attract foreign investment. U Thaung Tun, the Minister for the Ministry of the Office of the Union Government Minister and National Security Advisor – was recently appointed as Chairman of the commission.
An important part of the MIC’s work is to attract foreign investment through international trade road shows and promotional campaigns. An experienced former career diplomat and a fluent English speaker, U Thaung Tun is a perfect fit for the job.
“Myanmar needs to aggressively and actively attract investors,” said U Zaw Naing. “Investment promotion, especially in infrastructure and the government’s development strategy is sorely needed at this point of time,” he added. The government is simultaneously preparing a public investment pipeline or project bank – as it is more commonly called – to coordinate investment in the country’s infrastructure.
This is a list of prioritised potential infrastructure projects that are in the pipeline – intended to avoid random selection, as well as introduce rationality and transparency into the selection process, according to the government’s economic advisor, Sean Turnell. They are ranked according to socio-economic impact, access to finance and contract terms – whether government funded, with overseas development assistance, or public private partnership.
Within this context, there are great opportunities for Norwegian companies, the President of the Myanmar-Norway Business Council, Mr Ola Borge told Business Review. “There are good potential prospects in sectors like energy and aquaculture – where there is very strong need for new investments – and are areas in which Norwegian companies are world leaders.”
But investing in Myanmar is out without its dangers and pitfalls. “We see that many Norwegian -- and other Westerns companies -- have entered the market without a good strategy and understanding of the business environment,” he added. “Those businesses have often failed, while businesses that have done their homework have had very good commercial success,” he warned. “So I guess the message is: ‘Do your homework!’”
But while the government’s push to boost economic development and attract foreign investment is full-steam ahead, the Rakhine problems still cast a long shadow over the country’s investment climate, especially in attracting foreign investment. In the interim, Myanmar will have to rely on Asian investors, said U Aung Naing Oo. “We cannot expect investment from the West in the near future,” he said. Not for two or three years at least.
“We totally underestimated the impact of the Rakhine crisis – now compounded by the verdict in Reuters’s journalists case – on foreign direct investment from the West,” U Aung Naing Oo told Business Review. “We are fearful of the effect the continued crisis will have on investment from Europe and the US. We don’t expect it to change in the near future, not until after the 2020 elections,” he lamented. Though the government will try to restore better relations with those countries and as a consequence, we hope investment from them will come.
The State Counsellor is spearheading the government’s efforts to improve it international image and attract foreign investment. Her speech to the World Economic Forum in Vietnam in mid-September was another example of her attempt to ally international concerns and emphasise the government’s message: Myanmar is open for business. Left: Yangon is becoming a modern metropolis with new buildings reaching for the sky.