Myanmar is not yet attractive for foreign investment

Myanmar is not yet attractive for foreign investment

According to a report in the Wall Street Journal the interest has been there, especially since some democratic and economic reforms took place, but it seems that the reality does not match expectations

During this week the World Economic Forum (WEF) will hold its annual East Asian edition with prominent participants. Expected are 900 participants from 55 nations. They all will gather at the capital, Napyitaw, all 3000 hotel rooms are fully booked.

Already now, many firms have explored opportunities. Some have established a foothold of representative offices and joint ventures, but FDI Foreign Direct Investment amounted in the fiscal year 2012-13 (end of March) only to USD 1.4 billion or just about the same amount as Laos, however the latter has only a 10th of Myanmar’s population of 60 million.

The reason for the hesitance are lack of infrastructure, power shortages, high land costs, scarcity of skilled workers, cronyism and corruption, unclear regulation and insufficient official capacity. With other words cites the Wall Street Journal the first economic secretary at the U.S. Embassy, Machut Shishak: There is no frontier boomtown mentality.

FDI was mostly going to manufacturing (USD 401 million), power (USD 364 million), oil and gas (USD 309 million), and hotels and tourism (USD 300 million). The largest FDO slice came from Singapore (USD 418 million), followed by Vietnam and China, and Japan invested USD 54 million. There was no influx from the USA, not even after gradually lifting sanctions. The single biggest investment of USD 300 came from Vietnam’s Hoang Anh Gia Lai Group for a Angon complex, including a commercial centre, five star hotel, offices and apartments. Thailand’s Toyo-Thai Corp. invested in the first stage of a gas fired power plant.

McKinsey the international consultancy firm estimates that Myanmar has an investment potential of USD 170 billion, between now and 2030, and if realised this would certainly transform its economy.

Since normal business procedures are practically non-existing. It is also a problem to bring money in and out of the country. It is still customary that large amounts are effected in cash and this is horded in the safe rather than in banks. The reason is the uncertainty over government policies. International credit card firms are starting to expand, but few businesses accept electronic payment.

Also language is a problem to be solved, it is difficult to find qualified staff understanding and speaking English, another hindrance for setting up shop.

At the WEF conference some more aspects of Myanmar’s economic and political future will be discussed and TextileFuture will keep you posted.

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