NAYPYITAW, June 10 — In a cramped auditorium in Myanmar’s capital,
pro-democracy champion Aung San Suu Kyi had a message for the world’s
business elite: her country is teeming with foreign investors scouting
for opportunities in one of Asia’s final frontier markets, but not many
are actually investing.
Interviews with foreign and local business leaders on the sidelines
of last week’s World Economic Forum in the Myanmar capital, Naypyitaw,
show why.
Shoddy infrastructure, opaque regulations, red tape, recent bouts of
sectarian violence and lingering uncertainty over US sanctions are
hampering large-scale foreign investment in the country, strategically
nestled between India and China.
“Actually there isn’t that much investment coming in,” Nobel Peace laureate and opposition leader Suu Kyi told reporters.
The figures support her analysis.
Last month, reformist President Thein Sein said Myanmar attracted
only US$1.4 billion (RM4.3 billion) in foreign investment in fiscal
2012-13 - a decent figure for a country that only recently emerged from
49 years of military misrule and isolation, but far from the amounts
needed to jump-start its broken economy.
The country has clearly made a start: Anglo-Dutch consumer goods
giant Unilever plans to open two factories this year - part of a plan to
invest €500 million (RM2 billion) there over the next decade - and The
Coca-Cola Co has began bottling there for the first time in more than 60
years.
Ford Motor Co has opened a showroom in the largest city, Yangon. And
hosting the World Economic Forum was itself was a coup for the Myanmar
government’s investment drive.
“When was the last time a market of 60 million people fell out of the
sky?” said Martin Sorrell, head of advertising and marketing giant WPP
Plc, which has invested in media agencies in Myanmar.
“This is one of the last frontiers.”
Sorrell said major WPP clients such as Nestle SA, the world’s biggest food maker, would soon invest as well.
But there is a long way to go, with global consulting firm McKinsey
estimating Myanmar needs US$170 billion in foreign capital in the first
stage of its economic transition.
And like many frontier markets, the investment climate is still anything but sunny, despite the enormous changes.
Sorrell’s optimism is tinged with an awareness of the risks,
including growing ethnic and communal violence in Myanmar where unrest
between majority Buddhists and minority Muslims have killed hundreds of
people in the past year and displaced more than 140,000, mostly Muslims.
“Ethnic issues are a problem,” he said.
Other executives and analysts interviewed at the forum spoke of a
range of major investment barriers, including Myanmar’s poor
infrastructure and unclear regulatory environment.
SPECULATIVE FERVOUR
McKinsey has pointed to manufacturing as a key sector that could
generate 6 million jobs and eventually account for a third of the
economy. But Serge Pun, who heads Serge Pun & Associates, which has
interests in real estate among other sectors, said a lack of zoning laws
was holding back growth in manufacturing.
“Today they go out and speculate (on) industrial land with the same
fervour and enthusiasm as if it was prime residential land,” he told
Reuters.
Serge Pun said the government should set aside industrial land for
investors to build factories and employ people. “I always advocate that
if there’s a factory operator that’s willing to come in, the price
should be very cheap,” he said.
For Christopher Fossick, regional managing director for real estate
consultancy Jones Lang LaSalle, the problem is Myanmar’s foreign
investment law. It was passed by parliament in November but the
government has yet to put it into effect, leaving foreign developers
waiting for certainty before moving in.
“From there you need to develop a land ownership structure,” he said.
“Anybody coming in here and investing will need the confidence and the
understanding that there’s a certain level of transparency in the market
and that they can have title over the real estate that they’re
investing into.”
A similar lack of transparency is holding back growth in agriculture,
according to Don Lam, head of VinaCapital, a Vietnam-based investment
management and real-estate development company. His company is looking
at investing in agricultural processing and technology, but it will stay
away from production in a sector vulnerable to contentious land
disputes.
“Agricultural reform means the rules for investors have to be completely clear,” he said.
Lam said he was also looking into hospitality and financial services
in Myanmar but had encountered another challenge: decades of
mismanagement has left the country with a small educated workforce. Lam
said VinaCapital had so far been unable to find a local CEO to head its
operations there.
“We have funds allocated to Myanmar, we have investors ready to
launch a Myanmar fund,” he said. “So capital is not the issue - the
issue is finding the right talent.”
Doan Nguyen Hansen, a senior partner with McKinsey, said people in
Myanmar had an average of only four years of education, contributing to
the country’s weak productivity rate which was 70 per cent below that of
benchmark Asian countries, including China, Thailand and Indonesia.
But there is no way to build enough schools and train workers fast
enough, she said. Technology could fill the gap with remote learning,
but telecommunications infrastructure needs an overhaul: Myanmar has
among the lowest mobile telecommunications penetration rates in the
world, with only 4-8 per cent of the population connected. Internet and
mobile phone services are not available in much of the country.
Arvind Sodhani, president of Intel Capital, venture-capital arm of
chipmaker Intel Corp, said he was looking at Myanmar but was waiting for
the right “ecosystem” to develop - better and faster broadband access,
clearer regulations and a labour market with adequate legal and
financial expertise.
“The number one thing that matters to us is Internet access - high
speed, readily available, affordable relative to the incomes of the
population,” he said. Those factors have not been achieved “judging from
the fact that none of my devices work”.
Stephen Groff, vice president of the Asian Development Bank, said he
was impressed with the government’s commitment to reform and its efforts
to attract investment. But he added that the government could do more
to manage the expectations of investors and Myanmar’s people, who are
eager for the fruits of change.
“That patience runs out,” he said. “How much time are people willing to give the government to see this process through?”source: The Malaysian Insider
http://www.themalaysianinsider.com/business/article/the-hard-yards-begin-in-myanmars-quest-for-foreign-investment
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