Why fewer foreign investors are entering Myanmar

Myanmar’s less restrictive new foreign investment law, its large pool of cheap labour and its abundant natural resources are the good news for foreign investors. However, this hasn’t stopped many from voicing concern about the country’s more inauspicious facts: poor infrastructure, a lagging IT sector, unskilled labour and outdated labour laws. It’s generally agreed that the investment climate will ultimately be determined by how well the country’s leadership deals with political instability.

The U.S. and European Union’s easing of the main sanctions on the country, which is also known as Burma, has led many to believe that the country’s long-term economic prospects are looking much brighter. However, unless the Myanmar government takes immediate steps to address the country’s many liabilities, it risks deterring foreign investment.

According to the Myanmar Investment Commission (MIC), foreign investment has shown an upward trend since 2010 when the country introduced a raft of reforms.

Foreign direct investment accounted for US$20 billion (about Ks 20 trillion) in the 2010-2011 fiscal year. That is quite a jump from the previous year, says Cho Cho Wynn, deputy director general of the Directorate of Investment and Company Administration. But for the next two fiscal years, from 2011 to 2013 (ending in February), the numbers dropped by $4.6 billion and $1.3 billion respectively.

John Goyer, senior director of the US Chamber of Commerce for Southeast Asia, says Myanmar is “not steady, but full of business opportunity and potential,” attributing the new-found optimism to the U.S.’s relaxation of sanctions and Myanmar’s revived exports to the U.S., whose firms look set to invest in Myanmar’s information technology, oil and gas sectors.

Last year, Japan committed enormous investment across the board, winning concessions for mega-infrastructure, deep-sea port construction projects, and the development of economic zones including Yangon’s Thilawa Special Economic Zone, itself due for completion in 2015. But the concessionaire, Japanese International Corporation Agency (JICA), has been forced to battle the deadline in the face of adverse industrial conditions such as regular power and water supply disruptions, and bad sewerage management, factors that are stalling several other projects.

The local business community points out the lack of a skilled workforce and an updated labour law as major concerns among European and U.S. conglomerates. At present, industries lack the ground rules to settle contract and labour disputes and protect workers’ rights. It is also important for the government to encourage investment in vocational training, in order to create new sources of skilled labour and lift the standards of workmanship.

Transparency must be central to the way the state conducts its affairs. Many hope the current administration will try to resolve ongoing conflicts that have emerged as a result of the last regime’s controversial privatization and joint venture deals that were struck with favourable foreign investors. These involved damming and mining concessions awarded to Chinese companies despite protests from local residents and damage to the environment.

Sushant Palakurthi Rao, senior director of the World Economic Forum, says that Myanmar needs to invest in developing its education system if it hopes to keep pace with the challenges of industrialisation and urbanisation.

source: Eleven Myanmar
http://www.elevenmyanmar.com/business/3534-why-fewer-foreign-investors-are-entering-myanmar