Home Insider Insider Analysis FDI Entry Still Slow Despite Institutional Efforts and Years after Power Transition

FDI Entry Still Slow Despite Institutional Efforts and Years after Power Transition

A f t e r M y a n m a r attracted foreign direct investment ( F D I ) i n f l o w o f $234 million in past November, the total FDI value into the country in the first eight months of the ongoing financial year amounted to more than $4.47 billion, according to the Directorate o f I n v e s t m e n t a n d C o m p a n y A d m i n i s t r a t i o n ( D I C A ) , a g o v e r n m e n t department under t h e M i n i s t r y o f P l a n n i n g a n d Finance.

A s u m o f 1 6 3 e n t e r p r i s e s r e p r e s e n t i n g 2 2 c o u n t r i e s m a d e contributions to FDI into Myanmar for the period from April to November. The investments came into the sectors of agriculture, livestock and fishery, real estate, manufacturing, hospitality and tourism, transport and communications, energy and industrial estate and other service sectors. Oil and gas, mining and construction sectors saw no FDI entry in that period, the DICA statistics said. Singapore was the biggest investor with investment amount of $1.71 billion pouring from 30 enterprises, followed by China with $1.01 billion. Aggregate investment value of $533.9 million ventured by six enterprises from the Netherlands took the third biggest share of FDI entry into Myanmar in the 2017-2018 financial year that started on April 1.

Other countries that have made investments in Myanmar in the current budget year include France, Germany, Hong Kong, India, Japan, Macao, South Korea, Thailand, the United Kingdom, the United States, Vietnam, Taiwan and New Zealand.

Myanmar has expected to fetch annual foreign investment value of more than $6 billion for the current financial year. The projection is nearly the same as that of the past FY2016-2017, which grossed total FDI inflow of $6.6 billion.

FDI Situation in Power Transition Period

FDI entry into Myanmar ended up with a significant year-on-year drop in the 2016-2017 budget year, which marked a one year period the NLD-led government came to power. The year before saw a record-high FDI value of $9.48 billion for Myanmar under the previous administration.

FDI inflow started with a slowdown in the previous first year of the current administration. As the second last year of FY2014-2015 under the previous administration also garnered a record-high FDI influx of $8 billion, the slowdown raised widespread economic concerns under the incoming inexperienced government. That was because the potential investors were watchful of a power transition period, insisted Dr Wah Wah Maung, Director General of the Central Statistical Organisation of Myanmar.

“International investors are keeping an eye on Myanmar’s economic policies. They are aware of multi challenges facing Myanmar while they see many opportunities existing in the country,” she said.

Infrastructure Deprivation and FDI

Dr Wah Wah Maung linked the infrastructure deprivation of the country with the need to raise investment inflows.

“There are so many necessities, especially in infrastructure such as electricity, roads and bridges. So, we need to succeed in attracting quality investment which will bring both capital and technology. Quality investment goes for not only profit, it also pays particular attention to the host country’s sustainable development”, the Director General said.

The 2017 Global Infrastructure Outlook report has expected Myanmar to meet only half of infrastructure investment needs by 2040. Myanmar was estimated worst among the countries surveyed for the report, which is a global study of infrastructure investment needs and gaps covering seven sectors of energy, telecommunications, airports, ports, railway, roads and water.

The report, a G20-initiated assessment forecasting for five regions and 50 countries, provides a far-reaching analysis of Myanmar’s infrastructure deficit and its ability to undertake closing the gap.

Myanmar came with the biggest gap, estimated to be worth $112 billion. The Global Infrastructure Outlook report estimates infrastructure investment needs for all the nations up to 2040 and compares them with projected infrastructure investments for the same time frame, and calculates the ‘gap’.

The publication uses World Economic Forum data to assess the 50 countries’ current basic quality of infrastructure, and it analyses their infrastructure spending over the past 10 years and estimates such investment between the present and 2040. Using the resulted data, it forecasts the likely gap between infrastructure investment and requirements by 2040. In order to address infrastructure issue, Myanmar is designing the Infrastructure Public-Private Partnership Institutional Framework to effectively develop the country’s infrastructure that poses a challenge to FDI initiatives. It is a longterm FDI promotion plan developed by the DICA with support provided by the Japan International Cooperation Agency (JICA). Under the framework, the country aims to be able to attract total FDI value of $140 billion for the period from 2014 to 2030, according to Kyaw Win, Minister for Planning and Finance.

Moreover, the National Development Project plans to boost FDI influx through a set of measures that include revising the legal requirements that restrict the inflow of foreign investments, reduction of land prices that causes a cost burden to establishment of businesses, making industrial development policies to improve the manufacturing of valueadded products, increasing the fundamental need of power access and strengthening the transport infrastructure.

“Investments are essential to economic development of the country. It needs to achieve investments from both local and international investors. Myanmar is widely regarded as a promising destination for foreign investments,” said Maung Maung Win, Deputy Minister for Planning and Finance.

Investment Discussion Platform for Public and Private Sectors

As part of efforts to uplift foreign direct investments, the country organises the Myanmar Global Investment Forum, aiming to offer an annual platform for the public and private sector to discuss Myanmar’s continued economic open-up. Officially the Euromoney Myanmar Global Investment Forum, the event is intended for discussions exploring opportunities to be able to invite increased quality investments through such measures as Public Private Partnership.

The 2017 Myanmar Global Investment Forum was held from September 12 to 13 in Nay Pyi Taw as the 6th annual event. Discussions at the forum explored the opportunities arising from Myanmar’s latest economic agenda and reforms, covering topics of the country’s economic conditions and outlooks, investment situations, banking and financial reforms, the integration of power and energy sectors, challenges related to infrastructure, developments in industrial and agricultural sectors and tourism promotion arrangements. The conference is jointly organised by Myanmar Investment Commission (MIC) and Euromoney Institutional Investor (Asia) based in Hong Kong. And the 7th Annual Myanmar Global Investment Forum is scheduled to take place in September 2018.

Legal Changes

When it comes to institutions with regards to FDI enhancement, Myanmar passed a new Myanmar Investment Law in October 2016. Merging the preexisting Myanmar Citizens Investment Law approved in 2013 and Foreign Investment Law enacted in 2012, the new legislation aims to better the investment environment by providing easier access to business activities in the country.

Moreover, the new corporate legislation just recently approved is highly expected to be a boon for FDI environment, in turn, the whole economy.

The country has used the centurylong 1914 Myanmar Companies Act as its major company-related legal framework, while also maintaining the 1950 Special Companies Act, the 1955 Myanmar Companies (Amendment) Act and the 1957 Myanmar Companies Regulations when it comes to company administration.

As the long-running existing laws have proved to be outdated and no longer compatible with economic policies of the State, the country passed a new Myanmar Companies Law on December 6.

D e s i g n e d t o m o d e r n i s e a n d internationalise the company-related legal set-up of Myanmar, the new Myanmar Companies Law is aimed at lifting up domestic and foreign investments, developing the capital market of the country and improving the private sector. It comes with a facilitation of the registration of companies and liberalisation of procedures and regulations for smaller companies. But, the government has publicised that the execution of the new law will not start until August, 2018.

To summarise, the rate of FDI entry into Myanmar is still not sufficiently dynamic as expected under the current government despite the abovementioned institutional efforts and seemingly enough time following power transition.