As this is the first Myanmar Insider issue for the calendar year, it seems a good time to have a brief look at the country’s foreign investment situation within the context of what may reasonably be viewed as the critical event of 2015 for Myanmar- the national elections- scheduled (most likely) for early November. Consider- able uncertainty has surrounded the upcom- ing plebiscite itself, including issues relating to timing, or indeed whether the elections would actually go ahead, (that issue now ap- pearing to be put to rest following the Pres- ident’s January statement confirming that the elections would proceed as planned), constitutional matters and whether some parties might not participate in the process. Of much greater significance for foreign in- vestors, however, is perceived uncertainty about the impacts of the election outcome on Myanmar’s future direction, in particu- lar, the political and economic reform agenda.
Foreign Direct Investment in Myanmar continues to grow at an accelerating pace, reaching over US$6.6 bn in the first three quarters of the fiscal year ending April 2015, that figure itself coming close to double the inflow for the previous year. Would the FDI flow have been even higher, absent the looming general election? That some for- eign investors are less than convinced that Myanmar’s commitment to political and economic reform as a continuing, long-term process will be maintained by the next gov- ernment is not hard to understand, given the amount of negative commentary directed at the country’s progress in recent months, although one has to question whether the rapid initial transformation that occurred post-2011 has given rise to unreasonable expectations that the pace of reform could continue unabated. Certainly, there appears at this stage to be a marked reluctance on the part of western corporates to ‘take the plunge’ and invest onshore, despite their eagerness to exploit expanding markets in
Myanmar, in contrast to the willingness of Asian businesses to do just that, with DICA data clearly indicating the dominance of ASEAN sources in foreign direct investment start-ups. While there is a wide range of fac- tors that might be at play here, it is reasonable to suggest that a perception of political stability risk may be keeping some investors on the sidelines. Even an economist from the Ministry of Commerce was prepared to acknowledge this in a December 2014 in- terview, anticipating that FDI would surge after the election.
Now no one would suggest that Myanmar is a country that today represents the picture of an ideal destination for foreign in- vestment but it is an attractive one and we are convinced that it will continue to be- come increasingly so. Those who have had the opportunity to observe first-hand the changing economic landscape since 2011 can understand the enormity of the chal-
lenges faced and can appreciate what has been achieved in a relatively short time, especially in developing an economic envi- ronment increasingly conducive to foreign investment. Going forward, data from var- ious sources project continued strong eco- nomic growth in Myanmar and a serious and urgent need for foreign investment to fund the infrastructure development that is so critical in supporting modernisation of the economy. The economic signals are good, the opportunities are great and, we believe, reform will continue. Many com- mentators concur . In November 2014, Murphy and Clad from the National Bureau of Asian Research warned US businesses of the ‘deeply embedded downside’ of not engaging with Myanmar. While citing con- cern about whether the 2015 poll would be ‘free and fair’ as one reason behind firms’ reluctance, he puts decision-makers on notice that ‘waiting too long will result in lost
opportunities’ . We also agree with Trevor Wilson’s view that the broad thrust of cur- rent reforms is most likely to continue given the expectations that have been generated, and that the risk of ‘unexpected develop- ments’ post-election is low.
We consider that fears of instability follow- ing the general elections are disproportion- ate to the reality of the Myanmar political scenario. The efforts so far made by the gov- ernment to attract FDI and move the econ- omy forward plus the implications of the blueprint for the ASEAN Economic Com- munity suggest that no matter who takes the country’s reigns in November 2015, foreign investment will still have a pivotal role to play in the country’s development. There are opportunities now that won’t be there in 2016. The less timorous investors will reap the benefits of that.
