transition from military to democratic rule was supposed to
spark an FDI bonanza. Capital commitments to date have been a
trickle not a flood
Asia Times, Feb 15, 2017 by: Peter Janssen
Myanmar’s elected government under de facto leader Aung San
Suu Kyi is fast approaching its first anniversary in office on
April 1, providing an opportunity to assess its overall economic
performance. On the foreign direct investment front, the results
have so far been mixed.
New FDI approvals recorded by the Myanmar Investment Commission
reached US$3.5 billion for the period spanning April-December
2016, down 28% from the corresponding period a year earlier,
which was under the previous quasi-civilian government led by
Thein Sein. The commission says overall approvals for the full
financial year could reach US$7 billion, which would still be
down from the US$9.5 billion received the previous year.
For several reasons, a slowdown in FDI approvals was
anticipated. Firstly, the economy slowed to 6.5% growth in 2016
compared with 7.3% in 2015, the World Bank estimates. Earnings
from Myanmar’s main export, natural gas, were hit hard by a
global decline in oil prices. Prices on rice and pulses were
also weak last year. Nor have the country’s few export-oriented
manufacturers benefitted much from a decline of about 13% by the
kyat against the US dollar over the past four months.
Some analysts argue that all of the most profitable concessions
and licenses, namely in energy and telecoms, have already been
tendered. After European and US sanctions were eased on the
country in 2012, around US$8 billion worth of oil and gas
concessions were licensed off in 2014-2015 to a host of bidders
including US and European multinationals, though they are
expected to drag out exploration for as long as possible before
committing to actual production.
Two mobile telephone operating licenses were granted to
Qatari-based Ooredoo and Norway-based Telenor in 2013, both of
which pledged to invest billions of US dollars on transponder
towers and other infrastructure.
There has been little investment pledged in manufacturing,
understandably given Myanmar’s poor infrastructure (only 25% of
the population has access to electricity.) “What needs to come
now is the FDI that is truly transformational of [Myanmar’s]
economy, but this is harder to get,” acknowledged Sean Turnell,
economics professor at Australia’s Macquarie University and an
adviser to Suu Kyi’s government on economic policy.
Investor-friendly policies, however, have been slow in coming.
“The government came in in April last year but they did not hit
the ground running in terms of policies,” said Aung Htun,
managing director for Myanmar Investments, a private investment
company listed on the London Stock Exchange. “Even now the
policies are not very clear,” he said, noting the lack of
follow-up rules and regulations to the new investment law.
To its credit, the National League for Democracy-led government
promulgated the new Myanmar Investment Law in October, which
generally sets a more level playing field between local and
foreign investors. The accompanying rules to the law were
supposed to have been completed by year-end, but are now
expected to be finalized next month, paving the way for the
legislation to go into effect by April 1.
Some of the new pending FDI-related legislation, however, is far
from FDI-friendly. For instance, two draft laws governing the
employment of foreigners have sent shock waves through the
expatriate community. One, which regulates non-Burmese holding
Foreign Registration Certificates would require foreigners to
inform local authorities whenever they leave or enter a city, a
vestige of the restrictions imposed under military rule.
Those found travelling without the certificate could be
sentenced to one year in jail, according to the legislation.
“These are draconian even when compared with ASEAN,” said Eric
Rose, a founding partner in Herzfeld Rubin Meyer & Rose Law
Firm, the first US law firm established in Myanmar since 2013.
Rose has lobbied NLD legislators to amend the two laws before
they are approved by parliament. He claims the NLD was unaware
of their content as the laws were drafted by the Ministry of
Immigration, one of four ministries still controlled by the
military as stipulated by the 2008 Constitution. “These are not
NLD policy,” Turnell said. “I suspect we will see significant
modification of these laws.”
That may or may not be the case. Since coming to power last
year, the NLD has failed to shuffle and reform the old
bureaucracy, where the majority of bureaucrats were appointed by
previous military regimes.
While recent military offensives against minority groups has
spotlighted the NLD government’s lack of civilian control over
security affairs, the NLD’s powerlessness to control civil
servants in other ministries under the military and even those
it nominally controls, as the two draft laws on foreign
employment suggest, is now coming to light.
This raises questions of who exactly is running the economy and
whether the military and their aligned business associates who
have long dominated business in the country are as keen on
foreign investment as the NLD.
“If you can’t trust your staff and the staff have a different
agenda than the government agenda then this is a problem,” Rose
said. “This government will stand in the corner of the investor.
The problem remains the bureaucracy, because the bureaucracy is
left over from the old government.”
Government adviser Turnell acknowledged that the uncertainty was
a “concern,” but noted, “It takes more than a year to
restructure a system built up over the 55 previous ones.”
Peter Janssen is a Bangkok-based journalist who has been
covering Laos, Myanmar and Thailand for the past 36 years
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