Myanmar opens doors to foreign business
Myanmar’s military rulers have a message for investors – their isolated country is open for business. |||
Just days after releasing Nobel laureate Aung San Suu Kyi from house arrest, Myanmar’s military rulers have a message for investors with a steely risk appetite – their isolated country is open for business.
After entering a new era of military-managed democracy after the November 7 election, the secretive junta is courting investment and touting the potential of a country rich in natural gas, timber and minerals with urgent infrastructure needs.
Myanmar Prime Minister Thein Sein gave a rare speech at a regional summit on Wednesday in the Cambodian capital Phnom Penh to promote the former Burma’s business credentials and trumpet plans for a regulatory framework that is friendly towards investment.
“We encourage participation from the private sector,” Thein Sein told leaders and business executives from Vietnam, Cambodia, Thailand and Laos packed into a conference room. “We are creating a pro-business environment in order to work together to get much more business and investment in the region,” he said.
After decades off the investment radar, Myanmar appears ready to open its doors to foreign businesses, a step that analysts warn is easier said than done in a country blighted by decades of economic mismanagement and closed off by Western sanctions.
Sean Turnell, expert on Myanmar’s economy at Sydney’s Macquarie University, cautions that Myanmar is vastly different from other Asian frontier markets, such as Vietnam, whose communist government opened to foreign investment in the 1990s.
Since then, multinationals have piled into Vietnam, keen to break ground on factories and hire some of Asia’s cheapest workers. Today, Vietnam boasts gleaming shopping malls, a $33 billion (about R230bn) stock exchange and a surplus of foreign-run factories.
“In Vietnam, there may be problems with democracy, but that country has latched on to the southeast Asian ‘tiger’ economy model, which is about identifying external markets and investing in manufacturing, with a view to employing lots of people and getting into the global production chain,” said Turnell.
“But in Burma, it has been about dividing up the domestic economy rather than any sort of outward projection. The regime lacks that developmental mindset. That explains a lot about their decisions, which don’t make any economic sense. That is what separates them from Vietnam.”
US, European, and Australian sanctions, imposed in response to human-rights abuses, have stifled Western investment in the country of 50 million people, that just more than 50 years ago was the world’s biggest rice exporter and a major energy producer.
But the embargoes have not stopped the flow of money. China, Thailand and India are big investors. Official data show that China pumped $8.2bn into Myanmar from January to May, including $5bn in hydroelectricity projects and $2.2bn into oil and gas.
But last weekend’s release of Suu Kyi may offer a chance to recalibrate those sanctions, which critics say have hurt ordinary people by allowing the junta to monopolise the country’s economy.
Some diplomats expect the pro-democracy leader to play a pivotal role in pushing for a relaxing of embargoes. She hinted at this a day after her release. “If people really want sanctions to be lifted, I will consider this,” she told reporters.
The military junta rarely comments on sanctions. But diplomats in Myanmar say growing dependence on China is a concern for the generals, while analysts say the military leaders want an end to arms embargoes that limit their access to modern weapons technology.
Washington is wasting no time and said on Monday it was ready to engage with the new government, but made no mention of sanctions.
The recently formed Myanmar Business Council handed out glossy pamphlets this week to investors in a ballroom of the Cambodiana Hotel in Phnom Penh after its director delivered a presentation on investment opportunities in Myanmar.
“After 50 years of isolation, Myanmar’s doors have been unlocked,” read one pamphlet. “Myanmar is not a ‘maybe market’, it will be a ‘must-have’ market.”
“Unfavourable” Western sanctions offered opportunities for Myanmar’s closest neighbours, the council added, encouraging Thai investors to use the baht currency instead of dollars. It said Myanmar was “just like Thailand 20 years ago”, offering tax breaks.
But analysts, diplomats and executives with experience in Myanmar identify a host of risks for those trying to get in on the ground floor – corruption, fiscal mismanagement, poor infrastructure, cronyism, a rudimentary banking system, an unclear regulatory framework and opaque foreign investment laws.
“The major problem is political uncertainty. We never know what those generals want and if they will change their mind. It’s very risky,” said a trader at a leading Thai sugar miller, who declined to be identified.
This year, the junta set up the Myanmar Sugarcane Enterprise, a think tank, ahead of a free-trade zone in the Association of South East Asian Nations, whose newest members – Cambodia, Laos, Vietnam and Myanmar – must eliminate tariffs by 2015.
Asked how Myanmar was preparing for competition, Yi Yi Mon, the organisation’s general manager, said: “We are planning to increase sugar production.” But she declined to elaborate.
Myanmar produces 800 000 tons from six major millers, mostly run or held by the military. Unlike Cambodia and Laos, it has done little to attract foreign investment.
Some analysts see hints of change. The government sold off more than 300 state assets in the past year in areas such as shipping, aviation, banking and property.
Although the deals are likely to favour businessmen close to the regime, they could also generate interest among US and European investors willing to take a hit on their reputation. – Reuters
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