Foreign competition, Kyat worry Myanmar business

As most of the local businesses are small and medium-sized enterprises, they cannot compete with big foreign wholesalers and retailers that are looking to do business in the country, he told business leaders at the Asean Conference 2012 hosted by CIMB Bank.
“The government is so generous towards foreign investors,” he said, referring to a new investment law that the government is currently revising.
Under the new investment law, foreign investors will be able to set up either 100-per-cent foreign-owned firms or joint ventures in which the foreign party holds a minimum of 35 per cent of total equity capital.
Foreign investors will get five-year tax holidays, up from three years under the existing law, he said.
“The government is favouring foreign investors … We’re worried about the lack of a level playing field.”
Maung Maung Lay said he was especially concerned about the wholesale and retail businesses, in which foreign investors are looking for business opportunities. These investors do not want to make joint ventures with local businesses, but want to go it alone, he said.
Some of them are waiting for an end to sanctions against the country. The United States has suspended many sanctions, and is expected to lift them by early next year, he said.
The cost of electricity has also made some investors hold back, along with the limited supply of power. However, some have brought in their own generators, he said.
The shortage of skilled labour has also given some investors second thoughts. However, he said labour could be trained.
Mum-and-pop shops are afraid they will suffer the same way small Thai retailers lost their market share to giant foreign retailers, he said.
Another concern is the appreciation of the kyat. “Too much appreciation would adversely impact exports,” he said.
The kyat is under pressure because of an inflow of capital brought by foreign investors and even non-government organisations, he said. The kyat has gone from 2,000 per US dollar to 900-1,000, Maung Maung Lay said.
He said his country was being warned of a “tsunami” of foreign investment.
Myanmar is rich in natural resources, with plenty of natural gas, jade, timber and agricultural products such as rice, pulses, beans and fish.
As the banking system has not yet been developed, investors often bring money into the country via informal channels, he said.
Three main special economic zones are being developed: Dawei, Thilawa and Kyauk Phyu.
He assured attendees that political reforms towards democracy were irreversible, since the government had realised that Myanmar is nearly 50 years behind its Asean counterparts in all aspects.