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Investors’ optimism on Myanmar wanes

Jun 08. 2017
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EXPECTATIONS for Myanmar have been nothing short of a roller-coaster ride. Sky-high expectations followed the victory of the National League of Democracy (NLD) at the 2015 elections, led by Aung San Suu Kyi.

But now these have given way to a somewhat downcast outlook.

Some projects approved under the previous administration have been reassessed and foreign investments have been slow moving. The level of approved foreign investment into Myanmar dropped from US$9.5 billion in the last fiscal year to $6.6 billion (Bt225 billion) this year – the first drop in the four years after the country began its opening.

Growth of Myanmar’s gross domestic product too has slowed, from 7.3 per cent in 2015 to 6.4 per cent in 2016.

Myanmar companies are feeling the slowdown. Some potential foreign investors are beginning to look elsewhere. These are reasons for concern. But it would be premature to write off Myanmar.

More than a few investments and projects are moving ahead. Some developments are sizeable. They serve as positive examples of how businesses can move forward, and what the government can and must do.

When the Thein Sein administration began opening up the country in 2012, there was a stampede to enter “the last frontier” market. There was a second wave of optimism when the NLD secured a landslide election victory at the end of 2015. Too many believed that there would be a “happily ever after”.

But really, no one should ever have thought that doing business in Myanmar would be easy. After almost 50 years as a closed economy under military rule, a backlog of issues remains. The need to upgrade physical infrastructure is obvious. Financial systems and political structures are also in need of repair.

After bank failures and crises, an informal money-lending hundi black market has emerged. Fewer than 20 per cent of the people use formal financial services. This limits the central bank’s ability to reform the country’s financial system effectively. The government is also limited by the absence of a working tax system.

In politics, the majority of current headlines focus on the mistreatment of the Muslim minority in Rakhine state. Fewer report on Suu Kyi’s peace process to end the long-standing civil war that involves some 15 different armed rebel groups. Many have their own standing, armed militia forces, as well as secured sources of income – often from cross-border contraband trade.

The issues that confront the country are multiple and complex. Long-term effort is needed regardless of which party is in charge. Indeed, the NLD faces especially high expectations on some issues – such as human-rights questions in Rakhine state or on cleaning up deep-rooted corruption quickly.

This is not to say, however, that there is nothing the NLD government can and should do to improve matters. Suu Kyi herself acknowledged this at the commemoration of the NLD’s first year in power. She called for her people’s support and patience for her government to prove themselves, adding that she would “return the position if there is someone who can do this better than us”.

Those looking at the country would be well placed to recall the characteristics that brought attention in the first place – abundant natural resources, strategic location, a large and mainly young population, and a sizeable untapped market. Moving forward from a low base, these keep the economic undercurrent strong. There are signs of things moving ahead. Examples can be seen in the real-estate, construction, manufacturing and retail sectors.

Development of the Thilawa Special Economic Zone has progressed significantly. This attracted more than $122 million of foreign direct investment over this fiscal year, according to Myanmar’s Directorate of Investment and Company Administration. Much of this is through the strong partnership that Japan has built with a local consortium led by Win Aung, chairman of Myanmar Thilawa SEZ Holdings and Dagon Group of Companies.

Myanmar corporation the Shwe Taung Group has also moved ahead in downtown Yangon, in partnership with Singaporean property developer Keppel Land. Completed this year, the 23-storey Junction City towers offer premium-quality office spaces, and are drawing overseas companies.


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