Unstoppable FDI

Though major foreign investment may be delayed until after the 2015 election, foreign direct investment (FDI) into Myanmar will rise further to potentially reach $6 billion next year.

Aung Naing Oo, director-general from the Directorate of Investment and Companies Administration (DICA), said recently that Myanmar is setting the target to reap $6 billion in FDI next year. He noted that the target is achievable given that FDI this year could hit $5 billion.

The ambitious targets were set despite concerns from some big companies over political instability in the country. The election is tentatively slated for the last week of October or the first week of November. Ahead of this is the heated debate on charter amendment, as many parties seek to reduce the military power in Parliament. Aside, the government and ethnic armed groups are rushing to seal a nationwide ceasefire deal, just as fighting still haunts some areas of the country.

Consulting firm New Crossroads Asia was the latest to report that major foreign investment in Myanmar will be delayed until after the 2015 election. The report said that foreign companies entering the energy and mining industries were investing one-tenth of what they would after the election – if it does not spark unrest. Instead of investing billions of dollars each in the industries they are investing about US$100 million each, the report says, stressing that uncertainty over the upcoming election was the reason for their caution.  

Aung Naing Oo admitted that political instability was one of top concerns for foreign investors.

“Reports that foreign companies are waiting to invest big in Myanmar after the 2015 election are both right and wrong,” he said, adding: “Some may be waiting, but some are already here.”

He pointed to western firms like Coca-Cola, Pepsi and Unilever, which have already invested in Myanmar. Other companies are planning major investments, Aung Naing Oo added.

He said the major deterrent to foreign investment was the shortage of electricity in Myanmar.  

Myanmar currently produces 3,300 megawatts of power. While only 20,000 of the 64,000 villages in Myanmar have access to electricity, Myanmar plans to extend the access to 10,000 more villages this year and another 10,000 in 2015.

Drawing new investment to Thilawa Special Economic Zone which encompasses over 2,000 acres, the operator, Myanmar Japan Thilawa Development Co Ltd, promised to build a 50-megawatt power plant along with the upgrade of road and water infrastructure.

 

 

According to DICA, as of August 2014, 772 foreign companies have so far invested more than $49.4 billion in 12 sectors, including oil and gas, manufacturing, mining, hotels and tourism, transport and logistics, real estate, livestock and fisheries, agriculture, construction and services. As of June, more than 700 foreign businesses had received permission to invest in Myanmar.

Companies from China top the list, accounting for about 32 per cent of cumulative foreign investment. Thai companies follow – with about 23 per cent of total cumulative investment – and Hong Kong-based companies are third, representing about 15 per cent of cumulative foreign investment.

The FDI is expected to show 14 per cent annualised growth from now until 2030, to push the aggregate amount to $100 billion in the next 15 years.