Foreign Direct Investment in Myanmar

Foreign Direct Investment in Myanmar

Do you know ratio of foreign direct investment in Myanmar and opportunity in several sectors? Myanmar, is a Southeast Asian nation comprised of 100 plus ethnic groups. The nations neighboring Myanmar are Bangladesh, China, India, Laos and Thailand. A Buddhist nation with 52.89 million population and Gross Domestic Product GDP 67.43 billion dollars. With an area of 676578 sqm, It is the largest country in mainland Southeast Asia, and the 40th-largest in the world. The Capital is Naypyidaw and the Currency is  Burmese kyat equivalent to 0.00074 US Dollars. The rankings of Myanmar as per World Bank’s Doing Business report as follows:

Indices Ranks
Ease of Doing Business 170th
Starting Business 146
Getting Credit 175
Getting Electricity 149
Paying Taxes 119
Enforcing Contracts 188
Protecting minority Investors 179

Following just after the sanctions lifted by the major economies of the world in couples of years back, the economy of the Myanmar seemed well developing. But the boost seems to lose its health. With the falling of Kyat [well, to cope with the rising of interest rates by US the currencies of many Southeast Asian have lost their values, but kyat suffered a great loss] Myanmar’s growth forecast for 2017 has been revised downward by 1.5 points to 6.9 per cent. The one-time fastest growing economy of the Southeast Asia now fell behind Philippines’s, Laos’s and Cambodia’s. The World Bank blamed the underactive real estate market and the export trading for the slow growth of Myanmar’s economy. The key merchandise in its export basket, the natural gas, was badly affected owing to a volatile market conditions around the world. Then its green gold, the Jade too experienced a downtrend in exporting to the China being the biggest consumer of it. Against these phenomena the rising volumes of imports of petroleum and construction materials forced the growth of economy from bad to worse.

The Foreign Direct Investment [FDI] inflows to Myanmar in between 2012 & 2016 were 534.35 million dollars as averaged. The  same experienced  an all time high figure of 3821.91 USD million in March of 2016 and a record low of 3.14 USD Million in June of 2016. The top brass of the government machinery responsible for handling investments in the country, the Directorate of Investment and Company Administration DICA approved dollar 3.5 billion FDI during the last three quarters [April to December] of 2016. The figure was 28 percent lower than what was in the same period of preceding year. The government of Myanmar has set a goal of FDI inflows of 8 billion dollars for the 2016 – 2017 fiscal years ending in March 2017. But as of July 2017 it has recorded around 7.334 billion FDIs as per Myanmar Investment Commission.

The Foreign Direct Investments made by the China and Japan in the last three quarters of 2016 as approved by the authority in Myanmar are only 13 and 23 percent respectively against of their full-year figures for fiscal 2015. The inflows of FDIs from Thailand and Singapore during the first three quarters of the fiscal year 2016 worth comparatively better. The amount they invested in this period is 45 and 62 percent respectively of their figures for the full fiscal year 2015. In spite of the lifting of ban by United States on Myanmar, no US Company had made a direct investment in the country since then as of December 31, 2016.

Of course the nose diving of its foreign direct investment in Myanmar (FDI) is rather identical to overall declining trend worldwide. In this period, he global flows of FDI shrunk 13% to US$1.52 billion. UNCTAD reports that, FDI flows to developing Asia and Oceania fell 22 per cent in 2016. It did fall in Europe by 29%, Latin America and the Caribbean nations by 19% and Africa by 5%.

Myanmar lacking some key features that influencing the inflows of FDIs in a country. Skilled human resources, strong infrastructures, smooth communication & transport system, abundance in utilities, business friendly laws and corporate environment are not up to the requirements. Added to these are the image of the NLD [National League for Democracy] government in power, its management of economy and the state machineries responsible for investment management. Overseas investors still considering the country as a lucrative place for infrastructure investment as well as a production base, but many of them kept themselves waiting to launch new projects because of uncertainty over economic policies. Overseas investors adopted a ‘Wait and see’ approach toward Myanmar in view of the confusing and obscure economic policy of the government.

The socio-political issues that are reversing the trends of investments include another regulatory factor tarnishing the overall image of the government. The persecution of the Muslim ethnic minority group Rohingya, occupies the western parts of the country.

Government has disbanded MIC, the Investment Commission responsible for approving foreign direct investment in Myanmar in March 2016. It took the new government more than five months to reorganize the same, which resulted in healthy back log of applications awaiting approvals. This definitely expressed the image of an indecisive government and has sent a wrong message to the prospective investors, while annoying the investors awaiting approvals.

The go slow approach is approving investments proposals inducing the prospective investors to take U-turns. This is quite visible in its thriving sector, the oil & Gas. Till 2015 none of the proposals has seen the light of the day.

However, prescriptions and initiatives are in force in Myanmar to encouraging the FDIs in the country. Revising the companies act and the Foreign Investment Law FIL to take effect in 2017 will definitely boost the morale of investors in the pipeline. So far foreign companies are prohibited from taking stakes in domestic companies in business. Under new law government is considering to allow foreign investors to take up to 35 percent stakes in these. There are plans on the table to offer further tax exemptions in the form of tax holidays to companies that make investments and establish manufacturing bases in the less developed zones of the country. At the end, FDI- foreign direct investment in Myanmar is going up in agriculture sector day by day. For any company registration guide, contact us.

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