As Myanmar loses investors’ confidence, government looks east with revamped economic plans

As Myanmar loses investors’ confidence, government looks east with revamped economic plans

Larry Jagan,

Myanmar has revamped its economic ministries and launched a renewed investment drive to try to attract foreign investment that dipped over the last 12 months. International criticism of the government’s handling of the violence in its strife-torn western Rakhine region has reduced the country’s attractiveness to investors, especially from the West.

A new ministry of investment and foreign economic relations has been created, with the government’s current economic czar and national security advisor Thaung Tun as the minister. This is intended to reinforce and strengthen Myanmar’s new investment campaign, according to government insiders.

“We are seeking investment that will be a catalyst for change,” Thaung Tun said. It won’t happen overnight, he admitted, so there are short, medium and long-term plans, with specific sectors identified as priority areas: all part of a 20-year investment plan, that sets targets up till 2036.

The Myanmar government recently launched a new major investment drive centering on Asian countries in the face of declining interest from the West. “We must be proactive and seek the sort of investment that is good for the country,” Thaung Tun, head of the Myanmar Investment Commission (MIC), who is also spearheading the government’s efforts to attract more investment, told the South Asian Monitor in an exclusive interview.

This new campaign is aimed at attracting increased foreign investment, in what Thaung Tun calls a “Look East Policy”. Targeting Japan, Korea, Hong Kong, Southeast Asia and India—though not strictly east of Myanmar—the government’s investment supremo said. But China of course remains central to the government’s investment and development strategy.

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“We are seeking investment that will be a catalyst for change,” Thaung Tun said. It won’t happen overnight, he admitted, so there are short, medium and long-term plans, with specific sectors identified as priority areas: all part of a 20-year investment plan, that sets targets up till 2036.

The government has especially prioritised encouraging export and domestic import-substitution businesses to help alleviate the trade deficit. But developing infrastructure and natural resources remain key to the country’s development plans and attracting investment into these sectors is high on the agenda of the investment promotion plan.

But Thaung Tun is also interested in boosting investment in the agriculture sector. “Leveraging agri-business can give Myanmar some much-needed quick returns,” he said. Besides, this will help improve food security, essential in a rural-based country such as Myanmar, which accounts for more than 70 percent of the population, he added.

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The investment minister and MIC chairman is actively trying to turn strategy into reality. He has already been courting the major Thai conglomerate Charoen Pokphand—more commonly known as CP—which has had a presence in Myanmar for more than 20 years to develop their livestock interests. CP is planning to invest in chicken and pig farms around the capital Naypyitaw, according to government insiders. Land has been allocated for farms and feed mills, Thaung Tun said, but the details of the deal are still being negotiated, he added. “This is a good example of the plan’s ‘business’ matching approach, he said.

Thaung Tun also places great weight on the development of industrial zones or industrial parks, which could get off the ground within three years, he said. And Thai companies are being courted in this area as well. One of Thailand’s main developers of industrial estates, Amata, has been discussing their involvement in a Yangon industrial park project with the regional government.

The project would include the Yangon Amata Smart and Eco City project, Yangon sources said. Earlier this year, Amata signed an MoU to carry out a feasibility study for the creation of the Yangon Amata Smart and Eco City. So far, there has been little concrete progress as both sides try to agree on a framework for the project.

“Our goal is to provide better living standards for the vast majority,” said Thaung Tun. “But it has to be good for the country, with environmental and social impact assessments carried out. So, it makes sense to partner with established companies,” he said.

Myanmar’s efforts to attract foreign investment, however, have been half-hearted to date, according to prominent businessman Moe Kyaw, head of the country’s leading market research company, Myanmar Marketing Research and Development Company (MMRD). This is something government officials admit privately. Now, with the recent launch of the new Myanmar Investment Promotion Plan (MIPP), there will be a comprehensive and coordinated approach that will also involve local businesses and regional governments.

The new plan replaces the former FDI promotion plan drafted in 2014, by the previous government. “This was necessary to bring the country’s investment policies in line with the latest legislation,” Thaung Tun said. This includes the new investment, companies and special economic zones laws. But the other major difference is that it involves an integrated strategy that is not exclusively concerned with attracting foreign investment.

“Attention is also being paid to promote domestic investment and nurture local businesses,” said Aung Naing Oo, head of the Directorate of Investment and Company Administration (DICA). Connecting local companies with foreign investors is an important plank in the new investment promotion plans, he said. The MIPP will integrate and support both local investments and FDI with the aim of providing a ‘level playing field’ for foreign and local businesses, promote responsible investment, generate sustainable growth and ensuring greater equality, he said.

“This would allow Myanmar businesses to tap into international experience and expertise, help with the transfer of technology—so important to the country’s economic development—improve the skills of Myanmar’s workforce and, most critically, give companies greater access to financial resources for business expansion,” Aung Naing Oo said.

Government officials all admit that the promotion plans are at an early stage, though the vision has been clearly established. A dedicated investment agency is in the process of being created, according to Aung Naing Oo. The plan is to create an investment promotion committee—led by MIC chairman Thaung Tun—and deputy ministers and senior government officials from all relevant departments, including a senior business representative from the national employers organisation, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). When formed, it will be under the newly-created investment ministry.

But the long-term aim is to establish an autonomous body along the lines of Thailand’s Board of Industry (BOI)—which is chaired by the prime minister—and Singapore’s Economic Development Board (EDB).

The current committee and the planned investment promotion agency will have the sole purpose of promoting investment, especially foreign investment, and providing a ‘one stop shop’ for foreign businesses interested in investing in Myanmar. It will be the interface between businesses who want to invest and the government. There will be continuous discussion with key ministries and business on how to improve the investment and business environment.

“We want to make the investment promotion process smoother, facilitate discussions related to investment laws and procedures and enact policies that will attract FDI as well as make the investment process easier,” said Thaung Tun. “We intend to promote a transparent investment system.”

At present, the plan has identified some key strategies that are needed to actively promote investment. These include rolling out new policies and regulations, including improving the legal framework, safeguarding intellectual property rights and creating a more efficient and equitable taxation system.

It also involves institutional reform, improving the infrastructure and developing human resources. A number ‘task forces’ will be formed to be responsible for proposing solutions to these issues and developing an overall action plan.

In the meantime, the promotion campaign has kicked off with a number of what the MIC chair calls investment seminars in China, Japan, Hong Kong, Macao, Thailand and Singapore, since the beginning of the year. These investment roadshows or investment forums are aimed at describing the investment procedures, the new advantageous environment created by the new legislation and attempting to encourage linkages between local and foreign businesses, Thaung Tun explained.

To emphasise the new friendly attitude towards foreign investors, Myanmar announced two weeks ago the waiving of visas for Hong Kong and Macao passport holders, who now join Japan and Korea in being allowed to enter without visa. This is intended to streamline bureaucracy, said Thaung Tun. Chinese passport holders still must pick up visa on arrival. Asean citizens already have visa-free access.

The investment promotion team is also considering incentives schemes. But tax holidays are the preserve of the commerce ministry, and tax exemptions must be passed in parliament as an Act, so there is a lot more discussions that need to be held, the DICA head said.

But foreigner investors remain hesitant. The core problem is there no concrete strategy, according to Luc de Waegh, founder of the business advisory company, West Indochina, and a Myanmar resident for over 20 years. They need to select sectors in which Myanmar can excel and be a regional leader within the next 10 years. “They must create competitive incentives for investors in these sectors,” he said. “And then, above all else, communicate clearly to investors.”

While Western interest in investing in Myanmar maybe a long way off now because of the Rakhine crisis, it is very strong among Japanese, Hong Kong, Thai and Singaporean investors, according to UMFCCI vice-president MaungMaung Lay, who has accompanied the MIC chairman on recent forays abroad for drumming up investment. “We just have to imaginative and proactive in turning this strong interest into reality,” he told the South Asian Monitor.

The new ministry of investment and foreign economic relations is intended to meet some of these previous weaknesses. “The new ministry is a significant step by the government to help drive economic development, by attracting and funneling investment into key priority areas,” said Ye Min Oo, a member of the ruling National League for Democracy’s economic committee.

The ministry is going to include two the departments under the ministry of planning and finance—the Directorate of Investment and Company administration (DICA) and the Foreign Economic Relations Department—which are responsible to the MIC, which is tasked with attracting and regulating investment. The ministry will be responsible for ensuring all investment—domestic and foreign—that fit the government’s strategy, which is clearly laid out in the recently published Myanmar Strategic Development Plan. “This will ensure all investors understand the government’s strategic vision and that all proposed investment is in Myanmar’s interests,” he said.