Officials ask for patience from commercial suitors
YANGON – Mitsubishi might be among the Japanese brandnames lining up to invest in Myanmar, with deals done for revamping Mandalay’s airport and building a power plant at the proposed Dawei Special Economic Zone in Myanmar’s far south, but that didn’t hinder a senior company representative from telling it like it is to some Nay Pyi Taw government representatives.
“There are too many laws, frankly speaking. We have to study so much to enter into the country,” said regional Asia and Oceania CEO Toru Moriyama, speaking at a business seminar in Yangon hosted by Nikkei, the Japanese media conglomerate.
While Myanmar has passed several new codes aimed at attracting investors and pepping-up economic reforms, such as the 2012 Foreign Investment Law, some moth-eatenlaws remain in place, such as the 1914 Companies Law and, even older, the 1872 Evidence Act.
A century and more might have passed since some of these laws were enacted, but Dr Aung Tun Thet, an economics advisor to Myanmar President U Thein Sein, said that investors should be patient, reminding that Myanmar is a mere 30 months into a reform process initiated by Thein Sein’s civilian-run but army-backed government.
The progress made in that timeframe, or rather perceived lack thereof, has drawn fire from opposition head Daw Aung San Suu Kyi, who has said reforms are moving too slow, while U Thein Sein’s party colleague and Myanmar’s Parliament Speaker Thura Shwe Mann has also questioned how Myanmar’s reforms are going – politically and economically – even raising the ghost of former junta head Senior General Than Shwe to make his point.
Dr Aung Tun Thet, however, took issue only with what he’d been hearing from outsiders. “Your expectations are sometimes quite unrealistic,” he said, referring to both foreign governments and companies. “Some people say we are moving too fast, others say too slow,” he sighed. “I think that means we must be doing something right.”
While the Myanmar government hopes for a quadrupling of the country’s economy by 2030, such expansion, if it comes about, will be off the back of decades of sclerosis.
Myanmar’s US$53 billion economy is but one-seventh that of neighbour Thailand, which has a similar-sized population, and is just over a third the size of Vietnam’s economy – which undertook a similar economic opening-up to Myanmar in the 1990’s.
The signs of Myanmar’s ossification are much-remarked – from the absence of credit card friendly ATMs (until recently) to the on-off electricity to the largely cash-based economy – the latter dominated by well-connected elites known as ‘cronies’ for their ties to the still-dominant Army.
“You have to remember, we haven’t had a proper business system here for 60 years,” Aung Tun Thet reminded.
Among the major hurdles for would-be investors are Myanmar’s electricity and infrastructure shortcomings, as well as a lack of skilled workers. Less than 30 per cent of the population, mostly people in cities, are connected to the grid, while internet and mobile phone access is thought to be around the 10 per cent mark, and change is dropping slow. Telenor, one of the two foreign companies granted licences to set up mobile phone networks in Myanmar, said in November that it would be at least August 2014 before its network would be launched in Myanmar.
Foreign investment into Myanmar increased from US$1.9billion in 2011-12 to US$2.7bn in 2012-13, according to the World Bank, which predicted growth of 6.8 per cent for the current year, up to March 2014.
Sustaining that momentum – and pulling in job-intensive investment as opposed to companies interested in harvesting Myanmar’s oil and gas, work that typcially doesn’t generate much local employment – requires more reforms passed by Myanmar’s parliament, whose members are now moving into election footing as the Government passes the midway point of its five year term in office.
Win Aung, President of Myanmar’s main business representative group, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) said that Myanmar’s companies and the Government want whatever outside help they can get to address such deficits.
“We are optimistic and confident that with kind help and guidance of our partners, we will overcome these difficulties,” he said.
The past year has seen a revival of interest in Myanmar’s garment-making sector, with Korean companies drawn by southeast Asia’s lowest wages and setting up or pledging to set up shop – deals that will create thousands of jobs for Myanmar women.
But in a country wracked by harsh rural poverty and emigration, more factories are needed to soak up some of the estimated 37 per cent of the potential workforce that don’t have jobs.
Getting those investments means not only doing something about the power shortages and poor communications that wipe out the cost benefits of cheap labour, but changing Myanmar’s laws so the likes of Mitsubishi have less to complain about.
Aung Tun Thet pointed out Myanmar had recently signed up to the New Yok arbitration convention, affording foreign investors some legal protection in the event of a dispute with a local partner and undercutting at least some worries about corruption, an opaque legal system and cozy ties between politicians, army and business.
Dr Khin San Yee, Deputy Minister for National Planning and Economic Development said that Myanmar is trying to cut red tape and rein in “unnecessary procedures” – all part of Government plans to “improve our business environment.”
Such changes are needed. The World Bank recently outlined that starting a business in Myanmar involves 11 different procedures, takes 72 days and costs nearly US$1,500 – a price tag in turn dwarfed by the deposit of more than $58,000 required to start a business, all of which slows entrepreneurship, the Bank reported.
Tongue in cheek, the Deputy Minister told the mainly-Japanese audience in Yangon that although Myanmar was ranked a lowly 182 in the World Bank’s latest Doing Business global survey, the fact that the former army-ruled country was ranked at all is being taken as a sign of progress.
“At least we are on the list now,” she joked.
This article appeared in the The Irrawaddy’s January 2014 monthly print magazine, published Jan. 1Show