Myanmar looks East
The government of Myanmar has launched a major investment drive centred 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 spearheading the campaign, told Asia Focus in an exclusive interview.
A new campaign was recently announced to attract more foreign investment, in what Thaung Tun calls a “Look East Policy”, aimed at Japan, Korea, Hong Kong and Southeast Asia.
India is also is included — though not strictly east of Myanmar, it has an eastern or Asian outlook, the investment tsar said. But China, of course, remains central to the government’s investment and development strategy.
“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 until 2036.
The government has 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.
But Thaung Tun is also interested in boosting investment in the agriculture sector. “Leveraging agribusiness can give Myanmar some much-needed quick returns,” he said. But apart from that it will help with improve food security, essential in a rural-based country where more than 70% of the population depends on farming, he added.
And the MIC chairman is actively trying to turn strategy into reality. He has already been courting the major Thai agribusiness conglomerate Charoen Pokphand (CP Group) which has had a presence in Myanmar for more than 20 years to develop its livestock interests.
CP is planning to invest in chicken and pig farms around the capital Nay Pyi Taw, 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. “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. Thai companies are being courted in this area as well. Amata Corp, a major Thai industrial estate developer, has been discussing potential involvement in a Yangon industrial park project with the regional government.
The project would include the Yangon Amata Smart and Eco City project, local Yangon sources said. Earlier this year Amata signed a memorandum of understanding 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 assessment carried out. So it makes sense to partner with established companies.”
The government has also put great store on a fresh round of foreign investment into the oil and gas sector. It has slumped dramatically since the heady days under former president Thein Sein, but it is expected to attract substantial foreign direct investment (FDI) in the next 12 months, during which time the government plans to open up new gas fields — onshore and off — for international tenders.
The recent much-heralded gas find offshore at A6, a joint venture between Woodside, Total and the local company Moe Myint and Associates ,is expected to encourage substantial interest from foreign investors, according to Thaung Tun.
The government expects FDI in the rejuvenated oil and gas sector to bring billions of dollars in fresh funds into the country. The Directorate of Investment and Company Administration (Dica) has estimated the sum at around US$5.8 billion a year for the next five years. In 2017, Myanmar attracted a total of $6.1 billion in FDI. Over the next 20 years, FDI is forecast to reach $220 billion under the new promotion plan.
But efforts to attract foreign investment have been half-hearted to date, according to a prominent businessman Moe Kyaw, head of Myanmar Marketing Research and Development Company (MMRD). Government officials also admit privately that more needs to be done.
Now with the recent launch of the new Myanmar Investment Promotion Plan (MIPP), there will be a comprehensive and coordinated approach, also involving 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,” said Thaung Tun.
The new Investment Law, Companies Law and Special Economic Zone Law are part of the overall strategy. 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 promoting domestic investment and nurture local businesses,” Dica chief Aung Naing Oo told Asia Focus.
Connecting local companies with foreign investors is an important plank in the new investment promotion plans, he said. It 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 ensure 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 the Myanmar workforce, and most critically give companies greater access to financial resources for business expansion,” said Aung Naing Oo.
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 the MIC chairman and including deputy ministers and senior officials from all relevant departments. Also represented will be the national employers’ organisation, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).
The long-term aim is to establish an autonomous body along the lines of the Board of Investment (BoI) in Thailand — which is chaired by the prime minister — and the Economic Development Board (EDB) in Singapore.
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 Myanmar. There will be a 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. These include 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 the country’s human resources. A number task forces will be formed to be devise solutions to these issues and develop an overall action plan.
In the meantime the promotion campaign has kicked off with a number of investment seminars in China, Japan, Hong Kong, Macau, Thailand and Singapore since the beginning of the year, under Thaung Tun’s leadership.
These investment roadshows are aimed at describing the investment procedures, the new and more advantageous environment created by the new legislation, and attempting to encourage links between local and foreign businesses, Thaung Tun explained.
To emphasise the new friendly attitude toward foreign investors, Myanmar announced two weeks ago the waiving of visas for Hong Kong and Macau passport holders, who now join nationals of Japan and Korea in being allowed to enter without a visa. This is intended to streamline bureaucracy, said Thaung Tun. Chinese passport holders still must pick up visas on arrival. Asean citizens already have visa-free access.
The investment promotion team is also considering incentive schemes. But tax holidays are the preserve of the Commerce Ministry, and tax exemptions must by passed in parliament as an act, so there is a lot more discussion that need to be held, said Aung Naing Oo.
But foreign investors remain hesitant. The core problem is that there no concrete strategy, according to Luc de Waegh, founder of the business advisory company West Indochina and a 20-year resident in Myanmar.
In his view, authorities 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 may be a low because of the Rakhine crisis, it remains very strong among Japanese, Hong Kong, Thai and Singaporean businesses, according to Maung Maung Lay, a UMFCCI vice-president who has accompanied the MIC chairman on his recent forays abroad.
“We just have to be imaginative and proactive in turning this strong interest into reality,” he told Asia Focus.