Investors are likely to face many challenges

In spite of many potential opportunities in Burma, there are still many challenges new Thai investors must be aware of.

Thanit Sorat, vice president of the Thai-Myanmar Business Council, pointed out some obstacles that make Burma a target for future, rather than immediate, investment.

First, the Burmese government still requires foreigners to invest not less than US$500,000 (about Bt15 million) for a manufacturing enterprise and $300,000 for a service business. Investors must also transfer half of the initial capital investment to the government before starting the project.

Second is the big difference between the official and the black-market exchange rates, where there is a five-fold discrepancy. For instance, while officially US$1 may be worth 150 kyats, an underground moneychanger may give 780 kyats. To solve this problem, Thanit said the Thai government should negotiate with the Burmese government on creating a stable exchange rate in the banking system to draw more Thai investors.

Third is the problem of utilities such as electricity, as many Thai investors have complained about unstable supply.

Fourth, the development of infrastructure is a must, including roads, railways and deep-sea ports, to bring down the high cost of logistics. Currently, logistics costs in Burma are two or three times as high as in Thailand. Although Burma plans to develop its logistics system, the facilities currently are of a lower standard than in Thailand and other Asean countries.

Fifth, the prolonged sanctions by the United States and the European Union are still causing hesitation for new investors. Although many developed countries want to invest there, they are concerned about export privileges, and whether rich nations will grant the Generalised System of Preferences.

Finally, political instability is another risk factor for new investors. Since Burma declared itself to be a democracy, there have often been rumours about a return to military government to control the many minority groups.

Chawapol Jariyawiroj, country manager for Thailand and Indochina of VMware, noted that Burma had been under a trade embargo by the United States, and US companies are still not allowed to do business in there. However, there has been great progress towards the opening of Burma's economy during the past few months, which has received a positive response from most countries.

"We will continue to monitor the situation and believe there are a lot of opportunities there, and as soon as the trade embargo is lifted, we will be very interested," Chawapol said.

Nakrop Niamnamtham, managing director of nForce Security Systems AP, said: "The first thing Burma [should do is] open the country to investment in information-technology infrastructure and other related facilities such as electricity or telephone networks. As I always say, IT-driven business has made the world smaller, but the business opportunity is wider and easier."

Burma has great potential to develop because there are still many natural resources and cheap labour, attractive factors in foreign investors' eyes.

The company plans to expand into Burma and is looking for potential trading partners to form joint ventures.

Nakrop said the Burmese government should play a key role in ensuring security for foreign investors and business operations.

"It is a great opportunity for Thailand and [other] Asean countries, as we are moving towards the AEC [Asean Economic Community]. But we have to fight giant competitors like China that have had large investments in Burma for years, while Japan has provided huge financial assistance," Nakrop said.