Thai investors feel urge to rush into Burma depite challenges

Bracing for an expected increase in wage costs at home, Thai corporations are responding to the Burmese government's moves to make things easier for foreign investors.

"A friend of mine in a labour-intensive industry is looking at investment opportunities in [Burma]," said Areepong Bhoocha-oom, permanent secretary for Finance. He said he met his friend by chance during a recent trip to the country.

Areepong said the government fully supports Thai investors looking for business opportunities in the neighbouring country, which is rich in resources such as gas and oil reserves.

He sees mutual benefits for both sides, and for all Asean citizens, who in future will be able to travel freely in the region, similar to how Europeans can take advantage of the EU's economic integration.

The 10 Asean states will launch the Asean Economic Community (AEC) in 2015, enabling free movement of goods, services and labour.

Bhongbhichai Bhitakburi, general manager of the Chatrium Hotel in Rangoon, said there are a great many opportunities for Thai operators to open new hotels in Burma as demand for rooms has increased sharply recently. The supply of rooms is currently limited, he said. Chatrium is run by Bangkok Bank.

The spa business is also promising, as his hotel has many high-income customers, Bhongbhichai said.

Siriphong Fuenglikhit, external relations manager of PTTEP International Ltd's Rangoon office, said PTT group has been investing in oil and gas exploration in the country for 15 years.

"Currently most gas production is supplied to Thailand, but in the future the gas supply may go to the domestic market as foreign investors set up manufacturing plants in the country," he said.

Executives at Charoen Pokphand Group, meanwhile, have warned that Thai investors must deliver on their promises, and that Burmese people must benefit from their investments. CP Group has already invested in feed-meal and food businesses.

Diplomatic sources in Burma said Europe, the US and their allies were expected to lift trade and investment sanctions in March or April after recent progress in policy reforms and moves toward democracy.

Looking to create jobs, the Burmese government plans to woo labour-intensive industries.

Nuttasit Thienprasid, senior researcher at the Fiscal Policy Research Institute, warned Thai investors that relying on old connections may not be adequate, as the Burmese government was changing many old rules to accommodate fresh foreign investment.

The government has put in place a foreign investment law, a special economic zone law and the Dawei special economic zone law. The latter is designed to accommodate investment from Thailand in particular.

Nuttasit said Burmese ministers recently sent signals that more tax incentives would be offered. These were likely to be much more enticing than those offered by Thailand's Board of Investment, he said.

Areas with strong investment potential include agriculture, fisheries, wood products, rubber plantations and products, precious stone cutting, energy, metal ores, cement, food, textiles and garments, leather, shoes, machinery and consumer electronics, Nuttasit said, citing the Union of Myanmar Federation of Chambers of Commerce and Industry. Myanmar is Burma's official name.

But there were still big challenges - the unstable exchange rate, political stability, minority issues, logistics and infrastructure constraints, he said.

The International Monetary Fund is currently working with the government to put in place a new exchange-rate regime that will facilitate modern economic development.

Thai diplomats in Rangoon said the government is very keen to install a new exchange-rate regime. With the influx of tourists and the fast pace of political opening up, the kyat has strengthened against the US dollar, and land prices in Rangoon are already soaring, they said.

Rose, a middle-aged woman who sells jewellery to tourists in Bogyoke Aung San market in Rangoon, expressed confidence that her business would benefit from the country opening up.

Speaking fluent Thai and showing off her Thai mobile-phone numbers, she said Thai and Chinese tourists were her main customers. Tourists are buying jewellery made from Burmese jadeite, which is known for its high quality, she said.