Vague laws still hamper FDI in Myanmar: Jetro

Foreign investors are still concerned about inadequate infrastructure and obscure investment laws and regulations in Myanmar, while the sharp rise in the kyat has hurt its exporters.

"The biggest concern is poor |infrastructure," Toshihiro Kudo, a senior research fellow at the Japan External Trade Organisation's Insti-tute of Developing Economies, said yesterday.

Myanmar still faces a power shortage, but electricity supply is set to improve next year when a new power plant commences operations.

The high cost of logistics is also an obstacle to investment. Road, rail and port links with neighbours are weak, he told a seminar hosted by the Thailand Development Research Institute.

Foreign investors are also worried about how their interests will be protected by the investment law adopted last November. New regulations have been put in place but investors still do not know what they can or cannot do.

"They are concerned that the law gives too much discretionary power to authorities, so it may not be transparent," Kudo said.

Myanmar should establish its own version of Thailand's Board of Investment, he said.

Foreign direct investment is still a trickle as investors are waiting for better infrastructure. Myanmar received about US$1 billion (Bt30 billion) of FDI in 2011 while Vietnam welcomed $6.5 billion. Many foreign companies have set up representative offices and trade and investment missions have been sent to Myanmar but manufacturing investment has yet to arrive.

Clothing exports from Myanmar to Japan jumped to $408 million in 2012 from $4.6 million in 2005, but this was trivial compared with garment exports from China worth $25 billion in 2012. And these products are made by domestic companies, not by multinational corporations.

Myanmar has the potential to join the Asian production network, but it has to be done via MNCs, Kudo said.

As for the Dawei project, which is under development by a Thai company, there is strong interest among Japanese investors present in Thailand, he said. However, since the deep-sea port and industrial park need a lot of money, some companies may question the plan's feasibility.

Koji Kubo, also a Jetro researcher, said the rise of the kyat had started to hurt exporters, especially rice traders. The Myanmar unit was trading at about 1,300 per US dollar in 2007 but now it is at about 860.

Myanmar adopted a managed floating exchange rate regime last April. Official and black-market exchange rates have converged, but the country needs further reform, he said. In particular, state enterprises should be encouraged to sell foreign currency to banks.

The country is also heavily dependent on cash settlement compared with neighbours, making it difficult to stabilise the kyat, Kubo said.