Thomas Klotz, managing partner for Southeast Asia at Roland Berger(left) and Aung Thein, joint secretary general of UMFCCI (PhotoKhine Kyaw,Myanmar Eleven)
Thomas Klotz, managing partner for Southeast Asia at Roland Berger(left) and Aung Thein, joint secretary general of UMFCCI (PhotoKhine Kyaw,Myanmar Eleven)

Uncertainty mars investor confidence in Myanmar

Economy December 14, 2017 01:00


INVESTOR confidence in Myanmar has drastically dropped this year due to the lack of clear economic policies and action plans as well as other drawbacks such as skills shortage and rising labour costs, according to the second Myanmar Business Survey conducted by Roland Berger, a global consultancy firm.

Thomas Klotz, the firm’s managing partner for Southeast Asia, said on Tuesday that the government urgently needed to implement a decisive and clear action plan to overcome major bottlenecks that might dampen the economy.

“On the government side, policies and framework are not clarified and that investors’ decisions are still not taken. What was expected to be rapid development is taking too long,” he said.

Klotz admitted he was really amazed at the substantial drop in short-term business sentiment from 73 per cent last year to 49 per cent this year. The significant decline was mainly driven by unclear policies, unpredictable legislative environment and selective enforcement of regulations, on top of the lack of trained staff.

The survey was conducted from June to August in partnership with the Union of Myanmar Federation of Chambers of Commerce and Industry, and almost 500 owners and senior executives from companies of all sizes provided their input. 

Sixty-one per cent of the respondents came from local companies while international firms accounted for thirty-nine per cent. Singapore-based firms are a majority among the respondents, followed by European countries (particularly France, Germany, the United Kingdom, Switzerland), Japan, the United States, Malaysia, and China.

“It is a very strong indication that expectations have become significantly lower. Therefore, investment plans are being held back,” said Klotz.

He urged the government to set the main priority on a single thing first, hinting it is time to focus on the economy.

“Priority has to be on one thing first, and other things come later. All the things have to support each other when it comes to economic transformation. Economic development reinforces social affairs, peace, and a lot of other factors,” he said.

He stressed the importance of recognising the clarity of policies and putting more resources and efforts into serving the fundamental needs of people to ensure sustainable economic growth.

Start from the top 

“It should start from the top direction and has to be taken down into various sectors and ministries. The current government has taken a more cautious approach to liberalisation [of the economy]. Decisions need to be taken and communicated urgently,” he said.

Klotz urged the government to figure out what are the key decisions to be taken, probably energy and power for instance, and push them forward quickly. He also suggested strengthening the framework for participation of the society in the decision- making process of big projects.

“At this point, it is important to stop the negative momentum. There were some questions about individual tenders for power plants and utilities,” he said.

“In order to improve FDI (foreign direct investment), a number of initiatives have been taken, leading to positive impacts. On the other hand, there are also negative factors. It is not the question of how much has been done but what can be improved. It is a competitive game, competitive market.”

According to Klotz, investors are looking for much more specific plans endorsed by the government.

“What the private sector has been looking for and what is missing so far is the communication of an overall economic transformation roadmap, with clear targets, timeline and quick wins, followed by clear, comprehensive and consistent sector policies,” he said.

He added policies should be strengthened for key sectors such as financial services, electrical power and energy, agriculture, transport infrastructure, tourism and manufacturing. According to the survey, only 49 per cent of executives expected the business landscape to rapidly improve over the next 12 months, compared to 73 per cent last year.