Investment in Myanmar to get more difficult for Thais post- AEC
May 08, 2013 00:00 By Petchanet Pratruangkrai
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Thai businesspeople will find it harder to invest in Myanmar amid rapidly rising land and labour costs because of the influx of foreign direct investment (FDI), which is projected to grow by 200-400 per cent in 2015 after Asean integration.
A study by the University of the Thai Chamber of Commerce’s Centre for International Trade Studies (CITS) found that wage and land costs in Myanmar were expected to increase significantly three years from now after the Asean Economic Community is implemented.As a result, Thai investors will face more difficulty getting a foothold in Myanmar as competition with other foreign investors who have more money gets tougher.
CITS director Aat Pisanwanich urged the Thai government to negotiate with the Myanmar government to make the playing field more advantageous for Thai investors and traders.
"Because of rising labour and land costs in Myanmar, fewer Thai entrepreneurs will be able to invest in that country. The government should negotiate for the reduction of some difficulties to promote more Thai investment, especially increasing opportunities for small and medium-sized enterprises," he said.
According to the study, the value of FDI to Myanmar will skyrocket by 200-400 per cent in 2015 after the AEC kicks off. In 2010, FDI in Myanmar grew by 6,000 per cent from US$330 million to $6 billion. The FDI value in Myanmar increased by an average of 542 per cent per year between 1989 and 2012. The FDI value could reach as high as $127 billion after 2015, from a current combined FDI worth $41.25 billion (Bt1.22 trillion).
Last year, Thailand was the second-largest foreign investor in Myanmar after China. Combined investment value from Thailand was $9.56 billion, while China invested $14.14 billion.
The study also showed that wages in Yangon had increased significantly in the year after the general election, the average rising from the equivalent of Bt120 to Bt150 per day. The average daily wage in the business capital is expected to rise to Bt250 in the next three years. On top of that are other costs paid by employers for their workers such as food and transport.
The cost of land in Myanmar is projected to rise by 200-300 per cent in the next three years, Aat added.
For instance, the average price of land in Yangon this year is Bt128 million a rai (Bt800 million per hectare), an increase of 450 per cent from Bt79 million in 2012.
The price in Yangon was only Bt23 million per rai in 2011.
Land in Mandalay is currently traded at Bt35.6 million per rai, but is expected to increase to Bt61.9 million by 2016.
Land in Dawei is now Bt110 million a rai, up from Bt100 million last year. It is projected to increase by 600 per cent to Bt140 million by 2016.
Annual leasing fees in Yangon this year are Bt4.55 million per square wah (nearly Bt1.14 million per square metre), and are projected to double to Bt8.75 million by 2016.
The study also found that many businesses were waiting for Thai investment in different cities in Myanmar.
Businesses with high potential in Yangon are rice processing, automobiles and parts, garments, footwear, consumer goods, fishery, tourism and services, machinery, construction, and furniture and wood processing.
In Dawei, high-potential businesses for Thais include rubber plantation, palm, aquaculture, logistics, food processing and construction.
Aat added that many Thai producers would have greater opportunities to trade in Myanmar as its economy grows and its people get better incomes.
Thai traders should urgently explore this market to ensure they can compete when many foreign traders and investors move in.