Reckless Optimism or Hopeful Expectations

Much has been said and written about Myanmar in the last 2 years. Seminars and conferences proliferate both in Yangon itself and other centers of investment capital, notably London. It is easy to suffer from information overload.

Nonetheless foreign interest in investment shows no sign of abating: even in the face of untenably high property prices; an uncertain regulatory framework; corruption; traditional ethnic problems and more recently religious intolerance and violence

It is worth reflecting for a moment and to take stock of 2 astonishing years:
 

Politically; President Thein Sein’s leadership remains strong and his efforts to enfranchise the (Kachin and other “rebel groups”) whilst fostering strong international relationships should be roundly applauded. He has managed to find a way to work with Aung San Suu Kyi and to a lesser extent other democratic independence parties, who are as yet not represented in Parliament; a situation which is certain to change in the upcoming 2015 elections.



Since being appointed as President in March 2011, Thein Sein and his Government have concluded peace accords or ceasefires with 11 out of the 12 major rebel groups. It would be naïve to suggest that matters have been resolved with any finality, but the process continues to evolve in a positive direction.

For her part “The Lady” has shown that political compromise is no bad thing. The circumstances leading to her signing the Constitution; to which she was ideologically opposed, showed enormous political judgment and pragmatism.

One should not forget that the Regime initiated their dialogue, with the release from house arrest of Aung San Su Kyi in November 2010, precisely at the time when a dozen or more Arab and North African Nations began to experience violent political change (and sadly in several cases remain in turmoil). One can only hope that history will recognize the willingness and strength of character displayed by all the disparate leaders in the Myanmar political matrix.

At Ministerial/Cabinet level, previously a reservation for the army Generals, there has been significant change. Non-military academic appointments have been made, notably in Energy, Labour, Rail Transportation and Education. These are key areas which influence continued Foreign Direct Investment and the Government has shown a desire to put technically experienced leaders and deputies into these key Ministries. This re-engineering can also be seen in the Myanmar Investment Commission (“MIC”) and the Directorate for Investment and Company Administration (“DICA”); the two key Government departments for processing and approving foreign investment.

Socially; one must recognize, that sadly the benefits of foreign investment and a more open society will take much time to trickle down especially in rural areas, accounting for 70 % of Myanmar’s estimated 60 million population.



However, it is possible to see manifestations of positive change:

  • The pervasive fear in which the people existed, up until very recently, has all but disappeared;
  • Media freedom is now a reality, albeit with limitations;
  • Internet access and telecommunications coverage is improving dramatically; a local mobiletelephone sim card which in January 2013 cost USD 1,000 is now 8 months later USD 200. With the granting of telecoms licenses to Telenor and Ooredoo one may expect the coverage and price to become much more accessible;
  • In the cities the astonishing growth of private car ownership, in the last 6 months, shows real wealth creation.

Nevertheless:

  • There is a residual fear that the changes are only possible because of a currently benign leadership and a belief in reconciliation, but this balance could shift with a return to the old repressive ways;
  • The official unemployment rates of approximately 8% do not reflect underemployment which is critical in Myanmar, resulting in a real unemployment rate closer to 40%;
  • Energy, and general infrastructure to support a better quality of life are inadequate or nonexistent;
  • Observers are concerned how the 2015 elections will be conducted and the possible reaction by the military, should the democratic process threaten existing vested interests.

The reality is that so much depends on real FDI to generate the GDP which will allow people to embrace the status quo and thereby maintain stability.

One would be forgiven, from reading press reports, in assuming that the levels of investment are significant and that economic reform is inevitable and just around the corner.



However the reality is that fresh investment only began a little over 8 months ago with the passageof the new Foreign Investment Law in November 2012.

Investment; by foreigners was, until relatively recently, only in the extractive industries. Oil gas and mining are very lucrative industries but generate little benefit for the population as a whole. Labour intensive work in construction and manufacturing is only, now in August 2013, beginning to have an impact for the better.

The DICA and MIC seem to be doing all they can to promote investment by increasing efficiency and reducing bureaucracy. Three apparently minor but interesting changes in the last 3 months:

  • The fee for a Permit to Trade was reduced from USD2,500 to USD1,000;
  • At the same time the duration of such Permits was extended from 3 to 5 years;
  • Foreign applicants used to have to Notarise all documents (at the Myanmar Embassy in the country of origin) in support of such applications, to do business. This seemingly innocent bureaucratic step caused no end of confusion and delay for applicants. In response the MIC has declared that this requirement is no longer needed for documents in English. The authorities seem at ease dealing with documents in either English or Burmese, which in many ways is no surprise given that much of the applicable law in Myanmar derives from the old India Acts of 19th century Britain. The law which governs all company and corporate matters in Myanmar is the slightly archaic but very workable Myanmar Companies act 1914.

The Foreign Investment Law 2012 (and the enabling regulations in 2013) was not as encouraging as had been hoped for by the foreign community. The legislation arose following a fairly tortuous path


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