Naypyitaw, Myanmar: Optimism that Myanmar will follow other Asian “tiger” economies in welcoming foreign investment to drive growth took a hit last month.
Recent amendments to a proposed foreign investment law in the Lower House included requirements and prohibitions that threaten to scare away many companies from the reforming country, according to economists and some senior government officials.
“I have watched this law become less and less liberal, less and less open, with each draft,” said Sean Turnell, economics professor at Australia’s Macquarie University and a Myanmar specialist. “The new law is fast becoming the ‘No Foreign Investment Law.’”
Among the amendments are a $5-million (Dh18.3 million) minimum requirement on foreign investments, a 49-per-cent maximum for foreign equity in joint ventures and the outright exclusion of foreigners in several key sectors such as distribution and agriculture.
Industry Minister Soe Thane, who also heads the Myanmar Investment Commission, is one of the draft law’s biggest critics.
“This $5 million requirement is very discouraging for SMEs [small to medium enterprises], and SMEs are the only investors interested in Myanmar now,” he said.
If the legislation passes through the lower house, it is likely to be approved by the upper house and then President Thein Sein, sources said.
A groundswell of criticism has generated hope that the draft will not be rushed through the parliamentary session, that ended on Friday.
“The existing law is better than the new draft with its amendments,” Soe Thane said. Myanmar’s current investment law was enacted in 1989.
The prohibitive amendments were recommended by the Myanmar Chamber of Commerce, “which suddenly woke up” to the possibility of strong competition if they did not intervene in the legislative process, said one Yangon-based Western diplomat.
Myanmar has been isolated from the world economy for the past five decades, first by xenophobic socialist-based policies during 1962 to 1988, and then by economic sanctions imposed by Western democracies on the former military regime.
Many sanctions were suspended or eased this year after Thein Sein pushed through a series of political and economic reforms since taking office in early 2011.
The years of military rule and sanctions gave rise to a small but powerful private sector that now controls the economy.
The most successful tycoons had close links to the junta that ruled Myanmar during 1988-2010.
The government is dependent on the local business community to invest in public mega-projects, run banks and other services, generate jobs and provide charities to the poor.
“If there is no benefit for the local businessmen from the foreign investment law, it could cause political problems,” said Thein Tun, chairman of the Myanmar Golden Star Group, which runs a bank and produces a variety of consumer goods.
“It has to be a win-win siuation,” said Zaw Zaw, founder of the Max Myanmar Group, involved in construction, jade mining, banking and rubber plantations. “If there are no constraints on foreign investment, all our SMEs will disappear.”
Fears of an influx of foreign investment may not be limited to the business elite, some observers believe.
“Myanmar has been isolated for a long time, so the xenophobia is still there,” said William Wyatwunna, director of Good News Travel tour company.
“Xenophobia is at all levels of our society from high to low. In fact, people who don’t have a xenophobic attitude are the minority.”
If that translates into harsh constraints on foreign investment, it could be bad news for the majority of the population.
“There are 4 million of our people working outside Myanmar and 10 million unemployed inside Myanmar, so who is going to solve that problem if we get no foreign investment?” Soe Thane said.