Foreign money flows into Myanmar

YANGON — Foreign companies are making a full-fledged inroads into Myanmar, spurred by rising wages in Thailand and other neighbors and the establishment of industrial parks there.

This year is expected to bring the greatest amount of investment by Japanese and other foreign firms in Myanmar’s history, but many problems remain to be solved, including issues related to power supply and other forms of infrastructure.

The Thilawa Industrial Park is located about 20 kilometers southeast of Yangon, Myanmar’s largest city. Recruitment of firms to set up operations here began in mid-May, and the entry of 22 companies has already been decided. Compared with similar projects in nearby countries, this is “a historic pace,” said Takashi Yanai, president of the developing company Myanmar Japan Thilawa Development Ltd. (MJTD).

Companies from a wide variety of industries, including auto parts, shoe manufacturing and construction materials, have decided to set up business in the park. A broad range of countries will also be represented, including the United States, Thailand and Australia.

When I visited the park in the latter part of August, three men identifying themselves as involved with a Chinese firm appeared suddenly at MJTD’s office. They began to talk business, saying they were thinking of investing and asking to be told about the park.

Sumitomo Corp., Marubeni Corp. and Mitsubishi Corp. are leading the Thilawa project in cooperation with the Japan International Cooperation Agency. Compared to other industrial parks in Myanmar, the Thilawa facility has the advantage of being equipped with adequate power and other forms of infrastructure. MJTD expects about half of the first development section’s 211 hectares to be filled before the year-end.

Wages advantageous

Myanmar switched to a civilian administration very recently — in 2011— and for foreign companies, it is untapped as both a production base and a consumer market in Southeast Asia.

The basic monthly wage at a Myanmar factory worker is about $70 (¥7,600), or less than one-fifth that of a worker in such countries as Thailand and China. The Myanmar people also have a reputation for being industrious.

Myanmar’s per-capita gross domestic product is about $900, but it has a population of more than 50 million.

In the 2000s, Myanmar saw a yearly average of 10 cases of investment from overseas. In fiscal 2013, however, the figure reached 123. And as wages have been rising conspicuously in surrounding countries, “the sale of places at Thilawa began, and companies that were ‘waiting to see’ began to move,” said Toshikazu Gocho, a foreign investment adviser at the Japan External Trade Organization’s office in Yangon.

An official of Myanmar’s National Planning and Economic Development Ministry predicted that fiscal 2014 would see the highest number of foreign investment cases in the nation’s history.

The number of member companies of the Japanese Chamber of Commerce and Industry, Yangon have also increased from 53 in fiscal 2011 to 185 today. Actual business activities are also getting into full swing — for example, joint venture company JFE Engineering Corp., which builds bridges and other forms of infrastructure, made its first shipments in July.

Risks remain

However, infrastructure such as power supply and communications are still unstable in Myanmar, and the risks of doing business there remain significant.

The Myanmar government is loosening restrictions on foreign funding of retail operations, but “there are many difficult cases,” Gocho said, referring to such problems as administration officials not acting in accordance with the law.

Another problem involves the lack of LUXURY HOTELS, even in Yangon, that business clients from overseas tend to use.

A high-ranking government official acknowledged that there are problems. He said the country will use investment from overseas to resolve them. However, it appears this will take time.

Source: The Japan Times

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