Myanmar looks to FDI boost

LEADING businessmen in Myanmar’s manufacturing industry expect a surge in foreign investment as the country welcomes a newly elected government, saying it would be warmly welcomed as it would help strengthen local competitiveness.

In an interview with The Nation, Zaw Min Win, chairman of Myanmar Industries Association, said he foresees influx of foreign investment in the next few years particularly in labour-intensive industries like garment and footwear and resources-based ones like agricultural and food processing.

“Most of the foreign investment has so far gone to the oil and gas as well as power sectors. From now on, the manufacturing sector should draw more investment than other sectors, particularly from Indonesia, Japan and South Korea,” he said.

According to the Directorate of Investment and Company Administration, of US$47.7 billion aggregate foreign investment since 1988, the sum actually invested in the manufacturing sector as of October 2015 was valued at only $4.9 billion or 10.26 per cent, compared to the oil and gas sector’s 39.2 per cent and the power sector’s 27.84 per cent. The actual investment is also below the combined value of projects, $6.13 billion, approved by the Myanmar Investment Commission.

Convincing him of a change is the European Union’s reinstatement of the generaliased system of preferences (GSP) for Myanmar, allowing all products produced in Myanmar to benefit from full duty-free and quota-free access to the EU market.

Meanwhile, labour-intensive companies are moving away from China due to an increase in labour cost there. He declined to comment on the outlook if the United States also restores its GSP to Myanmar.

The GSP aside, he believed the sector would grow also because of the development of three special economic zones in Thilawa, Dawei and Kyaukphyu, which should appeal to supporting industries.

Of the three, Thilawa has progressed well, drawing 44 foreign companies from 12 countries.

“This will create jobs, bring in technology and capital investment, and raise our exports,” Zaw Min Win said.

Opportunities are bright, but he did not overlook grave challenges the industry is facing – poor infrastructure, inadequate power supply, poor transport and logistics, and shortage of skilled labour. To local businesses, poor access to finance and high interest rate, at 10.5 per cent, add up the headaches. Businesses cannot obtain loans without collaterals and even with collaterals, their appraised values vary. On top of that is the implementation of the Asean Economic Community (AEC).

Of about 40,000 registered manufacturing businesses, 95 per cent are small and medium-sized enterprises. These companies supply about 95 per cent of goods consumed in the country. About 65 per cent of the companies operate in food-related industries.

“Lack of skilled labour and the cost of production, which is a bit high, are worrying factors,” he said.

He pinned hopes on the enactment of the SME law during the next government’s term, to provide more incentives to SMEs. The association will next year be promoted to a federation, to toughen its role.

To increase the availability of skilled labour, training sessions are now provided with funds from the Japanese and German governments. Zaw Min Win eyes more help from other countries like Malaysia and Thailand on training. He said Myanmar is now short of skilled labour at all levels.

Aye Tun, managing director of auto-parts manufacturer Aung Thein Than Co, said that despite the desire to expand overseas, local companies are forced to focus on the local market due to lack of finance and technology.

He, too, is worried about the influx of foreign companies which have greater advantages over local companies. “We need a good policy to balance that or local SMEs will disappear,” he said.

Aung Min, secretary-general of the association and also chairman of Contracted Manufacturing Product Co, said that for now the focus is to grow the industry to substitute imports and only excess output will be exported.

He also expected that as the country welcomes a new government and when the local industry expands to some extent, Myanmar workers overseas – mostly in Thailand and Malaysia – will return home.

“The salary is higher in Thailand but the entry of foreign companies will improve that. If the salary here is the same or a bit lower, they should return. They are skilled labour, knowing how to operate machines. Everybody wants to be home. I heard that they also face problems staying in Thailand,” he said.

Zaw Min Win added that local SMEs also need to improve the quality of products. “We must develop. SMEs must grow. They must collaborate with foreign partners,” he noted.

“We have the new government, new policies and more investment is coming in. We need more infrastructure and human capacity development. Then we can grow our manufacturing,” he said.

Source: The Nation

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