The followings are the transcript that has been translated from Burmese to English:
Background: Foreign investment in Myanmar has significantly increased in the past few years, within 2012 and 2013 there had been $ 4.1 billion invested by foreigners. But according to the World Bank , Myanmar is still ranked 182 out of 189 countries in the world in terms of ease of doing business. To know more about the attractiveness of Myanmar market from foreign investor’s point of view, let’s have a short discussion with Mr. Andrew Tan, Managing Director of Consult-Myanmar Company Limited. Consult-Myanmar provides consultancy service to foreign investors that want to invest in Myanmar.
Interviewer: Hello Mr. Andrew Tan, even though Myanmar is a developing country many foreign investors complain about poor infrastructure and expensive rent for their office and accommodations in Myanmar? Are there any other challenges that foreign investors should know about?
Andrew: Yes, it is true that Myanmar is a frontier market and an emerging economy and like any emerging market infrastructure is weak. If you look at China in the 1980s when it started to reform its economy and opened it up to foreign investment – it faced the same situation of poor infrastructure. Vietnam and Indonesia went through the same process when it opened up its economy to foreign investment. Myanmar will have to develop its economy in stages. There is no express lane when it comes to reforming a developing economy like Myanmar.
Most of the foreign investors that are coming to Myanmar at this phase in its development have experience in investing in infrastructure projects in emerging markets such as China, Vietnam and Indonesia. So they know what they are getting into. They expect the infrastructure to be poor in areas such as power generation and distribution, transportation, telecommunication, etc. That is also where the opportunities are for the foreign investors.
However many investors did not expect the property rental to be so high in Yangon. It is reputed to be higher than Singapore or Hong Kong. This is mainly due to very limited supply of Grade A property that is suitable for foreign investors to rent or lease.
Another problem is a lack of skilled workers. Many skilled Myanmar workers prefer to work overseas as they are able to make much higher salary if they work overseas versus Myanmar.
Interviewer: With regards to infrastructure investment for example Ooredoo and Telenor are investing in building world class mobile network, we heard that some foreign companies are investing in transportation. Can we say that these infrastructure investments have been beneficial to Myanmar?
Andrew: Investment in infrastructure have benefited Myanmar significantly. When the Telenor and Ooredoo were awarded the telecom licence they in turn awarded contracts to equipment manufacturers such as Huawei, Ericsson and Nokia-Siemens. These equipment manufacturers in turn awarded contracts to local sub-contractors for engineering, logistics, recruitment, etc. The multiplier effects from these contracts created jobs in the local Myanmar economy. Similarly we see the same multiplier effects playing out from the oil and gas tenders and from the tourism related projects.
Interviewer: Approximately 50,000 new jobs were created in 2014. However there are still millions of Myanmar people working overseas. Which sectors will need more foreign investment in order to create jobs in Myanmar and to attract skilled Myanmar workers to return home to work in Myanmar.
Andrew: We need to develop in stages. First is to improve the infrastructure. Second is to develop more Special Economic Zones (SEZs) such as Thilawa, Dawei and Kyauk Phyu. This need to be done in co-operation with foreign companies which have experience to developed and run such SEZs. If this is done correctly and it attracts a lot of manufacturing industries to relocate to Myanmar – it will create jobs for the Myanmar people. However we need to be patient as the process takes time.
Interviewer: Myanmar have a lot of land. Do you think it is possible for the government to create more competition between the developers and to only award land to developers that can complete projects on time so that it will reduce land speculation and decrease land and rental price?
Andrew: The construction industry is booming due to demand created by foreign investors rushing into Myanmar and the very limited supply of Grade A property. The biggest challenge for the construction industry is the rules and regulations with regards to zoning law and building code. Many of these rules and regulations are still being developed and are not easily available to developers. Many developers learned about these rules and regulations only in the newspapers when the relevant government officials discuss about it.
The zoning law in Yangon for example prohibits construction of high rise around the Shwe Dagon Pagoda or in Mandalay around the Royal Palace. This height restriction limits the number of apartment or office unit that can be built in any one development in the restricted zone. This in term puts pressure on developers to increase the unit price of each property in the restricted location in order to be profitable.
On top of that investors from countries such as US, Canada and the European Union are not able to do business with people on the Sanction List. This again restrict the number of projects that foreigners investors are able to invest in in the construction sector.
Interviewer: Over time how do you see the Myanmar economy developing?
Andrew: Myanmar is lucky in that it can learn from its neighbours such as Vietnam, China and Bangladesh. However Myanmar will have to find its own development path as its history is different from that of its neighbours. For example in the 1950s Myanmar went down the socialist path and then was ruled by military government for many years. However when China opened up to foreign investment in the 1980s it was a Communist country and all land belong to the government. So China did not have problem of sky rocketing property prices when it started to develop its industrial zone and to attract foreign investment into manufacturing. In Myanmar however when it started the reform process in 2010 most of the properties are in the hand of private land owners as such it was subjected to a lot of land speculation and it also tie the government hand when it comes to controlling land prices.
Interviewer: Do you see improvements in the development of law and regulation in Myanmar?
Andrew: Many new laws will be passed in Myanmar this year. For example a new Company Act and Trademark Law will be passed before the end of this year.
The current Company Act was passed in 1914 when Myanmar was still a British colony. As such it is archaic and not in keeping with modern company law that we are familiar with in the more developed countries.
More importantly after passing the new laws, the Myanmar government must ensure that new laws are implemented properly by the various government ministries and departments.