Economic reform in 2015 out of the world’s spotlight

Next year could the most important for Myanmar’s economic transition since the heady days that followed the transition from a military to a civilian government.

The world’s attention may be drifting away, the spotlight drawn by any number of international concerns, while some circling investors appear flummoxed by the pace of change. The expectations of foreign investors have also become more realistic, with the realisation setting in that change cannot take place in just a year or two.

Yet Myanmar, for the first time in the modern era, is firmly on the international business community’s radar. Approved FDI hit US$3.6 billion from April to September – nearly as much as for the entire previous fiscal year.

While it is still far from the billions China pumped in at the tail end of the military regime, investment is increasingly being directed into labour-intensive industries, including manufacturing, construction and tourism. Tourism arrivals look set to hit 3 million for 2014, compared with less than 1 million in 2011.

The two private telcos, Telenor and Ooredoo, have finally set up, ushering in a wave of change in an embarrassingly outdated sector. Nine foreign banks were also selected in October to open next year for the first time since the nationalisations of the Ne Win regime, constituting more evidence of Myanmar’s commitment to encouraging foreign investment.

Myanmar may drift further from its hold on the world’s attention in 2015, particularly compared to two or three years ago, but foreign investors have already taken notice. Some have already taken the plunge to invest, while for many others Myanmar is on their radar and they will be closely watching to see when the time is right to bring their business.

Foremost among the concerns of potential foreign investors is politics, particularly entering an election year. A flood of foreign, particularly Western, interest began taking stock of the country in 2011. Though much of it never materialised into actual investment, some prominent firms like General Electric and Coca-Cola have set up shop.

Some experts say a successful election could set off a second wave of foreign interest in the country.

“I do think there will be a second rush, that’s for sure,” said prominent entrepreneur Serge Pun during a November interview.

“Because I’m optimistic the elections will again prove one thing – that we are again in the right direction, and that regardless of who wins, the economic policy of reform, level playing fields, open doors, would be the most important foundation for any government.”

“If we turn socialist, then god help us, but I think it’s not likely, whoever wins. And when that fact, that truth, is established post–election, then I think you will see another wave of investors rushing in.”

Government officials say making Myanmar an attractive destination for investors is a process that will require time and patience.

“Foreign investment is different from trading, it takes more than a few days,” said U Aung Naing Oo, secretary of the Myanmar Investment Commission, which approves large–scale investment projects.

“No investors come as soon as a country opens up. They assess the situation and make surveys for about two years before setting up a business. Some have come, taken a look and then gone back – that doesn’t mean they don’t want to be here, but that they’ve decided not to come now.”

As senior officials acknowledge, there are plenty of challenges to building an investor-friendly investment climate – with lots of work needed to improve areas like the macroeconomic environment, human resources, financial capacity and infrastructure.

“Like in many countries that are Asian, we also have many problems,” said U Set Aung, deputy governor of the Central Bank of Myanmar, during a speech on December 12.

“We don’t call them problems, we call them challenges. It’s a kind of sexy word we like to use. So we have many challenges, actually, and some of the problems are internal and some of them are external.”

Although economic reforms aren’t coming as quickly or as comprehensively as many would like, progress is being made. When US President Barack Obama visited Myanmar last month, he pointed to a few areas where reforms were slowing down or backsliding during an interview with The Irrawaddy. However, the economy was one of the areas he singled out as continuing to move forward.

European Union ambassador to Myanmar Roland Kobia said a strengthening economy is important to continuing reform in the overall country.

“If Myanmar generates business it will help to democratise the country and improve its relationship to the rest of the world. Doing business will strengthen the democratic power transition,” he said on the sidelines of a December 12 event.

As U Set Aung pointed out in his speech, the Myanmar economy is also significantly influenced by other, much

larger, economies. Nevertheless, observers say it is important not to lose sight of the need for continuing economic reforms regardless of the international business climate. Investors from countries like Japan, China and the European Union may shy away from Myanmar due to challenges at home – though there are significant domestic hurdles that need to be removed.

“The current government is trying to address challenges head-on,” said Eric Rose, lead director at Herzfeld Rubin Meyer and Rose legal firm.

Still, it takes two to tango, and foreign officials and investors must be willing to work with their Myanmar counterparts. It will take time to build these strong relationships and levels of trust, according to Mr Rose.

“There is still a substantial amount of incredulity that foreigners really, really want to help Myanmar and that obviously will take years [to overcome],” he said.

As some of the world’s focus on Myanmar has begun to dissipate, concern over the reform process has been growing.

“Am I just as optimistic today as I was a year ago? The answer is no. I fear that there is a wave of concerns both domestic and international that are now taking over the discourse as opposed to continuing the reform process.”

But on the whole, Mr Rose said he still counts himself as an optimist about the country’s future.

“There is a unanimity of desire among Myanmar people to reform the systems and continue those reforms going forward,” he said.

Now that the spotlight is beginning to move away from Myanmar, it may finally now have the breathing space it needs to address the biggest challenges – problems – facing the business environment. During 2015, the direction of future economic reform will become much more clear.


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