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Myanmar hopes to be the next Asian winner of US-China trade war as Vietnam nears capacity

Vietnam pulled ahead in the race to lure producers, but other neighbours including Thailand and Indonesia are stepping up efforts to attract them
One advantage for Myanmar – where about one-third of the population lives in poverty – is that Europe and the US offer preferential export terms

Myanmar expects to attract more investment as manufacturers seeking to relocate production from China to skirt US tariffs encounter capacity constraints in Vietnam.

The Southeast Asian nation aims to woo a total of US$5.8 billion in foreign direct investment this year and cut back the red tape that deters some companies, according to a senior government official.

“When it comes to relocation, Vietnam might be preferable but it’s already congested,” said Aung Naing Oo, permanent secretary at the Ministry of Investment and Foreign Economic Relations. “So, investors are now eyeing Indonesia and Myanmar.”

The spoils of trade war: Asia’s winners and losers in US-China clash

One advantage for Myanmar – where about one-third of the population lives in poverty – is that Europe and the US offer preferential export terms to boost growth, according to Aung Naing Oo. At the same time, the US$71 billion economy continues to face traditional obstacles such as insufficient supplies of electricity and industrial land.

Recent evidence suggests Vietnam has pulled ahead in the race to lure producers but neighbours including Thailand and Indonesia are stepping up efforts to attract them.

Clogged infrastructure is one of the risks for Vietnam, where shipping container capacity will need to grow at almost twice its 10-12 per cent pace of the past decade to keep up with new demand, Bloomberg Intelligence research shows.

Net foreign-direct investment into Myanmar collapsed to 1.8 per cent of gross domestic product last year from 6 per cent in 2017, World Bank data shows.

The Rohingya refugee crisis flared up in Rakhine state in the second half of 2017, with the US and the UN describing Myanmar’s treatment of Rohingya Muslims as “ethnic cleansing”.

As Western partners balked, Myanmar increasingly embraced Chinese money. But China is also a long-term backer: in records going back to 1988, Singapore accounts for 27 per cent of foreign investment, followed by China with 25 per cent and Thailand with 14 per cent.

Vietnam biggest winner from first year of the US-China trade war as supply chains shift
Chinese companies have to show commitment to sustainable practices to counter negative public perceptions about their conduct, according to Aung Naing Oo. “They must prove that they are responsible businesses,” he said in the interview on November 8.

The World Bank has said that production relocation sparked by the US-China trade war is an opportunity for Myanmar.

The lender expects the country’s economic expansion to climb toward 7 per cent by 2022, even as domestic conflicts – including in Rakhine – remain downside risks because of their potential impact on investor sentiment.

Source : South China Morning Post

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