Ongoing humanitarian crisis in northern Rakhine State expected to reduce Foreign Direct Investment (FDI) from the west to Myanmar in 2018 (U Aung Naing Oo, General Director of DICA)

Foreign direct investments (FDI) to Myanmar from the West are expected to be less than previous years’ as a result of the ongoing humanitarian crisis in northern Rakhine, said U Aung Naing Oo, secretary of the Myanmar Investment Commission (MIC) and general director of the Directorate of Investment and Company Administration (DICA).

U Aung Naing Oo was speaking about the investment outlook in Myanmar for 2018 at the office of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) on Sunday.

He added that the final stage of negotiations over an Investment Protection Agreement (IPA) between Myanmar and the EU have been suspended as a result of the conflict. The IPA, which had taken three years to negotiate, would have offered investors from both sides a predictable and secure investment environment, ensured they are treated in a fair and equitable way and that investments would not be unfairly taken away without fair compensation.

“We do not expect high volumes of FDI from the West over the next 2-3 years,” U Aung Naing Oo said. “Instead, we will rely on the continuous flow of investments from the East Asian countries.” 

“Myanmar is in need of FDI to develop its infrastructure, which, in turn, will draw more investors over the long term. However, before foreigners make a decision to invest, we must be able to guarantee political stability. If the political environment is weak, infrastructure investments and economic development will not take place,” said U Bo Bo Wai Maung, CEO of the Yangon Bus Service.

The anticipated drop in FDI is a step back for the country after it last year enacted the Investment Law, which drew an influx of funds into the country.

Already, the World Bank late last year noted that investment demand had also decelerated during the year as private investors held back their plans pending greater clarity in the government’s economic agenda and as the Rakhine humanitarian crisis continues to unfold, it said.

It also comes after Myanmar delayed implementation of the new Companies Law, which has resulted in a drop in business confidence in its economy. At least three reports and surveys have shown a plunge in business and investor confidence in the government. 

More than three quarters of the 600 companies in the Roland Berger/UMFCCI survey cited poor implementation or the lack of a clear economic policy as the main reason for their waning confidence in the economy. That is likely to be the root cause of Myanmar’s failure to attract higher FDI volumes this year and next.

Findings from EuroCham Myanmar’s second Business Confidence Survey showed more than three quarters of the 70 European companies active in Myanmar rated the business environment as poor or needing improvement compared to 67pc in 2016. 

Nevertheless, the EuroCham’s survey showed at least 70 European companies currently active in Myanmar are planning to reinvest in Mandalay, Nay Pyi Taw and Tanintharyi Region. The survey showed a decrease in the number of companies interested in reinvesting in Yangon Region and Rakhine State, though. 

Currently, the UK and Netherlands are the two countries with the highest level of FDI in Myanmar among the EU nations. Most of these investments are in the manufacturing, oil and gas and telecommunications sectors. 

Singapore, China, Hong Kong, South Korea, Japan and Thailand are  among the largest foreign investors in the country, with most approved FDI channeled into the oil and gas sector.

(The Myanmar Times: https://www.mmtimes.com/news/western-fdi-fall-2018-rakhine-crisis-continues.html )

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