But outside evaluations by the World Bank and US State Department sound warnings
Myanmar’s potential as the new frontier is wooing hundreds of businessmen piling into the country despite formidable challenges. More than 300 of them from China, Hong Kong, Singapore and Vietnam earlier this week attended a forum for regional investors sponsored by the Singapore-based United Overseas Bank.
According to a presentation by the bank, half of the large Asian companies by market capitalization see the country as an opportunity to expand.
However, there are plenty of warnings to indicate the exuberance might be irrational. The World Bank’s “Doing Business” report ranks the country one of the most difficult in the world in which to do business. In ease of starting a business, the country ranked 189th in the world. In four parameters – dealing with construction permits, obtaining electricity, registering property and getting credit, Myanmar actually slid in rank over the 2013 report despite efforts on the part of Myanmar officials to reform. For investor protection, Myanmar ranked 182nd in the world.
A study of the business climate, the 2013 Country Commercial Guide by the US State Department said that: “Major obstacles remain, and despite new pledges by the government to improve the country’s infrastructure, it will take years to marshal the investments needed to yield significant improvements.”
There is little accurate and relevant market or financial data, statistics are difficult to verify, the State Department report said. Well-educated and trained workers, after decades of the country’s isolation, are in short supply given a weak education system that has not produced a skilled work force. The legal and regulatory system relies on practice and government discretion rather than written laws, economic policymaking remains opaque, laws and rules are being drafted without public consultation, there is considerable corruption and cronyism. The Berlin-based Transparency International ranked Myamar 157th of 177 countries surveyed for its 2013 Corruption Perceptions Index 2013 – despite a healthy climb from 172nd in 2012.
Tax policies are arbitrary at best, intellectual property laws are weak or limited, and the financial sector is small and inexperienced. A venture capitalist eager to move into the financial sector told Asia Sentinel the opportunity to acquire banking properties is almost nonexistent.
The State Department report also points out that most of the government offices are in the administrative capital of Naypyidaw, 30 km. from the commercial capital of Yangon, with limited air connectivity,
Burmese officials are struggling with all of these drawbacks, analysts say, and are anxious to reform the economy away from the policies that paralyzed it during the long years of what was called the “Burmese way to socialism” before the junta, following the ouster of strongman Ne Win, introduced a limited number of market reforms.
UOB, however, is looking to provide finance for more ventures as economic reforms and the dropping of Western sanctions have sparked optimism for the country’s long-stagnant economy.
Deputy Commerce Minister Pwint San invited investors to take advantage of Myanmar’s “untouched” market. Fredrick Chin, UOB’s managing director and head of group, said UOB wants to support businesses to move into Myanmar.
“The participants at our symposium have serious interest in helping to unlock the potential for and within Myanmar,” Chin said. “Myanmar has very good potential business sectors for foreign investment in agriculture, mining and natural gas and oil sector,” Chin said, without giving details about the methodology of the survey. The UOB has already begun helping foreign investors enter Myanmar’s market.
Earlier this week, Singapore’s Asiatech Energy announced that it had secured a funding agreement—for an undisclosed amount—for a project to build a 230-megawatt gas-fired power plant in Moulmein, in southern Myanmar’s Mon State.
UOB is also working with US-based APR Energy, which last week announced it had agreed with the government to build a 100-MW gas plant in Kyaukse, Mandalay Division.
The bank has had a representative office in Yangon since 1994, and says it has provided loans for construction, manufacturing, trading and gems businesses in Myanmar.
(With reporting by The Irrawaddy, with which Asia Sentinel has a content sharing agreement)