Investment climate in Myanmar worsens over uncertainty, delayed reforms

Reading Time: 2 minutes

Myanmar, just until recently dubbed the new frontier for investments into nearly everything – infrastructure, consumer products, telecom, housing and tourism – has turned into a shaky playground for international companies that are faced with delays of reforms, uncertain political developments and doubts over the proper management of the economy by the country’s government led by  Aung San Suu Kyi.

A Reuters report said that Myanmar will delay until as late as August 2018 a long-awaited reform that would open the door further to foreign investment, and would have allowed foreign companies to take up to a 35-per cent stake in Myanmar companies. This would have given local businesses access to a larger capital pool and opened up the door for mergers and acquisitions in sectors that are in urgent need of an injection of cash from banking to property.

Adding to that, business confidence among entrepreneurs and new businesses in Myanmar dropped “drastically” this year due to an unclear economic policy, a survey shows on December 12, amid growing frustration over the direction the economy is taking.

Myanmar’s short-term business confidence dropped to 49 per cent in 2017 from 73 per cent a year ago, according to a survey by consultancy Roland Berger and the Union of Myanmar Federation of Chambers of Commerce and Industry.

Investors responded that they are not only frustrated by the government’s management of the fledgling economy,  but also fear reinstatement of some sanctions over Myanmar’s treatment of its Rohingya minority, which could be a hard blow for the country.

While Suu Kyi has identified economic reform as a key goal to complete Myanmar’s democratic transition after decades of isolation under military rule, the sluggish pace of change has disappointed many and is further threatening the promise of a reformist government to attract much-needed foreign investment in a country that is still among the poorest in the region. In fact, growth in both foreign investment and gross domestic product has slowed since her National League for Democracy took office last year in one of the region’s poorest countries.

Investors have been waiting for the corporate reform, which was initiated by the former military-backed government in 2014. It establishes guidelines on how a company is run and governed, removing outdated rules on share transfers and offering greater protection to shareholders.

Observers say that those problems are not owing to any change in Suu Kyi’s promised roadmap, but simply due to incompetency of the new government.

“I can’t see a compelling economic reason or policy behind the delay. It seems more driven by technology or administrative factors,” says Chris Hughes, a lawyer in Yangon who was commissioned to draft the rules, adding it was a “missed opportunity” for Aung San Suu Kyi’s administration which is closely watched by the international community and investors.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 2 minutes

Myanmar, just until recently dubbed the new frontier for investments into nearly everything – infrastructure, consumer products, telecom, housing and tourism – has turned into a shaky playground for international companies that are faced with delays of reforms, uncertain political developments and doubts over the proper management of the economy by the country’s government led by  Aung San Suu Kyi.

Reading Time: 2 minutes

Myanmar, just until recently dubbed the new frontier for investments into nearly everything – infrastructure, consumer products, telecom, housing and tourism – has turned into a shaky playground for international companies that are faced with delays of reforms, uncertain political developments and doubts over the proper management of the economy by the country’s government led by  Aung San Suu Kyi.

A Reuters report said that Myanmar will delay until as late as August 2018 a long-awaited reform that would open the door further to foreign investment, and would have allowed foreign companies to take up to a 35-per cent stake in Myanmar companies. This would have given local businesses access to a larger capital pool and opened up the door for mergers and acquisitions in sectors that are in urgent need of an injection of cash from banking to property.

Adding to that, business confidence among entrepreneurs and new businesses in Myanmar dropped “drastically” this year due to an unclear economic policy, a survey shows on December 12, amid growing frustration over the direction the economy is taking.

Myanmar’s short-term business confidence dropped to 49 per cent in 2017 from 73 per cent a year ago, according to a survey by consultancy Roland Berger and the Union of Myanmar Federation of Chambers of Commerce and Industry.

Investors responded that they are not only frustrated by the government’s management of the fledgling economy,  but also fear reinstatement of some sanctions over Myanmar’s treatment of its Rohingya minority, which could be a hard blow for the country.

While Suu Kyi has identified economic reform as a key goal to complete Myanmar’s democratic transition after decades of isolation under military rule, the sluggish pace of change has disappointed many and is further threatening the promise of a reformist government to attract much-needed foreign investment in a country that is still among the poorest in the region. In fact, growth in both foreign investment and gross domestic product has slowed since her National League for Democracy took office last year in one of the region’s poorest countries.

Investors have been waiting for the corporate reform, which was initiated by the former military-backed government in 2014. It establishes guidelines on how a company is run and governed, removing outdated rules on share transfers and offering greater protection to shareholders.

Observers say that those problems are not owing to any change in Suu Kyi’s promised roadmap, but simply due to incompetency of the new government.

“I can’t see a compelling economic reason or policy behind the delay. It seems more driven by technology or administrative factors,” says Chris Hughes, a lawyer in Yangon who was commissioned to draft the rules, adding it was a “missed opportunity” for Aung San Suu Kyi’s administration which is closely watched by the international community and investors.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid