Samsung decides against investing in Myanmar amid “government inaction”

South Korea’s corporate giant Samsung Electronics scrapped its plans to build a production base for smartphones or home appliances in Myanmar due to what it calls “an unfavourable administrative environment” and “lingering political uncertainties,” and also because of the Myanmar government’s inaction on economic reforms and concerns over a worsening bureaucracy. Samsung said that the decision was final, Korea Times reported.

The move comes after economists warned that multinational investors and corporations are facing growing problems in Myanmar. German consultancy Roland Berger and the Union of Myanmar Federation of Chambers of Commerce and Industry jointly released a survey in December last year, stating that business confidence among investors and entrepreneurs in Myanmar dropped drastically in 2017.

Many investors are complaining about lackluster regulatory reforms, absence of effective corporate governance, burdensome bureaucracy and lack of coordination between the government and municipalities, as well as insufficiently competitive investment promotion compared to neighbouring countries.

Samsung eventually pulled the plug after the Myanmar government demanded that teh company construct power plants and roads – which are essential to build and operate a factory in the country – at its own expense 

A company source said that they expected after Aung San Suu Kyi became the leader, there would be many positive changes on the economic front but so far little has changed.

The source also noted that Samsung had concerns about the county’s move towards decentralisation, driven by conflicts arising from many ethnic groups and different languages, and that this would make the government’s decision-making process even more complicated and inefficient.

Samsung was considering building a TV factory in Myanmar back in 2013 when the country opened up to the world after decades of military rule. However, the plan was dropped and never reconsidered owing to a lack of infrastructure such as power and industrial water.

According to Myanmar’s Directorate of Investment and Company Administration (DICA), the country received around $5.1 billion in foreign investment in the current 2017-18 fiscal year from April last year to February. The 12-month target of $6 billion seems unlikely to be reached in the time left.

“We have received more than $4.4 billion in foreign investment as of the first week of February, while existing foreign businesses have increased their investment by nearly $700 million,” said U Than Aung Kyaw, deputy director general of DICA.

The increase in investment of existing businesses was just 15 per cent, he said, significantly less than the expected 60 per cent. In the previous fiscal year 2016-2017, total foreign direct investment into Myanmar was $6.8 billion.

Foreign investment generally goes into manufacturing, transportation and communications, agriculture, livestock and fisheries, animal feed, electricity, oil and gas, property development, hotels and tourism and the service industry,

Currently, 49 countries have invested in Myanmar, with China, Singapore, Thailand and the UK topping the list and oil and gas, energy, manufacturing, transportation and communications receiving the larger proportion of foreign investment.

According to DICA, there is “so far no sign of existing foreign investors pulling their businesses out of Myanmar.”

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South Korea’s corporate giant Samsung Electronics scrapped its plans to build a production base for smartphones or home appliances in Myanmar due to what it calls “an unfavourable administrative environment” and “lingering political uncertainties,” and also because of the Myanmar government’s inaction on economic reforms and concerns over a worsening bureaucracy. Samsung said that the decision was final, Korea Times reported.

South Korea’s corporate giant Samsung Electronics scrapped its plans to build a production base for smartphones or home appliances in Myanmar due to what it calls “an unfavourable administrative environment” and “lingering political uncertainties,” and also because of the Myanmar government’s inaction on economic reforms and concerns over a worsening bureaucracy. Samsung said that the decision was final, Korea Times reported.

The move comes after economists warned that multinational investors and corporations are facing growing problems in Myanmar. German consultancy Roland Berger and the Union of Myanmar Federation of Chambers of Commerce and Industry jointly released a survey in December last year, stating that business confidence among investors and entrepreneurs in Myanmar dropped drastically in 2017.

Many investors are complaining about lackluster regulatory reforms, absence of effective corporate governance, burdensome bureaucracy and lack of coordination between the government and municipalities, as well as insufficiently competitive investment promotion compared to neighbouring countries.

Samsung eventually pulled the plug after the Myanmar government demanded that teh company construct power plants and roads – which are essential to build and operate a factory in the country – at its own expense 

A company source said that they expected after Aung San Suu Kyi became the leader, there would be many positive changes on the economic front but so far little has changed.

The source also noted that Samsung had concerns about the county’s move towards decentralisation, driven by conflicts arising from many ethnic groups and different languages, and that this would make the government’s decision-making process even more complicated and inefficient.

Samsung was considering building a TV factory in Myanmar back in 2013 when the country opened up to the world after decades of military rule. However, the plan was dropped and never reconsidered owing to a lack of infrastructure such as power and industrial water.

According to Myanmar’s Directorate of Investment and Company Administration (DICA), the country received around $5.1 billion in foreign investment in the current 2017-18 fiscal year from April last year to February. The 12-month target of $6 billion seems unlikely to be reached in the time left.

“We have received more than $4.4 billion in foreign investment as of the first week of February, while existing foreign businesses have increased their investment by nearly $700 million,” said U Than Aung Kyaw, deputy director general of DICA.

The increase in investment of existing businesses was just 15 per cent, he said, significantly less than the expected 60 per cent. In the previous fiscal year 2016-2017, total foreign direct investment into Myanmar was $6.8 billion.

Foreign investment generally goes into manufacturing, transportation and communications, agriculture, livestock and fisheries, animal feed, electricity, oil and gas, property development, hotels and tourism and the service industry,

Currently, 49 countries have invested in Myanmar, with China, Singapore, Thailand and the UK topping the list and oil and gas, energy, manufacturing, transportation and communications receiving the larger proportion of foreign investment.

According to DICA, there is “so far no sign of existing foreign investors pulling their businesses out of Myanmar.”

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