On domestic improvements to attract greater foreign investment
How do you foresee foreign direct investment (FDI) being affected in FY 2018/19 due to US-China tensions and the global trading environment?
U AUNG NAING OO: FDI inflows in 2018 have not been satisfactory compared to 2017’s figures, but this was expected. We approved around $2bn in the first three months of fiscal year 2017/18, while this fiscal year only $800m was approved in the first quarter. The significant decrease in FDI inflows is largely due to the unrest in Rakhine State, which has made Western investors reluctant to begin or expand activity there. They are waiting for the situation to be resolved before further investments are made.
In addition, because Myanmar is part of the global economy, the current international political situation is causing economic stress, damaging our trading relations, slowing domestic growth and triggering substantial currency devaluation. While the government is working to stabilise the situation, we foresee further fluctuations stemming from US-China tensions. Myanmar’s exports heavily rely on China, so we undoubtedly suffer from the side effects of these trade conflicts.
What results are expected from the implementation of the Companies Law on August 1, 2018?
AUNG NAING OO: After the implementation of the Companies Law on August 1 we expect FDI figures to increase, as the business community overseas is eagerly waiting for this piece of legislation to come into effect. At the moment we have about 30 proposals in our hands to be approved, and the number of inquiries are much higher than in previous years.
In order to expedite the application and registration process, we are digitalising the whole procedure, which in turn shortens the timeline for approval. We have been approving proposals in record time of 30 days in recent months. All members of the Myanmar Investment Commission (MIC) are committed to moving faster by simplifying the steps and procedures attached to every application. This is our way forward.
How does MIC plan to attract FDI from a more diverse array of sources in Asia and beyond?
AUNG NAING OO: As part of our efforts to promote investment in Myanmar, we are going abroad more often and sending delegations to relevant investment forums like the Myanmar Insight event in Thailand and the Belt and Road Summit in Hong Kong. Nonetheless, our most important strategy for attracting FDI is improving our organisations and the domestic business environment, both on a structural and legal level.
To achieve needed improvements, we are focusing on four main change drivers. First is ensuring that the legal framework is addressing investors’ major concerns. In this regard, one of our top priorities is passing the Intellectual Property Law, which is crucial to attracting technology-related investment. A better tax law is also in the pipeline, as is legislation regulating land prices.
Second, better infrastructure means more investment. This is understood by all members of the MIC, and we are therefore putting all possible tools in place to improve the context under which infrastructure projects are executed. To this end, we are working on creating a public-private partnership model that will bring clarity to investors, describe project requirements, highlight privileges and outline recommended procedures.
Third is the implementation of technology in all bureaucratic processes, including digitalising paperwork submission. Lastly, it will be important to improve the level of human resources available in the country, particularly within the public sector, where business knowledge needs to be more fully developed.
To what extent do you think the new Myanmar Mining Rules enacted in February 2018 will revive the stagnant mining sector and address investor concerns?
AUNG NAING OO: Both the government and the MIC understand the importance of the mining sector. We listened to investor concerns and we saw that further regulatory reforms had to be made if we were to leverage the opportunities that our country’s mining sites offer to international players.
The new rules bring greater transparency to the permitting process and have been welcomed by international companies. Under the new system, every company that is interested in mining must first meet with officials from the Ministry of Natural Resources and Environmental Conservation. After that, the MIC will provide the business approval. As of today, only prospecting works have been authorised and the MIC has not yet received any production inquiry from industry players. We will wait for the results of the exploration works.
Read More from OBG
