After a long walk for restoration of politics and ethnic integration, Myanmar is now moving forward for economic reform and deregulation of market. It is now standing in a crossroad which can be marked by the historical overhauling of its statecraft. The opportunity of advancement and breaking the deadlock of progress is in place for Myanmar. Present government of Myanmar understands that the regime of economic arena is entrenched than any other. Domestic socio-political scenario has changed significantly and a green signal has passed to international and regional development and investment partners. The incumbent regime of is trying to project Myanmar as a potent investment zone. The restructuring of foreign investment regime (FIR) is on to fill the gaps with current and prospective economic allies. As part of restructuring process, Myanmar enacted the foreign investment law (FIL)-2012 and formed the Myanmar Investment Commission (MIC). FIL-2012 ensure government guarantee on expropriation and foreign exchange profits. Remittances out of Myanmar, labor recruitment regulation and land leasing issue have been resolved through newly enacted law. Except few reservations for saving the indigenous small-medium industries (SMI), others are open for investment from joint venture (JV) and direct foreign investment. FIL-2012 has dragged the attention of neighbors in particular. Trans border trade and businesses seem to be flourishing quickly. The economy of Myanmar grew at 6.5 percent in 2012/13 and is projected to grow at 6.8 percent in 2013/14 (The World Bank, October-2013). One of the main drivers of this growth is foreign direct investment (FDI). McKinsey Global Institute (MGI), in its report on Myanmar (June/2013), stated that Myanmar requires $ 650 billion investment within 2030. It is obvious that the major bulk of investment will be generated through FDI. The goal of FIL-2012 is to ease the conditions that apply to investment, especially to the FDI. This has been followed by the United States (US) withdrawal of OFC general license no. 16, 17, 19 and other congressional order; all the sanctions from European Union (EU) are also lifted except the embargo on arms and equipments trade-import. The US already signed trade and investment framework agreement (TIFA) with Myanmar in May/2013 when President Thein Sein was in a state visit in the US. Unilaterally, United Kingdom, Australia and Canada also suspended their sanctions. It is opening up the opportunity of disbursement of large sum of capital from the US and the EU in the booming industries and infrastructure sector of Myanmar. Myanmar admitted into generalized system of preferences (GSP) facilities of EU in April/2013. That has opened up the opportunity to access the European market for exporting garments and apparel products. Global firms across all the sectors are waiting in the wings for the passage of new investment rules that would allow them to do business in Myanmar for the first time in 50 years. Myanmar is largely an urbanized country where more than 70 percent people are city dwellers. There are booming public demands for infrastructural and high tech development to meet the requirements of modern and globalized living condition. People’s dependency on general and upgraded services is rising. Therefore, investors from home and abroad found Myanmar as potent zone of services and products marketing and investment in social, medium and heavy industries. The background of FIR formation depends on the status quo of its political society. Myanmar can be described as a post civil conflict society. Generally, in the post conflict societies market economy is chosen as the best option. The respective government bodies try to adopt and exercise liberal economic policies and peace building package for the reform programme and helping marginalized communities. The situation demands classic economic policies with precautions like cutting budget, reducing economic deficits and monetary adjustment to make up foreign debts. In particular, the sustainability of peace and security in society rely on equitable development and comprehensive modernization of governance across the country. Government has to operate integrated legal and economic regime countrywide to make sure there is no remaining underprivileged groups or communities. The fact is the government has limitations and private have no bounds in real. Privately funded projects and programmes have growing impetus because profits and beneficiaries are involved in it. FIR is very significant for any country but it is truer in case of a developing one like Myanmar. Executive bodies have to make inclusive economic strategy to ensure countrywide development. All the stakeholders should be the part of development. Otherwise there will be element of risk that subversive groups may emerge from exploited and deprived communities. FIR can ensure flow of foreign funds legitimately and transparently. In addition, FIR facilitates foreign capital investment and disbursement multiplied.
FDI is a potent instrument for economic development especially in the context of current global eco-governance. It enables poor countries like Myanmar to build up capital reserve, creating employment opportunities, expanding production capacity, enhancing skills of local labor through orientation with high-tech and skilled management. The basic principles of FIR are:
• Articulate and accelerate the national development goals.
• Expand job markets for nationals.
• Expand and improve export based industries.
• Intensify production of originates goods to compress reliance on imports.
• Expand financial services and development of service sectors.
• Make room for comprehensive use of energy resources to reduce energy consumption.
• Encourage the renewable and recyclable energy.
• Arrange for professional and specialized training and drills for producing skilled labors and professionals.
Myanmar distributes the FIR reform programme into four phases: Political stabilization, economic emergent, good governance and transparency, private sector lead development. The ultimate result of international regimes’ liberal approach is to keep government of Myanmar under pressure to keep its promise of opening up the economic borders by 2015. As on the card, The Myanmar Government has implemented the FIL-2012 with two notifications creating a practical framework to match the policy of welcoming foreign investment. In general, Notification 1/2013 permitted activities for foreign investors and the activities which require a JV, and Notification 11/2013 set up various helpful regulations on applying for an investment license (MIC Permit), the use of land, transfer of shares, remittance of foreign exchange and the taking of security on land and buildings. The government is taking steps to establish specialized economic zones (SEZ) and Industrial Areas. The initiative has been taken for providing infrastructural and supplementary incentives and facilitation to the investors especially from external sources. Thilawa SEZ will be established by 2015. The new FDI oriented regulation framework permitted absolute foreign and JV investment and ownership of business. The provision of new law is giving foreign entrepreneurs the rights of taking lease of land for business with permission of setting private security and authorization system. The unilateral ownership is also available in gas-based power plants. In the previous regulation government kept safeguards measures for backward linkage industries of own. But revised regulations are providing opportunities for JV and foreign direct investors to invest in those areas. Myanmar passed a new regulation on March 18, 2013 to supplement and operationalize the FIL-2012. Newly enacted regulation has helped FDI flow in agriculture, livestock, fisheries and manufacturing and services. Earlier, foreign investors were allow to have only 20 percent of businesses in these particular sectors. Now foreign investors can own 100 percent ownership. Investors now have the privilege of tax holiday up to five years as well as investors are exempted from customs duties on capital assets in the importing of raw materials and technologies during business construction times. Legislature and executive bodies of Myanmar enacted several laws and orders to empower FIR and remove FIL-2012 limitation –
• The Central Bank of Myanmar (CBM) Law-2013 is enacted to make CBM more autonomous and responsive in monetary regulating.
• A Security Exchange Law-2013 has been passed to incorporate the companies of home and aboard in stock exchange system.
• Financial Institutions Law is amended to acted ? rules and regulation to govern financial service organization, especially, joint venture banks. Myanmar takes financial sectors reform roadmap to foster monetary development and with a new foreign exchange management guidelines.
• Private Service providers get the rights of insurance licenses.
• Inter banks foreign exchange trading bindings and restriction on sum limit has been withdrawn.
• A new telecommunication law has been enacted and two international telecommunication companies assigned to develop telecommunication system of Myanmar. According to the law a comprehensive telecommunication regulatory commission will be establish in quick succession.
• A mining law on process of making to allow FDI flow in this sector.
• A new Anti-Corruption Law-2013 is enacted to bring transparency and accountability in national financial system.
• A SME Development Centre opens in 2012. A SME Law will be enacted as soon as possible for strengthening SMEs operations and expansion nationwide.
These complementary laws and regulation energized FIR of Myanmar. CBM Law-2013 has been opening up opportunities for JV and foreign merchandize banking and financial services such as insurance providers operations in Myanmar economy. It helps capital flow and disbursement, creating job opportunities for nationals, motivating and encouraging people for savings and investment. Myanmar will be able to establish and operate a larger scale of stock exchange instead of presenting shorter and limited stock exchange within 2015. Then foreign and JV companies will be registered in large scale and people will have the opportunity of buying shares and contributing their capital in the market. Foreign Service labor allowed sending remittance from Myanmar. Out flow of remittance now gets monetary momentum like in flow of remittance. Mining Law will allow foreign companies for JV or direct exploration and mining projects. Laws regarding financial institution will encourage service provider companies from abroad to concentrate on the markets of Myanmar. Anti-corruption law is very critical of JV and service oriented foreign trade and business as it has lot to do in healthcare, telecommunication, power and energy supply, education and last but not the least infrastructural development. Another reason is these sectors are very much public oriented and public welfare related. So transparency and accountability have to be standardized. The multi ethnic society of Myanmar can be a source of distrust or rumor outburst which can affect the domestic stability. So caution with liberalization of trade and business facilities is an imperative. FDI flow in Myanmar economy has dramatically increased in last 5 years. FDI in Myanmar rose from US$ 1.9 billion (2011-12) to US$ 2.7 billion (2012-13). Peoples Republic of China (PRC) has contributed more than 40 percent in this total FDI. From 1988 to 2013 PRC and Thailand invested nearly US$ 14.19 billion and US$ 9.98 billion respectively. Among US$ 44 billion of Foreign Direct Investment (FDI) since 1988, the lion share was generated in 2013 after the new FIL-2012. The US is ranked as 13 in terms of investing in Myanmar (US$ 243 million). Oil, gas, electricity power plant and mining are the top four sectors receiving major investments. In the past US was missing from the top investor list, but companies from the US are not wasting any time anymore. Coca-Cola Company is investing US$ 3 million on 25,000 entrepreneurs who all are women. Abbott is investing more than US$ 1 million for advanced health care, education, women empowerment as a part of corporate social responsibility (CSR). Proctor & Gamble also donated million liters of fresh drinking water containers as CSR and public relations instrument. CSR from the US based companies is a long run strategy and it looks like a win-win strategy for both-Myanmar and private investors from abroad. In the energy and mining sector 30 companies were competing, including global energy giants such Daewoo, PTTEP, TOTAL, Chevron, GAIL India, Hawkley and Petronas. Two international telecommunication farms — Norway’s Telenor and Qatar’s Ooredoo — are going to invest largely in telecommunication development of Myanmar. It is visible that Myanmar is now getting commitment of bigger investments in the form of FDI, official development assistance (ODA) from developed countries bilaterally and multilaterally, and also from the global development partners and multinational corporations (MNCs). The CSR programmes of giant companies are showing the outstanding importance of Myanmar in recent times among the investors. In the neighborhood Myanmar is getting importance as a pivotal zone of investment, trade and business. Neighbors are trying to develop cross border trade and JV power plant project, exchange of raw materials and food-granaries supplies with Myanmar. Another crucial burden for the neighbors is to minimize trade deficit and build up export-import equilibrium. China has retained the No.1 position as investor for more than 10 years and others are trying to make their place in the list. Bangladesh, India from South Asia and countries of Southeast Asia are trying to knot economic ties with Myanmar bilaterally and multilaterally. South Asian countries take the sub-regional organization BIMSTEC and BCIM for strengthening multilateral cooperation. Southeast Asian countries are using the platform of ASEAN mechanism for developing their bilateral and multilateral economic relations. Bangladesh had taken considerable approach to make cross border trade and business relations and minimize bilateral trade imbalance. Bangladesh mainly imports food items — rice, lentils and fish — and timber from Myanmar and exports cement, pharmaceuticals, condensed milk and electric cables. Present bilateral trade volume $ 100 million in per annum (BMCCI, 2014). Bangladesh exported goods worth US$ 13.67 million to Myanmar, while imported goods worth $84 million during the fiscal year 2012/13 (Dhaka Tribune, 2014). It will reach $ 500 million within 2015 (BMCCI, 2014). The border and Rohingya tension are making the barriers on the process. But good intension were shown from both sides when they peacefully arbitrated maritime disputes over area of Bay of Bengal. Businessmen from both the countries successfully establish Bangladesh Myanmar Chamber of Commerce and Industry (BMCCI). Aviation Department of both the countries is working on establishing Dhaka-Chittagong-Yangon-Bangkok flight route. In the eve of the BIMSTEC summit, Myanmar and Bangladesh successfully figure out their matter of conscious and importance of pacifist solution for progressive development of this sub region. Both the countries set target of $ 1 billion bilateral trade volume by 2020 (Dhaka Tribune, 2014). It seems there is no shortage of investment in near future for Myanmar. But question remains that can Myanmar carry on the momentum and hold the pacification approach of national reconciliation? Liberalization of political institutions is necessary to build confidence among political parties and people about good intensions of running the government. Power sharing equilibrium of ethnic groups can construct peace in the national society. The minority issue requires more attention and revelation. Still tension remains in the horizon because recent national census creates some controversies. Out of 135 ethnic minorities the minority Muslims known as Rohingyas are left out from the census (Bloomberg.com, 2014). Zaw Aye Maung, Minister representing Rakhine denied any identity called Rohingya. Another issue is Rohingyas still bound to 2 child rule. These cracks in national reconciliation process may become lethal cause of deep crisis. Tempest of unrest might occur if government fails to make policies on particular minority groups. Because minority groups like Rohingyas are staying in very vital zone which can spark tension not only within border but in the cross border region. National reconciliation and ethnic integration requires more treatment for betterment of economic progress. FIR of Myanmar is formed with good intent and requires more exposure to be successful. Trade and business friendly policy adaptation and strategic framework formation need to be continued. If so, then Myanmar can emerge as one of the expressive developing country in the world by 2030. Blessings of natural resources and will to progress will change the scenario. Hoping odyssey of FIR in Myanmar is relying on economic reformation and evolution success.
The writer is a member of FAIR