Myanmar struggles to sustain foreign investment

Big 4G and hotel projects give way to manufacturers seeking cheap labor

YUICHI NITTA, Nikkei staff writer April 26, 2018 02:58 JST

Yangon, Myanmar's commercial capital, is situated near a Japanese-backed special economic zone. (Photo by Yuichi Nitta)

YANGON -- Myanmar approved less foreign investment for a second straight year, underscoring the challenges that Aung San Suu Kyi's government faces in keeping up the momentum of capital inflows.

Foreign spending greenlighted by the Directorate of Investment and Company Administration fell 14% to about $5.7 billion for the year ended in March, agency data shows. 

Transportation and communications investment plunged by more than two-thirds to $900 million, in what appears to be a lull following a round of spending on 4G wireless infrastructure and other big projects. The electric power sector suffered a 55% drop, while flows into hotels and tourism slid 56%.

The military's persecution of the Rohingya, condemned by the international community as human rights abuses, causes concern for Western and other companies weighing deals in the Southeast Asian frontier economy. But the data shows no clear link to falling investment.

Manufacturing investment soared 50% to a four-year high of more than $1.7 billion, as Chinese and other companies -- mainly in the apparel industry -- set up shop in Myanmar to take advantage of relatively low labor costs.

The total number of investments surged 61% to an all-time high of 222, with manufacturing accounting for just over 60%.

The Thilawa Special Economic Zone drew $400 million last fiscal year for a 53% increase in foreign investment, which is approved under a separate framework. The zone on the outskirts of Yangon is being developed jointly by Japan and Myanmar, and Japanese companies rank among the most prominent investors.

Myanmar's parliament passed legislation last year to ease restrictions on foreign investment, which is set to take effect in August. Recent deals include Singapore-based beverage group Fraser and Neave's return to Myanmar's beer market and a $5 million investment in local ride-hailing company Oway by Japan's Daiwa Securities Group.

Kazufumi Tanaka, head of the Japan External Trade Organization's Yangon office, called the flow of foreign money into manufacturing a "positive" sign. Though individual investments tend to be smaller than in other fields, the sector is expected to be a major economic growth driver.

Ref;https://asia.nikkei.com/Economy/Myanmar-struggles-to-sustain-foreign-investment