Are the doors for foreign firms open too wide?

The Myanmar Investment Commission’s move to open up all but 10 business activities to foreign investment has drawn opposition from some local businesspeople, who say it is a step too far.

The MIC released a list of the 10 business areas restricted to Myanmar-only investment as well as defining 64 activities that foreign companies can only participate in with a local partner on August 14, adding that all business activities not on the lists could be performed by firms with 100 percent foreign investment.

The areas totally closed to foreign investment includes mining along waterways, air and sea navigation, supervising electric power systems and forest conservation.

Activities including town development projects, railways, private hospitals and field crop production are not allowed to be done by 100pc foreign-owned companies, but can be done by foreign firms in joint ventures with government or private sector firms, MIC’s release said.

Some local businesspeople said that the move to open up a large number of industries may be a step too far.

“We businessmen are sitting back and watching to see if [the government] will let foreign investors do all the business the country has,” said U Hnin Oo, a businessperson and central executive committee member of the Union of Myanmar Federation of Chambers of Commerce and Industry.

“Actually, policy moves [by the government] should be focused on bettering local people, not making foreigners richer,” he said.

Other analysts said that while there is room for greater foreign involvement in some sectors, other areas may be best kept off-limits.

U Aung Thura, CEO of business consultancy Thura Swiss, said it is natural to allow in foreign firms to areas that local businesspeople may not be able to work in, because of limitations such as access to capital.

“But I think FDI should be restricted from areas in which locals can cope, or will be able to cope in the next two or three years,” he said.

There is lots of room for FDI, whether independent or with a local partner, particularly in infrastructure, in areas like electricity generation, highways and bridges.

U Aung Thura said that services for the market as well as business competition will both increase with the rule changes. He added he is concerned that some sectors may end up in a “strategic trap” where foreign investment crowds out local businesses.

Government officials say the rule changes were the result of a thoroughly discussed process.

MIC secretary U Aung Naing Oo said the rule changes are to bring the regulations into line with the Foreign Investment Law as well as the ASEAN Comprehensive Investment Agreement and other World Trade Organisation agreements.

“We sought the consensus of all stakeholders when issuing this announcement, but there are still the usual criticisims,” he said.

U Hnin Oo said that since Myanmar has already agreed to several international treaties loosening FDI restrictions, it will be tough to protest the changes, but added there should still be reservations for local firms.

More areas could be restricted to joint ventures to allow local business to build up capacity, while increased use of locally made products, such as spare parts for factories, could also be a focus for Myanmar companies, he said.

U Aung Naing Oo said the MIC had considered limiting more areas to JVs, but that often there are not enough local partners which can work at the high standards some international companies require.

“If we allow only JVs for multi-million dollar projects, and there is no suitable local partner, the country will lose out on that project. Then our own limits could hamper the country’s development,” he said.

U Aung Naing Oo added the MIC has thoroughly considered the issue of opening many sectors to foreigners.

The announcement is meant only for larger business covered by the Foreign Investment Law, and other small and medium businesses in all sectors that are small enough not to require MIC approval are equally open to foreign and local firms.

“Small and medium investors just need to register [at the Directorate of Investment and Company Administration] – they don’t need special permission from the MIC,” he said.


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