Services Likely to Play Key Role in New Economic Plan, Experts Say

Burma’s service sector, not manufacturing, will likely be the focus of national attention after the new government is formed in March, observers predict.

The country’s economy is expected to hit a lull in the post-election period, but experts say that the incoming administration will attempt to boost the service sector to keep the national economy from taking too much of a beating.

“Without better infrastructure, foreign investors won’t look to Burma. As far as the service sector is concerned, however, they don’t need to see a better infrastructure to want to invest,” Myat Thin Aung, chairman of the Hlaing Tharyar Industrial Zone and vice chairman of Yoma Bank, told The Irrawaddy.

President Thein Sein has attempted to enhance Burma’s manufacturing industry over the course of his five-year tenure, but aside from launching special economic zones (SEZs), he has seen little in the way of results due in part to weak infrastructure and lack of a clear policy.

“We need foreign investors for automobiles, electronics and other heavy industries, but they are waiting for new policies to be implemented,” Myat Thin Aung said. “I can see more foreign investors coming but only for the service sector—hotels and tourism, banking, finance.”

Soe Tun, chairman of the Automobile Dealers Association and vice chairman of the Myanmar Rice Federation, echoed Myat Thin Aung’s sentiments, also voicing some of the substantial problems that have arisen out of trying to construct SEZs.

“We don’t have enough electricity to supply these sorts of projects. That’s why many investors are looking toward things like hotels and tourism,” Soe Tun said. “But we could expect foreign sanctions to be eased on some sectors once the new government comes to power.”

Still, steep hurdles await the next administration. For one, it will need to update old rules and regulations in the trading and manufacturing sectors, including removing crippling red tape.

The World Bank’s latest report, from October, said that continued economic growth in Burma hinges on sustaining progress with broader macro-structural reforms, such as strengthening the business environment, modernizing the banking sector and prioritizing access to finance.

Tony Picon, director of Collier International Real Estate Agency, said that financial services would grow more quickly if the insurance and banking sectors had an international market.

“The government needs to think of how to open up without swamping local players,” he said.

But according to Thein Tun, known as Pepsi Thein Tun, chairman of Tun Foundation Bank and the MGS Group of Companies, the next administration will have its work cut out for it even if its policies work out as planned and the service sector is in full bloom.

“For instance, in the banking sector, even though the government has allowed foreign banks to operate in Burma, they can only lend to foreign investors, not to local ones. And the total capital of local banks, compared to their foreign counterparts, is very weak,” he said, noting that each service sector will face its own unique challenges.

“That’s why the new government needs to start preparing its policies.”

The Myanmar Investment Commission (MIC) reported that Burma received a record US$8 billion in foreign direct investment (FDI) in 2014-15, double that of the preceding year. However, MIC Secretary Aung Naing Oo said that less than half—$3 billion—of this investment entered the country, though the investment commission approved all $8 billion.

Source: The Irrawaddy

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