Lack of policy direction leads to drop in investor confidence

Alarm bells are ringing after a substantial drop in investor confidence in Myanmar as a result of the lack of a clear economic policy and plan in the economy.

According to the second Myanmar business confidence survey conducted by Roland Berger in partnership with Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) in the latter half of 2017, short-term business sentiment plummeted to just 49 percent between June and August compared to 73pc a year ago.

“The drop of 25pc is shocking. I am honestly surprised that the drop was by this much,” said Thomas Klotz, Southeast Asia managing partner of Roland Berger, during a sideline interview with The Myanmar Times.

The survey involved almost 600 companies, 60pc of which were local and the remaining international. At the time the survey was conducted, the crisis in Rakhine had not yet taken place. The latest developments are likely to have further reduced investor confidence in Myanmar.

Lack of clarity

More than three quarters of the companies surveyed cited poor implementation or the lack of a clear economic policy as the main reason for their waning confidence in the economy led by State Counsellor Daw Aung San Suu Kyi.

In fact, it is now found to be a significant challenge by 86pc of the international firms surveyed and the number one challenge overall. As such, this is likely to be the root cause of the failure of foreign direct investments to grow significantly.

Other problems contributing towards the drop in investor confidence include the lack of trained staff, unpredictable legislative environment and selective and unpredictable enforcement of regulations.

“Nobody would say the government has not done a lot. But it has not brought in the increased level of investments expected. So, something is still missing. There could also be other barriers to investments that are still not addressed,” Mr Klotz said.

One of the missing links so far is the communication of an overall economic transformation roadmap, with clear targets and timeline, followed by clear, comprehensive and consistent sector policies, particularly in key sectors such as financial services, electric power and energy, agriculture, transport infrastructure, tourism and manufacturing.

“As such, many in the investment community agree that a higher priority must be placed on accelerating growth in the economy,” Mr Klotz said.

Positive outlook

Nevertheless, most of the companies surveyed said they remain optimistic about Myanmar’s economic prospects over the mid to long-term. Meanwhile, more than 80pc said the reasons for companies to enter the Myanmar market include the country being one of the last frontier markets and having a potentially large domestic market.

Already, the new government has released 96 detailed policies which were derived from its 12-point economic policy, U Tun Tun Naing, permanent secretary of Ministry of Planning and Finance pointed out.

“Furthermore, the survey was conducted during the time when the real estate sector was stagnating. But the real estate sector has normalised now,” he said.

U Tun Tun Naing added that investors should “focus on and progress with the sectors they want to invest in instead of waiting for the government to announce favourable policies for each of the various sectors.

For now though, the damage has been done. “It may take a year or two for businesses to regain confidence. It’s easy to lose confidence and much more difficult to earn it back again,” Mr Klotz said. “So, more and faster will hopefully be the motto for the government’s economic agenda in 2018,” he said.

Source : Myanmar Times

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