Business confidence in Myanmar sinks as scepticism mounts

More European businesses say they have lost confidence in Myanmar due to concerns about the National League for Democracy-led government’s management of the economy compared to the last two years, a new survey shows.

According to the latest survey from the European Chamber of Commerce in Myanmar (EuroCham) published yesterday, a majority of firms (81 percent) are not happy with Myanmar’s business environment, compared with 76pc in 2017 and 67pc in 2016.

Almost half of the firms surveyed (45pc) said the business environment has worsened over the last 12 months, a significant increase from 2017 (30pc) and 2016 (18pc).

Falling profitability may have dampened confidence as only 37pc of the companies reported profits from their businesses in the country. In 2017 and 2016, the number stood at 41pc and 50pc, respectively.

Protectionism very clearly stands in the way of growth. The government, for example, has not delivered on its promise made last year to open up the insurance market. Around half of the respondents (48pc) said Myanmar’s economic nationalism – a business climate which is perceived as unfavourable to foreign investments – had a negative impact on their operations.

EuroCham Deputy Director Marc de la Fouchardiere explained that European investors saw a rise in economic nationalism in sectors related to pharmaceuticals and liquor, among others.

The kyat’s depreciation was also cause for alarm for 42pc of those surveyed.

Although 64pc of the survey’s respondents expected their market share to increase and 67pc expected an increase in revenue over the next three years, companies with a presence in the country have become less inclined to invest more. With the exception of Yangon, Ayeyarwady and Shan, all other states and regions have seen a drop in reinvestment interest.

Regulatory issues, lack of qualified labour and legal uncertainty still remain the biggest challenges for European companies the survey showed.

The falling business confidence is the latest worrying news for what many consider a grim year for the NLD-led leadership on the economic front and beyond. The World Bank has already downgraded Myanmar’s growth forecast by 0.5 percentage points to 6.2pc in 2018-19, while the government has failed to improve the country’s Ease of Doing Business ranking for the third consecutive year. Approved FDI this year has fallen short of the official estimates by a wide margin, with the business community increasingly impatient with stalled reforms and protectionist policies.

On top of Nay Pyi Taw’s handling of the economy, the ongoing human rights crisis in northern Rakhine has diminished investor interest and is beginning to threaten the country’s nascent but growing exports. Because of alleged human rights violations, the EU is now considering revoking Myanmar’s tariff-free access to the bloc. Should Brussels press ahead with the revocation, Myanmar’s garment sector would be severely hit.

Nishant Choudhary, co-chair of EuroCham’s legal group, said that although the new Companies Law and liberalisation of the banking sector have taken place, the business environment needs much improvement for it to attract investors.

Citing Myanmar’s position on the Ease of Doing Business ranking of 171 out of 190 countries, he said the report shows a major improvement is necessary in terms of enforcement of contracts, an area where Myanmar is ranked 188 out of 190, and access to credit, where it stood at 185.

“Despite the recent regulatory developments, implementation has not been to the fullest intent of the legislature. Often the laws are applied differently by ministries and departments and there is a lack of uniformity,” he observed.

The lawyer urged the government to prioritise improving the capacity of domestic courts in enforcing contracts, speeding up legislation to protect intellectual property and reforming stamp duties as well as securities.

“Additionally, emphasis should be placed on non-banking financial institutions and foreign participation. Particularly, the government should work towards fin-tech solutions and open this for foreigners as well,” he told The Myanmar Times. The ease of conversion of land from a non-commercial to commercial nature and registration of leases and securities created over such leasehold rights also merit attention.

Recently, State Counsellor Daw Aung San Suu Kyi created the Ministry for Investment and Foreign Economic Relations, headed by career diplomat U Thaung Tun, to jump-start her economic policy. According to Mr Choudhary, some investors expressed scepticism about whether the new ministry will be able to work in a frictionless way with other ministries, as the new body might turn out to be “an added layer of bureaucracy”.

Similarly, Mr Fouchardiere added that the lack of inter-ministerial coordination and tax inefficiencies are among the main causes for the fall in investor confidence.


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