Myanmar falls short of FDI target this year, but outlook is positive

Despite government efforts to hit its foreign direct investment (FDI) estimate of $5.8 billion during fiscal 2018-19, investors channeled just $4.1 billion into Myanmar, 70 percent of the original target, between October 1, 2018 and September 30, 2019.

But U Thant Sin Lwin, director general of the Directorate of Investment and Company Administration (DICA) and secretary of the Myanmar Investment Commission (MIC), said FDI has been picking up and should align with the government’s estimates for fiscal 2019-20.

In 2018-19, the government improved its investment policies with economic sustainability in mind. Now, investments that potentially cause losses or damage to the environment, society and natural resources are turned down.

“Last year, there were changes within the ranks of the MIC and its policies. The goal is to only invite responsible investments. Because of the stricter screening process, FDI volumes decreased,” said U Thant Sin Lwin. He added that time was also spent harmonising the various laws and restrictions in Myanmar.

Beyond Yangon

Myanmar held numerous investment forums in the states and regions, leading to higher volumes of investment being channeled into areas like Rakhine and Chin, U Thant Sin Lwin said.

State and regional governments were allowed to establish investment committees, which were given authority to make decisions on foreign and local investments under $5 million and K6 billion, respectively. U Thant Sin Lwin explained that ethnic business owners still needed time to understand the country’s investment procedures. “The locals in the states and regions still lack the knowledge to tell the difference between a Memorandum of Understanding and Letter of Intent. For them, these procedures are still new and many do not have the details needed to prepare documentation and proceed with a deal. This is why investments fell short in 2019,” he said.

Mixed outlook

FDI could continue to be subdued in fiscal 2019-20, U Thant Sin Lwin said, citing continued trade tensions between the US and China as well as the ongoing lawsuit brought against Myanmar at the International Court of Justice by Gambia.

“The ICJ issue has become a focus for foreign countries. Many western countries are waiting to see whether economic sanctions will be imposed on Myanmar as a result of the case. So, the prospects of FDI from the west are slim this year,” said U Thant Sin Lwin.

Furthermore, General Elections are expected to be held in 2020, prompting many investors to wait and see how things unfold in the political economy.

On the flipside, China and other Asian countries may consider this lull as a good opportunity to invest and expand, said U Maung Maung Thein, former deputy minister of the Ministry of Planning and Finance.

“FDI will come mainly from the east Asian countries in 2020,” said U Maung Maung Thein.

Most of the funds will likely be channeled into Thilawa Special Economic Zone, Nyaung Nga Pin Korea industrial zone and a third Thai-led industrial zone near Hlegu. Meanwhile, Hong Kong and Taiwan are also keen to develop industrial zones while Vietnam is preparing to invest heavily into Myanmar.

Since October 1, FDI commitments worth $1 billion have been made not only in Yangon but in Tanintharyi, Rakhine, Bago, Ayeyarwady and Nay Pyi Taw.

With more electricity supply expected and the Myanmar Investment Promotion Plan also in place, the outlook for FDI this fiscal year is still looking positive.

Source: Myanmar Times

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