Myanmar's moves
toward economic and political reform would not subtract from Cambodia’s regular
stream of foreign investment, experts and insiders said – at least not in the
short run.
Word of an investor-friendly Myanmar has spread quickly with the US’s partial
waiver on trade sanctions in early February, and some of the region’s business
players have called the country “ground zero for investment”.
But Cambodia’s more than decade-long claim to political stability
should eclipse Myanmar’s piecemeal reform, which a regime change in late 2010
set into motion after nearly 50 years of military rule.
“Political stability is the hot button for Cambodia, where they have
gotten it right for foreign investors, and that’s a place where Myanmar can’t
really compete yet,” Gordon Peters, manager at Emerging Markets Consulting in
Cambodia, said this week.
Myanmar may be turning some heads, but there will not be a flight of
investment dollars that were originally destined for Cambodia, he said.
If Cambodia were to lose foreign direct investment (FDI) to Myanmar, it
would likely be from the Kingdom’s garment manufacturing sector, worth US$4.25
billion in 2011, or 32.1 per cent of gross domestic product.
“This is a place where you could see some long-term change,” albeit at
a slow pace, Peters said. Some changes in milled-rice investment could occur as
reforms in Myanmar progress, but “that’s not going to be a big loss in
investment dollars for Cambodia”, he said.
An increase in tourists to Myanmar would inevitably translate into more
tourist dollars to Cambodia, Peters said. Angkor Wat will remain one of the
main destinations for tourists in the region, whether travellers land in Yangon
or Phnom Penh.
Still, Cambodia’s advantages as an investment destination are debatable.
Analysts at US financial services company Standard and Poor’s have
called Prime Minister Hun Sen’s hold on power a cause for concern about –
rather than a sign of – political stability. Laws on oil extraction,
telecommunications regulation and much of the country’s tax regime remain in
the draft phase, with some stagnating for more than a decade.
“Cambodia’s challenges to maintain a strong investment climate are
quite well known by now: to address governance and corruption, to improve
logistics and transport costs, to build a stronger skill base, and to address
the concerns of fiscal space,” Peter Brimble, senior country economist for
Asian Development Bank in the Kingdom, said this week in an email.
Any pull Myanmar has on FDI in the region would be temporary, and the
country’s emergence will stimulate growth throughout Southeast Asia, Brimble
said.
However appealing Myanmar’s recent reforms seem, continued progress is
still far from guaranteed, Business Research Institute for Cambodia CEO and
chief economist Hiroshi Suzuki said.
“I have concerns about the stability of Myanmar politics. I’m afraid
that there could be some backlash from older generations, such as the army, who
are not satisfied with the current reform,” he said.
Myanmar’s investment climate may need five to 10 years to catch up with
Cambodia, with large holes in law and regulation awaiting repair, he said.
Local businessmen in Myanmar have expressed a greater degree of faith in their new
government’s ability to attract FDI.
“The new government will be able to amend the laws on investment. They
are more and more flexible with businesses interested in Myanmar,” U Hla Maung
Shwe, a prominent Yangon-based businessman, said yesterday by phone.
While acknowledging the large discrepancies between investment in the
two countries, U Hla Maung Shwe said Myanmar would become a competent source of
competition in about two years. Human capital, he claimed, was more advanced in
Myanmar than it was in Cambodia.
Despite other threats such as sustained economic crisis in the West,
Cambodian officials have maintained a cool mien on the possibility of a new
regional star.
“We’re happy rather than concerned with [Myanmar’s] political and
economic reform,” Vongsey Vissoth, secretary general of the Ministry of Economy
and Finance, said this week on the sidelines of the 16th ASEAN Finance
Ministers’ Meeting in Phnom Penh.
“We see Myanmar absorbing some official development assistance, but I
don’t think this will impact Cambodia because we are quite competitive.”
May Kunmakara and Don Weinland
Business & Investment Opportunities
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