THE euphoria about Myanmar’s economic reforms
remains just that – euphoria. A lot has been written about Myanmar being the
next economic frontier in Asia but in reality things haven’t changed much in
the most reclusive country in South-East Asia.
No
doubt U Thein Sein has been making the right moves and buzzes to attract global
attention to his regime’s self-initiated reforms. Since “winning” power through
a controversial general election in 2010, his administration has released
hundreds of political prisoners and detractors.
He had
impressed the international community after he persuaded Nobel Laureate Aung
San Suu Kyi’s party, the National League for Democracy, to participate in and
legitimise the April by-elections for 44 seats vacated by his Cabinet
ministers.
Aung
San Suu Kyi’s party won a landslide victory and she was formally sworn into the
parliament after a short stand-off with the government over the script of her
oath. Her endorsement of Myanmar’s political process and her confidence in U
Thein Sein’s sincerity to implement reforms are seen as key catalysts in
pushing for Myanmar’s re-integration with the international community,
especially Asean.
U Thein
Sein has warned that “conservatives who do not have a reformist mindset will be
left behind” while the country is on its path to change. The premier has
admitted that there is a real desire for national development and his
government must improve their service at each administrative level to measure
up to the people’s expectations.
However,
Myanmar’s economic reforms can prove to be very difficult, challenging and time
consuming. Despite calls for international investors to invest in the country,
the level of bureaucracy, centralisation of power and lack of a formal
investment and economic development framework are deterring factors.
Most
foreign companies stationed in Myanmar are still playing the waiting game. They
are waiting for the announcement of full and detailed investment guidelines,
which the government has promised to release. The guidelines would need to be
passed in the Myanmar parliament and are expected to be enacted by the third
quarter of 2012.
Without
proper official guidelines, foreign investors are facing a bureaucratic
merry-go-round and “ridiculous” terms as they seek approvals for land or
building leases. Foreigners are not allowed to own or buy building or land in
Myanmar. The government has announced its intention to allow leasing of
colonial buildings for more than 50 years through tenders.
However,
the government has not approved any tender in the last 12 months due to
bureaucratic uncertainty, and there is no benchmark for subsequent tender
applications. A British Myanmar chief executive who is familiar with the tender
process said his company has been waiting for the last four months to be
informed if it has been shortlisted for a tender for a colonial building along
the popular Strand Road. He hinted that some companies may be asked to pay a
hefty “signing bonus”, which may run into millions of dollars, to obtain
relevant approvals.
He
added that despite the euphoria for change, the mindset and culture of the
administration and people might take a longer time to adjust.
U Thein
Sein has admitted that his administrators may find it tough to keep up with the
pace of his reforms. His call for decentralisation may still fall on deaf ears.
It is a fact that Myanmar does not have the right institutional structure to
help him implement the changes he has envisaged.
Foreign
companies going into Myanmar and hoping to find an immediate pot of gold may
find the road to Yangon (the country’s economic centre) is covered not with
precious stones but obstacles and out-of-the-world circumstances. It is not
that easy even to incorporate a local company in Myanmar. Those who are
interested must obtain a support letter from their own embassy and submit
documented proof that the company is genuine and has a strong financial
background.
Final
approval must come from the Myanmar Investment Committee (MIC) before a company
can assume its legal identity. Even after going through the tedious process and
paying US$2,500 (RM7,856) for incorporation, a foreign company is not allowed
to participate in trading activities in Myanmar.
The
main governing body for foreign investment law in Myanmar, the MIC must approve
all foreign investments going into the country. It is the epitome of over centralisation.
Apart from approving foreign investments and new company registrations, the MIC
also decides on applications for any property and land lease above one year.
The approval process normally takes up to two months if the application meets
all legal provisions.
Talking
about out-of-the-world circumstances, rental or lease rates in Yangon may shock
many unprepared foreign investors. A barely 600 square foot commercial space
along the busy streets can cost up to US$6,000 (RM18,854) per month in rental.
A decent apartment unit or flat can go up to US$3,000 (RM9,427) per month.
It is
well known that Yangon does not have proper infrastructure to support a modern
economy. It is not uncommon to experience multiple interruptions in electricity
supply throughout the day even in the classiest hotels. But its mix of old
colonial elements and a heavy dose of Buddhist culture can be quite alluring.
It is a
simple law of demand and supply. The price is high when demand is scarce. With
barely 3,000 proper hotel rooms in Yangon, the average room rate of
approximately US$80 (RM251) per day is even higher than in Kuala Lumpur or
Penang. However, an average hotel employee earns just US$100 (RM314) a month.
Despite
the present challenges and difficulties, Myanmar offers tremendous
opportunities to patient and smart investors. Foreign investors should start by
learning about the country and its rich culture. Here, a good understanding of
local culture and norms can help to mitigate risks and build useful local networks.
For
now, we can only hope for the best for Myanmar and her people. It is obvious
that U Thein Sein’s reform initiatives need sustainable, genuine and committed
support and participation of the international community.
Foreign
investors who don’t have the appetite for risk can wait until 2015 before
making a move on Myanmar. It is expected, by January 2015, to comply with the
Asean trade normalisation schedule. Under this schedule, all companies from
Asean operating in Myanmar will receive the same treatment as their local
counterparts.
Khoo
Kay Peng
Khoo
Kay Peng is a business consultant and a policy analyst. He can be contacted
at kpkhoo@gfworld.com.my
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