The Union of Myanmar Federation of Chambers of Commerce and Industry
(UMFCCI) has urged parliamentarians to reduce restrictions on international
companies in the new Foreign Direct Investment (FDI) law.
Burma’s Upper House of Parliament
is scheduled to debate the draft on Wednesday after the Lower House introduced
94 amendments designed to protect local businesses in the face of competition
from abroad.
“We would like to request
reducing some restrictions in the FDI law. More than 90 percent of local
businesspeople are small and medium entrepreneurs. So we want this FDI law
adapted to promote these businesses,” said UMFCCI Chairman Win Aung.
“Unfortunately, the draft FDI law
after it was confirmed by the Lower House only thought to protect businesses by
adding some restrictions for foreign investors.”
Under the current FDI draft, the
minimum amount for foreign investment in Burma is US $5 million—the highest
capital amount in the Association of Southeast Asian Nations (Asean)—with
neighbors Cambodia, Laos, the Philippines and Thailand only having low
restrictions in certain important sectors.
“The majority of foreign
investors cannot invest this amount,” said government consultant Zaw Oo. “Even
US companies have to request government permission if their capital investment
exceeds $500,000. We still are not clear of US sanctions yet and we don’t want
to extend them.”
Economists believe that foreign
investment in Burma is vital to boost jobs, increase standards of living and
encourage a real democratic transition.
“Burma certainly needs foreign
investment of the sort that will promote employment, bring new technologies and
methods, and generally ‘wire in’ Burma to the modern economy,” said Sean
Turnell, economics professor at Australia’s Macquarie University and a Burma
specialist.
Despite Burma’s new
military-backed quasi-civilian government currently undergoing political and
economic reform, around 80 percent of the country’s 60 million people live
below the poverty line after the decades of international isolation and fiscal
mismanagement.
And there are fears that Burma’s
new FDI law will favor cronies with links to the previous ruling junta by only
permitting between 35 and 49 percent foreign ownership of businesses. Some
Asean nations currently allow complete foreign ownership.
“Actually, we want to promote
incentives and reduce restrictions for foreign investment as we have to compete
with other Asean countries,” added Win Aung
A spokesperson from the Ministry
of National Planning and Economic Development told The Irrawaddy that President
Thein Sein’s administration considers the FDI a key factor to drive Burma’s
economic development and so it must provide serious incentives for investors.
“Some foreign businesses will
come with high standard technology and massive amounts of investment,” said Soe
Myint, chairman of the Myanmar Garment Manufacturers Association. “If local
businesses must own 51 percent of the total share without technologies and
strong investment, foreign investors will not think to enter as a business
partner.
“The garment sector would welcome
100 percent foreign investment. We need new markets and technology. We are sure
that foreign investment is one of the key solutions to promote the garment
sector.”
The UMFCCI said that Burma’s main
economic challenges are a lack of international markets and modern technology.
UMFCCI members include the Myanmar Garment Manufacturers Association, Myanmar
Beans and Pulses and Sesame Traders Association, government consultants and
other interested parties.
“Some businesses only need modern
techniques. We already have a good source of labor. If we also have the
infrastructure, why should we not accept technical investments of 10 to 15
percent by foreign investors,” said Win Aung.
The draft FDI law also contains
provisions for local workers in foreign-invested industries. In the first year,
25 percent of the total workforce must be Burmese, with this expanding to 50
percent and then 75 percent over the following two years. Foreign investors
also must help with the technical transfer of skills to domestic workers
through their local business partner.
“If the final law is not adapted
to all kinds of local business in Burma, it will lead to illegal practices such
as in the garment sector, for example,” said Khine Khine New, joint-secretary
of the UMFCCI.
“In 1982, the military government
enacted a law which prohibited 100 percent foreign ownership of garment
businesses. As a result, most Burmese garment industries are owned by foreign
investors but under local names such as the manager.
“Garment workers say that they
cannot change job as they are under pressure from the owner. Actually, the
owners are not really the owners but are just following the instructions of the
foreign investors,” she added.
The draft FDI law has already
passed through the Parliament’s Lower House and is currently being debated by
the Upper House with a final version expected to be made public later this
month.
The Irrawaddy reporter Lawi Weng also contributed to this article.
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