Foreign company executives are being invited to take part in an
investment “summit” in Rangoon this month despite the continued absence of the
much-promised new foreign investment law.
Several senior government
officials will speak on “investment opportunities and private sector
development”—while the Foreign Direct Investment (FDI) draft law languishes on
President Thein Sein’s desk waiting to resubmitted to Parliament for yet
further changes.
“Regardless of the delay in the
passing of the country’s foreign investment law, numerous global foreign
corporate executives and regional businessmen are convening in Myanmar
[Burma],” said the Centre for Management Technology, a Singapore-based
conference organizer trying to drum up business.
But just how much is the
10-month-long FDI wrangle hurting Burma’s economy?
“I think the delays in passing
the FDI law will deter some investors, but probably not those with a long term
outlook and [not] those who would probably most benefit Burma,” economist and
Burma expert Sean Turnell told The Irrawaddy on Oct. 1. “Given the shape that
the draft FDI law has taken at various times in this long process, I would be
more concerned that a bad law is passed, rather than the fact that there is not
one yet.”
Parliamentarians won’t meet to
discuss the president’s proposed amendments until after Aung Naing Oo, the
director-general of the Directorate of Investment & Company Administration,
has given a talk on “Investment Opportunities and Private Sector Development.”
He and other senior officials
from the Ministry of National Planning and Economic Development and the
Ministry of Finance and Revenue are supposed to advise participants on rules
for joint ventures and land ownership.
“The uncertainties surrounding
the status of this law and the process of enacting it are symptomatic of two
major challenges for Thein Sein’s administration: transparency and decision
making,” says a timely new study on Burma published by the Washington
think-tank Brookings Institution.
“It is difficult to reconcile the
democratic spirit of this [Burmese] administration with the reality that the
text of the initial draft law was not made public, that there was no public
discussion of the issues when the draft was deemed to be flawed, and that the
administration has declined to explain clearly the timetable for the law’s
enactment,” said the study’s author Lex Rieffel.
A former Southeast Asia specialist
in the US Treasury and senior executive at the Institute of International
Finance, Rieffel said, “For the most part, policy decisions are being made
largely in a non-transparent, top-down, discretionary manner as was the
practice in previous governments.”
It is this lack of transparency
that has stalled plans by the Ministry of Energy to hold a much-heralded
auction of offshore blocks for oil and gas exploration for which there have
been two major “find-out-all-about-it” conferences in Rangoon this year.
Those conferences attracted
executives from oil majors such as Chevron, Shell and ConocoPhillips who remain
uncertain about new conditions of investment and have voiced concern about the
continued involvement of the Myanmar Oil and Gas Enterprise which is tainted
with the military regimes of the past.
President Thein Sein has said he
wants parliament to make the FDI law clearer and more flexible than the version
which was approved by parliamentarians on Sept. 7. Officials in his office have
said Thein Sein wants the limit on foreign stakes in joint ventures raised
above the 50 percent level. An earlier draft had limited the foreign share to
49 percent. He’s calling for more flexibility, with the level of foreign
ownership variable depending on the industry.
The current law restricts foreign
investment in agriculture and fishing and agriculture, but the president wants
clarification of this too.
“Weaknesses in the policymaking
process have delayed the adoption of measures in the agriculture sector to
raise farmer incomes, an essential step in a country where 70 percent of the
population is rural. Furthermore, natural resource extraction continues at an
unsustainable and even counterproductive rate,” said Rieffel.
Turnell, who edits Burma Economic
Watch at Australia’s Macquarie University, said he believes some delays in new
investment might not be such a bad thing.
“I am in favor of something of a
moratorium on new mining and resource extractive concessions,” he said. “On
this front there needs to be better processes both in contract awarding and
revenue transparency, if for no other reason than to insure Burma is not ripped
off. So a pause here is something of a good thing, I think.”
Rieffel pointed out that no other
country in the 10-member Association of Southeast Asian Nations (Asean) has a
specific FDI law. Rules and conditions for foreign investors are generally
contains in other more general national laws.
In neighboring Thailand, for
instance, foreigners can never own land or property no matter how much money
they invest. In Malaysia, land ownership by foreigners is permitted.
“It remains to be seen how
important this new law will be to foreign investors contemplating entry into
[Burma] in the near term. After all, the existing law has not been an obstacle
to the tens of billions of dollars of foreign investment approved by the
government of [Burma] over the past 20 years,” said Rieffel.
“At the same time, the ambiguous
status of the new law is raising red flags and casting doubt on both the Thein
Sein administration’s commitment to build a modern market economy and its
ability to prevail over influential groups expected to be losers in such an
effort.”
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