Land prices deter investors

By Victoria Bruce
Volume 32, No. 633
July 2 - 8, 2012

Delegates attend an investment seminar in Yangon last week.
Pic: Ko Taik

HIGH land prices could prove a “deal breaker” for potential foreign investors, especially in the competitive manufacturing industry, experts said last week. Tony Picon, associate director of research with Colliers International, a Thailand-based real estate consulting and brokerage firm, said high land prices could slow Myanmar’s economic development.

“Land prices could become a big issue,” Mr Picon said. “If land is too highly priced it could hold back the development of the country.”

A Hong Kong-based businessman in the manufacturing industry, said the country’s high land prices were a deal breaker for his company.

“Initially, we thought Myanmar was very interesting for manufacturing because it has an abundance of raw materials, labour and land,” he told The Myanmar Times at a foreign investment summit in Yangon last week.

“But the high price of land, coupled with extremely limited infrastructure and restrictive regulations, make it an unattractive option for us to set up shop, especially compared with Cambodia or Vietnam.”

Mr Picon said a well functioning manufacturing industry would contribute to the growth of the country and give much-need employment to the population.

“Manufacturing is where sustainable growth will come from because it feeds into service industries and becomes a self-supporting cycle,” Mr Picon said.

U Maw Htun, an independent researcher of foreign investment, said the government needed to focus on attracting foreign investment in sectors that benefited the community, such as manufacturing.

“The government should consider how much people will directly benefit from the foreign investment coming inside Myanmar,” U Maw Htun said.

“For example, there is substantial investment in the extractive industries but we need to consider how much employment comes from oil and gas and downstream compared to the manufacturing and services industries,” he said.

Mr Picon said oil and gas investment could be a good thing for Myanmar but an over-dependence on extractive industries would hurt the economy.

“Myanmar needs to develop the oil and gas industry to support its internal growth, but the country should take care not to become resource dependent,” Mr Picon said.

Jared Bissinger, a PhD candidate at Australia’s Macquarie University who is studying Myanmar’s economy, said the country needed to be careful not to fall victim to the resource curse.

“Over the past decade Myanmar’s inward foreign direct investment [FDI] has become heavily concentrated in the extractive and power sectors, while investment in manufacturing, services and other secondary and tertiary sectors has been almost non-existent,” Mr Bissinger wrote in his latest journal article, titled “Foreign Investment in Myanmar”, published in Contemporary Southeast Asia earlier this year.

He said Australia was an example of a booming resource economy with high labour costs that in turn placed pressure on manufacturing and other industries that compete internationally.

“Resources can boom and other sectors of the economy can be hurt,” Mr Bissinger said.

“The dangers are [that] you get a lot of resource investment which drives up the currency and can make it difficult for someone to come here and start up a manufacturing facility.”

Alessio Polastri, managing partner of Yangon-based law firm P&A Asia, said high land prices was a major concern among the foreign investors who contacted his company.

“The high price of land is a major deterrent to potential investors, particularly in the real estate and manufacturing industries,” Mr Polastri said.

Mr Picon warned Myanmar’s high land prices could result in potential foreign investors choosing neighbouring Bangladesh or Cambodia as a cheaper alternative to relocate their manufacturing projects.

“Myanmar isn’t the only game in town for those sorts of projects,” he said, adding that land owners needed to drop prices to a more reasonable level in order to attract manufacturing projects.