Domestic reaction to President U Thein Sein’s enactment of the Foreign Investment Law on November 2 was mostly positive last week, although businesspeople said more needs to be done to give local firms a chance to compete.
The law, which was published in Myanmar in state-run newspapers last week, is yet to be officially translated into English and many grey areas still exist for foreign investors but Myanmar businesspeople say further reforms to the country’s banking sector and economy must be completed if Myanmar is to benefit from incoming investment.
Key recommendations from U Thein Sein adopted by parliament include the dropping of minimum capital requirements for joint ventures and caps on foreign share ownership.
Tun Foundation Bank chairman U Thein Tun said Myanmar’s finance and banking sector needed to be reformed if domestic businesses were to compete in the new climate.
“Domestic businesses are generally financially weaker than foreign companies so we have to encourage banks to offer more loans or perhaps to invest in companies. Most governments encourage their citizens in this way, and I hope that will happen in Myanmar too,” he said.
U Thein Tun is also the owner of the Myanmar Golden Star Company, which makes Quench, Crusher and Star Cola and is competing against Coca-Cola and Pepsi, both of which re-entered the market recently. He said companies operating against global giants might have to consider whether it would be better in the long term to form joint ventures rather than attempt to compete.
Myanmar Computer Company chairman U Tin Win Aung said it made sense for companies to try and partner with international businesses in some sectors.
“We need foreign companies to help develop the country. But I mean companies that adopt international standards when cooperating with local companies,” he said.
“We don’t have to think that we will lose out in competition with international companies but should cooperate because our businesses need technology, international experience and management, all of which we can get through cooperation.”
U Tin Win Aung said the government needs to encourage further development of the economy and avoid excessive regulations that might stifle growth.
Myanmar Garment Manufacturers Association chairman U Myint Soe said even though the United States and the European Union have lifted nearly all economic sanctions on Myanmar, significant Western investment has so far failed to materialise.
“I hope the investment law is more foreign investor-friendly than previous drafts but at the same time local investors need to be given a chance to compete too,” a spokesperson for the Union of Myanmar Federation of Chambers of Commerce and Industry said.
A Ministry of Energy official said that most investment in the sector has been made by Asian companies and it would benefit from increased involvement by Western companies, which he hoped would lead to technology sharing and stronger competition.
He added that there is little domestic participation in offshore upstream (exploration and production) energy projects because domestic companies lacked the financial might, he said.
“Western companies just want to the law to be accountable and will invest whatever the equity ratio or investment amount is if the conditions are right. But the law needs to be specific and clear.”