Foreign investors stay wary on Myanmar

Foreign investors stay wary on Myanmar

By Deborah Charles

YANGON (Reuter): Myanmar's military government is moving to liberalize its economy but foreigners are still wary of making large investments because of poor infrastructure, an overvalued official currency and political uncertainty.

Although the military government has relaxed its foreign investment laws and opened up on the amount of foreign-owned ventures it will allow, diplomats say investors remain cautious.

"There are many problems here... At this moment the situation is not good enough to make new investments on a large scale in Myanmar," one diplomat told Reuters. "The potential for investment in the future is not bad. But many people are watching and waiting for conditions to improve."

Diplomats, who calmly sat through several power outages in the course of an hour-long interview, said the lack of electricity was just one of the problems the government needs to address.

There is also the issue of insufficient roads connecting major cities with the rest of Myanmar, poor port facilities and an underdeveloped telecommunications system.

A hugely over-valued official exchange rate also hampers growth, because investors are forced to pay their expenses in hard currency at the official exchange rate.

The local currency, the kyat, trades at about six to the dollar at the official rate and at about 100 to the dollar on the black market.

Although the government is attempting to narrow the huge gap in exchange rates by issuing foreign exchange certificates which can be converted on the black market, diplomats say there is still a long way to go before the reforms can actually work to benefit investors.

Some foreign companies who have to answer to shareholders are also wary of investing in Myanmar because of its dismal human rights record and political uncertainty, observers said.

Most Western countries cut off financial aid to the nation after the military suppressed a brutal 1988 pro-democracy uprising, leaving thousands dead or in jail.

The State Law and Order Restoration Council (SLORC), which assumed power after the 1988 uprising, later refused to recognize elections in 1990 that were won overwhelmingly by an opposition, pro-democracy party.

The government has still not released opposition leader and Nobel Peace Prize laureate Aung San Suu Kyi, who has been under house arrest since 1989. Many nations have said her release is one of the prerequisites for a resumption of economic aid.

But at the same time the SLORC, which inherited the legacy of a disastrous 26 years of the "Myanmarese Way to Socialism" Doctrine, has tried to encourage foreign investment.

Soon after it assumed power the SLORC passed a Foreign Investment Law which permitted 100 percent foreign ownership in all but a few areas. Foreign companies were also allowed to form joint ventures with a private Myanmarese company or state enterprise as long as the foreign partner holds a minority 35 percent equity share.

The most popular areas of investment in Myanmar are oil and gas and hotels and tourism, businessmen say.

Foreign-owned hotels, including big name international chains, are mushrooming throughout Yangon ahead of Myanmar's "Visit Myanmar Year" Scheduled for 1996. Myanmar is the SLORC's name for Myanmar.

Under the Myanmar Investment Commission, a total of $2.38 billion in foreign investment has been approved for 119 different international enterprises from 17 countries as of Jan. 31 this year.

Some diplomats note the figure means only that proposals have been approved. It doesn't mean the investment has already been made.

The top five countries with companies investing in Myanmar are France, which has a large oil and gas venture, Singapore, Thailand, the United States and Japan.

Diplomats say businessmen continue to visit Myanmar to gauge its potential as a place to invest. Some are putting a small amount of money into business now but most are holding off on large investments until the future.

"They are coming in big missions, but mostly to study," said one Asian diplomat. "Some are making small-scale investments... but they're waiting to make any big moves.

"The government needs to fix its problems first. I think they are stepping forward but the steps are still not fast enough."