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."