Investors flirt with Myanmar again, but WB warns of risks
Investors flirt with Myanmar again, but WB warns of risks
By Juergen Dauth
SINGAPORE (DPA): Hong Kong textile manufacturer Joe Pang set
up in Myanmar to take advantage of the country's cheap labor and
ended up paying a very high price for it.
"We believe that Myanmar has great potential," Pang says with
a shrug, but politics is something that is beyond his control.
Fearing sanctions and customer boycotts, clients in Europe and
the United States stopped dealing with his firm.
Others are still tempted, Halpin Ho for example. Another Hong
Kong entrepreneur, Ho was afraid of missing out on the much-
awaited surge in the Myanmar economy and invested in a business
center in the capital city, Yangon.
But he soon discovered that the planned financing for the
Thuwanna New Business District was completely unrealistic -- the
military government retroactively charged him for the costs of
the infrastructure.
Small wonder, then, that the World Bank and the Asian
Development Bank are warning potential investors not to take
hasty decisions on Myanmar. The legal system in the country is
murky and the government's economic program inadequate to
guarantee steady growth.
Myanmar's 45 million people are among the world's poorest,
with an education level near the bottom of the international
table: only one in four children completes primary school.
Moreover, the ruling military government devotes a combined total
of only about 20 percent of its annual budget to education,
health and social programs.
"Defense," on the other hand, gets about 45 percent. And the
current account deficit is running at about 6 percent of gross
domestic product.
According to the World Bank, the result is poor prospects for
stable economic development. The junta did announce a
privatization program, encouraging an investment euphoria in the
country, but it has faded, leaving the state still dominant in
all sectors of the economy.
Myanmar's biggest "entrepreneurs" are the ministries. The
Union of Myanmar Economic Holdings is 40-percent owned by the
defense ministry, and foreign investors wishing to deal with any
of the vast conglomerate's many divisions cannot avoid
involvement with the generals.
Foreign investors have put some US$4 billion into Myanmar
since 1990, but only 30 percent of them have managed to find
local private partners, mainly because of domestic firms'
difficulties in raising sufficient capital.
Since the imposition of a U.S./European Union economic boycott
on Myanmar, the flow of foreign finance has essentially dried up
and state-owned enterprises have been grabing the lion's share --
about 80 percent -- of all capital generated domestically.
Private partners inside Myanmar, the World Bank has warned,
generally have little staying power. And the government cannot be
relied upon to live up to its commitments to develop necessary
infrastructure.
The junta -- officially named the State Law and Order
Restoration Council (SLORC) -- is bankrupt, and financing its
spending with the central bank's printing press -- not to mention
slave labor.
Accordingly, the monetary situation raises a huge question
mark for investors: while the SLORC insists on an official rate
of six kyats to the U.S. dollar, the Myanmar currency's
unofficial rate is 150 to the dollar.
Foreign oil and mining firms, more than any others, are
willing to enter Myanmar, despite the uncertainty, in order to
gain access to the country's rich natural resources.
The French oil company Total, building a $1.2 billion gas
pipeline from the Gulf of Martaban to Thailand, has found that
operating in Myanmar can be extremely expensive: it is having to
pay for essential port facilities, roads and bridges.
Still, as the last large, undeveloped economy in southeast
Asia, Myanmar is playing host to many foreign companies looking
forward to the day when the economy must finally begin to take
off.
No one wants to come too late, "even though we are not making
any profits at present," said Mike Nagai, the local manager for
the major Japanese firm Mitsui.
With an eye to future investors, the Muenchner
Messegesellschaft, a Munich-based exhibition organizer, will open
Myanmar's first-ever industrial fair later this month.
The political consequences of this opening in Myanmar cannot
be foreseen. Small foreign firms have not been alone in being
burned by international politics as it affects Myanmar.
Threatened by human rights organizers with a boycott, the
American soft drink maker Pepsico was embarrassed into dropping
its plans to move into Myanmar. Heavy protests also convinced two
major breweries, Dutch-based Heineken and Denmark's Carlsberg,
that Myanmar remains simply too hot to handle.