Japanese firms eying Myanmar as next target

Japanese firms eying Myanmar as next target

By Noriko Sato

TOKYO (Kyodo): More Japanese companies are contemplating investing in Myanmar since the release of pro-democracy leader Aung San Suu Kyi in July.

"Myanmar was almost forgotten before, but suddenly, people want to know all about it," says a spokesman at the Myanmar Center for Business and Information, which was set up in Tokyo by Myanmar's military government to respond to the new interest among Japanese companies.

"The country is one of the last frontiers in Asia, and companies don't want to miss their chance," he said.

Myanmar has been virtually secluded from the rest of the world for the last 30 years or so. In 1962, it shunned foreign investment under a nationalist socialist policy that lasted 26 years, and which led to economic stagnation.

In 1988, the country adopted free-market principles, reopening its doors to foreign investment under the Foreign Investment Law.

Investors have been largely wary, however, since most foreign aid to the country was cut off after the military junta's oppression of democracy movements in the same year.

The release of Suu Kyi, who was put under house arrest in 1989, is seen in some circles as a good reason to resume investment in the country.

"It's a promising sign. We can hope for investment to grow in Myanmar as in Vietnam," says Akinori Seki, deputy executive officer of strategies and coordination at Marubeni Corp., one of the major trading companies that is looking to do long-term business in Myanmar.

To encourage companies, the Ministry of International Trade and Industry this year resumed underwriting trade insurance policies for investment in the country, suspended since 1988.

For investors, the attractions in Myanmar are its rich natural resources and the low labor costs of a population of approximately 45 million.

"Also welcome are the people's ability to speak English, their industriousness, and most reassuring to Japanese companies, their mentality that is very close to the Japanese," says Seki at Marubeni.

However, the lack of infrastructure is a setback for many companies, particularly those in the manufacturing sector.

"Myanmar lacks water and electricity supplies and other basic essentials. We will be staying sidelined for the time being," says a spokesman at a major consumer electric appliances company.

In addition to the poor port facilities, transport and telecommunications facilities, investors also have to reckon with a dual currency exchange rate.

While the official value of the dollar is at around 5.60 kyats, its actual market value is 20 times higher at around 120- 135 kyats.

As of the end of June, only five government-approved Japanese companies were operating in Myanmar, their investment totaling US$101 million, ranking sixth among foreign investors. The top five investors are Britain, France, Thailand, Singapore and the United States.

Among the Japanese investors, major trading companies are notably taking the lead. Marubeni, in addition to the deals struck for joint ventures for galvanized steel and soft drinks, is hoping to cooperate in the airport, energy and industrial complex sectors.

"We also have our eyes on the farming industry, an area where Myanmar has a lot to offer," said Seki, saying the country could become an important food supplier amid the expected decrease of China's agricultural supplying capacity.

Another trading company, Mitsui and Co., is considering undertaking projects for gas development, industrial parks, steel sheet production and hotels, a company spokesman said.

The Japanese financial sector is also showing interest, prompted by the enactment of a new law early this year approving the establishment of commercial banks.

The Bank of Tokyo has opened a representative office, and will likely be followed soon by Fuji Bank and others.

Meanwhile, Daiwa Securities Co. is planning to tie up with its research arm Daiwa Institute of Research and the Myanmar Economic Bank to set up a securities company.

"There is little going on now, but we want to respond to the financial demand that is likely to grow in the near future," said a Daiwa Securities spokesman.

He said the Daiwa institute will be giving advice for the country's first stock exchange, which it hopes to build within the next few years.

Companies will have to be patient about Myanmar's transition to a market economy however, says Ikuko Ida, a researcher at the Institute of Developing Economies, noting that the process of privatizing national companies has been slow.

"The government is apparently not used to setting up industrial policies," she said. "The various ministries tend to go about their own affairs and fail to share a common vision."

Still, the country's economic transformation would be considerably boosted if foreign aid starts coming in, Ida said.

The U.S. and other Western countries are withholding aid in protest against the military government. But Japan, whose aid accounted for 70 percent of official development assistance (ODA) to Myanmar during the 1970s and 1980s, has been taking a flexible attitude, "giving aid case by case," as a source at the Foreign Ministry said.