Strong Start for Burma’s 2014-15 FDI

By Kyaw Hsu Mon 25 June 2014

RANGOON — Though the United States extended its economic sanctions against Burma for another year in May, overall foreign direct investment continued to rise in the first two months of the fiscal beginning April 1, according to a senior official at the Directorate of Investment and Company Administration.

Following last year’s record-breaking foreign direct investment, which saw outside firms put US$3.5 billion into Burma, the first two months of the current 2014-15 fiscal year tallied more than $1.1 billion in FDI, the DICA official said.

While Washington, like many other Western governments, has moved to allow new US trade and investment in Burma, the United States still forbids its nationals from investing in military-owned companies. Several dozen other Burmese corporate entities and individuals who are also suspected of ties to the former military junta, the narcotics trade or arms dealing with North Korea, are also off-limits under the terms of the sanctions.

Despite the restrictions, money continues to flow into the country. US firms themselves have announced several investments since the renewed sanctions were announced.

Burma’s garment sector is serving as an attractive investment for foreign firms, according to Aung Naing Oo, secretary of the Myanmar Investment Commission.

“The FDI flows have not declined, the flows continued to increase these past two months,” he said, adding that among the investors was the US toothpaste manufacturer Colgate.

Myat Thin Aung, chairman of Rangoon’s Hlaing Tharyar industrial zone, said the garment sector constituted an increasingly large portion of the industrial zone’s operations. Regional pressures elsewhere—from rising labor costs to the anti-Chinese riots that rocked industrial Vietnam last month—were leading firms to exit more established manufacturing bases, he said.

“Here, labor costs are still cheap, garment factories are always looking for cheap labor regionally. Thailand and Cambodia’s labor costs are increasing, that’s why they’re moving to Burma,” he said.

According to figures from the Hlaing Tharyar industrial zone, there are more than 90 garment manufacturing operations among more than 500 factories in the zone.

“In the past, garment factories numbered less than 60,” said Myat Thin Aung, while adding that some long-standing deterrents to investment, such as the country’s underdeveloped electricity grid, continued to hold back some.

“We need foreign heavy industry to come to our country, and we want them to open electronics factories here, but electricity supply shortages in Burma are a major problem for them,” he explained.

This year, the manufacturing, telecommunications, and hotels and tourism sectors are expected to lead FDI ventures. In March, Aung Naing Oo said total investment for the 2014-15 fiscal year was projected at $4 billion to $5 billion.