Telcoms Seen Taking Growing Share of Burma’s FDI Pie

By Kyaw Hsu Mon 3 March 2014

NAYPYIDAW — The Myanmar Investment Commission expects that foreign direct investment in Burma will reach between US$4 billion to $5 billion in the coming 2014-15 fiscal year, with the country’s telecommunications sector seen as a rising star in attracting overseas business interest.

Aung Naing Oo, director-general of the Directorate of Investment and Company Administration and a member of the Myanmar Investment Commission (MIC), told The Irrawaddy in Naypyidaw last week that the telecoms sector offered significant potential for foreign investment into Burma in the coming year.

“[Telcoms companies] Telenor and Ooredoo have received licenses as service providers, but they can’t implement everything themselves. We need other companies that can help their projects—for example, building fiber optic lines and towers around the nation—so we expect that some related foreign companies that can help them will be coming in the next year,” he said.

“I do expect that a full 20 percent of foreign investment will go to the telecoms sector this year, [and] more in the year after. It may become the number one investment in Burma.”

The two international telecommunications companies mentioned by Aung Naing Oo won bids to work in Burma last June, and officially received their operating licenses in January, in a move that they declared a “milestone” for the country. 

Telenor of Norway and Qatar-based Ooredoo have promised to dramatically boost mobile phone use in Burma, where only one in 10 people are currently thought to have access to a cellphone.

Telenor aims to provide network coverage to 90 percent of the population within five years, while Ooredoo says it has already started building its 3G network.

“This year belongs to Norway and Qatar, but there are Western telecoms, like the [Sweden-based] Ericsson company, and also Japanese and Singaporean companies are interested to invest in Burma,” Aung Naing Oo said.

Lwin Naing Oo, managing director of the local Shwe Pyi Tagon telecoms firm, said that though FDI may be poised to surge into the domestic telecoms industry, the government should be mindful of potential negative impacts on local players.

“We can learn technical skills from such foreign companies, but we need more support from the government. For example, they should allow us to build towers for Telenor and Ooredoo. We local companies can do this rather than foreign companies,” he said.

Lwin Naing Oo predicted that many foreign companies would enter Burma in the coming years to offer telecoms-related services.

“I’d guess that some small local companies will cooperate with foreign companies at that time,” he said, referring to the opportunity for joint venture partnerships.

According to MIC figures, the top draw for FDI in Burma was the country’s labor-intensive manufacturing sector, accounting for nearly half of the total $3.5 billion invested so far in the 2013-14 financial year, at $1.7 billion. The fiscal year ends on March 31.

Next year, the manufacturing sector will be trailed by the telecoms sector, with the hotels and tourism industry taking third place, Aung Naing Oo predicted.

“It [total FDI] may reach $4 [billion] to $5 billion next year. We had expected $3 billion this year, but it has reached $3.5 billion, so we can expect more next year than we once thought,” he said.

Aung Naing Oo said he did not accept a widely posited theory that many foreign investors are abstaining from major investments in Burma until the country’s political dynamics become more clear, waiting at least until after national elections scheduled for next year.

The numbers, he said, don’t support the theory.

The fact that $300 million in FDI in 2011-12 had risen to $1.3 billion a year later and nearly doubled to $3.5 billion in 2013-14 should be taken as a refutation of the notion of investors’ hesitance, he insisted.

“Since we enacted the FDI law in 2012, there have been more foreign companies coming to invest here. FDI is increasing year by year,” Aung Naing Oo said, adding that companies would nonetheless do their due diligence before committing to invest.

“As is the nature of FDI, they won’t come here with a bag of money straightaway. They will study the country’s situation [first],” he said.