YANGON — U Aung Naing Oo, director-general of Directorate of Investment and Company Administration under the Ministry of National Planning and Finance, talked to The Irrawaddy reporter Shwe Lay about foreign investment in Myanmar and the government’s plan to promote it.
How much investment has Myanmar had over the past year? Which countries are the largest investors, and which sectors received the largest investments?
Myanmar Investment Commission (MIC) approved more than US$3.7 billion in foreign investment by the end of August and approved about $200 million for the Thilawa Special Economic Zone [on the outskirts of Yangon]. So, we’ve received a total of $3.9 billion, a significant increase compared to about $900 million in the same period last year. About 32 percent of investment is in the manufacturing sector, 24 percent in housing, and 16 percent in the service industry.
Singapore is the largest investor this year, accounting for about 40 percent of total investment, followed by China with about 16 percent, and other Asian countries such as Korea, Japan, and Hong Kong. European countries like the Netherlands also invested in us.
We received the largest investment in the manufacturing sector as we’ve targeted. It is fair to say we are on our targeted path after enacting the new Myanmar Investment Law.
The new investment law enacted last October was created to provide simpler procedures and decentralize tax collection. Your directorate has opened branches in other regions and states to facilitate investment. Have these measures attracted more foreign investments?
Yes. Previously, region and state governments had to seek the approval of the Myanmar Investment Commission (MIC) for any investment project. They were not in a position to boost investment in their regions. Now, power has been devolved to them, and they can manage investment projects in their regions. They also have the authority to create an environment to attract investment and permit investment projects of up to $5 million. This contributes a lot to the regions’ economic development.
You said your directorate would also draw investment to underdeveloped areas. What strategies is your directorate implementing to attract investment to Rakhine and Chin states?
The new investment law provides tax incentives and so on to attract investment to underdeveloped areas. Under the new investment law, we group Myanmar into three zones. Zone 1 is the least developed townships, Zone 2 is townships of moderate development, and Zone 3 is developed townships. We’ve put all the townships in Chin and Rakhine states into Zone 1, so investors in those zones have greater exemption on their income tax.
We provide seven years’ income tax exemption for investors in Zone 1, five years for Zone 2, and three years for Zone 3. For example, investors in Hlaing Tharyar Industrial Zone will have only three years of income tax exemption. But if they invest in Chin or Rakhine states, they will be able to enjoy seven years of income tax exemption.
Another thing is land permission. We permit 50 years for a foreign investor, which can be extended twice, with ten years for each extension—so a total of 70 years. Again, the new investment law allows extension beyond the 70-year period for investments in Zone A like Rakhine and Chin states on condition that that investment project is very beneficial to the state’s development, and is also supported by local people.
But MIC has to seek the approval of Parliament to give permission beyond 70 years. MIC is also carrying out investment promotion plans in each region and state. Last year, we organized an investment fair in Shan State. We will do a similar event in November in Karen State, bringing those who are interested to invest the state. We’ll organize similar events in other regions and states, too.
Also, we’ll organize an investment fair with the assistance of the British government in Chin State, and open an investment office in October there. We’ll also open an office in Rakhine State on September 30. There won’t be rapid changes within one or two years, but there will be significant progress in the long run in underdeveloped regions.
Will the conflict in Rakhine hinder investment?
I don’t think it will, because the large proportion of foreign investment in Rakhine State is in offshore oil and gas production, not in businesses on land. The instability there has no impact on investment. We have not permitted either foreign investment or citizens’ investment in northern Rakhine State, which is experiencing conflict.
Ongoing conflicts do not have an impact on foreign investment, so we have nothing to worry about. And the Rakhine issue is not a recent problem, but gradually developed under the previous government since 2012. Under both governments, conflicts have not impacted investment. On the contrary, we’ve seen an increase. The Rakhine issue doesn’t have serious impact on foreign investment.
Another is about human nature, especially the nature of businessmen. They have greater interest in business than politics. They may take the stability of the country into consideration, but they care more about their business opportunities and political conditions.
You said your directorate is going to open offices in Rakhine and Chin states. So, what challenges do you expect?
There are mountains of challenges. The top challenge is transportation, which is poor in Chin State. And instability is the challenge in Rakhine State.
The second challenge is about forming an investment committee that will make decisions to permit investments. This system is new in Myanmar. So, those committees still don’t have enough experience and they have certain concerns about making the wrong decision.
The third challenge is that those states have no strong businessmen, so it would be difficult for foreign investors investing in states to find local partners.
These are the challenges, but at the same time, there are also opportunities. Poor infrastructure is a challenge to us, but an opportunity for investors. If we have no electricity, it is an opportunity for those wishing to invest in electricity supply.
This interview has been edited for clarity and brevity.
Translated from Burmese by Thet Ko Ko.
