Attracting Foreign Direct Investment

The Union of Burma became an independent nation in 1948. It was a former British colony, which joined the Commonwealth of Nations.

The British had administered Burma as separate units, Lower Burma, Upper Burma and the Frontier Areas. The Panglong Agreement, which was negotiated by national hero General Aung San, who fought in World War II and negotiated Burma’s freedom from Britain, combined these areas into one nation. General Aung San was later assassinated by political rivals.

Burma had a bicameral Parliament; Sao Shwe Thaik was the first President and U Nu the first Prime Minister. However, in March 1962, the Burmese military led by General Ne Win took control of Burma through a military coup de etat. Up to 1974 Burma was ruled by a revolutionary council headed by General Ne Win.

The ‘Burmese Way’ to socialism

Burma was removed from the Commonwealth of Nations. There was a humongous wave of nationalisation and virtually all enterprises of any scale were brought under government control, it was called the ‘Burmese Way’ to socialism.

It was a very unusual combination of statist Soviet style central planning with a superstition based South Asian sub culture, in which astrologers called the shots. In 1974 a new constitution for a Socialist Republic of the Union of Burma and the country was ruled through a one party system, until 1988. The military rulers resigned their commissions in the armed forces and joined the ruling Burma Socialist Program Party (BSPP), the only legal political party.

Over time Burma evolved into one of the poorest and deprived nations in the world. It was isolated from the global economy. There were occasional outbursts of protest, which were brutally suppressed. Ethnic groups such as the Karen people on Burma’s border regions also sought more autonomy and fought a war of attrition with the government of Burma.

These insurgent groups fuelled their wars by smuggling out drugs and Burma’s rich natural resources, timber and gems. In 1962 the students at Rangoon University demonstrated against the Government. It was brutally suppressed; 15 students were killed, large numbers arrested.

In 1988 there was a massive public protest against this economic mismanagement and political oppression, it was branded as the ‘88 Uprising’. The Army shot thousands of demonstrators in an attempt to suppress it. However, finally the Commanding General of the Burmese Army staged a coup d’etat, took power and formed the State Law and Order Restoration Council. Martial law was declared. The name of the country was changed to the Union of Burma in 1989.

Aung San Suu Kyi and the NLD

In May 1990, after around 30 years, free elections were held in Burma. The National League for Democracy (NLD) led by Aung San Suu Kyi, daughter of independence hero General Aung San, won 392 out of 489 seats up for election, amounting to 80%, a massive victory. But the ruling military junta refused to recognise the result and cede power, and continued to rule by force.

Aung San Suu Kyi was placed under house arrest and the NLD banned. She had originally returned to Burma from London, where her British husband was a professor at Cambridge University, leaving behind two young sons and her husband, to care for her elderly ailing widowed mother.

Being independence hero General Aung San’s daughter she had inevitably got involved in anti military junta politics and became a leader of the NLD. She was afraid to leave Burma and return to England, after her mother’s death, to see her children or even to nurse her husband who died of cancer without seeing her again, as she thought the military rulers would ban her from returning. Aung San Suu Kyi is Burma’s lady of destiny.

Repressive rule

Continuing their repressive rule, the State Law and Order Restoration Council, in 1997, reinvested itself as the State Peace and Development Council. The international community was of two minds as to how to deal with the Burmese military dictatorship.

While most Western democracies boycotted Burma, imposing sanctions and giving Burmese dissidents who managed to escape refugee status, neighbours like India and China, and the ASEAN nations preferred engagement.

China was primarily interested in Burma’s natural resources. So was India, especially the gas and petroleum resources. India also feared that democracy in Burma would weaken the power of the Central Government in Rangoon and unleash separatist forces on her Eastern border, where the Burmese military was battling minority rebels. These forces could link up with the Maoists, Gorkhas and the other insurgents within India and cause destabilisation within India.

China was interested in a client state, which could be exploited. Bangladesh was concerned about the Rohingya population, a Muslim community said to be on Bangladeshi origin populating Burma’s western border areas, who were claiming discrimination and suppression by the Burmese military.

ASEAN nations on the other hand, particularly, Malaysia, Thailand, Singapore and Indonesia, preferred engagement and discussion to convince the military junta in Burma to relax their repressive rule, through incentives, such as trade and investment.

In 1997 Burma was accordingly admitted to ASEAN. In August 2007, the Government was compelled to raise fuel prices due to international price increases. This led to a series of public protests.

The protests were led by the Buddhist monks, and it was branded the Saffron Revolution by the international media. The Government responded harshly; Aung San Suu Kyi became the focal point of the resistance to the military regime, with crowds collecting at her house, where she was under house arrest to pay their respects to her.

In May 2008, Cyclone Narghis hammered the Irrawady Delta, the response of the military dictators, was lethargic. Approximately 200,000 people were estimated to be dead or missing. The military delayed the international community’s response of assistance. In August 2009, minorities in Shan State in Northern Burma revolted openly, and in the course of the conflict over 10,000 Burmese refugees fled over the border to Yunan Province in China.

The Golden Land

In 2008 a constitutional referendum was held promising a flourishing democracy. The new constitution, entrenching the role of the military in Parliament, was approved and elections were held in 2010. The name of the country was changed to Republic of the Union of Myanmar (The Golden Land).

The military-backed political party claimed it had obtained 80% of the vote and that 77% of the voters had voted. Pro-democracy oppositionist contested these claims. However, after the role of the military was entrenched under the new constitution, the generals took off their uniforms and took civilian roles in the government.

They introduced a series of reforms, opening up the economy to private investment, dropping the earlier statist policies, releasing Aung San Suu Kyi from house arrest and establishing a National Human Rights Commission, etc.

ASEAN, which was always in contact with the military rulers of Myanmar, saying that engagement was a better policy than confrontation or isolation adopted by the Western liberal democracies through sanctions, etc., rewarded Myanmar with the 2014 Chairmanship of the Group.

The Western liberal democracies changed their tack and American Secretary of State Clinton visited Burma and met with the President and also oppositionist Aung San Suu Kyi. The hitherto banned NLD was recognised and allowed to undertake political activity. In April 2012, the NLD contest 45 seats in a by election and won 43, including the seat contested by Aung San Suu Kyi, who for the first time sat in Parliament.

Manmohan Singh, Prime Minister of India, also visited Myanmar. Britain’s David Cameron was also a conspicuous visitor. The leaders of the European Union also came calling. Aung San Suu Kyi attended the World Economic Forum Economic Summit at Bangkok Thailand, and called for ‘responsible foreign investment in Myanmar’.

Aung San Suu Kyi also visited the US, had a meeting with President Obama, and was awarded the Congressional Gold Medal, America’s highest civilian honour. She also visited Europe and went to Stockholm to collect her Nobel Prize Gold Medal, which she was unable to collect in person when it was awarded, as she was under house arrest in Myanmar. In Britain she addressed a rare joint meeting of the House of Lords and the House of Commons in Westminster Palace, the home of the mother of Parliaments.

Investors’ darling

Myanmar is currently number one on all the lists of foreign investors. With a population of 55 million people, it is the fifth most populous member of ASEAN. The Myanmar Government is keen to avoid domination by either India or China. Recently the Government backed out of a huge China financed damn project on a river in the North at Mysitone, ostensibly because local people objected. A Chinese financed copper mine at Monywa has also been objected to by the people.

The Chinese are interested in Myanmar’s natural resources and hydro electric potential. India has also invested in off shore oil and gas extraction and processing. South Korea, Singapore and other foreign investors are flocking to Myanmar.

The country has drafted a new foreign investment law. The draft has been sent back to Parliament by the President with recommendations to make it more flexible. Attracting foreign investment is seen as crucial for the Government’s ambitious plans for economic expansion.

The President has proposed that foreign investors can take up to 50% ownership of a joint venture in Myanmar. He has also suggested that the ratio should be flexible depending on the particular sector, which can be prescribed by regulation by the Investment Commission of Myanmar.

The President has called for a clearer definition of the sectors in which foreign investment will be restricted, if at all. The present draft bars foreign investment in farming, livestock breeding, fishing, and agriculture. The President has suggested that there should be more precision in the limitation, as Myanmar has an inefficient agricultural sector and a small industrial base. Further, most of their exports earnings come from extractive industries, especially natural gas.

Coca Cola has already returned to Myanmar. The easing of scansions has focused world attention. Japanese businesses are already visiting. Japan’s Ministry of International Trade and Investment (MITI) is coordinating a massive investment by the Trading Houses – Sumitomo, Mitsubishi and Marubeni. Japanese corporates hope to tap the cheap labour in Myanmar to extend its network of manufacturing units beyond Thailand and Indo-China, where they are located at present.

Japan has written off more than half the US $6 billion owed to it by Myanmar. On the sidelines of the recent IMF/WB semi annual sessions in Tokyo, at which the subject of restarting international aid to Myanmar was inserted into the agenda at Japan’s request, Japan announced that it would resume lending to Myanmar aimed at transforming it into a production and investment hub to rival Viet Nam, said Takehiko Nakao, Japan’s top financial diplomat.

The Business Times newspaper has predicted a flood of ‘business tourists’. Indeed many Sri Lankan businessmen have visited recently. Reuters reports that the Government of Myanmar is courting foreign investors assiduously by marketing its economic reforms and process of democratisation.

After five decades of isolation and ignored by the business community in Western liberal democracies, Myanmar has now been branded as one of the last ‘frontier markets’.

Multinational communications agencies like Ogilvy & Mather are trying to exploit the first in pioneer advantage, setting up a joint venture with a local company – Today Advertising, their long time partner in Myanmar, since 1966.

Ogilvy & Mather say that they are into Myanmar early so that they could access the best human resources first, help their clients to get the competitive edge early and capture opportunities early in the game. The combination of Ogilvy & Mather’s international outreach and Today Advertising’s local savvy is a formidable advantage which is on offer.

Myanmar has, in short order, shifted from the status of being an international pariah state , a persona non grata at international gatherings, run by a repressive military junta accused of serial human rights abuses, to a donors’ and investors’ darling!

The International Finance Institutions, ranging from the World Bank, the IMF, the ADB and the IFC have come knocking on the door.

ADB report

In a recent report the ADB asserted that Myanmar sits on a vast energy resource base, but has one of the lowest energy consumption rates of the region. The ADB says that there is a huge disparity between urban and rural Myanmar.

In the main business city Yangon, the electrification rate is 97%, while in rural areas it is 16%. Poverty is twice as high in rural areas. In the towns 63% of students enter secondary school, while in the villages 75% of children do not proceed beyond primary level. Myanmar spends only 3.7% of its budget on education, says the ADB.

Given the constraints, the ADB has said that ‘will take a generation to see a significant improvement’ in Myanmar. Stephen Groff, Vice President for East and South East Asia at ADB, has said that it will take “30 years for Myanmar to catch up to where Thailand is today”. The United Nations too is gearing up for a huge increase in their role and profile in the country.

Humongous opportunity

The release from house arrest and return of Aung San Suu Kyi to politics, the suspension of economic sanctions by the international community, the reintroduction of foreign diplomatic representation, has opened up an unprecedented green field economy for early bird investors.

Fifty-six million consumers, seeped in the culture and teachings of tolerance of Siddhartha Gauthama the Buddha, albeit somewhat tarnished by the violent suppression of the military junta and the recent anti Rohingya violence in western Myanmar, still is a humongous opportunity.

Myanmar’s location is critical, sandwiched between the world’s two emerging economic power houses of India (population 1,173 million) and China (population 1,330 million), who are already in a shadow boxing map over exploiting Myanmar’s resources.

In addition to these markets, Bangladesh, with 756 million people and Thailand with industrial and agricultural technological savvy with 67 million people also share a common border with Myanmar.

Though not a way station either on the famed Silk Route from the East to the West, through Central Asia’s ‘Stan’ states, nor on the sea fairer Spice Route from Malacca to Galle to the Cape of Good Hope and on to Europe, Myanmar historically has been a part of the Crown Jewel of the British Empire, the Indian Raj, English is widely spoken and the Rule of Law is known but junked by the demonised Military Junta, in the recent past.

One of the major challenges the current political leaders in Myanmar face is to re-establish respect for the Rule of Law and the independence of the judiciary, among other things, as there are very real issues regarding transparency and prevention of corruption to be resolved.

Financially, the currency, the Kyat, has been floated in April this year. Foreign Direct Investment, which averaged around US$ 2 billion from 1998 to 2010, ballooned to US$ 20 billion between March 2010 and March 2012! Myanmar is on a roll!

Sustainability faces challenges from without – the slowdown in the international economy, and within – the democratic reforms and reintroduction of the Rule of Law in all its manifestations. But it is doable.

Sri Lanka

The reader is invited to compare Sri Lanka with Myanmar. A former British colony, gaining independence also in 1948, member of the Commonwealth of Nations, with high literacy and healthcare indices, an ancient culture and respect for tolerance and diversity, grounded on the teachings of the Buddha, located on the main international trade routes – East to West, globalised from time immemorial, located in close proximity to the emerging economic power houses of China and India, with close economic ties to both, a wide knowledge of basic English.

Myanmar has a massive democratic deficit, and is so corrupt that it has been described by some as an ‘elective kleptocracy’ (there are many others!). Indeed we share many of the advantages and disadvantages that Myanmar has. On the downside, we are also emerging from a vicious 30-year civil war; some members of the international investing community have jaundiced views of our human rights record, on the credibility of the national reconciliation effort, on our democratic deficit, our financial integrity and our economic fundamentals and national financial management, also due to recent events, question the genuineness of our professed respect for and the operational reality of the Rule of Law.

Sri Lanka has a long and checkered history of private and foreign investment, ranging from the Dutch VOC and the British East India Company, tempered with guns and swords, the plantation economy, the nationalisation phase, privatisation and judicial intervention in assets reverting to the State, the ceilings on income, land and housing, the Free Trade Zones and the GCEC/BOI business culture (remember the notorious ‘Garment Quota’ kottang tree in front of the WTC?).

We have done a lot of good things to attract FDI and also some utterly imbecilic things, like the notorious Revival of Underperforming Enterprises and Underutilised Assets Act of 2011! On top of all this, Standard Chartered Bank has recently drawn attention to ‘Sri Lanka’s cumbersome FDI approval process’ – ‘delays and inconsistencies in implementing reforms’ and ‘excessive bureaucracy’. The latest is that the Kajima Corporation of Japan has been commissioned by Japan’s MITI to look into the prospects for Japanese investment into Sri Lanka.

Only time will tell whether Sri Lanka – the Wonder of Asia will attract more FDI than Myanmar – The Golden Land. Let the reader be the impartial judge, if such luxuries are still available, in reality.



(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)