Mar 2, 2013

Jetro: Boom in Myanmar aids Asean

Asean as a whole will benefit from foreign direct investment (FDI) as Myanmar starts to see improved cash flow in key sectors, says the Japan External Trade Organisation (Jetro).

Toshihiro Kudo, senior research fellow at Jetro's Institute of Developing Economies, said Myanmar has long been a missing link in the region despite having a strategic geographical position among Asean members.

"The electrical/electronics and apparel sectors in Myanmar are enjoying foreign direct investment that is supporting its export-oriented growth strategy," he said.

Myanmar's emergence and its increasing engagement with international communities are of great significance to the enhanced connectivity of the region.

Mr Kudo said service link costs need to be reduced for Myanmar to join the region's production networks and to attract multinational firms to relocate there.

Lower service link costs will enlarge its production network with Cambodia and Laos to export to other Asean countries, Japan and South Korea, he said.

Exports could be made through Thailand under the country's free trade agreements and regional agreements with partners such as India and China.

Mr Kudo said FDI will play a crucial role in Myanmar's electrical and electronics sector as well as other machinery production.

Foreign firms including joint ventures will increase their presence in the textile and apparel industry in Myanmar too, he said.

Providing information and statistics as well as consistent and clear-cut investment promotion policies such as those of Thailand are vital to attract FDI.

"The recent Myanmar boom has attracted many business missions. If Myanmar fails to meet their expectations, however, the boom may function as an amplified speaker of negative news to the international business community," Mr Kudo said.

Myanmar's new foreign investment law, which took effect late last year, does not have an English version, so foreign investors remain unclear about what they can do there and with what conditions, he said.

While Myanmar's developments could intensify FDI competition with neighbouring countries, the country should be viewed as a complementary base in Asean. Japanese and South Korean firms are keen to invest but will do so through Thailand, he said.

Koji Kubo, a research fellow at Jetro Bangkok, said some challenges remain in Myanmar's foreign exchange market, with gaps between rates in the public and private sectors as well as within the private sector itself.

Myanmar still relies on cash, and exporters are encouraged to sell their foreign exchange to banks, he said.

Source: Bangkok Post