This document discusses promoting investment climate and attracting foreign direct investment (FDI) in Myanmar. It outlines types of FDI, determinants of FDI, obstacles to FDI, and how FDI relates to socio-economic development. The document then examines investment promotion strategies and provides a case study on Myanmar's investment climate. Key recommendations include focusing on labor-intensive sectors, establishing clear rules and reducing red tape to attract more FDI, which can contribute to technology transfer and skills development but requires proper policies to maximize benefits for Myanmar's development. Challenges include weak infrastructure, capacity, and rule of law as Myanmar works to reform its economy and investment environment.

1. Promoting Investment Climate: How to attract FDI?
Presenter, Commentator,
Khaing Sape Saw (Ms.) Khin Maung Nyo (Mr.)
Freelance Researcher Freelance Researcher and Writer
Myanmar Engineering Society (MES), 3F, Hlaing Universities Campus
March 15, 2014
KGU-MARCED
The 1st International Conference On Development Alternatives
Kumamoto Gakuen University,
JAPAN
Myanmar Research Center for
Economic Development

2. Promoting Investment Climate: How to attract FDI?
2
Outline
• Types of FDI
• Determinants of FDI
• Obstacles to FDI
• FDI and Socio-Economic development
• Investment promotion
• Myanmar : Case study on Investment Climate

3. 3
Objectives
Where the Myanmar is with regards to the FDI
targets
Progress by which Myanmar is moving towards
the development

4. Types of FDI
4

5. 5
By Direction
Inward FDI
Outward FDI
By Target
investment
Mergers and Acquisitions
Horizontal FDI
Vertical FDI
By Motive
Resource-Seeking
Market-Seeking
Efficiency-Seeking
Strategic-Asset-Seeking
Types of FDI
Among types of FDI, efficiency-seeking FDI
is probably the highest potential impact on development
effect

6. 6
Determinants of FDI

7. Determinants of FDI
Economic conditions
• Markets
• Resources
• Competitiveness
Host country policies
• Macro policies
• Private sector
• Trade and industry
• FDI policies
MNE strategies
• Risk perception
• Location
• Sourcing
• Integration transfer
7
Key determinants of FDI in Host country

8. Determinants of FDI
Eclectic Paradigm Concept
John. H. Dunning (1976, 1980) introduced the
FDI theory via the Eclectic Paradigm.
8
Eclectic Paradigm means “the multinational firm that
posits three types of advantages benefiting the
multinational corporation: ownership-specific (O),
location-specific (L), and internalization advantages
(I).”

9. Determinants of FDI
Eclectic Paradigm Concept
Selected Variables for Myanmar
• Gross domestic Product
• Foreign Exchange Rate
• Interest Rate
• Inflation
• Economy Openness
• Countries official
language
• Distance (km)
• Shared Border
• Economic globalization
• Political globalization
• Social globalization
9

10. Obstacles to FDI
10

11. General obstacles to FDI
Administrative and legal barriers
• General approvals and licenses; industry specific
licenses; utility, labor, land access, clearance
procedures, reporting requirements
Policy barriers
• Fiscal, monetary, trade, exchange rate, debt
management
Infrastructure barriers
• Electricity, water supply, communications, roads,
ports, airports, etc.
Institutional and human resources barriers
• Health and education, social capital; public
institutions
11

12. Traditional obstacles to FDI (cited by business)
• Political and economic instability
• Lack of proper infrastructure
• Lack of required labor skills
• Difficult access to land and other assets
• Absence of rule of law/corruption
• Invasive red tape/high costs of doing business
• Lack of performance
• Incompetent partners
12

13. Obstacles to FDI : Myanmar
• Political risk: entrenched interests and the future of the reform process
• Ongoing conflict with ethnic minorities
• Regulatory uncertainty
• Poor enforcement of rules/lack of competence and impartiality of the court
system
• High land and real estate prices
• Insufficient level of labor skills
• Lacking infrastructure
• Higher costs of doing business/excessive red tape
• Difficulties with expatriation of profits
• Primitive financial system/lack of international accountancy standards
• Ongoing sanctions
• Export tax and exchange rate fluctuations
• Complex import and export procedures
13

14. Important factors attracting FDI
• Open economy, high growth (e.g. China, India)
• Rule of law (e.g. Singapore, Thailand)
• Political and economic stability (e.g. China, Singapore)
• Low labor costs (e.g. ASEAN, LDCs, China, India)
• Competent labor (e.g. India, Taiwan)
• Natural resources (e.g. Indonesia, Myanmar, Kazakhstan)
• Large market (e.g. China, India, Indonesia, AFTA)
• Infrastructure facilities (e.g. Singapore, Hong Kong, Thailand)
• Absence of red tape (e.g. Singapore, Hong Kong)
• Trade facilitation (cross-border zones and areas, e.g. growth triangles)
14

15. FDI and Socio-Economic development
15

16. FDI can contribute to technology transfer and
skills development
FDI can contribute to Economic development
but it is not a simple ways.
16
FDI and Socio-Economic development
Hypothesis

17. 1) Open economies generate development and
growth
2) Country Development and growth attract FDI
3) Liberalization improves efficiency.
4) The national regulatory framework ensures
stability.
5) National development strategies and plans must
integrate to FDI policies
17
FDI and Socio-Economic development
Key Factors

18. 6) Integration in global and regional
7) Whether Risk or Benefit : take opportunity
from ASEAN Economic Community (AEC)
2015
8) Promoting domestic investment by
supporting industries, clusters and finance
9) Negotiation of investment agreements and
contracts
18
FDI and Socio-Economic development
Key Factors

19. 10) A proper balance between the investor and
the benefits of the host country
11) Assess to Natural resources
19
FDI and Socio-Economic development
Key Factors

20. Investment promotion
20

21. Investment promotion
Hypothesis
The success of an investment promotion
The strategy depends on;
 A country’s image and proven commitment to CSR.
 policy coherence and consistency .
 Coordination and cooperation among all stakeholders.
 Quality and efficiency is important than size of
organization.
21

22. Investment promotion
Key Factors
• Formulation FDI policies
• Promotion and persuasion Strategies for FDI
• Legal requirements for FDI
• Negotiation
• Institutional capacity building
• Cluster between government and private
sector.
• Set regulatory Framework
• Clear mandate
• Investment facilitation
• Single window system
• Cut red tape 22

23. • Political and economic stability
• Rule of law and regulatory Frame work
• Skilled Labor
• Developed infrastructure
• Favorable investment climate
• Provide accurate information with
international Language
23
Investment promotion
Key Factors

24. Myanmar : Case study on Investment
Climate
24

25. 25
Natural Gas
Resources
Forest
Land Resources
Fishery Resources
Rich Natural Resources
Other Mining
Products
Gold
Copper
Precious Gem Stones

26. Economic Development Reform
• Attracting More FDI
• Modifying in Trade Policy
• Monetary Policy and Finance Policy
• Conducting National workshops in various
Economic sectors
26

27. Foreign Investment Law
27

28. 93.53%
5.33% 0.69% 0.43% 0.01%
Power
Oil and Gas
Manufacturin
g
Mining
Transport
2011-2012
Source : DICA
Foreign Investment by Sector
28

29. 28.23%
25.66%
21.78%
21.13%
1.08% 1.04% 0.68% 0.39%
Manufactur-
ing
Power
Oil and Gas
Hotel and
Tourism
Mining
Others
Agriculture
Fisheries
2012-2013 US$ million
Source : DICA
Foreign Investment by Sector
29

30. 30

31. Foreign Investment by Country
31
0
50
100
150
200
250
300
350
400
450
China
Vietnam
Singapore
U.K
HongKong
Japan
TheRepublic
ofKorea
India
TheNetherlands
Malaysia
Thailand
Canada
Brunei
Darussalam
407.318
329.390
247.810
232.700
80.809
54.063
37.942
11.500
10.301
4.324
1.300
1.010
1.000
China Vietnam
Singapore U.K
Hong Kong Japan
The Republic
of Korea
India
The Netherlands Malaysia
Thailand Canada
Brunei
Darussalam
US$ million
Source : DICA

32. 32
• Agriculture
• Fishery
• Mining
• Forestry
• Oil & Gas
Resources
Based
• Garment
• Electronic assembly lines
• Footwear
Labor
Intensive
• Hotel & Tourism
• Logistic
• Real Estate
Service
• Food Processing
• Seafood
• Mineral Processing
• Wood, Furniture
• Petrol Chemical
Labor Force 37
Million
Potential HR and Potential Industry

33. 33

34. 34

35. Issues related to SEZs/IZs
• Purpose, goals and target should be addressed.
• Many bodies involved and duties and responsibility unclear.
• Effective strategies for Development
• Flexible Procedures and regulations
• Develop infrastructure
• Be ensure with international trade and investment rules
35

36. Myanmar
Enacted Law related to Investment
• The Union of Myanmar Special Economic Zone Law
was enacted in January 2011
• The Dawei Special Economic Zone Law was also
enacted in January 2011 subsequently.
• The Republic of the Union of Myanmar Foreign
Investment Law (FIL) was enacted on 2 nd November
2012 (revised)
36

37. Strengths of Myanmar
Location
Advantage
Natural
Resources
Human
Resources
37
• GMS
• ASEAN Community
•Hub of South East Asia
• Rich Natural Resources
•Semi-skilled and skilled labours

38. Policy considerations
• Competition Policy
• Competition Policy during transition to Market
economy
• Action on the National Level
• Action on the regional level
• Cross-border Mergers and Acquisitions and
Development
• International Co-operation
• Benefitting from co-operation
38

39. Some government measures, examples in natural
resources
• Australia: 30% tax on iron ore and coal mining profits to tackle climate change
(75% of Australians are against it)
• Indonesia: 20% tax on raw mineral exports (caused uproar among foreign
investors)
• Mongolia: 68% windfall profit tax on gold and copper and up to 50% state
ownership (now rescinded)
• India: benefit-sharing with the local community (26 per cent of profits),
investments in CSR (3 per cent of turnover)
• Philippines: Executive Order of the President (July 2012): balancing the rights of
the state, communities and investors: rise in windfall tax and more stringent
environmental protection clauses (opposed by governors)
39
FDI in natural resources

40. FDI in the power sector
 Opportunities continue to increase
2011_2012 : 94%
2012-2013 : 26%
 Long-term:
Generation
 Medium-term:
Transmission
Distribution
 Short-term:
Distributed power generation 40

41. Considerations for FDI in the power sector
• Power generation should be not only for
domestic usage, but also for Export
• Power is essential for development
• Electricity rates should be affordable to
everyone.
• Ensure proper regulation of power sector
• Government Role
• Contract enforcement
• Ensure environmental and social sustainability
• Country wide and ASEAN-wide
• Manage the supply chain
41

42. Considerations for FDI in agricultural
sector
• Agricultural efficiency
• Access to technologies and rural employment
• Food security
• The rights to Land access
• Sustainable land use
• Environmental issues
• Water use
• Value added products for food industries
• Rural infrastructure, especially for transportation and
Logistics purpose
42

43. Recommendations for FDI policy
• Labor-intensive areas
Infrastructure, agriculture, electricity,
telecommunications, transport, logistics, health, other
services
• Systematic rule of law
• Reduce red tape
• Allow 100% FDI ensuring country benefits
• Integrate FDI strategies to the development plan
• Diversifications FDI
• Export-oriented FDI
• Create better overseas market access
• Proper sharing benefit in natural resources
• Particular attention to social and environmental impacts
• Incentives
43
Development Priorities

44. • Land ownership
• Profit sharing agreement
• Set up comprehensive investment promotion policy and
• Set up an investment promotion agency (IPA) for its
implementation
• Focus on greenfield investment
• Attention on both : domestic investors and foreign
investors
• Develop local capacity of SMEs
• Narrow gap in performance necessities
• Apply competition policy
44
Recommendations for FDI policy

45. Recommendations for FDI policy
Investment preference regimes
• Market access schemes;
• Tax exemptions for firms that invest in priority
sectors;
• Investment and credit-risk guarantees;
• Inclusion of productive capacity and
infrastructure-related provisions in International
Investment Agreements;
• Dissemination of information about investment
opportunities
45

46. Challenges
• Socio-economic and
humanitarian challenges
• Weak capacity for
implementing reforms
• Beginning not the end
• Much still depends on
individuals not policy
• Sanctions
• Official Development
Assistance (ODA)
• Lowest recipient of ODA
among all LDC’s, with 7.2
US$ per capita in 2010
• Kick-starting/Jump Start, Grow
– SEZs, Deep Sea Ports
• Equality of opportunities not
outcomes
• “Pulled Along” by China, India +
ASEAN
• Poor Infrastructure
• Corruption
• Weak rule of law and property
rights
• No independent judiciary and
lack of legal transparency
• Arbitrary tax policies

47. EXISTING CHALLENGES
• International sanctions not fully removed yet
• Opaque and arbitrary policymaking, including
frequent, unannounced and unwritten policy changes
• Tiny financial sector and shallow domestic capital
market
• Continued unpredictability in electricity supply,
especially areas outside Yangon and other major
cities
• Privatization
• Weak educational system and unskilled workforce
• Evolving system of exchange rates and foreign
exchange controls
• Investments approved on a case-by-case basis

48. Recommendation
New Myanmar
• One of Asia's final economic frontiers
• Comparative advantages
• Geographical location
• 60-million untapped market
• Numerous natural resources
48

49. THANK YOU
49

50. References
S., Lall, “Attracting Foreign Investment: New Trends, Sources and Policies,
Economic Paper 31” (Commonwealth Secretariat, July 1997)
J.,Wan Cho, “Investment Promotion and Enterprise Development Bulletin
for Asia and the Pacific: ESCAP Works Towards Reducing Poverty and
Managing Globalization By Economic and Social Commission for Asia and
The Pacific”, UN. ESCAP.
M., Proksch “Promoting FDI for Development”, UNESCAP
M., Proksch “Promoting and Attracting FDI for Development : Key Messages
and Areas for Technical Assistance”, UNESCAP
H., Qaqaya., “The role of competition policy in mobilizing investment and
competitiveness”, UNCTAD
Myanmar Investment Policy, Directorate of Investment and Company
Administration (DICA)
SEZs in Myanmar ,DICA
50