Wed 12 Sep 2012
Filed under: Business / Trade,News
NAYPYITAW—Investors in Myanmar Wednesday called on the government to hold off from finalizing a critical new foreign-investment law, instead urging President Thein Sein to pass it back to Parliament to clarify the new rules and make it easier for foreign businesses to invest in what is potentially one of Asia’s most promising new frontier markets.
The country’s Parliament passed the new investment rules on Friday, but criticism of the law has intensified in recent days, including at an investment conference run by Euromoney magazine in Myanmar’s remote capital. Many attendees worried that laws restricting foreign ownership to 50% in certain politically sensitive industries are too vague, making it difficult for overseas businesses to confidently plow money into this resource-rich nation of 54 million people.
Speaking on a panel at the conference, Serge Pun, one of Myanmar’s most prominent entrepreneurs, argued that the 13 restricted sectors—including agricultural businesses and some potentially polluting industries—are poorly defined.
“Some of them are specific and some of them are general, so is it really 13, or is it 13 that covers maybe another 35?” said Mr. Pun, who is the brain behind one of the country’s few internationally-listed companies, Singapore-listed Yoma Strategic Holdings Ltd.
Mr. Pun also predicted that 50-50 shareholdings in restricted sectors could also lead to disagreements. He suggested instead that foreign stakes be limited to 49% in restricted businesses, as they are in many neighboring countries, while foreigners should be allowed to invest as much as they like in other, nonrestricted businesses.
“Who’s actually going to have the big say? That’s the problem,” said Mr. Pun, adding that the law as it stands now is “a sure way for deadlock.”
Some analysts initially granted the new foreign-investment guidelines a cautious welcome when Parliament endorsed them last week. Drafted during the country’s democratic transition and aimed at regulating a fresh wave of investment, the legislation emerged as battleground between reformers and conservatives.
Politicians with strong ties to the country’s old military regime inserted restrictive clauses that in some instances would tie potential investors doing business to well-financed and politically-connected partners.
Mr. Thein Sein, backed in part by lawmakers aligned with opposition leader Aung San Suu Kyi’s National League for Democracy, persistently pushed for a liberal law to lure investment in order to help make up for decades of lost growth.
One opposition NLD legislator, Win Htein, said, “We are not dogmatic. We are willing to change any law that is not investor friendly.”
The latest draft of the law removed some of the heaviest restrictions, such as requiring minimum initial investments of $5 million and limiting foreign ownership to 49% in those 13 restricted sectors.
But it is still unclear whether that was enough to satisfy Mr. Thein Sein. One government official said, “It is only a draft bill,” adding, “Nothing is official”, noting that the president could opt to send it back to Parliament for revision when it meets again in October.
Mr. Thein Sein is also expected to attend the United Nations General Assembly meeting in New York later this month, so it might be weeks before he decides whether to sign the foreign-investment law, or ask Parliament to liberalize and clarify it further.
Some investors worry that Myanmar’s leaders have been rushing too quickly to introduce a law in order to satisfy the international community, when the government might be better advised to build for the long term.
“We have to manage expectations,” said Mr. Pun, who recently announced plans to launch an airline in the country. “There is euphoria about Myanmar…But I think it is better to debate a bit more” to get the best laws.
Whatever the outcome, Myanmar’s government is continuing to court potential investors. In its latest step, a senior minister said the country is committed to signing a global agreement to promote transparency in the mining and energy sectors.
Soe Thane, a minister in the president’s office, said the move was part of an “unprecedented transformation” under way in the country that is aimed at rebuilding it after years of military rule. The Extractive Industries Transparency Initiative, the pact that Myanmar intends to join, is a Norway-based multisector program aimed at tackling bribery and corruption in the mining and energy sectors in developing countries.
Only a handful of nations have signed the agreement, including Mongolia, Kyrgyzstan, Yemen, Nigeria and Peru. Other candidates to join include Indonesia, Uzbekistan and Tanzania, according to EITI’s website.
Myanmar’s plan to join the grouping is designed in part to show that the country is willing to put in place safeguards to help prevent corruption, and enable global oil and gas firms to accelerate plans to invest in the country. It could take some time for Myanmar to sign the pact. Some of the most resource-rich parts of the country have been racked by civil conflicts, and an insurgency is continuing in northern Kachin State.
The Associated Press, meanwhile, reported Wednesday that students have joined a growing protest among farmers seeking more compensation for land appropriated under the previous military regime. The area near Monywa is now the site of a copper mine being jointly developed by military-owned Union of Myanmar Economic Holdings Ltd. and China’s Wan Bao Mining.
—Celine Fernandez in Kuala Lumpur contributed to this article.