Wed 9 Apr 2014
Filed under: Business / Trade,News,Regional
Summary: China’s total investment in Myanmar in 2013 was about $20 million, 5% of the volume in 2012 and less than 1% from the peak year of 2010.The rules of the game in Myanmar have changed. In 2011, Myanmar’s civilian government came to power. China’s plummeting investment coincides with the announcement of the 2012 foreign investment law.
According to China Business News, China’s direct investment in Myanmar in the 2013 fiscal year that just ended (April 2013 to March 2014) contracted tremendously. Some media estimate that the total investment from China was around $20 million, 5% of the amount in fiscal 2012($400 million) and less than1% of the peak year fiscal 2010(about 820 million). As for ranking of foreign investors, China lost the leading position for the first time in 4 years and dropped to around 10th. At the same time, Myanmar’s total FDI rose sharply. It’s estimated that foreign direct investment in 2013 could triple that of fiscal year 2012.
The reason for China’s plummeting investment is the changed rules of the game in Myanmar. In 2011, Myanmar’s civilian government came to power. China’s plummeting investment coincides with the announcement of the 2012 foreign investment law.
The sharp contrast of China’s dropping investment in Myanmar and the rising total volume of FDI in Myanmar is due to the failure of the Chinese companies to change their own game and catch up with developments of Myanmar.
There is certain inevitability for China to drop from the No.1 investor’s position. Under the military government, Myanmar’s market was isolated. The West not only refused to invest, but also imposed sanctions on Myanmar. China had traditional friendly ties with Myanmar, and therefore enjoyed advantages that the West did not have in investing in the country. However, now the West has lifted most of sanctions on Myanmar and Myanmar has also opened up its country to attract investment from all over the world. The Myanmar government also wishes to diversify its sources of FDI. So there should be rational understanding about China not being Myanmar’s largest investor anymore.
Myanmar is regarded by the West as the largest virgin land for foreign investment with its undeveloped market, high-quality human resources and highly literate, English-speaking population, as well as its wealth of natural resources. Myanmar is the low ground into which investment flows. South Korea enhanced the level of its investment in Myanmar in 2010 and expanded its portfolio to various industries, such as mining, energy, as well as the special economic zone. Furthermore, South Korea’s investment also covers new energy sources and environmental protection. Japan has always had close trade ties with Myanmar. Even during the military government, Japan was a key trading partner of Myanmar.
If Chinese companies want more business opportunities in Myanmar, they should “put themselves in Myanmar’s shoes and cater to what it wants.” They should invest in the things that Myanmar truly needs for its social development and economic prosperity. In the past Myanmar had almost no internet, cellphone, or telecom industries. Its urban transportation and infrastructure have not changed in many years. Now the country is under development- telecom and infrastructure have become major markets.
Other than energy and mining, Myanmar also needs foreign investment in infrastructure such as railways and highways. Chinese companies have advantages in these fields. In addition, China has a long land border with Myanmar with close personnel exchanges. These are advantages that the U.S., Europe, South Korea and Japan could not match. Chinese companies need to understand the situation, change their mindset, put themselves in Myanmar’s position, use their own advantages so as to re-enter the Myanmar market with competitiveness.
Before the transition to civilian government in 2011, Myanmar underwent three previous failed transitions.
On March 30, 2011, the chairman of Myanmar State Peace and Development Committee (SPDC, the military government) , Senior General Than Shwe signed SPDC announcement No.5 of 2011, abolishing the SPDC at all levels, transferring power to the newly inaugurated officials at the union parliament and completing the transition of the country’s legislative, judicial and executive authory. President-elect U Thein Sein took the oath of office and was inaugurated as president of the Republic of the Union of Myanmar, along with two vice presidents U Tin Aung Min Oo and Sai Mauk Kham. The new government has 34 ministries and 30 appointed ministers (four ministers carry two ministerial positions). Main officials of provinces, states, regions and autonomous area also came into office shortly thereafter.
The government formed after the elections of November 7, 2010, which has formally replaced the military government, is the first civilian government since military government was initiated in 1962. Therefore it has historical significance.