Since 1994, a number of government policy changes have
taken placed especially in the area of FDI Foreign Development Investment. For
example, NAFTA agreement between the US, Canada and Mexico which has great
success even though it has some hiccups.
Many policy makers and scholars traditionally regard FDI
is important for economic growth. They adopt FDI as a form investment injecting
into a country where there are business opportunities and in return, the
receiving country can benefit by lowering the un-employment or having
transferred knowledge and skills and boosting the country’s economy. Type of
the FDI may be differed but the motives are the same.
Usually, the investors are looking forward to have a good
return on their investment. The managements are looking forward the best place
to do operate, alternatively, where there are business opportunities and
profitability. Most developed countries are looking forward to invest in the
least developed countries to take advantage of low wages and cost reduction. Similarly,
the people from those countries who receive FDI expect two particular benefits
from this investment; developing market environment and social environment. With these two aspects and in view to build up
the country economy, the government of the countries who accept investment allow
the investment by giving a number incentive such as a number of years in tax
relief or having a lower rate of tax.
Therefore,
it is acceptable that “Win/Win” concept is rooted in FDI. Both sides; the
investor and the country being invested are looking forward to have benefit
from different perspective.
However,
there are many historical events that FDI has some disadvantage if it is not
properly applied especially a lack of government involvement in safeguarding
the regulations and practice. One of the recent examples is the safety issue
and ethical issue of Marks & Spencer investment in Bangladesh industry.
Furthermore,
foreign ownership of companies can be a concern, especially if the industry is
strategically important for countries. For example, Myanmar is being too much reliant on
FDI in energy sector.
Recently, Myanmar has changed its political view and
opens up a number of opportunities for the investors. As Myanmar is lagging behind
the neighbouring Asian countries, therefore, many economists believe FDI is a
good opportunity for Myanmar for its economic growth. Following are the recent
FDI investment made by world countries into Myanmar.
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The top 5
investors are from China, Thailand, Hong Kong, Korea and UK. First, I am amazed
by the UK on the number 5th. But thorough looking at the list, I have
understood they are from British Overseas Territories and the reason behind the
frequent UK official visit to Myanmar after opening. Together with this, I am
interested to know the opportunities available in Myanmar and the sector most
investors are interesting in Myanmar.
U Set Aung,
the Deputy Governor of Myanmar Central Bank said FDI in Myanmar amounted to
US$42.1 billion as of Feb 28, with the power sector ranking first at $19.2
billion. The top 3 sectors highest approved FDI is Mining, Oil & Gas and
Power. Due to the limited availability of data, it is difficult to verify the
investor interest. Are they only interesting in those sector where the higher
and greater opportunities for profit?
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Image source: http://www.nexiats.com.sg/uploads/images/Images/Nexia%20Pulse/2013Q4/highest%20FDI.jpg
Most of Myanmar FDI investments in oil and
gas sectors are operating under the product sharing contract at 80:20 ratio.
The management authority is with the foreign companies which appear to be natural
and reasonably understandable. The oil produced from Myanmar oil field will be
served to China, India and Thailand. But the present situation of Myanmar itself
does not have sufficient supply for domestic use. The possible scenario is to purchase
the necessary oil and gas from those fields to fulfil the need of the country.
The energy is essential for all the projects operating under the economic
reformation. The government should plan and handle this situation with care.
Based on the circumstances, the impacts of
FDI are differed. In summary, Myanmar government has to judge the best for
their own people. In the mean time it is fair to comment that Myanmar
Government needs to create legally binding frameworks that embed compliance
with the rule of law in all economic activities, whether in terms of labour
law, environmental regulation, or arrangements covering social impacts. Some
Myanmar officials are aware of the FDI negative impact but they acknowledge the
need to change the policy and benefit of FDI. In Myanmar there is still some way to go before all of these are in
place.
References:
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