Investing in Myanmar: Balancing Risk and Reward (Part II)

In Part I of this article, we reviewed the Myanmar investment considerations of a US investor as they are impacted by US legislation and practice. This article continues the analysis by examining the “on-the-ground” investment considerations in Myanmar, including its Foreign Direct Investment Law of 2012 (FDI) and Foreign Direct Investment Rules of January 2013 (FIR), banking issues, and other aspects of investment.

Investment security

The FDI has specific provisions that protect foreign investment from nationalization and guarantees repatriation of profits and security of invested capital. These protections are in addition to the guarantees an investor may find in the seven bilateral treaties Myanmar has with other countries (Thailand, Laos, Vietnam, Philippines, China, Kuwait and India). Similar investor protection provisions can be found in the newly enacted Myanmar Special Economic Zones Law, which is applicable in the three Special Economic Zones (Dawei, Thilawa and Kyauk Phyu).

Additionally, Myanmar recently became a full member of World Bank’s MICA, which makes direct foreign investment into Myanmar eligible for the agency’s investment guarantees (e.g. covered risks include expropriation, breach of contract, transfer restriction, failure to honor financial obligations, or war/civil disturbance). Furthermore, American businesses which desire to make investments in Myanmar sourced with US manufactured goods or services can also avail themselves of limited facilities extended by the US ExIm Bank, including limited short and medium term lending and investment insurance. Additionally, it is expected that OPIC will soon start a program for Myanmar-bound US investors.

Form and function

Once the issue of security of its investment is resolved, a US investor must choose the right corporate form for its investment vehicle. A number of questions need to be asked: How will the Myanmar entity (public or private limited liability company, or a branch) relate to the investor’s other investments? Is 100 percent foreign ownership the only means of investment, or is seeking a suitable local partner an option?

Legal barriers contained in the FDI and the FIR will require that the foreign investor petition the Myanmar Investment Commission (MIC) for a permit and for an exemption from the FIR limitations that prohibit, for example, the operation of foreign-controlled businesses in certain business activities reserved to either state-owned enterprises, or to Myanmar citizens. The MIC Permit will allow the newly formed Myanmar subsidiary to import duty-free foreign raw and finished materials for its project, will exempt it for up to five years of income taxes, and allow it to lease land for at least 50 years (as of today, foreign entities, or their Myanmar subsidiaries, are otherwise prohibited from owning or leasing long-term land or buildings, a very distinctive disadvantage to foreign investment). Foreign-controlled Myanmar businesses have to project what areas of business they intend to operate in at the outset, thus a clear outline of their intended activities has to be provided to the MIC as well as to the Ministry of Planning’s Department of Investments and Corporations Administration (DICA) in seeking exceptions from the FIR prohibitions, as well as petitioning for the grant of an MIC Permit and a Permit to Trade, respectively.

A local partner and a capable bank

Assuming that a Myanmar partner is required, the US investor has to do three things before starting any registration process: conduct a thorough due diligence investigation into the background of the potential Myanmar partner; submit a prospective name of the Myanmar business for preliminary approval by the Companies Registration Office (CRO); and discuss with its U.S. bank the prospective investment in Myanmar.

Doing the preliminary investigation of the Myanmar partner is a critical step in order to reduce any chance that the partner has OFAC SDN connections (see Part 1 of this article, which was published last week, for a more in-depth discussion of this aspect). Choosing the name is an important factor, as registrations of trademarks and trade-names in Myanmar are essential to protect oneself from copycats. Although the country does not yet have a comprehensive IPR legal system, it does have a procedure for registering trademarks. Talking with your banker is a prudent initial step because very few US bankers will conduct business with Myanmar or its banks or companies. The ability to repatriate profits would be of limited value without a banking relationship capable of undertaking such transactions … or without knowledge of available offshore solutions. It goes without saying that due diligence should also be performed on any local Myanmar bank to be used. The local banks may or not be on the SDN list, and/or have the sophistication and capital to be able to assist the US investor.

Eric Rose is the Lead Director of Herzfeld Rubin Meyer & Rose, the first US law firm in Myanmar. He focuses on the global aspects of business development, specifically including mergers, acquisitions, privatisations, technology transfers, compliance counselling, and international commercial transactions. His experience in Myanmar spans over twenty years.

Nina Dunn, who is an adviser to Herzfeld Rubin Meyer &Rose, has more than twenty-five years of experience in international trade and investment, securities and defence and national security matters. She has advised domestic and international corporations with respect to a wide range of corporate issues, achieving favourable results from government agencies, including the US DOS, DOD, DOJ and SEC.

The article was originally published on InsideCounsel.com and has been republished with the authors’ and publication’s permission.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Malaysia’s IHH Aims to Expand in Myanmar, Vietnam and China

Malaysia’s IHH Healthcare Bhd, the world’s second-largest hospital operator by market value, is looking to make its first foray into Myanmar as well as expand further in China and Vietnam, its chief executive said.

IHH’s primary focus of expansion is emerging markets, CEO Tan See Leng told Reuters in an interview, as it looks to replicate the success it has had in India and Turkey.

IHH, the healthcare arm of Malaysian state investor Khazanah , has expanded aggressively since its July 2012 listing and counts Singapore hospital operator Parkway Holdings, Turkish hospital group Acibadem AS and India’s Apollo Hospitals Enterprise Ltd among its overseas assets.

The company has added over 3,000 beds since its listing in and now has nearly 9,000, said Tan.

Strong growth potential, improved cash flows and lowered debt levels have sent its stock soaring nearly 50 percent since its market debut. It now has a market value of around $10.5 billion, lagging only US firm HCA Holdings Inc among hospital operators.

But high labour and other running costs for the business have weighed on profits and in the first quarter it made just 159 million ringgit ($49 million), though that was up 25 percent from the same period a year earlier.

Tan added that other key markets for expansion include Myanmar and Vietnam and that the company will explore both organic growth and acquisition opportunities.

“We are looking at Myanmar… we are looking at sites in Hanoi and in Myanmar itself, we look at Yangon, Mandalay,” he said.

“The other thing that we are starting to now explore potentially would be Cambodia, but I think Cambodia still a bit early for us.”

He added that Indonesia’s economic growth was also attractive and that the company may look at opportunities in some of the country’s bigger cities, although attracting qualified staff in Indonesia was not that easy.

He declined to comment on reports that the company had been interested but had now turned cool on bidding for Australian hospital operator Healthscope.

One particular focus will be China now that Beijing is moving to ease curbs on foreign investment in joint-venture hospitals in a bid to improve its healthcare system, he said.

With almost eight years of operating in China, Tan said IHH is well poised to capture growth in the industry, for which annual healthcare spending is expected to triple to $1 trillion by 2020, according to consulting firm McKinsey.

“We have also built ‘guan xi’ or relationship and networks with different municipalities, authorities, and understand the licensing of their approvals,” said Tan, who took the helm of IHH in January.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Swedish Business Delegation Explores Business Opportunities in Myanmar

A Swedish Business Delegation comprising high-level representatives from twelve companies, largely based in Singapore, visited Myanmar last month.

The purpose of the visit was to identify business opportunities and to get a better understanding of the economic and political developments in Myanmar.

The programme included meetings with Minister of Industry Maung Mying, Vice Minister of Finance Dr Maung Maung Thein and Vice Minister Commerce Dr Pwint San in Nay Pyi Taw.

The event was organised by the Embassies of Sweden in Bangkok and Singapore in close cooperation with the Swedish Business Association of Singapore.

The Business Delegation was led by the Ambassador of Sweden to Myanmar, Klas Molin, together with Mr Hakan Jevrell Ambassador of Sweden to Singapore.

The delegation also met with representatives from Asian Development Bank, World Bank and International Finance Cooperation.

The program also included meetings with the Myanmar Federation of Chambers of Commerce & Industry (UMFCCI) as well as a discussion on CSR issues lead by Ms Vicky Bowman from Myanmar Responsible Business.

The delegation also had the opportunity to receive first-hand knowledge about the business climate in Myanmar from interactions with representatives from the Swedish business community and representatives from the local business community in Yangon, through meetings as well as networking sessions.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Are Markets Rational?

I remember arguing with one of my undergrad finance professors about the efficient markets hypothesis on multiple occasions, and in the end I remember his final concession amounted to something along of the lines “it doesn’t matter what the reality is, academia says markets are efficient and that’s what you need to answer on the exam.” Anyone who has ever sat on a trading desk knows that markets are far from efficient and that investors are not the least bit rational, so how does this affect your overall investment strategy?

The first thing to do is accept reality for what it is. The basic law of supply and demand is the one and only real reason why the price of anything goes up and down. This is true for oranges and i-phones, as well as stocks, bonds, and real estate. At any given moment on an exchange, there are those wishing to purchase and those wishing to sell, and most often they have a price that will entice them to do so. Often they have formal offers to sell out (known also as the “ask”) while simultaneously others have offers to buy out (known as bids). When these converge a trade happens, and a market “price” is established.

It is important to keep in mind that this price is only for a certain number of shares or bonds, etc. It is also important to realise bid and asks can be cancelled relatively quickly. This is why markets can move very fast in times of a panic. All the buyers suddenly disappear at all prices close to the most recent trade. Similarly in a rapidly rising market people looking to sell will keep moving their offers up hoping to get a better price.

What is more important than the live orders in the market, is all of the market participants holding the security or potential participants looking to either buy or short (bet that the price will go down by borrowing the security and selling it first with the hopes to buy back later at a lower price). At any moment in time you cannot see this potential supply and demand, but it is there and when the conditions are right it can send prices rapidly in any direction.

The reasons behind why this supply or demand suddenly enters the market are irrelevant, and this is the concept that is so hard to grasp for most people who naturally have brains wired for logic and rationality. If a company beats its earnings forecast, logic dictates that this is a positive event and therefore the price should rise. However, if most participants had already bought because they had inklings that the company just might beat its forecast, than there is nobody left to buy when the company actually does so. The demand that would be expected by the news does not materialise because instead of participants looking to enter on the good news, they are already holding the shares and want to bonds, etc. It is also important to realise bid and asks can be cancelled relatively quickly. This is why markets can move very fast in times of a panic. All the buyers suddenly disappear at all prices close to the most recent trade. Similarly in a rapidly rising market people looking to sell will keep moving their offers up hoping to get a better price.

What is more important than the live orders in the market, is all of the market participants holding the security or potential participants looking to either buy or short (bet that the price will go down by borrowing the security and selling it first with the hopes to buy back later at a lower price). At any moment in time you cannot see this potential supply and demand, but it is there and when the conditions are right it can send prices rapidly in any direction.

The reasons behind why this supply or demand suddenly enters the market are irrelevant, and this is the concept that is so hard to grasp for most people who naturally have brains wired for logic and rationality. If a company beats its earnings forecast, logic dictates that this is a positive event and therefore the price should rise. However, if most participants had already bought because they had inklings that the company just might beat its forecast, than there is nobody left to buy when the company actually does so. The demand that would be expected by the news does not materialise because instead of participants looking to enter on the good news, they are already holding the shares and want to dump them to cash in on their correct prediction. Sadly all of this supply pushes down the price and the participants are punished for the fact that too many people made the correct prediction.

This is why it is often said that markets will do whatever they can to prove the most people wrong, and is also why contrarian investing works so well. Once the majority of market participants have all agreed on an expected future outcome and put their money where their mouths are by taking positions in the markets, they unwittingly become a resistant force to the price actually moving in their direction. Next time you see markets doing something totally crazy (such as rising for six years to new highs in the midst of a weak global economy), understand that the underlying mechanics of the market are based on supply and demand rather than logic. The reason cycles happen is that after a certain amount of time overhead supply builds up to a tipping point, and when the general public bails out it usually happens fast and furiously. The old adage that the trend is your friend works well for short term trading, but when it comes to investing, make sure you never follow the herd.

David Mayes MBA provides wealth management services to expatriates throughout Southeast Asia, focusing on UK Pension Transfers. He can be reached at david.m@faramond.com. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Apple to Get Beats, Music Mogul Iovine for $3 Billion

Apple Inc will buy eats for about $3 billion and bring recording mogul Jimmy Iovine into its ranks, hoping to win points with the music industry and help it catch up in fast-growing music streaming.

As expected, Beats cofounders Iovine and rapper Dr Dre will join Apple as part of the acquisition of the music streaming and audio equipment company.

They should prove key in forging relationships with an industry that historically viewed Apple with suspicion but in recent years has pressed the iPhone maker to do more on subscription services, a market expected to eclipse song downloads in the long run.

Iovine’s music industry relationships could ease notoriously difficult licensing negotiations for a future streaming service, recording industry executives say.

“The ugly truth is that there is such a Berlin Wall between Silicon Valley and LA,” Apple Chief Executive Tim Cook told the Wall Street Journal in an interview. “The two don’t respect each other, don’t understand each other.”

While the price tag represents an iota of Apple’s roughly $150 billion cash hoard, it marks a significant departure for a company that for two decades has stuck mainly to acquisitions worth hundreds of millions of dollars.

The deal is seen as Apple’s effort to jump-start an uneven attempt to make headway in music streaming, the fastest-growing segment of the market, as iTunes sales decline. Pandora Media Inc and Spotify have raced ahead while Apple’s eight-month-old iTunes Radio has not made much of a dent.

With music downloads in decline, record labels have I also put pressure on Apple to get its act together on streaming. The record labels hope Apple can turn Beats Music into a strong competitor to Spotify and other streaming services, sources familiar with the matter have said.

“Apple created the digital download business and has had an amazing run, but the industry is going in the streaming service direction,” said Daniel Weisman, a manager for Roc Nation who represents bands.

Gaining cool Apple is also gaining a line of high-end headphones popular with a young urban demographic, bumping up its “cool” factor, analysts have said. But industry executives say the company was most impressed with Beats’ five month-old music service. The market as a whole is burgeoning. Streaming subscriptions jumped 51 percent in 2013 to $1.1 billion, out of $15 billion spent on music, according to the International Federation of the Phonographic Industry. Meanwhile, downloads slipped 2.1 percent.

The other prize is Beats’ co-founder himself. Iovine, 61, is best known as the co-founder of Inter-scope Records, a rap music pioneer that branched out to include acts like Lady Gaga and U2.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

US Factory, Confidence Data Boost Growth Prospects

Orders for long-lasting US-manufactured goods unexpectedly rose in April and consumer confidence perked up in May, supporting views of a rebound in economic growth.

Other data showed home prices moving higher in March and services industries, which dominate the economy, growing at a fast clip in May.

“It appears that the economy continues to bounce back from the harsh winter,” said John Ryding, chief economist at RDQ Economics in New York.

Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, climbed 0.8 percent last month after an upwardly revised 3.6 percent gain in March, the Commerce Department said.

Demand for defence capital goods surged and orders for fabricated metal products, transportation gear and electrical equipment, appliances and components all rose. While non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.2 percent, the March reading on these so-called core capital goods was revised sharply higher to show a 4.7 percent gain – the largest since November.

“The large upward revision hints at a stronger handoff into the second quarter,” said Gennadiy Goldberg, an economist at TD Securities in New York. “The data is indicative of a pickup in capital investment activity during the spring.” Separately, the Conference Board said its index of consumer attitudes rose to 83 in May from 81.7 in April as households’ labour market views improved. Rising household optimism should boost consumer spending, which accounts for more than two-thirds of U.S. economic activity.

House prices rise
 Another report showed house prices continued to appreciate in March. The pace, however, is moderating. That could help the market, where rising prices and mortgage rates have undercut sales. The Standard & Poor’s/Case Shiller gauge of prices in 20 metropolitan areas rose 12.4 percent in March from a year ago. The reports helped to lift US stocks and push the Standard & Poor’s 500 index to a record high. Prices for US Treasury debt fell. The dollar was flat against a basket of currencies.

Core capital goods shipments, which are used to calculate equipment spending in the government’s GDP measurement, fell 0.4 percent last month after rising 2.1 percent in March.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Thai Military Rulers Appoint Advisers; Economy in Doldrums

Thailand’s junta has appointed as advisers two retired generals with palace connections, putting powerful establishment figures hostile towards former Prime Minister Thaksin Shinawatra firmly in the ascendant in the country’s long-running power struggle.

Hoping to show things are getting back to normal, the military has also relaxed a nighttime curfew brought in after it seized power in a May 22 coup, and is expected to speed up efforts to get the economy moving again after months of debilitating political protests.

Data showed factory output fell 3.9 percent in April from a year earlier, the 13th monthly drop in a row.

Figures later in the day are forecast to show imports tumbled 18.2 percent that month. Exports may have risen marginally, but that will not be enough to offset the depression in the domestic economy.

The team of advisers announced in a brief statement included a former defence minister, General Prawit Wongsuwan, and former army chief General Anupong Paochinda.

The two are towering figures in Thailand’s military establishment and have close ties to coup leader General Prayuth Chanocha. All three are staunch monarchists and helped oust Thaksin, who remains at the heart of the political crisis, in a 2006 coup.

A Reuters report in December revealed that Prawit and Anupong had secretly backed the anti-government protests that undermined the government of Thaksin’s sister, Yingluck Shinawatra. She was removed by a court on May 7 for abuse of power and the coup ousted remaining ministers two weeks later.

Also among the advisers is Pridiyathorn Devakula, overseeing the economy. A former central banker, he was finance minister in an interim government after the 2006 coup when strict capital controls were introduced to hold down the baht, causing the stock market to plunge 15 percent in one day.

Thailand’s gross domestic product shrank 2.1 percent in the first quarter of 2014 as the anti-government protests frequently shut down ministries, damaged confidence and scared off tourists.

The military has moved quickly to tackle economic problems, notably preparing payments for hundreds of thousands of rice farmers that the ousted government was unable to make.

But General Prayuth has not set any timetable for elections, saying broad reforms are needed first.

That may further complicate relations with foreign governments that have called for a speedy return to democracy, an end to censorship and the release of politicians, protest leaders, journalists and others detained.

“We’re going to have to continue to calibrate how we’ll work with the government and military when they don’t show any pathway back to civilian rule,” a senior US official told Reuters in Washington. “We’re very concerned and there will be an impact on our relationship.”

Clampdown

Scores of politicians and activists have been detained as the military moves to stifle resistance to its takeover.

There have been daily, peaceful protests against the coup in Bangkok with crowds calling for elections and confronting troops, although the number of protesters had dwindled to about 200 on May 27 from about 1,000 on May 25.

A seven-hour curfew the army imposed after the coup from 10pm each night from May 28 was shortened to four hours starting from midnight.

Thaksin has not commented on the coup except to say he was saddened and hoped the military would treat everyone fairly. Yingluck has been released from detention but remains under some restrictions, officers and aides say.

Soldiers detained a former education minister, Chaturon Chaisang, after he had emerged from hiding to denounce the coup, saying it would only worsen conflict. He said people in detention were not being treated badly.

Years of political turmoil have polarised Thailand.

The Shinawatras’ strength is in the north and northeast, populous, mostly rural regions that have won them every election since 2001. Some Thaksin loyalists had vowed to resist a coup and the army and police are hunting for weapons.

Many Bangkok voters support the establishment and approve of the coup if it means ending Thaksin’s influence. They say he is corrupt and disrespectful to the monarchy. He denies that.

Most Thais express steadfast loyalty to 86-year-old King Bhumibol Adulyadej.

“This is a good coup,” said Chanchai Thonprasertvej, 54, a doctor at a small pro-coup gathering at Bangkok’s Democracy Monument. “The army can protect the land and the king. It will protect my country from Thaksin.”

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Japan Consumer Spending, Factory Output Skid After Sales Tax Hike

Japan’s household spending in April fell at the fastest rate in three years in a sign that consumption could be slow to recover from an increase in the nationwide sales tax, raising questions over the pace of economic recovery.

Industrial production fell more than expected in April as companies cut output to avoid a pile up in inventories in the lull after the sales tax hike took effect.

BOJ officials have repeatedly said they are confident spending will quickly recover as the labour market remains tight, but the bigger-than-expected spending drop in April and a slowdown in factory activity could raise the stakes for monetary policy.

“Spending will recover from May, but sales of durable goods look weak and this could be a drag on overall spending,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

“The government can afford to let the spending in its stimulus package run its course. The BOJ doesn’t need to move now, but it needs to keep an eye on the situation.”

Japanese household spending fell 4.6 percent in April from a year ago, more than the median market forecast for a 3.2 percent annual decline. That marked the fastest annual decline since March 2011, when an exceptionally powerful earthquake triggered a nuclear disaster. Compared to the previous month, spending tumbled by a record 13.3 percent in April, more than the 13.0 percent decline expected by economists. Government data published with the new figures show that household spending fell further after the April 1 sales tax hike than it did after the 3 percent sales tax in was imposed in 1989, and when it raised the tax to 5 percent in 1997.

In both 1989 and 1997 spending remained flat after the tax was imposed and then increased.

Nationwide consumer prices showed that inflation picked up in April, excluding the April 1 sales tax hike – a welcome sign in the Bank of Japan’s battle to bring inflation to 2 percent.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

After SAARC, Modi Must Look East

A new government in India, led by Prime Minister Narendra Modi, bolstered by a majority in the Lok Sabha, will be in a position to take bold initiatives in the domain of foreign policy. An early signal of this is the invitation to South Asian Association for Regional Cooperation (SAARC) leaders to attend the swearing in ceremony.

It is an adroit move with a strong potential to pay future dividends in India’s neighbourhood policy. It is also, perhaps, the first step to catapulting Prime Minister Modi from a charismatic provincial leader to a global statesman.

Prime Minister Modi will look towards Asia first, having visited several Asian countries as chief minister of Gujarat. This will give greater heft to India’s Look East Policy (LEP) which was India’s response to a unipolar world, marked by the end of the Cold War and the demise of the USSR.

The impetus for reworking India’s foreign policy emerged from the economic reforms and globalization of the Indian economy. The expanding potential for India’s trade and investment with the dynamic Association of Southeast Asian Nations (ASEAN) region, as well as the pessimistic outlook for regional integration of South Asia through SAARC, were added incentives for the LEP. In a sense it was harking back to India’s historical links with Southeast Asia via maritime routes. A major share of global maritime trade goes through the Strait of Malacca. Rampant piracy has been controlled and the India Navy has played an important role in this arena. India’s strategic interest in the Indian Ocean is to keep trade and commerce open, safe and inclusive.

The conflict brewing in the South China Sea is worrying for all countries, with China laying claim to disputed islands and virtually the whole of South China Sea as its territorial waters will pose a challenge to the LEP. India is encouraging all claimants to the disputed islands to maintain peace and find a solution within the UN Convention on the Law of the Sea (UNCLOS) and ASEAN’s Code of Conduct. The need to balance China’s rapid rise, by inviting and facilitating a stronger engagement of India and others with the region, was a strong motivation for ASEAN’s reciprocating positively to India’s LEP.

The core of India-Southeast/ East Asia relationship is the India-ASEAN equation. Beyond ASEAN, the East Asia Summit (EAS) has emerged as the larger institution, with ASEAN as its driver and hub. It includes not only ASEAN member states but also China, Japan, South Korea, India, Australia and New Zealand, Russia and the USA. Besides, India is a member of Asia-Europe Meeting (ASEM) and is also interested in joining Asia-Pacific Economic Cooperation (APEC).

Trade and investment, two important pillars of the LEP, have registered steady growth. India’s trade with ASEAN has gone up from $2.9 billion in 1993 to about $7o billion in 2013, after India signed the Free Trade Agreement (FTA) in goods in 2010. The aim is to propel this figure to $100 billion. Eventually, a full-fledged Free Trade Area (FTA) is to be established. It will be one of the world’s largest markets of 1.8 billion consumers with a combined GDP of $2.8 trillion.

Physical connectivity remains a very important aspect of the LEP. The India-MyanmarThailand Trilateral Highway is a 1,360km long highway that would establish seamless territorial connectivity. India is a party to the ambitious Trans-Asian Railway project. Myanmar is not yet linked by railway to India or Thailand. A 180km segment from Assam to Moreh via Imphal is under construction. The security dimension has had a dampening effect on infrastructure projects in the northeast. While the MorehTamu-Kalemyo Road has been completed, other projects like the India-Myanmar-Thailand trilateral highway, Kaladan multi modal project, Tamanthi hydroelectric project etc are facing delays due to political, security and financial problems. The other major infrastructure project is the industrial corridor linking the Myanmar port of Dawei with Thailand. India must take a deeper interest in this project that has attracted Japanese and South Korean companies.

The LEP has domestic implications on the development of India’s northeast region and the Indian economy in general. Though the immediate focus was on Southeast Asia, specifically the ASEAN, over time, the scope of LEP has come to encompass a much wider and inter-linked region. Some of the platforms India has chosen to use in pursuance of its Look East Policy, such as BIMSTEC (that brings together select Southeast and South Asian countries) and the Mekong-Ganga Cooperation (MGC), linking India with a number of ASEAN countries, would point to that intended broader geographical space.

Pinak Ranjan Chakravarty is a former Secretary, Ministry of External Affairs. He can be contacted at southasiamonitorl@ gmail.com. This is an abridged version of the original article in South Asia Monitor.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014

Sri Lanka Targets $2b in FDI Again for 2014

Sri Lanka has set a $2 billion foreign direct investment (FDI) goal this year, its investment minister said, though it failed to meet that target for two years in a row.

The $67-billion economy failed to achieve its ambitious FDI targets partly due to inconsistent investment policies amid allegations by investors over corruption, lack of good governance and the government’s failure to address human rights violations in line with UN resolutions.

However, the country till attracted some select FDI to mainly its tourism industry due to optimism after the end of a 26-year war in May 2009. FDI in the first quarter of this year more than doubled to $442 million compared with the same period a year earlier, data released on Thursday showed. Lakshman Yapa Abeywardena, the investment promotion minister, said that despite negative publicity the country was able to draw loo percent more FDI in the first quarter of 2014. “This year, we will be able to get at least $2 billion,” Abeywardena told reporters in Colombo.

FDI edged up 4 percent to $1.39 billion last year, from $1.34 billion the previous year. The Indian Ocean island nation had aimed to secure $2 billion each in both years.

Sri Lanka has seen economic growth average more than 7.4 percent in the last four years through 2013, but that has not attracted foreign investors to it as an investment destination because growth was mainly fuelled by state-led massive infrastructure projects financed by foreign commercial loans.

Abeywardena said the country needs at least $4 billion in foreign investments to sustain 8 percent economic growth.

Sri Lanka’s investment policies have been under criticism after the government re-nationalised some privatised ventures, took over 37 private firms, citing they had underperformed, and reversed a key investment after the deal was signed.

Source from Myanmar First Bilingual Business Journal Jun 5-11,2014