Myanmar in many ways is still a virgin market for Western investors. With a view to attract outside companies by offering a transparent and attractive business environment, the country’s current opening process goes hand in hand with legal reforms in the economic field aimed at investment promotion and facilitation.
The foreign investment law passed by Parliament on September 7 can be seen as an important building step in this regard. The intense public and parliamentary debate of the draft law before it was passed has resulted in important and in some cases even “radical” modifications, which however are not necessarily welcome by all the players involved. Welcome by the foreign investors community is certainly the abolishment of a minimal capital requirement (in the draft law it was set as high as US$ 5 million). This not only brings the country in line with other Asian neighbors as for example the Philippines, Thailand and Laos, which neither have minimum capital requirements for foreign investment, but it also takes out a prohibitive investment condition for medium foreign enterprises.
The approved law also raises the limits of foreign capital participation from initially 49 to 50%.
The decision not to set a minimum investment requirement, however, is at the same time contested by parts of the local medium-sized entrepreneurship, which fears that such easy market entry for foreign companies would endanger their existence.
No doubt, there is no rose without a thorn!
Foreign investment will bring about increased market competition to the inside. At the same time however it will offer opportunities for partnerships, industrial modernization and improved competitiveness to the outside.
There is some basis for the argument brought forward by local business people ” that capital requirements would keep out small and sloppy investors that might come in quickly, make money and then disappear”(Times Business, September 10-16,2012), leaving nothing in return for the country. However, in our opinion there is even more danger in having high capital requirements which would allow only big companies to arrive, creating an even bigger threat for medium-sized local enterprises.
It is still left to President U Thein Sein to enact the law as it is, or to return it with comments to Parliament for further discussion.
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