2.1.1 Foreign Direct Investment
Since 1988, following Myanmar’s transition to a market-oriented economy, special emphasis had been made to step up investments. One of the most important initiatives undertaken was the promulgation of the Foreign Investment Law in November 1988, and it was immediately followed by an endorsement of the procedure in December. The main aim of this law is to provide incentives for the inflow of foreign capital and technology, which is essential to expedite the development of the national economy.
Moreover, in order to promote the participation of foreign investors, the State Economic Enterprises Law was enacted. Under this law, eight sectors are opened to foreign participation. In addition, 12 different areas, which are exclusively the domain of the state economic enterprises, are opened to joint ventures with private entrepreneurs and organisations, if it is beneficial for the state. The permitted areas include production, sale and exports of teak, petroleum, natural gas, precious stones, fish, prawns, metal, and such services as banking, insurance, air and rail transport.
With the introduction of the Myanma Foreign Investment Law and State Economic Enterprise Law, a favourable climate conducive for investment has been created in Myanmar. This is reflected in the number of foreign investors that have taken advantage of the opportunities. As at the end of September 1994, 107 projects from 17 countries were approved. From the 1989-90 fiscal year to 1996-97 fiscal year, the total foreign investment reached US $ 6.05 billion in 1997-1997 as compared to US $ 449.5million in 1989-90. In t e r m s of investment value, the United Kingdom headed the list with 23.80 % share of the total, followed by Singapore with 18.20 % share while Thailand came in third with 16.96 % share. In terms of the ownership structure, wholly foreign- owned venture dominated the list with 48.85 %, while joint ventures between the state-owned economic enterprises and foreign investors came in second with 36.66 % share, followed by production sharing with 14.49 % share in 1996- 97. Until 1995-96, FDI was dominated by investments in oil and gas w i t h 44.34 % share of the total FDI and hotel and tourism sector accounted for 20.00 % of the total FDI. However, the trend has moved in favour of the
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manufacturing sector in 1996- 97. The industrial sector grew at over 10% annually during 1992-93 to 1997-98. This growth came mostly form the construction and the energy sectors as investors from the neighboring counties responded to the opening of the economy. FDI from ASEAN nations include Singapore, Thailand, Malaysia, Indonesia and the Philippines and they had amounted to US $2,808.733 million which was 46.41 % of the total FDI. Its share in the GDP was 4.5 % in 1996-97.
2.1.2 Domestic Investment
With the adoption of a market-oriented policy, the private sector has been encouraged to play an active and extensive role in the economy. The annual economic plans were formulated and implemented to drive the economy towards the twin objectives of achieving economic and price stabilisation. The economy responded well to the liberalisation of 1988. Myanmar’s economic performance improved in the first half of the 1990s. Growth averaged at 7.3 % during 1992- 93 - 1996-97, following an average decline of 5.5% in the late 1980s. The government enacted the Myanmar Citizen Investment Law in 1994 to give impetus to local investors enabling them to enjoy rights and investment incentives comparable to those accorded to foreign investors. The result was an impressive expansion in investment. Local investment (by companies registered under the Companies Act) grew and the number of registered private Myanmar companies reached 2,140 in 1996- 97. The Government promulgated the Private Industries Law and Cottage Industries Production Law. The Myanmar Industrial Development Committee was formed to assist private industrial enterprises and the Industrial Development Bank was established to provide financial assistance. Due to state encouragement, the percentage share of private investment in the GDP increased from 3.8% in 1988-89 to 7.0% in 1996-97. The share of private investment in fixed investment grew at an average rate of 59.18% during 1988-89 to 1997-98. The increase was mainly due to the extensive participation of private industries in the production of foodstuff and beverages, clothing and wearing apparels, personal and household goods, and industrial raw materials. Subsequently, the reforms opened up banking to the private sector. The Financial Institutions of Myanmar Law and the Central Bank of Myanmar Law, which were enacted in July 1990, provided for the establishment of private banks in parallel with the state-owned banks. As at 1996-97, 15 private domestic banks were opened and 30 foreign banks were permitted to open representative offices in Myanmar, without license to do banking operation as yet. However, most of the foreign representative offices have correspondent banking arrangements with the domestic banks.
Regarding public investment, while the stated government policy has been to encourage the development of a market economy, many capital-intensive industries remain state-owned. The state dominates such key sectors as energy, communications, and oil and gas sector. The state has a large but declining share in fixed capital formation. In most of the years, the growth of private investment out-paced public investment following the implementation of the incentives and liberalisation measures. Total investment grew at an average annual rate of 17 % during 1992-93 to1996-97.
The total investment grew at an average annual rate of 17% during 1992/ 93 to 1996/97. In most years, the growth of private investment out-paced that of public investment following the implementation of the investment incentives and liberalisation measures. However, the share of investment in the GDP at round 13 % during this period is comparatively low by Asian standards.
2.2 Domestic Investment and Foreign Direct Investment in the Post-