On April 1, 2016, Aung San Suu Kyi’s National League for Democracy (NLD) took over the reins of power in Myanmar, following its overwhelming victory in national elections in November 2015. They did so after the country received a robust inflow of FDI pledges in the previous 12 months, amounting to $9.4bn (up from $8bn in the previous year), spanning 217 licensed projects, according to the Directorate of Investment and Company Administration, the government agency responsible for all investment and company registrations
Given the political uncertainty surrounding 2015’s election run-up, the election results themselves, and the delicate transfer of power process, this figure is greater than some observers had anticipated. However, a substantial proportion of this was approved in the first three months of 2016, once the election was over and it was apparent that the military would honour the election results.
Thus, in part, the uptick in FDI inflow pledges represented a positive reaction by international investors to the election results, as well as a drive to push through a increased number of licence applications by a government about to depart from office.
The NLD pledged in its election manifesto that it would seek to encourage further FDI into Myanmar, but a number of constraints will need to be addressed if FDI inflow disbursements are to increase in a sustained fashion. The first is to pass a new investment law that the International Finance Corporation had been assisting the previous government on, and which seeks to merge the current Myanmar Citizens Investment Law and the Foreign Investment Law. And for the new law to open up more business sectors to unrestricted foreign investors.
The second constraint is somewhat beyond the Myanmar government’s ability to address; the continued imposition of US Treasury Department. sanctions under the ‘specially designated nationals' list. At the recent confirmation hearings in Washington, DC, for the new US ambassador to Myanmar, it was apparent that the sanctions will probably not be lifted any time soon.
But one constraint that is in the government’s power to address is the urgent need to improve the regulatory framework for business in Myanmar (its Company Act dates from 1914 when the country was part of colonial India), and making major steps to improve the business environment. The World Bank’s latest ‘Doing Business’ survey placed Myanmar 167th (out of 189 countries), overall, and 187th for enforcing contracts in particular.