As President Barack Obama arrives in Myanmar next week for the East Asia Summit, he will find less optimism not only about the political situation but also about Myanmar’s economic future. As I noted last week, when Obama first visited Myanmar in 2012, it was at the height of the country’s political reform process. Since then, the process of political reform has deteriorated, so much so that President Thein Sein last week held a kind of emergency summit with top civilian and military leaders, including Aung San Suu Kyi. This meeting was held in an attempt, I think, to get all top Myanmar public figures to at least paper over their differences during the East Asia Summit. Still, it has become clear that the military does intend to just easily hand power over to a truly civilian government, freedom of expression and press has been curtailed once again, and western Myanmar has exploded into inter-religious conflict, leaving over 100,000 Rohingya living in squalid camps that have been described by the Arakan Project as open air prisons. It will not be easy to paper over these serious problems.
Myanmar’s economic progress has stalled as well. To be sure, the country’s offshore oil and gas deposits continue to attract significant interest, which is why the government in March awarded twenty tenders to foreign companies to explore different offshore blocks. Winners of tenders included ConocoPhillips, among other foreign companies. But these oil and gas multinationals have long experience operating in some of the most politically troubled and economically restrictive environments in the world, and the fact that they are exploring offshore makes them more insulated from Myanmar’s growing political instability than if they were exploring in Myanmar itself.
In other industries, many U.S. companies that sent executives to Myanmar in 2012 and early 2013 on visits to assess the market’s potential have decided to do nothing for now. As the Wall Street Journal reported this past August, although the Obama administration has eased sanctions on investment in Myanmar, U.S. companies have invested less than $250 million in the country, a tiny figure for a country with such low penetration of consumer goods and with a population of around 53 million people. Several prominent projects in Myanmar that were supposed to be hubs of investment have stalled, including the building of a new airport for Yangon and the Dawei Port project. In addition, as the Journal noted, a number of large foreign companies that had planned to invest in Myanmar’s aviation sector, which is badly under-served, or had been granted licenses to open bank branches in Myanmar, have shelved their plans.
There are several reasons why U.S. investment into Myanmar has not reached the high expectations set in 2011 and 2012. The instability caused by violence in western Myanmar, which has led to Buddhist-Muslim violence in other parts of the country, clearly worries some foreign investors not used to this level of political risk. After traveling outside Yangon and Naypyidaw during second, third, and fourth trips to the country, many U.S. executives have come to better appreciate how poor Myanmar’s physical infrastructure is outside of the capital and Yangon, which makes even low-end manufacturing more expensive than in neighboring nations like Vietnam and Bangladesh. (Yangon isn’t exactly Singapore, either, but its infrastructure and workforce is better than in other parts of Myanmar.) And a series of recent court decisions have reminded foreign investors that Myanmar lacks any semblance of an impartial judiciary or any real protections for foreign investors.
Meanwhile, U.S. companies still operate under restrictions in Myanmar that investors from most other countries do not, including being prohibited from dealing with certain companies that have links to Myanmar’s previous military regimes. Yet many of these blacklisted companies are among the most powerful potential partners in Myanmar.
Given the potential of Myanmar’s consumer market and the quantity of its (onshore) natural resources, U.S. companies will continue to pay close attention to Myanmar. The Obama administration has sent a number of high-level missions to Myanmar to promote investment and improve overall economic ties—too many, in my opinion, given the potential of other markets in the region like Indonesia and Vietnam. Still, one cannot say that the White House has not tried to foster greater investment in Myanmar. But it will be many years before U.S. investment in Myanmar matches U.S. investment into other sizable countries in Southeast Asia.