FDI & Garments Industry in Burma.doc - Foreign Direct Investment and the Garments Industry in Burma Burma Economic Watch June 2001 Introduction The

FDI & Garments Industry in Burma.doc - Foreign Direct...

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Foreign Direct Investment and the Garments Industry in Burma Foreign Direct Investment and the Garments Industry in Burma Burma Economic Watch, June 2001 Introduction The coup d'etat by General Ne Win in 1962, and the introduction of the ‘Burmese Way to Socialism’, ensured that for almost 30 years foreign direct investment (FDI) in Burma was near enough to non-existent. In 1989, after the uprisings of the previous year and the re-shuffling of the upper military echelons into the reconstituted State Law and Order Restoration Council (SLORC), the door to foreign investment was opened once more. The following attempts to clarify the state of play regarding FDI in Burma. A particular emphasis is placed on the apparel industry, the one area of FDI growth in Burma in recent years. The first section presents an overview of the procedures for foreign investment, highlighting the role of the military regime in garnering resources. The second section briefly examines the data relating to FDI in Burma, highlighting its limitations. The third section provides an overview of FDI, including the recent collapse, the main sectors in receipt of foreign investment, and source countries. Overall, FDI is small in comparison with comparable countries and the prognosis for future investment is poor due to the winding down of certain prominent gas pipeline projects. The fourth section examines Burma's growing exports of apparel, notably to the USA. Due to the unreliable nature of the data surrounding Burma's apparel industry, a brief comparison is made with this industry’s development in Cambodia. 1. Foreign Investment Law and the Myanmar Investment Commission The Myanmar Investment Commission was established in 1989 to administer foreign investment under Burma’s Foreign Investment Law. This commission is one mechanism that ensures that the regime controls FDI, with the majority of the Commission’s members coming from the military cabinet itself. The practices of the commission ensures that the regime is able to direct resources towards the quasi-military companies which dominate the economy. Standards of competitive equality are not applied to private companies in competition with state or quasi-military companies, or even to private companies competing amongst themselves for access to foreign partners to form joint ventures. FDI in joint ventures has historically been with state enterprises and the quasi-military companies. The most important of the latter is the Union of Myanmar Economic Holdings (UMEH), which often has priority in accessing foreign partners. Reports suggest that UMEH is a major player in Burma’s apparel industry.
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FDI approved by the Commission has access to a range of incentives not available to other investors. Once the investment proposal is approved, it goes to the Office of the Myanmar Investment Commission . As this office includes representatives of the state enterprises who may be in competition with the foreign investor, restrictions can be imposed. In the past, this has
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