Chiang Mai (Mizzima) – Recently, the Burmese regime enacted a Special Economic Zone Law to attract foreign investment and to help stimulate economic development in one of the poorest countries in the world.
The law is the second attempt to invite foreign investment into the country. In 1988, the then military government enacted a Foreign Investment Law. Now, about 20 years later, this new law emerges, which seems to incorporate lessons learned during the past 20 years in dealing with foreign companies.
The new law is clearly more specific and targeted. The previous law was touted as extremely flexible. However, the low level of foreign investment during the past years indicates a different picture, which includes confusing bureaucracy hurdles and red tape, poor infrastructure, an inadequate, rudimentary banking system and ongoing economic sanctions from the West. Those factors, among others, scared potential investors away. To some extent they remain in place today.
According to the old Foreign Investment Law, tax exemptions were for three years. The new law offers a tax exemption for five years and an additional five years extension at a 50 percent
income tax rate.
For now, China and Thailand are still the major investors in Burma. For the foreseeable future, this picture is not likely to change, because of the sanctions by the U.S and European Union, which are not likely to be lifted anytime soon.
Furthermore, international investors will also be looking at other countries in the region. Also, investors are right to look cautiously at the new government recently installed by the military junta, and to question if it is capable of smoothing out the long-term obstacles to doing business in Burma.
The idea of “one-stop’ service is unheard of in Burma. On the positive side, the new law does take into consideration environmental issues.
It can be expected that some countries, such as Japan and South Korea, will continue to invest in Burma, taking advantage of the new law.
However, the new Special Economic Zone Law may become really special if and when it attracts new investments from countries that heretofore have held back on their Burmese investments.
So for now, it’s wait and see, and hope that the Burmese economy–which desperately needs outside investments–can attract new money into a country that until now has offered little incentives on the upside. So far, it’s been a gambler’s game.
John Hanness is a pseudonym for an economist who has observed Burma for many years.
Source:http://mizzima.com/edop/commentary/4911-is-special-economic-zone-law-special.html
The law is the second attempt to invite foreign investment into the country. In 1988, the then military government enacted a Foreign Investment Law. Now, about 20 years later, this new law emerges, which seems to incorporate lessons learned during the past 20 years in dealing with foreign companies.
The new law is clearly more specific and targeted. The previous law was touted as extremely flexible. However, the low level of foreign investment during the past years indicates a different picture, which includes confusing bureaucracy hurdles and red tape, poor infrastructure, an inadequate, rudimentary banking system and ongoing economic sanctions from the West. Those factors, among others, scared potential investors away. To some extent they remain in place today.
According to the old Foreign Investment Law, tax exemptions were for three years. The new law offers a tax exemption for five years and an additional five years extension at a 50 percent
income tax rate.
For now, China and Thailand are still the major investors in Burma. For the foreseeable future, this picture is not likely to change, because of the sanctions by the U.S and European Union, which are not likely to be lifted anytime soon.
Furthermore, international investors will also be looking at other countries in the region. Also, investors are right to look cautiously at the new government recently installed by the military junta, and to question if it is capable of smoothing out the long-term obstacles to doing business in Burma.
The idea of “one-stop’ service is unheard of in Burma. On the positive side, the new law does take into consideration environmental issues.
It can be expected that some countries, such as Japan and South Korea, will continue to invest in Burma, taking advantage of the new law.
However, the new Special Economic Zone Law may become really special if and when it attracts new investments from countries that heretofore have held back on their Burmese investments.
So for now, it’s wait and see, and hope that the Burmese economy–which desperately needs outside investments–can attract new money into a country that until now has offered little incentives on the upside. So far, it’s been a gambler’s game.
John Hanness is a pseudonym for an economist who has observed Burma for many years.
Source:http://mizzima.com/edop/commentary/4911-is-special-economic-zone-law-special.html
Comments
Post a Comment