Foreign Direct Investment in Myanmar

Foreign Direct Investment (FDI) is a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in, and retains a significant degree of influence over an enterprise resident in another economy. Foreign Investment involves capital flows from one country to another, granting the foreign investors extensive ownership stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management as a part of their investment or an equity stake large enough to enable the foreign investor to influence business strategies.

​​In recent years, foreign investment in Myanmar has significantly declined due to multiple crises, pandemic, global sanctions, particularly political instability. Foreign investment fell 60 percent in the first quarter of 2023, compared to the same quarter in 20221. In the aftermath of the coup, many international firms suspended their operations, with some withdrawing their operations and investment plans completely.

Following political and economic reforms in 2011, with the first democratic elections held in 2015, Myanmar reopened to the global economy, experienced high economic growth. FDI is one of the main factors to boost its economy. In fact, the Myanmar government began to encourage forest investment in late 1988. Initially FDI was not increased due to a lot of restrictions and prohibitions until 2011 by economic reforms, lifting of sanctions, and optimism for greater stability, and saw improved FDI inflows until 2018 when FDI inflows dropped due to the weaknesses in implementing economic policies with restrictions and the Rohingya crisis. In February 2021, the military coup set back the country’s democratic transition, drove many international firms’ to suspend operations, and some withdrew their operations and investment plans, resulting in a significant drop of FDI in Myanmar.

Laws and Regulations

Myanmar’s Foreign Investment Law was enacted in 1988 soon after the adoption of a market-oriented economic system to boost the flow of FDI into the country. Since then, Myanmar has implemented several laws to attract foreign investment, such as the Myanmar Investment Law (MIL) (2016)2, related Myanmar Companies Law (MCL) 2017, Special Economic Zones Law 2014, Environmental Conservation Law 2012, and the 2018 Companies Law. These laws as well as the support of other bodies of regulators continue to govern treatment of foreign investment in Myanmar.

The Benefits and Challenges of FDI

The current political situation in Myanmar presents a multitude of challenges for investors, with opaque regulations, policies and rules for governing foreign investment. As a result of the political instability and opaque process, foreign investment has decreased year on year since 2021. The MIL designates which sectors are available for investment with it also listing a list of prohibited and restricted sectors. Whilst the Companies Law stipulates that foreign investment can only be up to 35% in domestic companies.

Despite these challenges Myanmar continues to invite investment. For example the Myitsone Dam project was initially signed off in a joint venture with China Power Investment that sought to construct seven hydropower dams along the Irrawaddy River. However, the Myitsone dam has been subjected to multiple delays. The Myitsone Dam was planned to have a generation capacity of 6,000 MW with the intended destination of the produced electricity primarily for exporting to Yunnan, China, with completion of the project scheduled for 2019. Rumours of the project’s revival arose in 2016 and 2019 and again since 2021, but to this date the project remains suspended.

Main Investors

Between 1988 and 2024 there were 53 countries investing in Myanmar. After the military coup, many investors withdrew and suspended the projects due to political instability and associated risks.3 About 17 companies have publicly announced their decision to withdraw or suspend operations.4 Furthermore, nine companies decided to suspend operations in Myanmar. Overall, nearly 13% of companies operating in Myanmar have ceased all activities since the coup.5 However, some companies from some countries continue to operate the projects.

According to the latest Directorate of Investment and Company Administration (DICA) report in April 2024, Singapore is one the biggest investors, followed by China with 25.9 per cent ($18.89 billion) and Hong Kong SAR with 13.5 per cent ($9.84 billion) as the second and third largest investors in 2024.6 As of now, the UK, Hong Thailand, the Republic of Korea, Viet Nam, Japan, Malaysia and the Netherlands are also the leading countries with significant investments. However, throughout the period, Singapore remained a major investor, with contributions from China and Thailand. Singapore, China and Thailand have been the major investors in Myanmar since FDI was permitted in 1988.7

Three Main Investors in Myanmar

1. Singapore

Singapore stood as the largest foreign investor in Myanmar in the previous years, equal to 29% of FDI in Myanmar.8 According to Global New Light Of Myanmar, Singapore invested over US$21 billion from 299 existing projects. Additionally, after a top investing Japan, Singapore stands as the second largest foreign investor in the Thilawa Special Economic Zone.

2. China

Sectors: Main sectors into urban development, real estate, power and manufacturing. 

China has been investing in Myanmar since the first permission of FDI. In recent years, China was the second largest investor with over $18.89 billion with 25.9 percent of overall FDI. 

Sectors: Infrastructure, energy (particularly hydropower and oil & gas), mining, manufacturing, and telecommunications. 

3. Hong Kong SAR, China

Hong Kong SAR has been a significant investor in Myanmar over the years, contributing to various sectors of the economy. This year, Hong Kong SAR stands as the third largest investor in Myanmar.9

Sectors: Real estate development, energy, and Manufacturing (garment businesses).

Made with Flourish

Investment Industries and Sectors

In recent years, the power generation sector has consistently received the largest amount of FDI in Myanmar. During the financial year of 2023-2024, the power sector received the largest amount of foreign investment over US$820.27 million.10 Throughout the most recent year, the power sector still stands as the largest investment, followed by the oil and gas sector in Myanmar.

The government of the Myanmar welcomes and promotes FDI in the following sectors:

  • Agriculture and its related services (except cultivation and production of tobacco)
  • Plantations and conservation of forests, and other businesses with forests
  • Livestock production, breeding and production of fishery products, and related services
  • Manufacturing (except manufacturing of cigarettes, liquor, beer, and other harmful products to health)
  • Establishment of industrial zones
  • Establishment of new urban areas
  • City development activities
  • Construction of roads, bridges and railway lines
  • Construction of seaports, river ports and dry ports
  • Management, operation and maintenance of airports
  • Maintenance of aircrafts
  • Supply and transport services
  • Power generation, transmission and distribution
  • Production of renewable energy
  • Telecommunication businesses
  • Education services
  • Health services
  • Information technology services
  • Hotels and tourism
  • Science research development business

Made with Flourish

Significant Foreign Investment Projects

The Myitsone Dam was planned to have a generation capacity of 6,000MW with the intended destination of the produced electricity primarily for exporting to Yunnan, China, with completion of the project scheduled for 2019. The project developers for this project, a group of Chinese investors, were Yunnan International Power Investment Co., Ltd. with the main contractors being China Gezhouba Group, China Power Investment Corporation Materials and Equipment Co., Ltd., and Number 4 and 11 Bureaus of Sinohydro. The $3.6 billion dam, ranked as one of the biggest hydropower projects in the region, was suspended by former President Thein Sein in 2011. Rumours of the project’s revival arose in 2016 and 2019 and again since 2021, but to this date the project remains suspended.

Reflecting common trends in foreign investment across the Lower Mekong region, Myanmar has also invited investment in extractive industries, with investment in mining. An example of one of these projects is the The Letpadaung Copper Mine Project. This project, a joint Myanmar and China venture, between Myanmar Wanbao Mining Company Ltd. (MWMCL), military-owned Myanmar Economic Holdings Ltd. (MEHL), and state-owned enterprise Mining Enterprise No. 1 (ME-1) of the Ministry of Natural Resources and Environmental Conservation (MoNREC). It aims to fulfil domestic raw materials for mineral resources and promote exports of the same which will encourage the growth of heavy industries, leading to long-term national development.

Both of these projects have faced criticism from local residents, and Civil Society Organisations (CSOs). Concerns include the ecological impact of the projects, and in the case of the Myitsone Dam criticism was directed at the fact that 90% of the generated electricity would be exported to China, whilst many residents of Myanmar lacked access to electricity. Both projects have also been subject to opposition due to enforced relocation of communities living in affected areas.

Data

Myanmar Foreign Direct Investment data is updated quarterly in the Directorate of Investment and Company Administration (DICA) platform. The DICA platform is controlled under the junta’s Ministry for Investment and Foreign Economic Relations.

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References

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