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.

 


 

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 included the rejection of joint ventures between domestic private and foreign partners – only subsequently for projects to be approved with the domestic private firm replaced by a state enterprise. Privileges for those associated with the FDI approval process include signature fees, both official and unofficial.

 

Not all FDI is approved under the Foreign Investment Law. Small scale investment, and investment in industries that are not legally monopolised by the state and its various organs, do not seem to need approval under the Law.  The minimum requirement for investment under the Foreign Investment Law is $500,000 in the manufacturing sector and $300,000 in services.[1]  Small-scale foreign investment by Chinese nationals has not needed approval under the Foreign Investment Law.

 

2.     The Data

 

In addition to the usual problems of compiling statistics for developing countries, there are three additional problems with the FDI data in the context of Burma. The first problem is the large discrepancies in the data, with the amounts varying wildly depending on the source.  There are a number of sources of FDI data including the IMF, the World Bank, the Economist Intelligence Unit and the Central Statistical Office (CSO) of the SPDC.  The IMF data generally shows much larger FDI than the other agencies. The following table nicely illustrates these discrepancies:

 

Comparison of FDI Data 1996-2000 ($m)

 

1996

1997

1998

1999

2000

IMF (Actual)

317.6

580.7

878.8

683.6

304.2

EIU (Actual) [2]

310.4

387.2

315.1

216.3

 

World Bank (Actual )

 

 

70.0

 

 

Xinhua (Approved)[3]

668.2

2,814.2

777.394

29.455

55.61

EIU (Approved)[4]

 

 

777.5

29.5

55.6

IMF (Approved)

668.2

2,814.2

1,012.9

54.4

58.1

CSO (Official Statistics)[5]

668.2

2,814.2

777.4

 

 

 

 

Another source of misrepresentation and confusion in analysing the data is the distinction between approved and actual FDI.[6]  Total approved (or committed) FDI during the last ten years was $7,177.1m, whereas total actual (or disbursed) FDI was only $3,636.4m.[7]  Not surprisingly, official Burmese agencies almost exclusively highlighting approved over actual FDI.   In the last ten years only about 50% of investment committed by foreign investors has resulted in actual investment.  This is something that is often overlooked by commentators when assessing Burma's performance in attracting foreign investment.  The large discrepancy between approved FDI and actual FDI highlights a very uncertain investment environment, created by inept economic and political management.[8]

 


 

Another issue with the FDI data is that it only presents figures for foreign investment that has been approved under the Foreign Investment Law.  According to the IMF some foreign investment recorded in official statistics is not approved under the Foreign Investment Law.[9]  The IMF notes that this investment appears in the Balance of Payments data. In the view of BEW, however, this is doubtful given that the foreign investment flows that appear in Burma’s balance of payments data are typically less than FDI approved under the Foreign Investment Law.


 

3. Foreign Direct Investment

 

a. Sectors receiving FDI

Actual FDI in Burma collapsed by nearly one third after the Asian economic crisis, falling from $878.8m  in 1998 to $683.6m in 1999.[10]   New commitments of FDI fell from $1,012.9m in 1998, to almost zero in 1999 and 2000.[11]  The collapse in commitments to invest means that we can expect actual FDI flows in the next couple of years to be relatively insignificant. However, the Asian economic crisis is not the only important factor behind the collapse, and in determining future flows.

 


 

 

 

 

 

 

Another important determinant of the collapse in commitments to invest in Burma is the near completion of the construction of the Yetagun and Yadana gas pipelines. In the last two financial years only $5.2m of new FDI has been committed by foreign investors in these projects. If no new large projects come online, FDI in this sector  will dwindle rapidly.  Total investment in Burma’s oil and gas sector is $2,235.7, whereas total commitments are only $2,308.3.  As such, and if no new commitments are made, there is only $72.6m left to disburse. 


 

The Hotel and Tourism sector has also been an important recipient of FDI since 1994.  FDI in hotels and tourism collapsed, however, after the Asian economic crisis and its relative importance as a recipient of FDI (especially vis-à-vis oil and gas) declined dramatically. The large drop in investment in this sector took about a year to flow through, probably reflecting the time period necessary to complete projects. However, the decline in importance does not just reflect the Asian crisis, but also the limited success of the tourism industry - plagued by allegations of forced labour and subsequent international boycotts. Investors will also be wary of investing in this sector which is already over supplied with hotel capacity.  Between 1995 and 1998 the number of hotel rooms almost doubled, to just under 14,000.[12]

 


The manufacturing sector, though still a small recipient of FDI in comparison to the oil and gas sector, has been slowly attracting FDI since about 1995.  However, commitments (approvals) to invest in manufacturing in 1997, though relatively significant, have so far largely failed to result in actual investment. The Asian economic crisis having no doubt a significant impact.  However, the impact of the Asian economic crisis on actual FDI in the manufacturing sector has been much less dramatic than its effect on hotels and tourism.

 


 

 


 

There has been a shift in the importance of sectors receiving FDI.  The Oil and Gas sector, in terms of absolute amounts of investment and in terms the percentage of FDI received, is by far the largest recipient of FDI.  The collapse in commitments to invest in this sector in the last two years, however, has seen its relative importance shrink. This decline is largely due to the completion of the aforementioned two large pipeline projects.  The hotels and tourism sector, after receiving its largest percentage of investment in 1995, has been declining in relative importance since.  In 1999 and 2000 the sector received less than 10% and 5% of actual investment respectively. 

 

% o Actual FDI/Total Actual FDI by Sector (1990-2000)

 

Manufacturing

Oil & Gas

Hotels & Tourism

1990

1.6

98.39

0.0

1991

8.0

79.12

3.42

1992

0.34

97.15

1.15

1993

6.38

86.38

6.3

1994

4.69

72.52

21.92

1995

10.36

41.36

32.8

1996

9.63

59.57

18.67

1997

5.01

46.27

31.36

1998

6.02

55.68

19.57

1999

14.00

56.44

8.8

2000

17.95

65.25

3.45

 

The manufacturing sector in terms of absolute amounts of investment and percentage of total investment has seldomly been as important as hotels and tourism, but it seems to be becoming more significant.  In 1999 and 2000, FDI to this sector was larger than the hotels and tourism sector.

 

b. Sources of FDI

Singapore, the UK and Thailand have made the largest commitments to invest in Burma.  Thailand, however, despite its relatively large commitments, has largely failed to go ahead with investment projects, only disbursing 17.3% of committed funds.  What is often overlooked is that in terms of actual investment in Burma, the most important investors have been the United Kingdom, Singapore, France and the United States. With regard to the latter, this is despite the Clinton Administration’s sanctions against new investment imposed in 1997.


Approved and Actual FDI by Country (1990-2000 US$)

 

It is often reported that the majority of investment in Burma comes from the Asian region.  Again, however, this is only true in terms of commitments to invest, with Asian countries committing approximately $4.26b, or about 60% of total commitments since 1990.  In the last 10 years Western countries only committed about $2.89b.  However, Western countries disbursed more than 80% of the investments that they committed. Asian countries only disbursed about 31% of committed investment.

 

Percentage of Approved and Actual FDI by Region 1990-2000

 

% of Approved FDI

% of Actual FDI

Asian Countries

59.3% ($4.26b)[13]

36.0 % ($1.31b)

Western Countries

40.25% ($2.89b)

64.84 % ($2.36b)

 

This means that in terms of actual investment, Western countries have been the largest investors in Burma.  Western countries invested about $2.36b, which accounts for nearly 65% of actual FDI in the last 10 years. Asian countries only disbursed $1.31b of their committed investment, or about 35% of actual FDI over the decade. 

 

The majority of the FDI from France, the United Kingdom and the United States is in the oil and gas sector. Total a French oil company, Premier from the United Kingdom and UNOCAL from the US, are all major shareholders in either of the two major pipeline projects.[14]  These countries account for the majority (almost all) of actual investment in the oil and gas sector since the Asian economic crisis.  However, the completion of the pipeline projects suggests that FDI from these countries will be significantly smaller in the next few years.   Recent commitments from Western countries are small - with commitments to invest from the largest investing country, the UK, of only $67m in the last 3 years. Whereas there have been no new FDI commitments by France since 1997. Investment from the United States is drying up following the Clinton sanctions.[15]

 

Unlike Western countries, FDI from Asian countries has not been concentrated in large projects. Singapore is the most significant source of FDI in Asia. However, since the Asian economic crisis approved FDI from Singapore has been only $18.9m. This compares with an average of  $389.8m in the previous three years.[16] Approved investment from both Malaysia and Thailand declined significantly following the Asian economic crisis. However, actual investment in Burma continues at low levels, and similar to those prior to the crisis. The recent official trade missions from Malaysia have not led to a rush of private investors, with no new commitments of Malaysian investment occurring in 1999 and 2000.[17]  This is one of the reasons behind the visit by Mahathir to Burma in January 2000, and the SPDC’s open desire to attract investment from Malaysia. However, Mahathir has to convince business people in his country that Burma offers profitable business opportunities.  Japan's close relationship with the regime and recent resumption of ODA has not been coupled with any significant investment in Burma. Also, the regime’s relationship with China has not manifested itself in large scale FDI. Rather, the relationship is sustained by close military and strategic links and significant cross border trade.

 

 

 

Burma's Apparel Industy[18]

 

Burma's Significance in the International Apparel Industry

 

The value of the world trade in apparel in 1999 was $186b, or about 3.4% of world merchandise trade. The largest flow of exports of apparel in 1999 was between countries in Western Europe with $46.6b (32% of world apparel trade). The second largest flow of apparel exports was between Asia and North America with $31.5b (22%), followed by Intra-Asia trade of $21.0b (14.5%).

 

Major Exporters and Importers of Apparel 1999 $USb[19]

Exporters

Importers

China

30.08

United States

58.79

Hong Kong

22.37

Germany

20.77

United States

8.27

Japan

16.4

Mexico

7.8

Hong Kong

14.76

Germany

7.44

UK

12.53

Turkey

6.52

France

11.58

 

Burma's role in the world apparel industry is not significant. However, Burma’s exports of apparel, notably to the US, have increased dramatically in the past two years. Burma exported $403.7m worth of apparel to the US in 2000, more than double the $168m worth in 1999. In 2000 Burma also exported $29.5m worth of garments to Canada, also more than double the amount ($12m) of the previous year.  This puts Burma in the top 20 of importers to Canada and in the top 25 to the USA. However, Burma's exports are very small compared to other garment importers to these countries. The biggest garment importers to Canada by far are China and the USA, with $745m and $564m, respectively.  The biggest importers to the USA are Mexico and China, with $7,908m and $7,735m respectively.   Burma is not in the top 40 of importers to the two other largest apparel markets, the EU and Japan. 

 

The export of apparel between Asian countries is a significant component of world apparel trade accounting, in terms of value, for nearly 15%.  There are some suggestions that Burma’s apparel exports are "destined mainly for other Asian centres, such as Japan, Taiwan, Hong Kong and Korea."[20] However, there is no evidence that Burma has made significant inroads into the Asian market and at present exports seem to be centred on the USA.

 

The WTO and the World Apparel Industry

 

One of the issues that has arisen in the debate over Burma's new apparel industry is the role of (particularly US) quotas in encouraging foreign investment in Burma. The major importing countries (especially the United States and the European Union) instituted an extensive system of quotas after World War Two to protect their local textile and apparel industries. This quota system has meant that exporting countries have sometimes found themselves bumping up against their quotas, limiting the value of exports.  One of the methods some countries have used to circumvent quotas has been transhipments.

 

Transhipment occurs with the establishment of ‘fake’ factories to hide the country of origin of textiles and apparel. [21]  The idea is that these factories pretend to make apparel and hence avoid the quota placed on the country of origin.  So, for example, textile and apparels produced in China are transhipped through these factories (maybe for relabelling) so that at US customs they appear to have originated in, say, Hong Kong.  Manufacturers involved in transhipment can have their goods confiscated and future imports banned. There is some belief that Burma is a centre of transhipment.  However, there are a number of reasons to believe that Burma's apparel industry is real and not just a paper phenomena. 

 

The American ambassador to Burma is one US official who believes that Burma's apparel industry is designed to escape quotas imposed on other countries. However, it seems that he and other US officials are not referring to transhipment, but to businesses from countries moving production offshore to escape quotas.  "Most of Myanmar's garments factories… have been financed by Korean, Taiwanese and Hong Kong manufacturers that have turned to Myanmar because they are bumping up against quotas imposed by the United States limiting imports from their countries. Myanmar, by contrast, has unfilled quotas to the United States."[22] This is not the same as transhipment and is not illegal. As such, it has quite different implications.[23]

 

As a result of the WTO-sponsored ‘Agreement on Textiles and Clothing (ATC)’, the quotas on textiles and apparel imports will be completely eliminated by January 1, 2005 for those countries that are WTO members.[24]  The ATC has allowed for existing quotas to be progressively enlarged and quotas on some items removed altogether.  The first two changes occurred in 1995 and 1998. Each time the quotas in the US have been raised imports of apparel have increased by a similar order of magnitude. The next change in quotas is set to occur in 2002 and finally, on 1 January 2005, the quota system will be completely dismantled. Importing countries are allowed to impose tariffs under the ATC, but only on a non-discriminatory basis.

 

The quota system has led to expanding and constantly shifting global production capacity as investment in new facilities is made in the less-restricted or unrestricted countries. Some producing countries currently benefit from the quota system, allowing them an opportunity to compete with major producers such as China. China's access to markets has been limited by quotas, allowing other producing countries to fill the demand.  This may not be the case in 2005 when all producing countries will have to face increased competition to access the major markets.  This may be one of the explanations for production being shifted offshore (from South Korea and Taiwan, for example) to  countries such as Burma.  Burma has the advantages for producers of low wages, non-functioning trade unions and a regime hungry for foreign exchange.  These may be more important reasons for investment in Burma rather than the short-term issue of evading quotas.

 

Sources of FDI in Burma's Apparel Industry

 

The limitations of the data make any precise assessments of the origin and impact of FDI on output in Burma’s apparel industry rather difficult. Official FDI data by industry only gives investment in manufacturing and thus does not directly identify FDI in the apparel industry.  However, the growth in FDI in the manufacturing sector as a whole may be a reflection of investment in the apparel industry.[25]  The ADB reports increases in growth in the manufacturing sector but does not discuss the sources of this growth. [26]

 

 

FDI in Manufacturing, 1995/96-1999/00 (US$)

 

1995/96

1996/97

1997/98

1998/99

1999/00

Total

Approved

21.3

923.5

319.2

43.3

18.1

1325.4

Actual

30.6

29.1

52.9

95.7

54.6

262.9

 

Taiwan, South Korea and Hong Kong are being reported as heavy investors in Burma's burgeoning garments industry.[27]  However, according to the official data, no investment from Taiwan under the Foreign Investment Law has occurred.[28]  The official FDI data does show some investment by South Korea and Hong Kong in Burma.  Whether this has gone into the apparel sector is not possible to ascertain from the data. Given the appalling and extensively documented labour practices of South Korean garment factories, they will be at home in Burma, where people have no labour rights or opportunity for protest. 

 

Actual FDI  from Countries reportedly involved in Burma's Apparel Industry 1995-2000 (US$m)[29]

 

 

1995

1996

1997

1998

1999

2000

 

 

Act

 

Act

 

Act

 

Act

 

Act

 

Act

Korea

 

0.6

 

1.4

 

0.5

 

6.5

 

17.1

 

8.8

HK

 

6.5

 

5.7

 

13.2

 

4.7

 

10.7

 

13.8

China

 

0.1

 

3.1

 

2.2

 

0.4

 

2.6

 

0.0

Total

 

7.2

 

10.2

 

15.9

 

11.6

 

30.4

 

22.6

 

 

If investors have moved to Burma to circumvent quotas in their home countries, then it is unlikely that this industry will be able to sustain its growth beyond 2005 when it will have to face direct competition from China. However, countries such as South Korea could be gearing up for the removal of quotas in an attempt to compete with China beyond 2005.  As noted, Burma has very cheap wages and no labour unions.  The complete removal of quotas could lead to countries such as China becoming even more dominant in the market.  South Korean firms manufacturing onshore may not be able to compete with China in a more deregulated market.  Burma may be an opportunity to temporarily avoid any problems with quotas but also may be a preparation for the complete removal of quotas in 2005.

 

Cambodia's Apparel Industry

 

A comparison with Cambodia's textile and apparel industry is worthwhile given the many similarities between the economies of both countries. Like Burma, Cambodia declared itself open to FDI in 1989. Growth in Cambodia’s apparel industry began to become apparent in 1993. In about 1997 the industry began to experience rapid growth, becoming Cambodia's main engine for real GDP growth in the last couple of years. The industrial sector in 1993 comprised about 13% of GDP, but grew to nearly 20% of GDP by 2000. The apparel industry has been one of main sources of this growth, and it now employs over 100,000 workers and is the country’s major foreign exchange earner. [30] In 1999 foreign exchange earnings increased by 60% to $567m and accounted for 79% of export earnings.  By 2001 foreign exchange earnings from apparel had increased to 90%[31].  The US is the largest export market for Cambodian apparel, receiving 62% of the country’s apparel exports in 1998. Germany is the second largest importer of apparel from Cambodia, receiving 24% in 1998.[32] Cambodia, like Burma, has not obtained access to the Japanese market and there is very little penetration into the broader Asian market.

 

The rapid increase in apparel exports from Burma has came from a very low base and an even smaller manufacturing sector than Cambodia. "The industrial sector, including, energy, mining and manufacturing, accounts for only 12-13% of GDP.  Real growth in manufacturing accelerated from 5% in FY 1997/98 to 6.2% in FY 1998/99, and is reported to have registered even a much higher rate in FY 1999/00."[33]  Though the value of Burma's apparel exports is about half of Cambodia's, the growth rates in foreign exchange earnings appear similar.  However, in Burma’s case the increase in foreign exchange earnings appears only in the data for importing countries, and is not showing up in the balance of payments numbers supplied to agencies such as the IMF. 

 

Foreign owned factories began shifting factories into Cambodia in 1995, a process that accelerated during 1997-98. One of the reasons for the shift of factories to Cambodia was that neighbouring countries were close to filling their quotas.  Another spur to the industry was the granting of preference status by the US and EU in 1995 along with duty free access to both markets in 1998. Cambodia's apparel industry was assisted by the availability of unfulfilled quota to the EU, the Most Favoured Nation status in Europe, and the General System of Preferences status granted by the United States in 1997.  However, in January 1999 the US imposed quotas on 12 garment categories but exports to the US have continued to increase.[34] The movement of factories to Burma occurred around the same time but without the spur of preference status or duty free access.  This suggests that part of the shift of factories to both countries was spurred by the quota system and low labour costs.

 

Another similarity between Burma and Cambodia is the impact of the Asian economic crisis on apparel exports.  Post-crash, both countries experienced increases in apparel exports. Cambodia increased its market share to 1% of the US market and 0.5% of the EU market.  This is very different to the major garment exporters, China, HK, Thailand and Indonesia, who suffered from the impact of the Asian economic crisis, and recorded decreases in apparel exports.

 

In the Cambodian context, FDI has had a major role in the development of a textiles industry for export.[35] Cambodia's experience in this regard is probably similar to Burma's.   Both countries also seemed to have experienced significant and obvious increases in FDI in the apparel sector during 1997-1998.  After the imposition of quotas by the US on Cambodian apparel exports there was a major slowdown in investment approval. Burma is likely to experience a slowdown in FDI in this area with the filling of quotas to the US.

 

The Cambodian authorities have implemented a management plan to deal with the quotas placed on apparel by the US with 80% of the quota allocated to individual exporters based on the previous year's exports. 10% of the quota was allocated as an incentive to factories for quality improvements in labour conditions, with the remaining 10% auctioned through competitive bidding.[36]  This raises the question, given the even less transparent nature of Burma's institutions, of how the authorities allocate the quotas established by the US.

 

Current and Future Problems

 

Many obstacles remain to the further development of Burma’s apparel export industry.

 

- Electricity

 

One of the most significant of these are the difficulties prospective manufacturers face in securing adequate power supplies at a reasonable price. There was a 10-fold increase in electricity prices in March 1999, and the Ministry of Electricity Power is planning to double the price again shortly - from 25 Kyat to 50 Kyat per unit.

 

Even worse for prospective manufacturers than the high cost of electricity is the unreliability of its supply in Burma. According to one businessman in Dagon Satellite township of Rangoon, "I am not optimistic with the possible recommended electricity plan even though we have to pay double cost for having electricity on a regular basis. In mid-1999, the charge rose to 25 Kyat from 5 Kyat per unit of electricity. We received regular electricity for only three or four months and went back to the same old shortage", said a local businessman in. Said another from Shwe Pyi Thar Industrial Zone, "We can not rely on diesel generator to meet the electricity in the long run. The price of diesel fuel also has jumped to 750 Kyat from 550 Kyat per gallon. It makes the production cost higher and in fact it does not work".[37]

 

- General Infrastructure

 

The first criterion when investing in a country is its productive "quality".  "Quality" is determined by infrastructure - roads, ports, airports, utilities, legal, administrative – all of which determine turnaround time. Turnaround time has to be fast enough to satisfy current customers. The second criterion is direct costs - wage structure, employee absenteeism and turn-over rates.  Employee costs are determined by more than just cheap wages. Other considerations, none of which particularly favour Burma – the quality of the education system, levels of training, the health of workers, the quality of management, worker morale - all have to be considered. Any extra training a firm has to provide is an extra expense.

 

Shipping costs are very important. Air cargo costs double surface rates.  The number of carriers not just the number of flights or sailings is important.  Competition in the freight business allows companies to negotiate better rates. There is very little competition in transport to, from, and in Burma at present

 

 

Companies tend to use local management that have good relations with the government.  A manager with good relations with the local ministry can avoid delays. On the other hand corruption – rampant in Burma – adds to the costs of doing business.

 

TABLES

 

Actual FDI 1995/96-1999/00 (US$)[38]

 

1996

1997

1998

1999

2000

Foreign-Owned

211.0

313.6

588.5

478.8

187.1

Joint Venture

106.0

267.1

290.3

204.8

117.1

Total

317.6

580.7

878.8

683.6

304.2

 

 

Actual & Approved FDI 1990-2000 (US$m)[39]

 

 

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Approved

449.5

280.6

5.9

103.8

377.6

1,3151.9

668.2

2,814.2

1,012.9

54.4

58.1

Actual

56.0

225.1

235.1

149.0

91.7

114.6

317.6

580.7

878.8

683.6

304.2

 

 

 

Total  Actual Foreign Direct Investment 1995/96-1999/00 (US$)[40]

 

 

1996

1997

1998

1999

2000

Approved under Foreign Investment Law

317.6

580.7

878.8

683.6

304.2

Not Approved Under Foreign

Investment Law

324

316

421

592

304

Total

641.6

896.7

1,299.8

1,275.6

 

 

 

Actual FDI by Industry, 1990-2000[41]

 

Manufacturing

Oil & Gas

Hotels & Tourism

1990

0.9

55.1

0.0

1991

18.0

178.1

7.7

1992

0.8

228.4

2.7

1993

9.5

128.7

9.4

1994

4.3

66.5

20.1

1995

11.9

47.4

37.6

1996

30.6

189.2

70.5

1997

29.1

268.7

182.1

1998

52.9

489.3

172.0

1999

95.7

385.8

60.2

2000

54.6

198.5

10.5

Total

309.2

2290.8

572.8

 

 

 

 

Approved and Actual FDI by Industry (1995/96-1999/00/ US$m)

 

Approved

Actual

Oil and Gas

887.7

1,531.5[42]

Hotels & Tourism

485.9

495.3

Manufacturing

1,325.4

262.9

 

 

FDI in Manufacturing, 1995/96-1999/00 (US$)

 

1995/96

1996/97

1997/98

1998/99

1999/00

Total

Approved

21.3

923.5

319.2

43.3

18.1

1325.4

Actual

30.6

29.1

52.9

95.7

54.6

262.9

 

 

 

Approved and Actual FDI by Country (1990-2000 US$m)

 

Singapore

Japan

Malaysia

Thailand

France

UK

USA

 

App

Act

App

Act

App

Act

App

Act

App

Act

App

Act

App

Act

1990

3.5

0.9

40

5.8

-

-

64.1

-

-

-

12.1

4.3

80

15.8

1991

5.3

2.2

60

32.3

-

-

96.9

19.6

-

-

7.5

12.9

93.2

60.7

1992

-

3.5

0.7

31

-

-

0.6

-

-

-

-

10

-

87.3

1993

23.2

1.2

0.5

5.7

8.6

1.4

8.9

1.0

10.0

27.1

4.0

13.4

29.5

52.2

1994

228.8

6.1

-

1.0

45.2

1.8

41.3

9.0

-

24.7

8.1

10.5

19.5

33.4

1995

55.1

29.8

-

0.5

15.8

0.5

199.8

15.0

455.0

25.0

599.8

16.6

4.0

16.4

1996

287.4

55.5

19.4

0.4

157.7

5.7

10.2

32.4

-

86.9

160.3

87.6

14.8

30.2

1997

611.3

175.0

72.1

15.6

235.1

10.6

605.7

42.6

5.4

71.8

512.2

222.2

341.0

14.3

1998

270.6

279.1

26.9

18.9

124.8

5.1

210.4

32.0

-

201.7

47.5

288.6

-

30.6

1999

14.2

79.1

8.9

33.5

-

12

10.8

58.0

-

90.0

4.4

203.1

-

158.3

2000

4.7

14.9

5.1

18.8

-

15.5

16.5

9.6

-

33.0

15.1

176.1

5.3

0.8

Total

1,504.1

647.3

233.6

163.5

587.2

52.6

1,265.3

219.2

470.4

560.2

1,371

1,045.3

587.3

500

 

 

 

 

 

 

 

 

 

12 Month Restraint Limit on Textile and Apparel Categories Imports to the USA (from Burma) 1997-2001[43] (dozens)[44]

 

1997

1998

1999

2000

2001

Male Shirts (Cotton/Man-made Fibres)

96,823

97,791

98,769

99,757

100,755

Skirts (Cotton/Man-made Fibres)

26,152

26,414

26,678

26,945

27,214

Male Trousers, Breeches, Shorts (Cotton)

135,649

137,005

138,375

139,759

141,157

Nightwear & Pyjamas (Cotton/Man-made Fibres)

41,102

41,513

41,928

42,347

42,770

Female Trousers, Breeches, Shorts (Wool)

2,386

2,410

2,434

2,458

2,483

Male/Female Trousers, Breeches, Shorts (Man-made Fibres/Silk Blends/Non-Cotton Vegetable Fibres)

25,295

25,548

25,803

26,061

26,322

 

Percentage of Quotas Filled for Textile Imports to the US (from Burma)[45]

1997-2000[46]

 

1997

1998

1999

2000

Male Shirts (Cotton/Man-made Fibres)

22.8

4.0

48.1

51.6

Skirts (Cotton/Man-made Fibres)

16.8

13.1

34.8

63.7

Male Trousers, Breeches, Shorts (Cotton)

30.8

43.9

70.4

100

Nightwear & Pyjamas (Cotton/Man-made Fibres)

7.2

0.0

8.2

16.3

Female Trousers, Breeches, Shorts (Wool)

0.0

0.0

0.0

0.0

Male/Female Trousers, Breeches, Shorts (Man-made Fibres/Silk Blends/Non-Cotton Vegetable Fibres)

57.5

23.5

85.5

100

 

 

 

1999

2000

Burma

185.113

403.827

Thailand

385.769

469.670

China

910.407

929.159

Hong Kong

840.948

916.311

South Korea

537.370

587.204

Singapore

72.503

84.845

Vietnam

21.065

30.085

Philippines

1792.039

1894.665

Malaysia

736.664

780.526

Cambodia

584.952

808.363[47]

Laos

11.875

9.248

Taiwan

637.435

670.740

India

1525.092

1785.770

Bangladesh

1675.715

2115.840

Indonesia

1685.817

2054.758

Pakistan

733.238

920.171

 

 

 

 

FDI  from Countries involved in Burma's Garments Industry 1990-2000 (US$m)[48]

 

 

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

South Korea

7.1

40.9

38.0

7.3

2.0

0.6

1.4

0.5

6.5

17.1

8.8

China

0.0

0.0

0.0

0.0

0.1

0.1

3.1

2.2

0.4

2.6

0.0

Hong Kong

0.0

1.3

0.0

3.3

1.5

6.5

5.7

13.2

4.7

10.7

13.8

 


 



[1] All figures are presented in US dollars unless otherwise noted.

[2] EIU Country Profile, Myanmar (Burma), 2000.

[3] Xinhua "Foreign Investment in Myanmar Picks Up in 1999-2000" August 1, 2000. This english language, Chinese newspaper regularly publishes official data from Burma.

[4] EIU Country Profile, Myanmar (Burma), 2000.

[5] Directorate of Investment and Company Administration (www.myanmar.com)

[6] IMF data is used in the article unless otherwise indicated.

[7] "Since opening to such investment in late 1988, Myanmar had drawn from 25 countries and regions a total of 7.236b." Xinhua, "Foreign investment in Myanmar sharply up in eight months" Dec.14, 2000.

[8] Though other factors can obviously be important, namely, the Asian economic crisis.

[9] This probably excludes small scale foreign investment already mentioned in such areas as Kareoke clubs and the like.

[10] Most data in this report are for financial years. For example the year 1998 refers to the 1997/1998 financial year.  The financial year in Burma ends on 31 March.  The Asian economic crisis began in July 1997.

[11] International Monetary Fund, Myanmar Statistical Appendix, IMF Country Report No. 01/18, January 2001.

[12] Far Eastern Economic Review (FEER), "Wish you were here?", May 17, 2001.

[13] Some countries outside the region, notably Israel, committed funds for investment.

[14] The three foreign partners in the Yadana project are Unocal (28.26% equity), Total (31.4%) and PTTEP (25.5%). The local partner is the state enterprise, MOGE, which has 15% equity. Premier Oil is the operator and largest shareholder in the Yetagun pipeline.

[15] Sanctions applied by the United States allows approved investments to be disbursed. However, in 2000 the IMF data shows US$5.3m of approved investment.  This probably was necessary to complete an investment project (Yadana pipeline) already undertaken prior to the imposition of sanctions.

[16] Singapore has disbursed about 40% of committed investments in the last 10 years.  Higher than other Asian countries but still significantly lower than Western countries.

[17] In the last 5 years only 28.8% of approved FDI from Malaysia has been disbursed. Only 20.45% of approved FDI from Thailand has been disbursed.

[18] Note Textiles and Apparel are different categories of manufacture. They are two distinct stages of the clothing production process. The production of textiles is capital intensive, relying on sophisticated machinery with larger companies dominating the industry. This production tends to be located in the more developed countries or at least those with a reasonably developed manufacturing sector. The apparel industry is labour intensive with the majority of the labour force consisting of sewing machine operators. The majority of this production process is located in developing countries.

[19] WTO Trade Data 1999

[20] Myanmar Times "Big players fare well in textiles" April 2-8 2001. The title is just one of the misnomers in the article.

[21] A textile verification team from the USA in Taiwan found in August 1999 that of 49 factories investigated, 44% were suspected of illegally transhipping garments to the USA. Visits by the team to Hong Kong in January 1999 found that 27 of the 55 factories visited were suspected of being involve in transhipping. Preliminary findings suggest that 50% of targeted factories in Singapore and 39% in Malaysia were suspected of being involved in transhipment. (US Customs Service, "1999 Textile Transhipment Report").

[22] New York Times, "Memo feeds concerns that exports to U.S help Burmese junta" March 1, 2001.

[23] Also, the claim that these countries are bumping up against quotas, and that Burma's are unfilled, is not strictly correct.  Burma in 2000 filled two of its quotas whereas for countries such as Korea, quotas remained unfilled. 

 

[24] This is the culmination of a 10 year transitional agreement to gradually integrate textile and apparel products fully into GATT rules.  The ATC replaced the Multifibre Arrangement (MFA), 1974-1994, where quotas were negotiated bilaterally. The MFA meant that certain developed countries established quotas on imports of textiles and apparel from developing countries. The four WTO members which maintained import restrictions under the former MFA were Canada, the EC, Norway and the US.

 

[25] There is always the possibility that investment in the apparel industry is mostly local.

[26] ADB "Country Assistance Plan (2001-2003): Myanmar" December 2000.

[27] "Big players fare well in textiles" Myanmar Times, April 2-8 2001.

[28] The data is only  shows the source country of the FDI and the sectors that receive it.  The data does not provide information on the sector in which the source country invests.

 

[29] Note, this table does not show FDI in the apparel sector, only actual FDI from countries reportedly involved in this sector.

[30] ADB "Cambodia 2001-2003: Country Assistance Plan" Dec 2000.  The ADB reports the existence of 180 and the IMF for the same year reports 152 firms.

[31] Foreign exchange receipts from garment exports in 2000 were $851m and in 2001 $902m.

[32] Official categories for Cambodia refer to these exports as textiles, but the exports are mostly apparel.

[33] ADB "Country Assistance Plan (2001-2003): Myanmar" December 2000.

[34] IMF "Cambodia Selected Issues" October 2000

[35] IMF "Cambodia Selected Issues" October 2000

 

[36] IMF "Cambodia Selected Issues" October 2000, p.52.

[37] The Irrawaddy "Electricity Woes Continue" May 11, 2001

 

[38] IMF figures

[39] IMF figures

[40] IMF Figures

[41] The data for 1996-2000 comes from IMF, "Myanmar: Statistical Appendix" Nov. 17, 2000.  (This data differs slightly from the data available in the IMF "Myanmar: Recent Economic Developments" IMF Staff Country Report No. 99/13, Nov. 1999).

[42] In the previous 5 years total actual FDI is larger than total approved. This shows that much of the actual investment that has taken place in the last 5 years was approved prior to 1995/96. This also reflects the completion of the gas pipeline projects.

[43] Calender year.

[44] Federal Register Online - www.access.gpo.gov

[45] Quotas are based on limits notified to the Textiles Monitoring Body as part of WTO agreements on Textiles and Apparel.  Quotas are established for each calender in negotiations under the WTO.

[46] www.customs.gov

[47] Garment exports to the USA, which receive tax advantages, make up 90% of Cambodia's exports.

[48] IMF figures