Foreign Direct Investment (FDI) in Myanmar has experienced a significant downturn, registering a decline of over 60% in the period from April 1 to July 31, compared to the same timeframe in the previous year. This data, released by the Directorate of Investment and Company Administration (DICA), sheds light on the challenging investment landscape within the country.
Decrease in FDI:
During the aforementioned four-month period, Myanmar’s FDI plummeted to approximately $467 million, in stark contrast to the $1.22 billion recorded during the same period last year. Notably, Singapore and China constituted the primary sources of FDI, contributing around $335 million and $124 million respectively. Additional contributors included Taiwan, Hong Kong SAR, India, Korea, Samoa, the UK, and the United States.
The distribution of FDI across sectors during the April-July period revealed that over $317 million was invested in the electricity sector, while $77 million and over $48 million were directed towards the transport and telecom sectors, and manufacturing, respectively.
First Quarter Trends:
The initial quarter of 2023 also saw a substantial decline in FDI by 60% in comparison to the same quarter in 2022. FDI in the first quarter of 2023 amounted to $178 million, a considerable drop from the $402 million registered in the corresponding period of the previous year. It’s worth noting that FDI had reached $908 million in the first quarter of 2021.
According to the Myanmar Economic Monitor by the World Bank, the country demonstrated a slight recovery in domestic investment in the latter half of 2022. However, foreign investment remained fragile due to ongoing political uncertainties. The report tentatively projected a potential 3% growth in GDP for the current year, though the overall GDP still lags behind 2019 levels by 13 percentage points.
Challenges and Factors:
The investment decline is attributed to a multitude of factors beyond political instability. The junta’s mismanagement of the financial sector, inadequate infrastructure, and notably, a scarcity of reliable electricity supply are all deterring foreign investors from engaging with Myanmar.
In the opening month of Myanmar’s fiscal year 2023-24, a solitary FDI project valued at $3.7 million was recorded in the manufacturing sector. This underlines the significant challenges that the country faces in attracting foreign investors, particularly amidst the complex economic and political landscape.
In summary, Myanmar’s foreign direct investment has experienced a substantial decline in recent times, largely influenced by a range of factors including political instability, inadequate infrastructure, and the mismanagement of the financial sector. While domestic investment displayed signs of recovery, foreign investment remains weak, causing a notable impact on the country’s economic growth prospects.