Upper House Rejects FDI Restrictions

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Traditional boat and shipping by Rangoon. (Photo: Steve Tickner / The Irrawaddy)

The controversial Foreign Direct Investment (FDI) law will be debated at Burma’s Union Parliament on Friday after the Upper House objected to certain restrictions.

Upper House MPs approved the FDI draft as amended by their bill committee on Wednesday, but the proposed changes will have to be put to the vote during Friday’s combined-houses session.

“We will try to get it out to the Union parliament on Friday as the FDI bill has been debated for such a long time,” Phone Myint Aung, Upper House MP for the New National Democratic Party, told The Irrawaddy on Thursday.

He said MPs objected to some restrictive amendments made by the Lower House last month.

“We agreed to remove the minimum amount of US $5 million for foreign investments; the maximum 49 percent foreign ownership on joint ventures; over protection on small and medium enterprises, and many others,” he added.

The minimum capital for foreign investment in Burma under the draft FDI was $5 million—the highest capital amount in the Association of Southeast Asian Nations (Asean)—with neighbors Cambodia, Laos, the Philippines and Thailand only having low restrictions in certain important sectors.

Foreign ownership is allowed for restrictive businesses—such as agriculture, livestock and offshore fishing—but set at a maximum of 49 percent while the minimum level is 35 percent across even nonrestrictive sectors. Foreign investment in areas which would damage culture, health, natural resources or the environment would be prohibited.

Critics allege that these new restrictions were added to the amended bill to protect Burmese crony tycoons with close links to the former military junta who fear becoming uncompetitive if unfettered foreign ownership is allowed.

Earlier this week, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) also urged MPs to relax these restrictions if the country is to welcome foreign investors. Business owners say foreign capital and technology is vital to help develop the economy and create jobs.

Phone Myint Aung said, “in the previous drafts, which the Upper House agreed, such controversial amendments were not included as these were newly added by the Lower House last month after the Lower House Speaker [Shwe Mann] and his delegation met with the local businesspeople.”

There is also a fear that restrictions on overseas investment will result in ownership fraud, which is currently rife in garment businesses as legislation passed in 1982 prohibits 100 percent foreign ownership. Many international businessmen use their local manager’s name to register factories and so dilute lines of responsibility for worker rights.

The draft FDI law also contains provisions for local workers in foreign-invested industries. In the first year, 25 percent of the total workforce must be Burmese, with this expanding to 50 percent and then 75 percent over the following two years. Foreign investors also must help with the technical transfer of skills to domestic workers through their local business partner.