RANGOON — With its companies doing over US$1.6 billion worth of business in Burma, Malaysia was ranked as the seventh-biggest source of foreign investment into the country by the end of January 2014.
And with Burma’s government touting big plans for upgrading infrastructure such as roads and railways, as well as building more houses for an urbanizing population, Malaysia’s corporate presence in its Southeast Asian neighbor could be set to jump some more, with construction companies eyeing up more than $100 million worth of deals.
“Since the reforms began in Myanmar in 2011, there has been an upsurge in interest from Malaysian companies, which can be seen in the increase in trade figures,” said Sadat Foster, assistant trade commissioner at Malaysia External Trade Development Corporation (Matrade), the state trade agency.
Burma received $3.6 billion in total foreign investment for the first 11 months of the 2013-14 fiscal year, almost double the previous year. A recently-published OECD Investment Policy Review of Burma said that “Myanmar has many attributes that are likely to appeal to foreign investors: its endowment of natural resources, large and relatively young population, rich cultural heritage and strategic location.”
And among the better-known Malaysian brands already present in Burma are fast-food chain Marrybrown, as well as Petronas, the state gas and oil behemoth whose joint venture in Burma’s offshore Yetagun gas field is part of a global portfolio that sees the company fund around one-third of the Malaysian budget.
Malaysia’s pitch is not the first concerted government-business national front to try to play up its worth to Burma. Since 2012, Japan has made a high-profile effort to increase its involvement in the much-touted “frontier” economy, writing off billions of dollars of Burmese debt, arranging for high-powered business delegations to visit Burma and backing the Thilawa Special Economic Zone outside Rangoon.
But Malaysia outranks Japan as an investment source—for now, at least—and with some of the country’s bigger-name builders in Rangoon over the past week as part of a Putrajaya-backed trade mission, Malaysia’s government is touting Malaysian companies as sound partners for Burmese firms aiming to build or upgrade roads, or put up new hotels and shopping centers in Rangoon.
Some of the more notable Malaysian-built or -backed foreign construction work in recent years includes the airport at Siem Reap in Cambodia, the F1 circuits in Abu Dhabi and Bahrain, and what for now is the world’s tallest building, the Burj Khalifa in Dubai. All of these marquee projects were name-dropped during the Malaysia-backed investment conference in Rangoon this week, where nine Malaysian construction companies were represented among the delegates.
Burma’s Deputy Construction Minister Win Myint addressed the gathering, and after his speech, delegates queued outside an ante-room in Rangoon’s Traders Hotel—itself a Malaysian-linked establishment—for a few minutes of face time with the minister.
“Myanmar is now counting on other sources of finance such as foreign aid, loans and private investments from both domestic and foreign resources,” Win Myint said, explaining on Tuesday how Burma aims to finance infrastructure rehabilitation after a military era when such work was usually carried out by businesses with close links to the ruling junta and often paid for by granting the contractor lucrative concessions in Burma’s natural resource economy.
With donor governments and agencies such as the World Bank and Asian Development Bank being tapped for loans and other funding for Burma’s road and railway revamps, investors and partners might be forgiven for being concerned about particular projects getting off the ground. A proposed upgrade to the rail link between Mandalay and Myitkyina in Kachin State is awaiting a funding green light from South Korea’s Exim Bank, and officials from Burma’s Ministry of Rail Transportation were unwilling to discuss the status of the funding application when asked during the Malaysian investment conference earlier this week.
“It is slightly a hindrance and maybe can slow things down,” said Sadat Foster, discussing the often time-consuming sourcing of project financing from outside. “But it is also reassuring to know that the money will be there too.”
That mix of promise and uncertainty seems to color companies’ thinking about Burma, where the 2012 Foreign Investment Law and related rules are likely to be revised as early as this year.
Jason Kon, the Myanmar country manager for Muhibbah Engineering—which was among the companies shortlisted for the proposed Hanthawaddy International Airport in Burma’s Pegu Division—said “opportunities in Myanmar are plenty, mainly in high-rise buildings and infrastructure. But what is lacking here are funds to spur the projects. Most of the projects relay on foreign investment.”
Muhibbah is currently assessing whether or not it will submit a new bid for the Hanthawaddy tender, an airport slated to handle 12 million passengers a year, which was initially awarded to South Korea’s Incheon but has since been reopened.