Despite low rating, Myanmar business climate improving

BANGKOK Wed Oct 30, 2013 3:03am EDT

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BANGKOK (Reuters) - For a country rolling out economic reforms at a startling pace, Myanmar's lowly ranking among the likes of Eritrea and Chad for ease of doing business might set off alarm bells for would-be foreign investors.

The good news for firms seeking to tap the country's natural resources, tourism potential and urgent infrastructure needs is Myanmar is making progress in preventing the rampant graft, bureaucracy and cronyism that under military rule made it one of the world's riskiest places to do business, according to the International Finance Corp (IFC), the private-sector arm of the World Bank.

Myanmar's inaugural ranking of 182 from 189 countries covered in the World Bank's annual Doing Business report on Tuesday should not be taken at face value, said Charles Schneider, the resident IFC representative in Yangon.

"All the indices point towards corruption, but with increased transparency and increased use of tendering they have taken a lot of questions mark out of these processes," Schneider said in a telephone interview.

Since replacing a military regime in March 2011, Myanmar's quasi-civilian government has introduced a wave of economic, political and social reforms, which convinced Western countries to restart development aid and suspend most of the sanctions that for two decades prohibited trade and investment.

Under the junta, Myanmar's investment climate was considered high-risk for firms, with many put off by the its reputation for corruption, limited legal safeguards and opaque deals struck largely without tenders.

In an effort to create urgently needed jobs and infrastructure in one of Asia's poorest countries, Myanmar has sought help in drafting new legislation and setting up panels led by technocrats to try to improve the investment climate.

LOW BASE

Myanmar, however, was still far behind Southeast Asia's biggest economies according to the report, with average time taken to set up a business 72 days compared with 2.5 in Singapore, 27.5 in Thailand and 6 in Malaysia.

For procedures involved in acquiring construction permits, there were eight in Thailand, 11 in Singapore and 16 in Myanmar. Gaining electricity access took an average 113 days in Myanmar, compared to 34 in Malaysia and 35 in Thailand, the study showed.

Schneider said Myanmar had started from a low base and still had a long way to go in areas like regulation, licensing, and dispute settlement mechanisms.

But new banking and micro finance laws and parliament's passing of an investment bill last year offering tax breaks, long land leases and foreign participation in most sectors were signs of its commitment to attracting businesses.

"The government is way ahead of the curve on many of these reform programs," he said.

A break from the past was the holding of an auction for telecoms licenses, he said, which passed heavy scrutiny. Telecoms is seen by many economists as one of the most important development areas in Myanmar and a sector, that like many, was monopolized for years by a state-run firm.

Qatar's Ooredoo, and Norway's Telenor won the rights to provide telecoms services in June.

"It's a couple of years ... Myanmar can easily be at the stage where they are doing as well as other AEC members," Schneider said, referring to the ASEAN Economic Community, which will come into play in 2016.

(This story was fixed to correct economist's affiliation in paragraphs 2, 3)

(Editing by Martin Petty and Ron Popeski)

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