| YANGON, Sept 20
YANGON, Sept 20 Myanmar has approved more
foreign direct investment in the past five months than all of
last year, but companies setting up operations in the hot
frontier market face a growing problem: Southeast Asia's highest
office rental rates.
Myanmar has approved FDI projects worth more than $1.8
billion from the start of the fiscal year on April 1 to the end
of August, compared with $1.4 billion in the whole previous
fiscal year, Aung Naing Oo, a director general at the Ministry
of National Planning and Economic Development, told Reuters.
But he said he fears potential foreign investors will be
turned away by a severe shortage of office rental space.
The wave of investment comes as Myanmar's quasi-civilian
government implements political and economic reforms, initiated
two years ago by President Thein Sein, a former general who led
the country out 49 years of military rule and global isolation.
The European Union agreed in April to lift all sanctions on
Myanmar, while the United States suspended sanctions in May last
year and allowed U.S. companies to invest through a general
license. Some American executives have urged Washington to go
further and lift sanctions entirely.
Most of the approved FDI came from other Asian nations, said
Aung Naing Oo.
"Malaysia, which brought about $500 million for
manufacturing Nissan cars, is the biggest investor during this
fiscal (year) in terms of size followed by Hong Kong and South
Korea, who injected funds in the garment industry," he said.
Nissan Motor Co plans to start a complete knock
down production of its cars in Myanmar with a Malaysian partner
Tan Chong Motor Holdings Bhd, the Japanese automaker said on
Friday, becoming the first major global carmaker to be
assembling cars in the Southeast Asian country.
The rising tide of foreign investment is fuelling a property
boom in the commercial capital Yangon with the increasing demand
for rental space feeding the highest office rental rates of any
Southeast Asian city, according to real-estate firm Colliers
International, which opened a branch in Yangon in July.
Colliers put the average rental rate in Yangon at nearly $80
per square metre, compared to about $25 in Bangkok and $30 in
Hanoi. At about $70 per square meter, even the affluent
city-state of Singapore doesn't match Yangon, it said.
Scipio Services, a Yangon-based firm that helps foreign
companies establish themselves in Myanmar, puts prime office
rental rates even higher. According to their survey, commercial
spaces in the few business towers available jumped from $50 per
square metre in mid-2011 to as much as $90 by May this year.
Some companies choose to rent houses and villas in lieu of
office space, said Brett Miller, Scipio Services' managing
director. But residential rates have also shot up, with villas
ranging in price from $4,000 per month to $25,000, he said.
As a result, some companies "are coming in with a small
footprint," stationing only skeleton staff in the country, he
Other companies base executives in neighbouring Thailand and
fly them to Yangon where they stay at hotels, said Tony Picon,
Colliers' managing director in Myanmar. "I call them the
'half-pats', spending around half their time in Yangon," he
Aung Naing Oo said the government is taking measures to
increase the supply of rental space.
"To solve the problem of the shortage of hotel and office
apartments, we are now encouraging investors in these sectors by
approving their proposals very speedily," he said.
Drastic rises in property prices are being driven partly by
land speculators. Miller at Scipio Services said the government
could implement a "holding tax" that would encourage landowners
to either build on a property or sell it to a developer.
Picon, however, was sceptical the government could enforce
"For tax on unused land, the owner could build something
small and say the land is being used," he said. "Overall I find
using tax often counterproductive especially when you have
limited capacity within government to enforce laws."
(Editing by Jason Szep/Simon Cameron-Moore)