2003-07-31 07:15:00
Embassy Rangoon
Cable title:  


pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.



E.O. 12958: N/A




E.O. 12958: N/A

1. Table of Contents:

Preface: U.S. Investment in Burma Subject to Sanctions

1. Openness to Foreign Investment

2. Conversion and Transfer Policies

3. Expropriation and Compensation

4. Dispute Settlement

5. Performance Requirements and Incentives

6. Right to Private Ownership and Establishment

7. Protection of Property Rights

8. Transparency of the Regulatory System

9. Efficient Capital Markets and Portfolio Investment

10. Political Violence

11. Corruption

12. Bilateral Investment Agreements

13. OPIC and Other Investment Insurance Programs

14. Labor

15. Foreign Trade Zones/Free Ports

16. Foreign Direct Investment Statistics

2. Summary: New U.S. investment in Burma has been illegal
since 1997. New sanctions imposed in 2003 ban imports of
Burmese products into the United States and forbid all
financial transactions between a U.S. person and Burma.
Burma is a country blessed with extensive natural resources,
low labor costs, and a great potential for tourism. It is
also a member of ASEAN. However, even if U.S. sanctions were
removed, an extraordinarily hostile investment climate would
hold U.S. investment as it has held all other investment to a
very low level.

Though local investment laws are liberal on the surface,
their implementation is racked, at all levels, with
corruption. The ruling military junta, the State Peace and
Development Council (SPDC),despite pledging itself to an
"open door" economic policy and urging foreign firms to
invest, regularly comes out with punitive and capricious
regulations, which make investment for foreigners difficult
if not impossible.

Our view of the current investment climate is very dim. We
have not seen any movement toward reform in recent years and
expect none in the next year. In fact, if recent events are
any indication, the situation for investors could well become
worse before it improves. End summary.

3. Preface: U.S. Investment Subject to Sanctions

On May 20, 1997, by Executive Order 13047, the President
imposed economic sanctions prohibiting new investment by U.S.
persons or entities in Burma (Myanmar). Those sanctions were

based on the President's determination that the Government of
Burma (GOB) has committed large-scale repression of the
democratic opposition. The Cohen-Feinstein Amendment to the
Foreign Operations Act of 1997 formed the legal basis for the
investment ban. The U.S. government every six months reviews
sanctions policy. Since sanctions were imposed in 1997, the
State Department has found no measurable progress toward
political liberalization in Burma.

Prior to the imposition of sanctions, a number of
high-profile U.S. investors had already withdrawn from Burma.
An active anti-Burma consumer movement in the U.S. caused
investing in Burma to be high risk in terms of corporate
image. The federal investment sanctions ban new investment
but allow companies already invested in Burma to remain.

The 1997 ban on new investment is in addition to a number of
sanctions the U.S. imposed against Burma following the
military crackdown against civilian democracy activists in
1988 and the failed election of 1990. The U.S. opposes the
extension of international financial assistance to Burma,
prohibits military sales, suspended economic aid and
commercial assistance programs, banned the issuance of U.S.
visas to members of the military, political, and economic
elite, and downgraded our representation in Rangoon from
Ambassador to Charge. In addition, the U.S. continues to
engage in a vigorous diplomatic effort to promote political
and human rights reforms.

Since the early 1990's U.S. commercial policy toward Burma
had been neither to encourage nor to discourage trade or
investment. With the 1997 investment ban, that policy was
revised to prohibit new investment.

4. Openness to Foreign Investment

With a view to attracting foreign investment, the Burmese
government instituted the Foreign Investment Law (FIL) on
November 30, 1988. The basic priorities of foreign
investment, according to the FIL, are as follows:

(a) Promotion and expansion of exports;
(b) Exploitation of natural resources that require heavy
(c) Acquisition of high technology;
(d) Support for production and services requiring large
amount of capital;
(e) Expansion of Employment opportunities;
(f) Development of facilities that would reduce energy
consumption; and,
(g) Regional development.

According to the State-owned Economic Enterprises Law,
enacted in March 1989, the Government state-owned enterprises
have the sole right to carry out the following economic

(a) Extraction of teak and sale of the same in the country
and abroad;
(b) Cultivation and conservation of forest plantations with
the exception of village-owned firewood plantations
cultivated by the villagers for their personal use;
(c) Exploration, extraction, sale, and production of
petroleum and natural gas;
(d) Exploration, extraction, and export of pearls, jade and
precious stones;
(e) Breeding and production of fish and prawns in fisheries
which have been reserved for research by the Government;
(f) Postal and telecommunications services;
(g) Air transport and railway transport services;
(h) Banking and insurance services;
(i) Broadcasting and television services;
(j) Exploration, extraction, and exports of metals;
(k) Electricity generating services other than those
permitted by law to private and cooperative electricity
generating services; and,
(l) Manufacturing of products relating to security and

However, the law provides that the Myanmar Investment
Commission (MIC) may, "in the interest of the State," make
exceptions. Exceptions have been made in areas such as banks
(though not for foreign investors),petroleum and natural gas
extraction, and air services. This discretion, though, like
most else resides in the hands of the cabinet and senior

According to the FIL, the MIC must review all investment,
either foreign or domestic. However, due to corruption
within the MIC, the ruling State Peace and Development
Council (SPDC) removed much of the MIC,s real influence at
the end of 1999. Potential investors must still work through
the MIC, but it has lost the authority to make a decision.
Interested foreign companies still approach and submit
proposals through the MIC, which in turn gets approval from
either the Cabinet (chaired by SPDC Chairman and Prime
Minister Senior General Than Shwe) or the Trade Policy
Council (TPC, chaired by SPDC Vice Senior General Maung Aye).
The Cabinet and the TPC have the same membership so the
choice of decision-making body is made on a case-by-case
basis. Though MIC has no power or authority to protect
foreign companies, we have no evidence of overt
discrimination against foreign investors.
Once the government grants permission to invest, a foreign
company must get a "Permit to Trade" (essentially a business
license) from the Ministry of National Planning and Economic
Development's Directorate of Investment and Companies
Administration (DICA). In a typical "Catch 22" that has for
all intents and purposes closed Burma to most new foreign
investment, since February 2002 the government is no longer
permitting DICA to issue new permits or renew existing ones
for foreign firms. This decision has disrupted the business
of many foreign investors, and forced closure of several
foreign manufacturing firms.

In theory once a company has the "Permit to Trade" it may
then use it to get residence visa status, lease cars and real
estate, etc., and to get import and export licenses from the
Ministry of Commerce. The Ministry of Commerce has had a
policy in place since the end of 2001, though there is
nothing in writing, to only issue import licenses to those
firms who are export earners.

The existing foreign investment law and its procedures are
positive for investors on paper. However, in practice, it is
very difficult to make the system work properly due to poor
transparency and corruption all along the line. The senior
generals making the decisions do not seriously consider the
law when they want to take action for or against investors.

The FIL allows for FDI as a wholly foreign-owned venture or a
joint venture with any Burmese partner (individual, private
company, or state-owned company). Sole proprietorships or
partnerships are equally acceptable. Overall, the FIL
requires that at least 35 percent of equity capital in all
JVs and partnerships be foreign-owned. Officially, the
minimum foreign investment is $500,000 for manufacturing
investments and $300,000 for services.

The military, via the military economic enterprises, the
Union of Myanmar Economic Holdings, Ltd. (UMEHL) and the
Myanmar Economic Corporation (MEC),is involved in many
economic activities. To set up a joint venture, foreign
firms have reported that it is useful to be affiliated with
MEHL or MEC in order to receive the proper business permits.
Nonetheless, entering into business with MEHL or MEC does not
guarantee success for the foreign partner, and some foreign
investors report that their military partners are parasitic,
making unreasonable demands, providing no cost-sharing, and
sometimes muscling out the foreign investor after an
investment is up and running.

5. Conversion and Transfer Policies

According to the Foreign Investment Law, investors in Burma
have a guarantee that they can repatriate profits (after
taxes). The law also provides that, upon expiry of the term
of the contract, the investor of foreign capital has the
right to the foreign currency in which the investment was
made. However, due to the shortage of foreign exchange it is
in reality not easy for foreign investors to legally transfer
their net profits abroad. Foreign currency can be
transferred abroad only after obtaining permission from the
Foreign Exchange Management Department of the Central Bank of

Likewise, multiple exchange rates in Burma make conversion
and repatriation of foreign exchange very complex and ripe
for corruption. The official rate of 6 kyat to the dollar is
grossly overvalued. The government issues Foreign Exchange
Certificates (FEC) that trade somewhat closer to the market
rate but are still overvalued. Generally speaking, foreign
companies get rid of kyat earnings as quickly as possible --
usually by purchasing FEC or dollars at some variant of the
market rate. The government has allowed foreign companies to
use dollars or FEC to pay utility and telephone bills, and
rental charges. It has also allowed foreign firms to deposit
dollars in a state bank for withdrawal as FEC by the
company's employees.
In Burma, only three state banks, the Myanma Economic Bank
(MEB),the Myanma Investment and Commercial Bank (MICB),and
the Myanma Foreign Trade Bank (MFTB) are allowed to deal with
foreign exchange transactions. In practice the MFTB and MICB
handle most of these transactions. The MFTB mainly handles
foreign currency transactions of government organizations,
businesses, and individuals, and the MICB caters primarily to
companies and joint ventures. MEB handles foreign currency
transactions in border trade regions.

Because most of Burma,s international trade is done in U.S.
dollars, the restrictions on provisions of financial services
by U.S. banks will cause serious disruption to the legal
foreign trading system. U.S. banks will no longer be able to
offer trade facilitation or correspondent banking services,
making the use of U.S. dollar letters of credit problematic.

As of July 29, 2003, the correspondent accounts of MEB, MFTB,
and MICB in the United States are frozen, along with all
other assets and property.

Private banks, despite assuming a large share of banking
activity in the last several years, are not permitted to deal
in foreign exchange. In February 2003 there was a major run
on private banks, and as of now their future is uncertain.
However, there is no indication that if the private banking
system is revitalized it will be given the right to deal in
foreign currency.

6. Expropriation and Compensation

The Burmese Foreign Investment Law provides guarantees
against nationalization during the investment's "permitted
period" of investment. However, a number of foreign firms in
various sectors have been forced to leave the country when
the terms and conditions of their investment agreements have
not been honored. In recent years two large Japanese firms
exited Burma after they found they were not able to operate
as they had been led to believe. Additionally, there have
been cases where the government has seized the assets of
foreign and local investors (without compensation),when the
investment turned out to be very profitable.

The most recent example we know of is the case of a Swiss
cement importer and distributor that was forced out
ostensibly because it was not operating according to its
permit. In reality, the government turned the company out,
after significant investment in plant and equipment, because
the investor was able to sell better quality, cheaper cement
than its government-controlled competitors. In another case
in 1999-2000, the military-owned MEC confiscated a large
brewery that an expatriate Burmese businesswoman had made
profitable. The local courts were not helpful and to date
the investor has been unable to get compensation from the GOB.

7. Dispute Settlement

Private and foreign companies are at a disadvantage in
disputes with government organizations. Arbitration is
addressed under the 1944 Arbitration Act. Foreign investors
generally prefer to use international arbitration, though the
Burmese government will try to stipulate local arbitration in
contracts it signs with foreign investors. If handled
locally, difficulties arise since the central leadership
controls the whole legal mechanism. The courts are not
independent and cannot make free and fair decisions. There
is no recourse available for companies who face an adverse
administrative decision. Burma is not a member of the
International Center for the Settlement of Investment
Disputes nor is it a party to the New York Convention.

The legal system in Burma is ostensibly under the control of
the Attorney General's Office and the Supreme Court.
However, neither the Attorney General nor the Supreme Court
is independent. Burmese criminal and civil laws are modeled
on British law as practiced during the colonial period --
which ended in 1948. Every township, state, and division has
its own law officers and judges. However, the township,
state and divisional SPDC branches have supreme authority
over judicial decisions at the local level.

There is no bankruptcy law in Burma.

Foreign companies have the right to bring cases, and defend
themselves, in local courts. However, as the SPDC ruling
junta controls all the courts, foreign investors who have had
conflicts with the local government, or even had their
business illegally expropriated, have had little luck getting

8. Performance Requirements and Incentives

Officially, companies covered under the Foreign Investment
Law are entitled to a tax holiday period of three consecutive
years. Under the law this tax holiday can be extended with
permission of the Myanmar Investment Commission (MIC).
Investors are also eligible, at the MIC,s discretion, for a
number of other incentives including: accelerated
depreciation of capital assets, a waiver of customs duties
and taxes on imported machinery and spare parts during the
period of construction, or on imported raw materials during
the first three years of commercial production, etc. Again,
the TPC and the Cabinet, not the MIC, make decisions on these
incentives and extensions.

There are no official performance requirements for new
foreign investors in Burma, but the government does require
an investor purchase local machinery, fire, marine, and
personal liability insurance. Unofficially, the government
often requires companies to commit to a certain level of
exports before being allowed to invest. The government then
requires compliance reports every three months with evidence
of export or explanation why the goals were not met. We have
no evidence that action is taken against firms that do not
meet their initial export targets.

There is no requirement that foreign investors buy or hire
from local sources. Technology transfer is not generally a
pre-requisite for investment.

According to Burmese law, any enterprise operating under the
Foreign Investment Law or the Myanmar Companies Act must pay
a 30 percent income tax rate. Withholding tax on royalties
and interest is 15 percent for resident foreigners and 20
percent for non-resident foreigners. Tax collection in Burma
is very lax, but foreign investors are an easy target for the
cash-strapped tax authorities. The Burmese fiscal year ends
March 31 and tax returns are due by June 30.

A surprising reversal of the government's mantra of "open
door economy" came in a February 2002 verbal directive which
outlawed the issuance of new, or renewal of existing,
"Permits to Trade" for trading firms owned by foreigners (or
by foreigners and Burmese). This was done ostensibly to
promote local trading firms, but has served only to further
distort the local marketplace. The authorities have not
published any official notice of this directive but it is
being enforced, including against foreigners who have tried
to evade the directive by listing their company under the
name of a Burmese colleague or friend.

9. Right to Private Ownership and Establishment

By law, foreigners may not own land, and may only rent
property on a short-term basis.

A private entity can establish, buy, sell, and own a business
only with the review and approval of the MIC (and by proxy
the top leadership).

10. Protection of Property Rights

Burma does not yet have adequate IPR protection. Patent,
trademark, and copyright laws and regulations are all
deficient. Thus Burma is unlikely to meet WTO TRIPS
obligations in the near to medium term. After Burma joined
ASEAN in 1997, it agreed to modernize its intellectual
property laws in accordance with the ASEAN Framework
Agreement on Intellectual Property Cooperation. However, an
IPR law, first drafted in 1994, still awaits approval and
implementation. A Patents and Design Act was introduced in
1946, but never brought into force. Thus the Indian Patents
and Designs Act of 1911, which was enacted under British
colonial rule, continues to govern the registration of
patents and designs.

Piracy of music CDs, video CDs, CD-ROMS, DVDs, books,
software, and designs is evident nationwide, especially in
the two major urban centers of Mandalay and Rangoon.
However, given the small number of customers (most Burmese
are too poor),and the lack of adequate infrastructure (e.g.,
reliable electricity),we do not believe piracy has a
significant adverse impact on U.S. products, which, are in
any case, not readily available. There is little evidence of
widespread use of pirated software and hardware by government
agencies, though the nascent computer and IT sector often
relies on pirated software for training courses and other

Burma has no trademark law, though trademark registration is
possible. Some firms place a trademark caution notice in the
local newspaper, declaring ownership of their trademarks.
Once this notice has been published, criminal and/or civil
action can be taken against trademark infringers. Title to a
trademark depends on use of the trademark in connection with
goods sold in Burma. While a Copyright Act was promulgated
in 1914, no means to register a copyright was ever
instituted. There is thus no legal protection in Burma for
foreign copyrights.

In the vast majority of cases, real estate is purchased with
cash or using regular bank loans. However, there are a few
banks that offer rudimentary mortgage facilities. Foreigners
may not generally avail themselves of this, though, because
they may not own land.

11. Transparency of the Regulatory System

Burma is notorious among foreign businesspeople for its
complete lack of regulatory and legal transparency. All
existing regulations, including those covering foreign
investment, import-export procedures, licensing, foreign
exchange, etc., are subject to change, with no advance
notice, at the whim of the senior ruling generals. The
economic decision-makers here are influenced strongly by
wealthy cronies, the demands of state-owned enterprises, and
of the military-controlled Myanmar Economic Corporation and
the Myanmar Economic Holdings Ltd. The government also
regularly issues new regulations with no notice and with no
opportunity for review or comment by any non-governmental
domestic or any foreign market participants. Furthermore,
new regulations or regulatory changes are rarely published.
Instead, they are communicated verbally to interested
parties. If a new regulation or law is published it will
appear in the government's mouthpiece newspaper, the New
Light of Myanmar (Myanma A'Lin or in the Burma Gazette.

Burma's health, environmental, tax, and labor laws as written
do not impose a major burden on investment. However, the
protean nature of the regulatory and legal situation -- and
the irregular enforcement of existing laws -- makes
investment tricky without good, and well-connected, local
legal advice.

12. Efficient Capital Markets and Portfolio Investment

Burma has no true equity or debt markets, and the notion of
portfolio investment is not well understood by the average
person. Burmese authorities have said in the past that the
existence of capital markets is essential for the development
of a well-functioning financial system. To this end, the
Myanmar Economic Bank (MEB) and Japan's Daiwa Institute of
Research Co. Ltd. established a joint venture, the Myanma
Security Exchange Centre Ltd., to set up a stock exchange.
This exchange is in existence, though moribund, with only one
listed company -- a forestry joint venture. A few companies
have also begun to sell bonds privately and on a very small
scale. Private companies, both foreign and domestically
controlled, are generally small and thus their shares are
closely held by a small number of people or entities -- often
within a family. There is a securities law being drafted
now, but no interested private parties have been allowed to
see, or comment on, the draft.

A large bank run in February 2003, and the subsequent
decision by the government to avoid bailouts, has effectively
cut off the private banking system from the market. The
state-owned and semi state-owned banks were not impacted by
this crisis. Government instructions and internal bank
policies have made it impossible for private banks to take in
new deposits or loans, and weekly withdrawals are capped.
Currently the private banks are in limbo, the government
indecisive for now on whether to liquidate, actively
restructure, or rescue the troubled institutions.

Foreign firms do not have access to bank loans since the
banks require collateral of land or real estate, neither of
which foreigners can own. Since mid-2002 the use of gold as
collateral has been forbidden. Loans in kyat are available
for local companies and individuals from state and, until
February 2003, private banks. Interest rates are currently
running about 15 percent per year with inflation about 3
times that. Because of these negative real interest rates, a
lack of adequate supervision, and a shortage of banking
experience the private banking system, even at its peak, was
very unstable. Private banks engaged in reckless lending and
suffered high levels of non-performing loans. Though
statistics are not available, it is believed that public
banks, forced to bankroll the regime's pet projects and
personal needs, also have extremely large numbers of
non-performing loans.

A 1990 banking law permitted foreign banks to open branches
in Burma but not to conduct business in the local market.
These offices may serve as a trade and commercial liaison for
local and foreign clients. For a variety of reasons,
including the Asian financial crisis of the late 1990s, the
slow local business climate, and the lack of liberalization
of the banking sector, most of the original 49 foreign banks
have left Burma, or downgraded their representation, in the
past five years. U.S. persons may not provide financial
services to Burma.

Burma has no standard accounting system. International
accounting firms in country, though they may offer only
"consulting services," adhere to the General Accepted
Accounting Principles (GAAP). We have heard that the Burmese
government is trying to establish a separate Myanmar
Accounting Principles (MAP) system, but this is still on the
drawing board.

13. Political Violence

In May 2003, government-affiliated thugs ambushed a convoy
carrying opposition leader Aung San Suu Kyi while she was
traveling in northwest Burma. Dozens were killed or wounded
during the attack. Two bombs went off in downtown Rangoon in
early 2003. A small incendiary device exploded at a downtown
pagoda in 1996, and Burmese authorities reportedly found
other bomb devices in 1999 and 2000. The military government
tightened security around the international airport in
Rangoon after two RPG devices were discovered near the
airport in early 2002.

Burma experienced major political unrest in 1988 when the
military regime jailed and/or killed an undetermined number
of Burmese democracy activists. In 1990, the military
government refused to recognize the results of an election
that the opposition won overwhelmingly. Burma experienced
major student demonstrations in 1996, and demonstrations
occurred in August and September of 1998. Popular unrest and
violence continue to be possible.

For the last decade there has been sporadic anti-government
insurgent activity in various locations, such as an attack on
a natural gas pipeline in the Tanintharyi Division and bomb
attacks against family members of senior military officials
in Rangoon. Chin and Arakan States and the Thai-Burma border
area in Burma's southern Shan, Mon, Karenni, and Karen States
have been the scenes of occasional fighting between
government forces and various insurgent groups. In February
2001, several people were killed and some tourists left
stranded during shelling and cross-border gunfire in the town
of Tachileik, Shan State. The Thai-Burma border is closed
from time to time due to increased insurgent activity, most
recently in 2002.

14. Corruption

Corruption is systemic in Burma and is considered by
economists and businesspeople to be one of the most serious
barriers to investment and doing business in Burma. Because
of the Byzantine and capricious regulatory environment,
rent-seeking activities are rampant and very little can be
accomplished, from the micro to the macro, without paying
"tea money." We think this problem will only get worse at
all levels as inflation and the erosion of the kyat further
impoverish government bureaucrats and as senior leaders seek
additional income from a shrinking number of investment

Corruption is a jailable offense in Burma, and has been since

1948. However, the anti-corruption statute is applied only
when the senior generals want to take action against some
official who has become an embarrassment. In all other cases
corruption is considered a very normal practice -- indeed a
requirement for survival. The major, though by no means
only, areas where investors run into corruption are: when
seeking investment permission, taxation, when applying for
import and export licenses, and, when negotiating land and
real estate leases.

15. Bilateral Investment Agreements

Burma has signed bilateral investment agreements, known as
"Protection and Promotion of Investment" agreements with the
Philippines, the PRC, and Vietnam. Except for increasing
investment from the PRC, these agreements have had little
impact on incoming investment from Vietnam or the Philippines.

16. OPIC and Other Insurance Programs

Due to U.S. law OPIC does not operate in Burma. Burma is not
a member of the World Bank's Multilateral Investment
Guarantee Agency (MIGA).

17. Labor

In 1989, the United States withdrew Burma's eligibility for
benefits under the generalized system of preferences (GSP)
due to the absence of internationally recognized worker
rights. Labor unions are illegal in Burma. Workers are
unable to organize, negotiate, or in any other way exercise
control over their working conditions. Although regulations
set a minimum employment age and wage, and maximum work
hours, these are not uniformly observed, especially in
private factories and other establishments. The government
uses forced adult labor in infrastructure construction and
porterage for the military in active combat zones. These
labor practices are not consistent with Burma's obligations
under ILO Conventions 29 and 87, and thus explain why the ILO
imposed sanctions against Burma in 2000. The United States
strongly supported this decision.

Burma,s cost of labor is very low, even compared to some of
its Southeast Asian neighbors. Burmese over the age of 40,
and particularly those over 65, tend to be very well
educated. However, a sad side effect of the repeated closing
of Burmese universities over the past 15 years is that the
current 15-30 year old demographic is sorely lacking in
technical skills. Many Burmese, though, speak at least some
level of English. Many educated Burmese studied English in
mission schools during the British colonial and early
independence period. After the nationalization of private
and mission schools in 1964, the socialist government
mandated English courses in school starting from the middle
school. However, soon thereafter then-dictator General Ne
Win ordered that English instruction begin in kindergarten
after his daughter failed an English exam and was rejected
for studies in the U.K.

The government does not publish unemployment figures.
However, anecdotal evidence and the recent divestment by many
foreign companies, support the assumption of a very high
level of unemployed and underemployed in non-agricultural
sectors. An average factory worker in Burma will make about
500-800 kyat per day.

18. Foreign Trade Zones/Free Ports

The government has set aside as "industrial zones" large
tracts of land surrounding Rangoon and Mandalay. However,
these zones are merely zoned for industry and do not come
with any investment incentives.

There are no free trade zones in Burma.

19. Foreign Direct Investment Statistics

Note: Investment figures published by the GOB include only
investment approved by the Myanmar Investment Commission
(MIC). These figures do not include investments not
submitted for MIC approval, such as a myriad of small and
medium Chinese projects.

According to government figures at the end of March 2003,
cumulative foreign investment approved by the MIC totaled 371
projects, valued at US$7.5 billion. This amount is 1.2
percent higher than the cumulative total listed at the end of
March 2002. However, it should be noted that this
cumulative number does not factor in subsequent divestment,
or investment that was approved but that did not actually
enter the country.

Extrapolating from the latest government statistics on FDI
flow for the Burmese FY 2002-03 (April-March),we estimate a
357 percent year-on-year increase in new FDI approvals
($86.95 million) in 4 sectors compared with total new
investment approvals in FY 2001-02 ($19.002 million). The
new investments came from Malaysia ($44 million in oil and
gas and $18.25 million in fishery),Hong Kong ($12.88 million
in manufacturing),Singapore ($6.1 million in fishery),
Switzerland ($3.38 million in mining),Brunei ($2.04 million
in fishery) and Korea ($0.3 million in manufacturing).

Despite the hangover from the Asian financial crisis, the
trickle of approved new investment since 1997 has come almost
exclusively from Asian countries. Malaysia, Singapore,
Switzerland, and Korea registered new investment in Burma in
FY 2002-03. Western countries have largely stayed away from
the Burma market. U.S. investment has been zero since 1997
when the U.S. government imposed an investment ban.

In stock terms, the United States is the fifth largest
foreign investor in Burma with 16 projects totaling US$582
million. U.S. investment approved prior to May 1997, which
was grandfathered under the U.S. investment sanctions order,
is largely centered in oil and natural gas exploration. The
small number of other U.S. firms in Burma is involved
primarily in tourism, management, consulting, and trading.
While Malaysia is ranked 4th in FDI stock, it was 1st in new
FDI agreements in 2002-03 (according to Burmese government
statistics). These official statistics do not take into
consideration considerable new investment, some of it
state-financed, from the PRC.

Major non-U.S. foreign investors in Burma are: Petronas
(Malaysia),Total (France),Ivanhoe Mines (Canada),PTT, Plc.
(Thailand),Shin Satellite (Thailand),Keppel Land
(Singapore),China National Construction and Agricultural
Machinery Import and Export Co. (PRC),and the China
International Trust and Investment Corporation (PRC).

So far there is no concrete evidence of large-scale
investment abroad by Burmese companies. However, we believe
that some wealthy Burmese individuals and small family
businesses have made a few investments in neighboring ASEAN

3/31/2003 BY SECTOR

(US$ million)
Approved In percent of Total
No. Particulars No. Amount Approved Amount

1. Oil and Gas 56 2,403.17 32.0

2. Manufacturing 150 1,604.07 21.4

3. Hotels and Tourism 43 1,059.66 14.1

4. Real Estate 18 1,025.14 13.7

5. Mining 52 526.74 7.0

6. Livestock and Fisheries 23 309.76 4.1

7. Transport and Communications 14 283.27 3.8

8. Industrial Estates 3 193.11 2.6

9. Construction 2 37.77 0.5

10. Agriculture 4 34.35 0.5

11. Other Services 6 23.69 0.3

Total 371 7500.73 100.0

3/31/2003 BY COUNTRY

(US$ Million)
No. Particulars No. Approved Amount

1. Singapore 72 1,572.73

2. U.K. (a) 37 1,404.01

3. Thailand 49 1,290.20

4. Malaysia 33 660.75

5. U.S.A. 16 582.06

6. France 3 470.37

7. Indonesia 12 241.50

8. The Netherlands 5 238.83

9. Japan 23 212.57

10. Hong Kong 29 162.72

11. The Republic of Korea 32 156.41

12. Philippines 2 146.67

13. Australia 14 82.08

14. Austria 2 72.50

15. China 13 64.15

16. Canada 16 59.78

17. Panama 1 29.10

18. Germany 1 15.00

19. Denmark 1 13.37

20. Cyprus 1 5.25

21. India 1 4.50

22. Macau 2 4.40

23. Switzerland 1 3.38

24. Bangladesh 2 2.96

25. Israel 1 2.40

26. Brunei Darussalam 1 2.04

27. Sri Lanka 1 1.00

Total 371 7500.73

(a) Inclusive of enterprises incorporated in British Virgin
Islands, Bermuda, and the Cayman Islands.