NAYPYITAW -- In a bright, well-carpeted conference hall in Naypyitaw -- Myanmar's sprawling capital built by the former military government -- more than 1,000 investors and business executives gathered earlier this week for the annual Euromoney Myanmar Global Investment Forum.
The opening remarks on Sept. 12 by speakers including government officials and foreign and local executives were typically optimistic and laudatory, acknowledging the "mouthwatering" opportunities available to investors in the country. Many at the conference, both speakers and delegates, were positive on the outlook for the economy and investment.
Speaking on economic reform, Peter Beynon, Jardine Matheson's country chairman for Myanmar and Cambodia, said he was "very happy with what's happened to date," adding that it was time to quicken the pace of investment and economic development.
Perhaps anticipating mild criticism on the speed of economic liberalization, Deputy Finance Minister U Maung Maung Win told attendees the government was taking fresh steps to "improve the credibility" of its economic reform platform, forecasting falling inflation and robust economic growth. The deputy minister pointed to a new investment law that offers protection and dispute settlement, and a Companies Act that, although still in draft form, is expected to help encourage investment in local companies.
A few hundred kilometers west of Naypyitaw's coffee and canape sessions, in northern Rakhine state, burnt, empty villages showed the devastating impact of a brutal military campaign against Rohingya militants.
Nearly 400,000 Rohingya refugees have fled the military "clearance operation" launched in response to Aug. 25 attacks on at least 30 police posts and military facilities by a group calling itself the Arakan Rohingya Salvation Army. About 12 military and police personnel and more than 77 militants were killed in the attacks, although since then the military claims to have killed hundreds of ARSA fighters and suspects.
The United Nations High Commissioner for Human Rights, Zeid Ra'ad Al Hussein criticized human-rights abuses against the Rohingya in the wake of ARSA's first attacks in October last year. On Sept. 11, the high commissioner said that because the government refuses to allow access to human-rights investigators, the situation on the ground cannot be fully assessed, but that "it seems a textbook case of ethnic cleansing."
The Myanmar government and much of the majority Buddhist population has largely rejected international criticism from bodies like the U.N. and Amnesty International. But some business representatives are keenly aware that how Myanmar is perceived internationally is also important as the government opens up sector after sector to foreign investment in attempt to build a modern economy.
Yangon-based law firm VDB Loi held a matchmaking event on the Euromoney forum's sidelines, providing a list of over 30 local projects across electricity, insurance, real estate, health, and oil and gas that are in search of foreign partners. The Myanmar Investment Commission has already approved over $3.6 billion in FDI applications since the start of the financial year and the government views foreign investment as "important" in achieving its goals, the deputy finance minister said.
With reports of sweeping violence and an escalating refugee exodus dominating international headlines, however, many investors are worried about what to tell their boards and shareholders. VDB Loi partner Edwin Van der Bruggen said he has been receiving calls from concerned investors, although the events in Rakhine state have yet to prompt investors to pull out of Myanmar.
In part, this may be because the flood of interested investors who have flown in to casually appraise opportunities in Myanmar over the last five years has been whittled down to those prepared to accept the risk and put money to work.
"The people who came to kick the tires no longer come," said Melvyn Pun, CEO of Singapore-listed but Myanmar-focused company Yoma Strategic Holdings. Pun has been on a series of roadshows to update investors in Hong Kong, Bangkok and Singapore on his firm's operations, which now include a thriving business selling tractors to help modernize Myanmar's agricultural sector.
A U.S. roadshow is scheduled in the near future. The reaction of American investors will be "interesting," but so far there is little evidence that they have lost their nerve or interest, Pun told the Nikkei Asian Review. "Lots of people expressed that they don't like what's going on [in Rakhine]," he said, while noting that investors also understand that the violence is part of a complex, long-running situation. "Investors have been quite understanding that these things flare up now and again, but that there is a long term road map to have economic prosperity for everyone."
Myanmar's economic growth is no longer as stellar it was, however. Although GDP growth remains among the fastest in the world, the pace has slowed each year since 2013, according to the World Bank. The country posted GDP growth of 8.5% that year, but by 2016 when the National League for Democracy took power the figure had dropped to 6.5%.
Investors have been quite understanding that these things flare up now and again, but that there is a long term road map to have economic prosperity for everyone.Yoma Strategic Holdings CEO Melvyn Pun
The World Bank is forecasting average growth of 7.1% over the next three years. But Yangon based-executives say business in the commercial capital still feels "slow" and "sluggish" compared to earlier years.
One sector that is perhaps more vulnerable to investor anxiety is the burgeoning tourism industry -- one of the most significant growth sectors in Myanmar's economy in the past five years.
Visitor arrivals to Myanmar -- the overwhelming majority of them tourists -- have soared from less than 200,000 visitors in 2007 to a projected 3.5 million in the 2017 calendar year, according to official figures. However, this number likely includes a high number of arrivals crossing land borders from neighboring countries for hours, not days. In an analysis of how the tourism and immigration ministries record data, local news magazine Frontier Myanmar reported that the tourism sector began to slow in 2014 and contracted in 2015.
There has still been a surge in tourism-related development in the hotels and hospitality industry. According to the World Travel and Tourism Council, Myanmar's tourism sector contributed 5.9% to the country's total gross domestic product in 2016. And that figure is expected to rise to 7.8% per annum through to 2026.
However, following extensive reporting of the Rakhine crisis and the issuance of travel advisories by some Western governments against travel to Myanmar's western regions, there are now concerns about the impact on the nascent tourism industry.
At the same time, tourism operators and investors agree it is essential to keep development on track and to work to reform existing tourism laws. Ohnmar Khin, co-founder and executive director of Orchestra Hotel Company and Managing Director of Orchestra Travel, one of the most established tour operators and independent hotel groups in Myanmar, told the forum that the country has faced "dark times" before and must stay the course to survive the challenges ahead.
Tint Thwin, director general of the government's Ministry of Hotels and Tourism, told the forum that the government is finalizing a new tourism law that will significantly streamline the process of licensing and development of tourism facilities in the country. In an unusual move, the ministry over recent months has held extensive consultations with industry and civil society in drafting the policy, and hopes to present the draft law to parliament by year end.
Tourism industry representatives have welcomed the plan and called on the government to support private sector efforts. At the same time, the industry itself must take the initiative to develop and observe sustainable tourism policies, Win Aung, managing director of Amata Hotel Group and CEO of Amata International Company, told the forum.
The long haul
International investment in Myanmar is also shifting toward long-term sectors like infrastructure, where the government is pushing hard to attract foreign capital through public-private partnerships to address a colossal shortfall in spending. Investors prepared to enter decades-long agreements to build roads or run water treatment plants have already factored in the Rakhine state issue.
Maung Maung Lay, vice president of Myanmar's national chamber of commerce, said that although the chamber meets many existing and potential foreign investors, there have been no questions on the conflict.
"They only wish to know the fundamentals on things like electricity, skilled labor and infrastructure," he said. "Investors are not naive, when they come in they know the difficulties and they are prepared."
The geography of Myanmar investment also makes it easier for investors to live with the Rakhine violence, which as MIC secretary Aung Naing Oo noted is confined to an area in the north of Rakhine that would not receive much FDI anyway.
Although the state as a whole has technically received billions in FDI, that is almost entirely concentrated in the offshore oil and gas industry. Nor did the outbreak of violence in Rakhine in 2012 -- intercommunal riots between local Muslims and Buddhists -- affect overall FDI then, Aung Naing Oo told forum attendees.
"I'm quite confident everything in this area will get much better," he said.
Few people are confident that the situation in Rakhine will improve. But the foreign head of an organization whose work includes increasing international investment in Myanmar said he believes Aung Naing Oo is likely correct that in its current form the Rakhine violence will not hit overall foreign investment.
There is talk of the odd company that has either left, including a European investment bank, or decided not to enter, such as an Asian clothing manufacturer supplying U.S. firms, because of the worsening situation in Rakhine over the last year. But these investors have until now been easily replaced by others willing to accept the risk. No one in the business community seems to believe that individual projects large-scale or small outside of northern Rakhine will be short of foreign partners due to the Rohingya crisis.
Even if the situation worsens, foreign executives in Myanmar say the result is likely to be a subtle tilt away from European and U.S. investment -- already dwarfed by regional investment, particularly from China -- rather than a serious drop in capital flows. The governments and private firms of trading partners like China, Japan and Thailand, which are among the largest investors in Myanmar, have shown no public signs of concern over the Rakhine violence.
Nor has the violence stopped the Rakhine state government's own plans for a new economic zone in Maungdaw, despite that area's proximity to the conflict, according to a report in Frontier Myanmar. The local government plans to sign a memorandum of understanding with a domestic consortium Naff River Galaxy Infrastructure Development Group on Sept. 29, Frontier reported.
Maung Maung Lay said he expected development in the area to move forward despite the military operations. "There are some investors planning to move forward with investment in the Maungdaw area, although I don't want to mention which companies," he said.
Nikkei Asian Review chief editor Gwen Robinson contributed to this report.