Workers at the Vietnam Hoang Anh Gia Lai (HAGL) construction site in Yangon yesterday. Myanmar has approved more foreign direct investment in the past five months than all of last year.
YANGON: 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 $1.8bn from the start of the fiscal year on April 1 to the end of August, compared with $1.4bn in the whole previous fiscal year, Aung Naing Oo, a Director General at the Ministry of National Planning and Economic Development, said.
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 US 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 $500m 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 yesterday, 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.