Friday, September 26, 2014

Japanese investment set to surge, banker says

Khine Kyaw
Myanmar Eleven - September 25, 2014

Japan could become one of the top three sources for foreign direct investment (FDI) in Myanmar as manufacturers and infrastructure developers from the East Asian nation pour into the three largest special economic zones being built here, the country head of a Japanese bank vying for a licence to operate in Myanmar said.
Japan could jump from its ranking as the 10th largest source of FDI in Myanmar to the top three "in the near future", Ritsuo Fukadai, chief representative of Bank of Tokyo-Mitsubishi UFJ, told Myanmar Eleven in an exclusive interview.

Japanese businesses are very keen to invest in the three main special economic zones being built - Thilawa, Dawei, and Kyauk Phyu - as well as the oil and gas industry, Fukadai said.

"Thilawa SEZ is the first priority as it is one of the mega projects between Myanmar and Japan. In the future, Japan will consider cooperating in the Dawei project because we also have a very close relation with Thailand. Dawei has a lot of potential for Japanese investment," Fukadai said.

"Dawei SEZ is situated very close to Thailand, and there are also very many Japanese companies in Thailand, especially auto companies such as Toyota, and [Korean automaker] Hyundai. These factories are very close to Dawei. It is still a work in progress as Thailand has some programmes for its development. I think the Myanmar government can bring more investment to Dawei," he said.

"Thilawa is our priority. In the future, we may focus on Dawei and Kyauk Phyu. Kyauk Phyu [SEZ in Rakhine State] is a bit far from Thilawa and other areas. Yet, some Japanese companies are interested in investing in Kyauk Phyu," Fukadai said. He singled out large corporations as Mitsubishi and Hitachi, saying they were considering infrastructure projects in Kyauk Phyu.

The banker said Thilawa's strategic location - adjacent Yangon, the country's largest city - made it most attractive to Japanese investors as well as its one stop service centre, which made investment convenient.

Fukadai said one key to attracting FDI was a streamlined process - a characteristic of Thilawa that is lacking in Myanmar's fragmented government. "Myanmar has many ministries, but they are [usually] not connected to each other. If we apply at one ministry and then have to go to another it takes time. Having a one-stop service, as Thilawa does, is better. Procedures should be simplified and made quicker," Fukadai said.

As of June 30, Japan ranked 10th as a source of FDI in Myanmar, with 47 permitted enterprises investing a total of US$332.89 million. China tops the list with 65 permitted enterprises with combined approved investment of $14.25 billion, followed by Thailand with 74 permitted enterprises with combined approved investment of $10.11 billion. Hong Kong Special Administrative Region is third with 79 permitted enterprises with combined approved investment of $6.54 billion. Singapore, the United Kingdom, South Korea, Malaysia, Vietnam, and France also precede Japan on the list of source countries for FDI.

Fukadai's bank is among the 25 foreign banks in the final process of vying for a licence to operate in Myanmar. Two other Japanese banks have joined the fray: Mizuho Bank and Sumitomo Mitsui Banking Corporation.

Bank of Tokyo-Mitsubishi UFJ has a long history in Myanmar, dating back to 1918 when it opened a representative office in the then-capital Rangoon. It was called Yokohama Specie Bank then, and expanded to 14 branches across the country before closing them all at the end of the Second World War.

In 1954, BTMU attempted to re-enter Myanmar with a representative office, but it was forced to shut due to the insular policies of the then-government. It became the first Japanese bank to re-enter the country in 1995, opening a representative office. In 2012, it forged an alliance with locally owned Co-operative Bank (CB Bank) that has seen it offer training to CB Bank staff as well as funding to help it launch its microfinance lending.

Fukadai believes that the bank has a good chance of winning a licence. "We have a long history here and have acquired a lot of international experience in developing countries. By using our knowledge gained from these markets, we can start our business here," he explained.

"We are processing many transactions from Japan. The potential is rising as the domestic market is booming and many foreign investors are flocking to Myanmar. That's why, in the near future, our figures for Japanese investment will be bigger than before."

He also stressed his bank had no intention to compete with local banks.

"We handle transaction from foreign companies. Local banks mostly handle local currency transactions … that is why we always say that we can have a win-win situation. If a customer comes from Japan and needs foreign currency transactions, we can help him … If the clients need local currency transactions, we can introduce them to our partner, CB Bank. We will not compete with each other," he said.

Fukadai also said the limit placed on one branch for foreign banks would ensure that those that won licences would need to cooperate with local lenders.