Monday, September 25, 2017

DICA to track actual levels of foreign investment from 2017

Approved foreign direct investment has reached more than US$9 billion in the financial year ending March, while officials say they plan to track the level of pledged foreign investment that has been spent in the country, which will likely reveal a far lower figure.

A construction worker carries materials at the Dawei special economic zone. Photo: Aung Myin Ye Zaw / The Myanmar TimesA construction worker carries materials at the Dawei special economic zone. Photo: Aung Myin Ye Zaw / The Myanmar Times

A rush of last-minute approvals pushed headline foreign direct investment (FDI) up by almost $4 billion in March alone – from $5.6 billion at the end of February to $9.4 billion by the end of March, according to an official at the Directorate of Investment and Company Administration (DICA).

This is over $1 billion more than the $8.1 billion approved in the previous financial year and much higher than the government’s $6 billion target.

Over $2 billion of the March approvals came from a single project in the oil and gas industry, said U Kyaw Win Tun, a director in DICA’s statistics department.

Even before the March jump the approval numbers looked good, said Charles Schneider at the World Bank in Yangon. Local and international officials look to the DICA numbers to assess investor confidence in Myanmar, and so an increase is broadly positive for that reason.

But the DICA figures, although they are a useful benchmark, show what is approved, not what is actually invested. Approvals may signal confidence, but actual investment has a far greater impact on the real economy.

DICA does have data on actual investments, which it collects quarterly. This comes partly from reports local firms are required to make, detailing the foreign investment they receive. But the reliance on reporting means DICA is not confident in the final figures.

“Sometimes firms do not comply [with the regulation],” said U Kyaw Win Tun, which he said led to “weakness” in the data.

Rather than settle for uncertainty, DICA is planning a more rigorous and detailed FDI survey, which is scheduled for April of 2017, U Kyaw Win Tun said. That should provide some clarity over how much of the billions in pledged investment every year actually ends up entering the country.

DICA plans to receive technical assistance from the ASEAN-EU commerce program, which has already provided assistance on three previous occasions, said U Kyaw Win Tun.

Collecting the necessary data to provide reliable actual FDI figures will require help. DICA will need to work and negotiate with government ministries, the Central Bank, the customs department and the internal revenue department among others, U Kyaw Win Tun said.

The planned survey would bring Myanmar closer to its ASEAN peers, whose governments typically provide data on actual FDI, he added. In many countries, the central bank monitors the banking system to track the flow of public and private investment coming into and out of the country. But the Central Bank of Myanmar is unable to monitor such FDI flows, said U Kyaw Win Tun.

Because DICA does not have confidence in its existing actual FDI figures it does not make them publically available, he added.

However, the data is made available to the United Nations Conference on Trade and Development, which publishes it annually. Comparing the two, it is clear that actual investment is far smaller than approvals (see graph above).

Astrit Sulstarova, chief of UNCTAD’s Investment Trends and Data Section, said his organisation had provided technical assistance to DICA in the past on collecting FDI data, and that its process had improved.

He could not comment on how reliable the figures are and until the 2017 survey it will remain unclear how much of the gap between pledged and actual FDI is down to under-reporting, which an official at an international financial institution, who asked to remain anonymous, said was clearly an issue.

In the meantime, IFIs and other groups continue to offer a range of different estimates. The IMF also receives DICA’s data on actual investment, according to U Kyaw Win Tun, yet the Fund has considerably higher figures for FDI.

In its recent Article IV Consultation report the IMF said FDI for the 2012 fiscal year – the last year it had a hard figure for – was $2.8 billion.

The ASEAN Secretariat, which also receives the DICA data, gave a $1.35 billion figure for the 2012 calendar year. The World Bank estimated 2012 calendar year FDI at $1.33 billion.

The IMF also offers projections, and in its Article IV report predicted FDI for the 2014 and 2015 fiscal years at $3.2 billion and $3.6 billion respectively.

An early version of this article misstated the IMF FDI figures, which have now been corrected.