Burma is open for business, and foreign investors are champing at the bit.
Time for a reality check.
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industries made up over 80 percent of exports last year. They also
dominate foreign investment: oil, gas and mining alone comprised
almost[102] 90 percent of FDI over the last half decade. Burma's
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interest in telecoms and banking, it's the extractive industries that
are Burma's main draw for potential investors.
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export-oriented manufacturing to develop. Their foreign direct
investment (FDI) was mostly in manufacturing, not resources. They also
developed in a much different international environment, one with far
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exports tend to grow more slowly than countries like the Asian tigers
due to unequal investment in other parts of the economy, a concept
known as [106]Dutch Disease. Burma already suffers from this illness,
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"Burma needs foreign investment and it needs it now."

It's complicated. The foreign investment that Burma will receive most
of is the kind it needs the least: resource investment. This type of
investment tends to create little direct employment. Its major benefit
is the income it generates for the government. But the government of
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Burma, like so many others, isn't good at turning resource revenues
into productive investments.

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Despite this, the prevailing attitude in the capital seems to be that
"foreign investment equals development." That's [107]just not true.
Different types of foreign investment have drastically different
effects on the economy. Investment that transfers technology and brings
know-how can be beneficial, but resource investment can be dangerous
because it creates revenue by selling non-renewable assets. Why sell
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these assets so quickly if the government does not yet have the
capacity to invest all the proceeds in productive ways? Burma's recent
steps toward acceptance of the [108]Extractive Industries Transparency
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balanced economy. Burma would actually be better off without a massive
rush of primary sector investment.

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contributed to the rise, one of the major culprits is the lack of
alternative investments. Banks aren't trusted and moving money overseas
is difficult. So people store their wealth in fixed assets like
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accessing decision makers still depends intensely on personal
connections. For example, foreigners investing in mining must now
partner with one of 38 companies on a government approved list. The
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The debate over a new foreign investment law, which was passed earlier
this month by parliament but appears [113]unlikely to be approved by
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President Thein Sein, shows the contending forces at work. As part of
the government's bid to attract foreign investment quickly and in large
amounts, preliminary drafts of the law contained numerous concessions.
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As debate progressed, local businesses pushed back. They demanded
numerous restrictions, including a $5 million minimum for investors,
restrictions on "low technology industries," and a limit of 49 percent
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version of the law represented a hard-fought compromise that met with
little approval from foreign investors.

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benefit for broad-based development, such as the new laws on foreign
direct investment or Special Economic Zones (SEZ), are crowding out
debate on more important issues.
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strategy to increase worker productivity, build a viable manufacturing
sector, and direct resource revenues into productive investments
(especially infrastructure). This should not entail offering foreign
investors myriad tax breaks, which will only starve the government of
revenue. Broad-based development will come only by understanding and
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* [152]THE E-RING
[153]Allen cleared in Petraeus affair emails investigation
BY KEVIN BARON