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Myanmar’s economic promise no threat to investment in Cambodia

Myanmar’s moves toward economic and political reform would not subtract from Cambodia’s regular stream of foreign investment, experts and insiders said – at least not in the short run.

Word of an investor-friendly Myanmar has spread quickly with the US’s partial waiver on trade sanctions in early February, and some of the region’s business players have called the country “ground zero for investment”, but Cambodia’s more than decade-long claim to political stability should eclipse Myanmar’s piecemeal reform, which a regime change in late 2010 set into motion after nearly 50 years of military rule.

“Political stability is the hot button for Cambodia, where they have gotten it right for foreign investors, and that’s a place where Myanmar can’t really complete yet,” Gordon Peters, manager at Emerging Markets Consulting in Cambodia, said this week.

Myanmar maybe turning some heads, but there will not be a flight of investment dollars that were originally destined for Cambodia, he said.  If Cambodia were to lose foreign direct investment (FDI) to Myanmar, it would likely be from the Kingdom’s garment manufacturing sector, worth US$4.25 billion in 2011, or 32.1 percent of gross domestic product.

“This is a place where you could see some long-term change,” albeit at a slow pace, Peters said. Some changes in milled-rice investment could occur as reforms in Myanmar progress, but “that’s not going to be a big loss in investment dollars for Cambodia”, he said.

An increase in tourists to Myanmar would be inevitably translated into more tourist dollars to Cambodia, Peters said. Angkor Wat will remain one of the main destinations for tourists in the region, whether travelers land in Yangon or Phnom Penh.  However appealing Myanmar’s recent reforms seem, continued progress is still far from guaranteed, Business Research Institute for Cambodia CEO and chief economist Hiroshi Suzuki said.

“I have concerns about the stability of Myanmar politics. I’m afraid that there could be some backlash from older generations, such as the army, who are not satisfied with the current reform,” he said.  Myanmar’s investment climate may need five to 10years to catch up with Cambodia, with large holes in law regulation awaiting repair, he said. Local businessmen in Myanmar have expressed a greater degree of faith in their new government’s ability to attract FDI.

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