Myanmar's plans for an eagerly awaited foreign investment law leave small domestic firms out in the cold, stunting the benefits of proposals aimed at reawakening the economy, business leaders warned Tuesday.
The draft legislation risks cutting out small to medium enterprises (SMEs) by imposing onerous ownership rules, the Union of Myanmar Federation of Chamber of Commerce and Industry said.
UMFCCI Chairman Win Aung told a press conference in Yangon that the proposals stipulate foreign firms can hold only up to 49 percent of a joint venture, with a minimum investment of $5 million -- meaning the local partner would have to find significant funds to be the majority owner.
"If so, the local SMEs will lose their role in the upcoming new economic setting," he said, adding the large stake required could also deter smaller overseas firms.
The investment law is aimed at regulating a flood of interest from overseas companies, which have been eyeing resource-rich Myanmar since the international community began dismantling sanctions to reward reforms.
"When foreign firms enter into the country, we could get technology, investment and access to markets from them," said Win Aung.
"We all know that there are weaknesses in our SMEs."
The draft law, which is currently being debated in parliament and is tipped to be passed shortly, was also criticised for not being competitive compared to Myanmar's neighbours in the Association of Southeast Asian Nations (ASEAN).
Zaw Oo, of the Vahu Development Institute think-tank, said there would be "so much trouble" if the law failed to match those of other regional countries, many of whom do not impose as strict ownership rules.
With huge natural resources and a strategic position between China and India, Myanmar is seen as a potentially huge market for foreign firms as it opens up to the world after years of isolation.
President Thein Sein has vowed to put the economy at the centre of a new raft of measures, following a series of dramatic political changes since decades of military rule ended last year.
The government's boldest economic reform so far was the start of a managed flotation of its currency in April, overhauling a complex foreign exchange system in a bid to facilitate trade and investment.
Myanmar has since invited foreign firms to invest in the mining sector and signed a raft of oil exploration deals with foreign companies.
Critics say the rewards of the nation's energy bounty have so far only been shared among foreign investors and the regime, rather than its impoverished people.