Financing Trade With Burma - Essay Example

Political instability is a great challenge for investors in Burma. The investors also face risks from consumer boycotts. Therefore, Burma is not a favorable investment option for American companies. It becomes apparent that there is hesitation among investors to spend money on projects in Burma, which is the reason why there is a dearth of foreign investment in the country. For making investment in Burma, the companies should get approval from Burmese authorities. The foreign companies can do business only through joint venture with Burmese collaboration.

Burma lacks strong economic policies to bring foreign investment. Therefore, it is really a threat for US firms to make investment in Burma. Moreover, the political instability and conflicts in the country are another problem. The country’s governance lies with its military and there no uniform or precise rules in the country to protect the investors. The poor infrastructure facilities are also a major handicap for companies investing the country. Thus, any person who intends to invest there will have to develop the basic facilities.

This will entail additional costs to the investor. The fiscal policies in the country also do not favor investment there. Besides, Burmese government imposes huge taxes on foreign investors. “Foreign investment has risen dramatically over the past year, as international companies cooperate with Burma’s government to exploit the country’s natural resources” (Jared, 2011, para. 1). 2) Since a military government rules Burma, they impose many restrictions on foreign trade and most of their policies are arbitrary in nature.

Thus, the country is not investment friendly for foreign investors. America has banned investing in Burma due to the military actions against the civilians. In Burma, government owns all major industries and they place many restrictions on foreign trade. The country has trade relations with Asian countries and they export agricultural products and import manufactured goods. Burma’s trade with United States accounts only 5% of total foreign trade. Even though Burma has liberalized its economy, they still impose many restrictions on foreign trade.

The major earnings in the country derive from oil and natural gas. Therefore, if an investor decides to invest in this country this industry is a better option. If US companies propose to start business in Burma, they will have to face several challenges there. Any person or firm can start business in the country only as a joint venture, in collaboration with a Burmese entity. Due to political instability the country’s fiscal and monetary policies are not good. The inflation rates are high, which will have a direct bearing on the cost of operating a business.

Investors may also face problems form the government as they do not encourage foreign investment. The tax rates on foreign traders are also quite high. “In Burma, however, foreign trade and investment helps perpetuate the rule of a repressive, unelected junta. Full foreign ownership of companies operating in Burma is forbidden and almost all large investment in Burma is carried out through joint ventures with the military regime” (Burma: Country in Crisis, 2002, para. 1). 3) Every business involves some part of risk.

It may also have to face uncertainty of earnings or risk of loss because of some unexpected developments in