While Myanmar has become a population destination of choice for foreign investment, investors face both substantial opportunities and threats. Myanmar’s challenge is to ensure the investment benefits the nation. The inflow of capital provides less developed countries with much needed funds for development that cannot be generated in the domestic market due to a lack of savings. Foreign investment, for example, serves to foster the creation of the infrastructure and industrial base deemed necessary for a market economy to develop. This capital can also fund local entrepreneurs willing to take the risk of starting business ventures. As growth begins, the allure of profits and the desire of firms and individuals to improve their economic standing provide the catalyst for even further investment. This puts the country on the development path and, theoretically, these benefits of the market should significantly contribute to economic growth and in the long-run spread to all sectors of the economy.

At the same time, however, forces are at work that may negate some of the investment benefits. Foreign investment, for example, may mainly drive out local producers. Although the argument can be made that foreign investment creates efficiency in the market due to increased competition, the long-run result may simply be the monopolization of the market by the foreign investor due to deep financial resources. If most of the profits of the foreign investor are repatriated, the positive effects on the domestic market may be negligible and generate fear of exploitation of a country’s resources.

In addition, the foreign investments, which tend to flow to those areas with the highest expected rate of return, are often not necessarily the types of investment the population at large needs most. The construction of five-star hotels, office space and golf courses receive investment priority and tend to continue even if a glut occurs. Overseas development aid has too often placed emphasis on providing opportunities for companies associated with the aid- provider rather than the recipient with the end result harmful real estate speculative bubbles. The phenomenon can be found particularly in Myanmar which has become the new gem of both donors and foreign investors despite significant human right violations against ethnic and religious minorities. Although criticism of this opening up has come from some sources, perhaps the best way of understanding the change in philosophy is to quote British economist Joan Robinson, who postulated that “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

International organisations such as the World Bank and the International Finance Corporation, for example, still subscribe to the belief that increasing profits of the private sector (and mainly the high income sector) will in the long run benefit the poor. This is just a version of the controversial and frequently discredited trickle-down economic policy of free-market economists. Yes, the benefits may trickle down, but often the amount is a drop of water to the poor for every bucket of water given to the rich. Yes, the luxury hotel will have to hire staff which one can argue benefits the lower income groups.

Granted, over the long run, the growth of the country’s economy may have positive effects for the nation as a whole, while the poor (mostly rural sector) may see marginal improvement in their standard of living. However, quite often their relative position declines as prices rise and environment degradation of these areas occurs due to an attitude of “develop at all costs”.