Foreign investment in Myanmar was heavy before World War II, but in the postwar period, and particularly after independence, a government policy of economic nationalism (and later socialism) strongly discouraged private foreign investment. After the nationalization of industry in 1963–64, private foreign investment in Myanmar was eliminated entirely. In 1976, the government indicated a willingness to establish "mutually beneficial economic cooperation" with foreign enterprises having the technology that Myanmar needed. The scope of state capitalism was expanded when the Saw Maung regime legalized internal and external trade without giving up control of major industries.
Foreign investment in Myanmar has been permitted only since 1988 under the Union of Myanmar Foreign Investment Law, and the level and variety of investment is limited. Sectors eligible for foreign investment include manufacturing, oil and gas exploration and development, mining (except gold and precious stones), jewelry production, and agriculture. The Foreign Investment Commission (FIC) screens foreign investment proposals for export generation potential, technology transfer, and the size of the investment. Various investment incentives are provided, such as exemption from income tax, and relief or exemption from customs duties. Bureaucratic procedures and a antiquated and inadequate infrastructure hamper foreign and local investments alike. Foreign entities cannot own land in Myanmar. The government's maintenance of an official exchange rate for the domestic currency, the kyat, which was overvalued by some 60 times its unofficial value; by the start of 2002 the disparity had reached about 100 to 1, constituting a major obstacle to foreign investment. Foreign investors must also fear being criticized in the West for investing in a country with a long record of human rights violations. In 1996 a lawsuit was brought against Unocal for its predication in the joint venture building the natural gas pipeline with Thailand, and the forced labor and other human rights abuses connected with the construction. The Clinton administration pressured Unocal to sell its shares in the Myanmar Oil and Gas Company (MOGC). The French company, Total (now Total Fina Elf) had earlier been pressed to sell its share in MOGC to Unocal.
In 1997, Myanmar was admitted to the Association of Southeast Asian Nations (ASEAN), a step that might have relieved some of the international pressure against doing business in the country; however, in May of that year, the US government enacted restriction against new investment in Myanmar by US companies or citizens.
As of January 2001, foreign investment under the liberalized regime of 1988 totaled about $7.4 billion. Of that amount, investment from the US totaled only $582 million, with the majority, 51.35%, coming from ASEAN countries, including $1.5 billion from Singapore, $1.2 billion from Thailand, $597 million from Malaysia, $240 million from Indonesia, and $147 million from the Philippines. The United Kingdom, however, was the second-largest source of approved investments, at $1.4 billion. Investments from France and Japan totaled $470 million and $233 mil, respectively.
After the Asian financial crisis, however, foreign investment dropped off considerably. Of the total, only $1.17 billion (16.8%) represents approved investment value after 1996, $673.6 million or 57.59% from ASEAN countries. In 1996/97, annual foreign investment peaked at $2.6 billion and then fell to $29.5 million in 1997/98. The continuance of the declining trend was made starkly apparent in the first six months of 2002 when investment from ASEAN members fell to zero, compared to an already-low $32.28 million from these countries in the first six months of 2001. In March 2003 the government introduced a measure that stopped the issue of import and export permits to Myanmar-based foreign companies, making the regime less attractive to foreign investors.