Foreign direct investment in Myanmar: the role of financial development

This study examines the influence of financial development on Foreign Direct Investment (FDI) in Myanmar from 2016 to 2022 by utilizing the Generalized Method of Moments (GMM) and Principal Component Analysis (PCA). The analysis focuses on financial development indicators related to the banking sector, stock andbond markets. The findings suggest that state-owned loans initially have a positiveinfluence on FDI inflows. But over time, this beneficial influence turns into negativeand points to possible long-term economic issues that could result in fiscal constraints. Moreover, the results highlight the influence of a healthy financial system in attracting FDI in Myanmar with a strong capital-to-assets ratio. A favorable investment climate is also linked to well-functioning financial markets as demonstrated by active stock and bond markets. Furthermore, in Myanmar, variables of political stability, exchange rate and trade openness appear as critical elements to attract foreign investment.