"We need to lift sanctions, but still sanctions remain. It's only suspended, not totally lifted," he said at a forum in Singapore.
Myanmar has surprised observers with a series of reforms following the end of nearly half a century of military rule last year, leading Western nations to start rolling back sanctions.
But Hlaing added: "Without the total lifting of sanctions, only the suspension of sanctions, it doesn't work to persuade the long-term investors."
His comments came as Australia announced Thursday it will lift remaining sanctions against the country and more than double its foreign aid to encourage democratic reforms.
Australia's Foreign Minister Bob Carr said in a statement released by his office that targeted travel and financial sanctions would be scrapped although an arms embargo will be maintained.
Canberra said in April it would lift sanctions against Thein Sein and more than 200 others under travel and financial bans, but kept about 130 names on the restricted list, including senior military officers and others suspected of human rights abuses. It does not impose general trade sanctions.
US President Barack Obama's announced last month that the United States was easing investment restrictions on Myanmar while maintaining wider US sanctions on the government and figures linked to the former junta.
And US secretary of state Hillary Clinton said Washington would keep broad sanctions in place an "insurance policy" against "backsliding" on reforms.