Authors: Eitra Myo & May Myat Thu
Change in Myanmar’s political scene opens doors for the economy
Myanmar’s political reform from a military regime to a democratic government started in 2011 and the transition quickened after the landslide victory of the National League of Democracy (NLD) under the leadership of Daw Aung San Suu Kyi in the 2015 general election. The positive changes in political situation enabled Myanmar to become the fastest-growing market in Asia, and sanctions against the country are also being lifted by European Union (“EU”) member states and other countries.
Myanmar has a population of over 52 million people and has direct access to China, India, ASEAN and other international markets through ports along the Bay of Bengal and Andaman Sea. According to the World Bank, the GDP of the country increased by 6.5% in the 2016-2017 fiscal year and is estimated to maintain a 7% annual growth rate for another 3 years. This growth is driven by the developments and investments in telecommunication, extractive industries, oil and gas, construction, manufacturing and service industries (tourism, healthcare, and education, etc.) In 2017, Foreign Direct Investment (“FDI”) in Myanmar amounted to almost USD 7 billion, with China being the largest investor followed by Singapore, Thailand and Hong Kong. In particular, China has cumulatively invested about USD 19.94 billion into Myanmar since 1989.
The Government, both past and present, has focused on developing the country’s business environment to attract foreign capital and expertise especially in the infrastructure sector. Myanmar requires a significant level of investment in infrastructure across all sectors including power (hydropower, renewables, and thermal), Transport (roads, rail, ports, deep seaports and airports), urban infrastructure (water supply and distribution, waste water treatment, sewage and solid waste disposal) and the Special Economic Zones (“SEZ”) (Thilawa, Dawei, and Kyaukphyu). Investment incentives, simplified processes and industrial facilities at international standards have been designed to attract foreign investors.
In order to encourage and facilitate investments into Myanmar, the new government has enacted new and revised various existing laws. The new Myanmar Investment Law (“MIL”) was enacted in October 2016 to replace the old Myanmar Investment Law and Foreign Investment Law. The new Investment Law provides attractive terms such as tax exemptions and long-term land lease rights. While the previous Myanmar Investment Rule enforced many restrictions on land titles, assessment period and local employment requirements, the revised Rule announced on 31 March 2017 removed many initial investment barriers faced by both local and foreign investors.
The new Myanmar Companies Law was enacted in December 2017 and will be enforced in August 2018. This new law will replace the existing Companies Act that had been in force since 1914. Under the new Companies Law, a company holding no more than 35% of foreign shareholding shall still be defined as a Myanmar Company – a far cry from the previous requirement of being 100% owned by Myanmar citzen(s). This will allow foreign investors to invest in Myanmar companies that had been restricted to foreign investors.
Banking & Finance
In the financial sector, the Government and Central Bank of Myanmar have been taking steps to reform and develop the financial services environment and framework. After years of isolation and under-development, the banking sector has been reformed with the introduction of basic banking services in the last few years. In parallel with the reform and development, steps are being taken to improve regulations in banking and financial services to raise investors’ confidence. The Financial Institutions Law 2016 was enacted on 26 January 2016, and by 2018, 4 state owned banks, 24 private banks, 25 financial companies, 13 foreign bank branches and 48 representative offices of foreign banks and Finance Company have received licenses to operate in Myanmar.
Collaborations Regionally and Internationally
Other attempts by the Government to increase FDI in Myanmar include collaborations regionally and internationally. As a member of ASEAN, Myanmar is a party to the ASEAN-China Free Trade Agreement, the ASEAN-Korea Framework Agreement, the ASEAN-Japan Agreement, the ASEAN-India Framework Agreement on Comprehensive Economic Agreement and the Agreement Establishing ASEAN-Australia-New Zealand Free Trade Area. Negotiations for an EU-ASEAN Free Trade Agreement are also underway. In June 2013, Myanmar became part of the EU’s Generalized System of Preferences to benefit from lower duties on exports. A Trade and Investment Framework Agreement was also signed with the United States in May 2013. Myanmar has also signed Bilateral Investment Treaties with China, India, Israel, Japan, Kuwait, Laos, the Philippines, South Korea, Thailand and Vietnam. These agreements will enable Myanmar to experience a rise in trade flow and significant development in the economy.
In conclusion, Myanmar offers tremendous investment opportunities to foreign investors and this transitional period is the best time to invest or start your business in the rapidly developing economy of Myanmar. Although there are legitimate concerns raised by foreign investors relating to human rights issues due to political instabilities in some areas of the country, the government is doing its best to encourage and facilitate FDIs in Myanmar and the inflow of foreign partners is always welcomed by local entrepreneurs and the larger society alike.
If you want to know more general or legal information about investing/setting up company in Myanmar, please do not hesitate to contact us.
Vanessa Ng, COO
+65 6535 8100
Eitra Myo, Legal Manager
May Myat Thu, Corporate Affairs Executive
Written by: Eitra Myo & May Myat Thu