Trade

Myanmar could be classified as a country rich in natural and human resources because of her vast cultivable land, and a long coastline, navigable river systems, lush forests, abundant minerals, gems and literate population. What she really needs to reap the benefits of such endowment is capital for exploiting the same to her advantage and the state of the art technology accompanying it. In this regard it is evident that foreign direct investment can play a significant role. Keeping that in view the Government has taken a significant step by promulgating the Union of Myanmar Foreign Investment Law in November 1988 followed by the procedures of the said Law in the following month. In exercise of the powers conferred under section 7 of the Foreign Investment Law, the Government formed the Foreign Investment Commission (FIC) by Notification 12/88 dated December 7, 1988, with the Minister for Planning and Finance as the Chairman and a Secretary to be appointed. The Commission (FIC) was formed for the management of the Foreign Investment Law and to act as initial approving authority.

The Government then reformed the Foreign Investment Commission by Notification 4/93 dated April 21, 1993 with the two Deputy Prime Ministers as Chairman. and Vice Chairman. There are now 16 Ministers in the Commission as members and the appointed joint secretary carries out the administrative matters of the Commission. The duties and power of the Commission are to accept proposals which will promote the development activities and which is in line with the rules and regulations laid down by the State, to scrutinise the proposal with regard to the financial credibility, economic justification and appropriateness of technology. The Commission can also grant terms and conditions on issuance of permit, to monitor and evaluate foreign investment situation, relax and amend the terms and conditions previously defined, to give suggestions and recommendations to facilitate and promote foreign investment and to take necessary and prompt action in respect of issues regarding foreign investment.

With the promulgation of the Myanmar Citizens Investment Law in April 1994, the Government formed the Myanmar Investment Commission by Notification 7/94, dated May 4, 1994, with the same members. The Commission will act as authority for both foreign and Myanmar citizens investment.

Foreign Direct Investment Policy

Myanmar's policy on foreign investment is an important component of the overall restructuring and development policy of the Government. The main components of the policy are:-  

·        adoption of market oriented system for the allocation of resources. encouragement of private investment and entrepreneurial activity. 

·        opening of the economy for foreign trade and investment.

The policy objectives of the Foreign Investment Law are :-

·        promotion and expansion of exports.

·        exploitation of natural resources which require heavy investment.

·        acquisition of high technology.

·        supporting and assisting production and services involving large capital.

·        opening up of more employment opportunities.

·        development of works which would save energy consumption.

·        regional development.

To give more specific guidance to foreign investors the Foreign Investment Commission (FIC) issued a notification in May 1989 giving in detail the type of activities, covering almost all the economic activities except those reserved to be solely carried out by the State according to the State-owned Economic Enterprises Law. These activities are extraction and sale of teak, exploration and sale of petroleum, natural gas, pearls, jade and precious stones, breeding and production of fish and prawns in fisheries which have been reserved for research by the State, conservation of forest and plantation on commercial scale, postal and telecommunication services, air and railways transport, banking and insurance, broadcasting and television, electricity generating services and manufacture of product relating to security and defense. However Section 4 of the said law relaxes the reservation by providing that the Government may waive the reservation whenever necessary. These activities can be carried out by forming Joint Ventures between the State Economic Enterprises and Local or Foreign Entrepreneurs or organizations. Accordingly Myanmar Investment Commission has permitted the exploration of oil and gas and minerals with the approval of the government. In accordance with the new banking laws, the Central Bank of Myanmar has granted operating licences to 21 new domestic private banks. The Central Bank of Myanmar has also granted licences to 48 representative offices of foreign banks. The investors wishing to invest in activities not included in the list issued by Myanmar Investment Commission may nevertheless make proposals for investment. Such proposals are being considered individually by the Commission.

Foreign investors can incorporate their enterprises on a 100 per cent owned basis. As defined by the Foreign Investment Law a foreign investor who is joining with local investors must contribute at least 35 per cent of equity capital. Form of incorporation can be sole proprietorship, partnership, or limited company. Incorporation of enterprises not involving state enterprises is to be made under the Myanmar Companies Act. If the investment involves a state enterprise, incorporation must be made under the Special Companies Act.

As the private sector in Myanmar is still at an early stage of development, it may not be easy for foreign investors to find suitable local private business partners. To mitigate this problem, and also to assist Myanmar businessmen to familiarize themselves with various economic activities, the government has established a number of joint-venture corporations ( J V Cs ) with the private sector. A holding company ( The Union of Myanmar Economic Holdings Limited ) formed with the present and veteran members of the defense forces has also been set up. Foreign investors can thus enter into joint-ventures with these organizations. They can also enter into joint-ventures with existing state enterprises or co-operative societies or local private business partners, or establish their business on a wholly-owned basis.

The Law guarantees that foreign investments undertaken under the F I L shall not be nationalized. It also guarantees the repatriation in foreign currency the rightful entitlement of the foreign investor after the termination of the business. The repatriation of savings of the foreign employees engaged by the foreign investor is also allowed.

Foreign investors may hire Myanmar labour without restriction according to the existing law. Employment of foreign technical staff are not restricted. Foreign personnel may also be engaged if necessary, with the approval of the Myanmar Investment Commission. Social Security Programmes as laid down by the Social Welfare Department are to be observed.

Foreign organizations and persons are not allowed to own land in Myanmar. However, land may be acquired on long renewable lease ( up to 30 years ) and extendible on individual case basis, generally every 10 years.  

The Foreign Investment Law provides special tax incentives for foreign investors in Myanmar. These incentives are presented below:-

• in respect of any enterprise for the production of goods or services, exemption from income-tax for a period extending to 3 consecutive years, inclusive of the year of commencement of production of goods or services; in case where necessary, exemption or relief from income-tax for a further reasonable period depending upon each case may be granted;

• exemption or relief from income-tax on profits of the business if they are maintained in a reserve fund and re-invested therein within 1 year after the reserve is made;

• right to accelerate depreciation in respect of machinery, equipment, building or other capital assets used in the business, at the rate approved by the Commission;

• if the goods produced by any enterprise are exported, relief from income-tax up to 50 per cent on the profits accrued from the said export;

• right of an investor to pay income-tax on behalf of foreign employees and the right to deduct such payment from the assessable income;

• right to pay income-tax on the income of the foreign employees at the rates applicable to the citizens residing within the country;

• right to deduct from the assessable income, such expenses incurred in respect of research and development relating to the enterprise which are actually required and are carried out within the State;

• right to carry forward and set-off losses up to 3 consecutive years from the year the loss is sustained;

• exemption or relief from customs duty or other internal taxes or both on machinery equipment, instruments, machinery components, spare parts and materials used in the business, which are imported as they are actually required for use during the period of construction;

• exemption or relief from customs duty or other internal taxes or both on such raw materials imported for the first 3 years' commercial production following the completion of construction.

In case of export oriented commodities, commercial tax levied on these commodities may be exempted on application.

In addition to these incentives foreign investors will be able to lease land and immovable property at reasonable rates from the government. As Myanmar is classified as a least developed country it is also entitled to tariff privileges such as the generalized system of preferences. The incentives provided are reviewed and adjusted to be inducive and competitive with other countries.  

The application and approval procedures in practice at present are as follows:-

A promoter for foreign investment shall submit a proposal in prescribed form to the Myanmar Investment Commission. The proposal has to be supported by the following documents.

Business profile and documents supporting financial credibility (audited final accounts of a most recent year of the person or the firm that intends to make investment).

Bank recommendation regarding the business standing.

Detailed calculation relating to the economic justification of the proposed project indicating:

·        estimated annual net profit

·        estimated annual foreign exchange earnings or savings and the foreign exchange requirement for the operation

·        recoupment period

·        prospects of creating employment

·        prospects of increase in national income

·        local and foreign market conditions.

If it is a hundred per cent foreign investment, a draft contract to be executed with a State organization that is responsible for the smooth operation of enterprise in the respective field.

If it is a joint-venture, a draft contract to be entered into between the foreign investor and local counterpart.

If it is a joint-venture in the form of a limited company, draft Memorandum and Articles of Association and also a draft contract between the foreign and local investors.

The Commission issues a permit if the proposal is approved.

Limited company whether a branch of foreign principal or engaged in local joint venture, being a foreign company has to apply for permit to trade to the Ministry of National Planning and Economic Development through the Companies Registration Office.

For being granted a permit to trade the company has to be registered with Companies Registration Office under the Ministry of National Planning and Economic Development.

Enterprises whose operation involve foreign trade have to apply for registration as an exporter or importer with the Export Import Registration Office under the Ministry of Commerce.

The promulgation of Foreign Investment Law has been effective in inducing foreign capital inflow and up to end of December 1997, the Commission has permitted 293 enterprises from 23 countries. The total foreign capital participated is estimated to be US $ 6615.53 million.

Myanmar provides a rich venue for investment with her vast forest, river system with broad delta, a long coastline, mountain ranges, cultivable plains and highlands on geographical surface. Myanmar's natural resources here are still unexploited as the area of investment had been mostly in the primary sector. The emphasis now is to enhance development to the primary sector and to give priority to those investment that will develop primary product-based industries, or industries with higher value added and particularly export oriented industries. Foreign capital plays an important role in the development process and foreign investments which meet the basic criteria of export promotion, effective and efficient mobilization of natural resources, acquisition of high technology and regional development are warmly welcome.

Foreign Investment in Myanmar by Sector
( as of December 31, 1997 )  

Foreign Investment by Country of Origin
( as of December 31, 1997 )