Anxiously awaited by both domestic and foreign investors, the new foreign investment law of Myanmar was enacted by the Government of Myanmar as Pyidaungsu Hluttaw (Union Parliament) law No.21/2012 on 2nd November, 2012. There are 20 Chapters and 57 sections in the law.
This statute law only prescribes vital policies, rules and regulations, and facts to facts on what is legally permitted. Additional rules and regulations will have to be enacted further for smooth implementation and to abide by this law. Details about these additional rules and regulations have not been enacted as yet. Currently the new Foreign Investment Law has been issued officially in Myanmar language and some unofficial English- language translated copies may be publicly available. There may be some deviations in interpretation of the law depending on the translator. The official translated English version of this law has not yet been approved by the Union Attorney General Office.
There are however some existing acts and laws in Myanmar which should be studied together with this new foreign investment law. Generally, these are as follows;
(1) Special Economic Zone Laws
(2) Myanmar Companies Act (1914) and Special Company Act (1950)
(3) Labour Laws
(4) Land Laws
(5) Tax Laws
(6) Intellectual Property Laws
(7) Arbitration Act
The following vital facts are important considerations for investments;
Forms of Investment
- 100% foreign investment is allowed in permitted business, joint venture (JV) with Foreigners/ Local invividual or entity/ government entities;
- Business performing under a contract as agreed by the parties (FIL Section 9).
Investment Requirements
- The investor has to form a company under existing laws;
- If it is a joint venture company, the capital ratio shall be agreed to by both parties;
- The minimum capital shall be determined by the Myanmar Investment Commission (MIC) based on the nature of business;
- If business activities are in restricted areas, it must be carried out with a local Partner and the foreign capital must be in accordance with the ratio prescribed by Foreign Investment Rules.
Formation of Myanmar Investment Commission (MIC)
- MIC Chairman is the Union Minister.
- MIC Members are experts from the relevant ministries, government departments/ organization, non-governmental organizations.
- The MIC Vice Chairman, Secretary, Joint Secretary will be appointed from the members of MIC.
- The establishment and nature of the MIC will be broadened with the involvement of experts from non-governmental organizations and entrepreneurs from the business sector.
Restricted Activities
Foreigners are prevented from holding 100% of a venture in certain sectors. The following activities are included in these restricted sectors;
- Activities that can affect traditional culture, or customs of ethnic, public health, natural resources and the environment.
- Activities related to manufacturing and services that can be done by Myanmar citizens that will be specified in the FI rules;
- Activities that involve agriculture, livestock breeding or fisheries (also the activities specified in FI Rules are included)
- Activities within at least ten miles of the boundary demarcation within the state territory except economic zones specified by the Union Government.
Foreign Employees
Investors must appoint and employ staff based on the percentage which has been determined in the formation of the company with the local partner for skilled workers, technicians and staff as follows;
- At least 25% local staff during the first two years;
- At least 50% of local staff within the next two years;
- At least 75%a of local staff in the third two year.
However, the regulator may amend the above time limit for knowledge-based enterprises. (Under section 24).
Tax Incentives & Guarantees
- 5 years tax holiday is applicable to all investors, plus additional tax incentives may be granted by the MIC;
- An exemption of Commercial Tax for export activity (Section 27 FIL);
- Exemption of customs duties for 3 years on machinery and raw materials, if granted by the MIC;
- An additional customs duty and other internal tax exemption in case of the expansion of an existing investment. (Section 27(j)).
Use of land
- Lease of land from the government or private sector is allowed for a period of land use or grant for (50) years initially which is necessary for the economic or industry depending on type and volume of investment (section 31);
- It can be extended twice additionally with 10 years period consecutively after expiration of the previously allowed under section 31, depending upon volume and type of investment.
Rights & Obligations of Investors
- Sections 17 prescribes the obligations of Foreign Investors;
- Sections 18 prescribes the rights of Foreign Investors.
Foreign Capital & Rights to Transfer
- The commission will register the name of investor according to the foreign currency accepted by the bank as foreign capital. The type of foreign capital must be described when it is being registered (Section 37);
- Repatriation or remit out the foreign capital will be designated by the commission within stipulated period upon termination (Section 38);
- The investor has the right to remit abroad through a local bank which has the right to deliver service for foreign banking activity at the prevailing exchange rate for the relevant currency (Section 39).
Administrative Penalties
MIC may award the following administrative penalties to investors who violate the provision of the law, rules, regulations, procedure, notification, order or directive or any condition of the permit:
- Warning
- Temporary suspension of tax exemption and relief
- Revocation of permit
- Black listed with the punishment of no further issue of permit.
Dispute Resolution
Any dispute arising from investment activities shall be settled amicably. If unable to settle the dispute then the following guidelines apply;
- The existing laws of the Republic of the Union of Myanmar shall be applied, unless the method of dispute settlement which has been prescribed in the contracts.
- The method of dispute settlement which as been prescribed in the contract shall be applied if noted in the contract.
Myanmar has decided to accede to the New York Convention; an alternate option is the ASEAN Dispute Settlement Mechanisms.
Conclusion
The nature of the new foreign investment law prescribes the scope of the policies and makes further reference and gives consideration of enacted rules, regulations, procedures and notifications. The objective is to inform and guide foreign investors in their business activities in Myanmar. For smooth implementation, it is recommended to professional lawyers, and seek guidance from the relevant departments and authorities on investments in Myanmar.
Ref;thefuturemyanmar
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