Myanmar Unveils New Investment Framework

Yangon, Myanmar skyline at Shwedagon Pagoda.

“Yangon, Myanmar Skyline at Shwedagon Pagoda” by SeanPavonePhoto/stock.adobe.com

Myanmar Unveils New Investment Framework

Myanmar’s first democratic government in half a century has received more criticism than complements for its handling of the economy and business sector during its first year in power. But recent legislative and regulatory changes have also brought new opportunities and greater clarity for foreign investors.

In a notification last month, the Myanmar Investment Commission vastly reduced the number of ventures that require a local partner – cutting a list of over 90 activities down to just 22. The new list arrived a few weeks after the Ministry of Planning and Finance published the rules accompanying the country’s new unified Investment Law.  Foreign investors now have a much clearer picture of what areas are open to them, and how the new investment procedure works.

In the agricultural sector, for example, commercial livestock farming and poultry farming no longer require joint ventures, nor does the “production of seasonal crops”. The import, production, domestic marketing and re-export of seeds, and the production and export of hybrid seeds are also open to wholly foreign owned firms, as is the manufacture, distribution and export of pesticides and fertilizers. Approval from the Ministry of Agriculture, Livestock and Irrigation for all these activities is still required, however.

The new government is heavily focused on building a productive and modern farming industry, which is in huge need of better quality inputs such as seeds and fertilizer. Agriculture is classified as a “promoted sector” under the new Investment Law, which means that many agricultural activities open to foreign investment are eligible for a corporate income tax exemption. The length of the exemption, which can be three, five or seven years, depends on the geographic location. Animal farming, cultivating a variety of crops, milling, and the production of fertilizer and insecticide all appear on the promoted list.

Healthy competition

Health services are another promoted sector where various activities are eligible for the income tax exemption. The operation of private clinics and hospitals are all now open to wholly foreign owned firms, dependent on approval from the Ministry of Health, and also eligible for the income tax break. The manufacturing of “traditional drugs” is also now open to foreign investors without a joint venture, but is not on the list of promoted activities.

The volume of FDI into Myanmar’s healthcare industry is thought to be minimal, but as the government does not track approved or actual investment into healthcare as a distinct sector data is scare. Foreign healthcare firms have started to show interest in Myanmar, however. Indonesia’s Lippo Group has formed a local partnership with First Myanmar Investment to open a series of hotels. Thailand’s N Health Asia and Bahosi Hospital have joined with Myanmar firm Sea Lion to launch a high-end medical laboratory, and other Thai hospitals have set up referral clinics.

Yangon region chief minister U Phyo Min Thein was quoted by local media in March stating that the country spends over $600 million on overseas medial expenses each year, and that private investment was necessary to help upgrade Myanmar’s health facilities.

In the oil and gas sector, foreign firms no longer need to form a joint venture with the Ministry of Electricity and Energy for a range of activities including building offshore platforms, refinery and pipeline operations, and the import, export, distribution or sale of petroleum products. These activities are now open to 100% foreign owned companies, although they still require approval from the ministry.

Myanmar continues to make progress in developing its oil and gas infrastructure. Puma Energy Asia Sun, a joint venture between Puma Energy and local firm Asia Sun Energy, has opened the country’s first international standard petroleum products terminal near the Thilawa special economic zone. In addition to supplying commercial fuel and jet fuel, the new terminal is the only source of international standard bitumen in bulk, in a nation badly in need of road repair.

A cosmetic change

The list of activities completely off limits to foreigners has also been altered. Some ventures that under the old rules were listed as requiring a joint venture and permission from a relevant ministry are now totally off limits to foreign investment. But in practice, these are mainly in areas like postal services where the ministry in question would never have allowed foreign participation. 

Other changes to the off limits list include barring international investors from relatively minor activities, including providing tour-guide services and pet care. Perhaps more significantly, the manufacturing of soaps and cosmetics now require a joint venture. The absence of any cosmetic sector activities from previous MIC lists was conspicuous, and the Myanmar Cosmetics Association (MCA) asked the commission to add a joint venture provision last year.

Senior figures in the MCA have, however, welcomed the prospect of partnering with foreign firms to modernize the industry. The country’s Food and Drug Administration, which includes cosmetics in its remit, is also making efforts to set up new branches and better address safety issues in food, drugs and cosmetics.

The latest notification also bars foreigners, even with a joint-venture, from operating mini-markets or convenience stores with a floor area less than 10,000 square feet. But this is the only restriction the MIC places on retail and wholesale services for foreigners. As long as the floor area criterion is met, retail is now open to international investors with approval from the Ministry of Commerce.

Help with hurdles

While the new MIC notification broadens the range of activities that do not need a joint venture, the new Investment Law aims to make the investment process more straightforward.

For projects not deemed strategic, investors no longer require a full MIC permit but a simpler MIC approval. Ministry approval is still necessary for many ventures, and this has been a frequent headache for investors in the past because each ministry has its own, often opaque, rules. But the MIC is hoping that new procedures will prevent it being a hurdle in the future.

Investors no longer need to go directly to a ministry for approval. The commission is responsible for the process, and each ministry has a designated senior official that liaises with the MIC. If a ministry fails to reply to an MIC request for an investment approval by a set deadline, the MIC intends to interpret silence as approval. If a ministry does attempt to stymie a legitimate investment application for illegitimate or unclear reasons, an investor should theoretically have recourse to the investor grievance mechanisms contained in the new Investment Law.

The MIC also aims to notify investors whose applications has been rejected within 15 days, and will provide reasons in each case.

Grievance mechanisms have yet to be tested, and individual ministries may vary in how responsive and acquiescent they are to investment proposals. States and regions will be able to approve investments below $5 million, but may take time to build the capacity to process applications. Nonetheless, Myanmar now has a clear investment framework that means potential investors can focus more on their business case and less on regulatory uncertainty.

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