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Investment In Myanmar

Introduction

Myanmar adopted the market oriented economic system in the year 1988 after adopting the centralized planning economic system for more than two decades. Substantial stabilization and reform measures had been undertaken to be in line with the new economic system. The initial step taken towards a more liberalized economy is to allow foreign direct investment and to encourage the private sector development. In the area of legal framework one of the first laws on investment promulgated by the state Law and Order Restoration Council is the Union of Myanmar Foreign Investment Law, promulgated on 30th November 1988 to induce foreign investment and to boost investment particularly in the private sector.

Foreign Investment Environment

Myanmar's foreign direct investment policy is a component of the overall restructuring and development policy of the Government. The main components of the policy are:

(a) adoption of market oriented system of the allocation of resources.
(b) encouragement of private investment and entrepreneurial activity.
(c) opening of the economy for foreign trade and investment.

The objectives of the Union of Myanmar Foreign Investment Law are:

(a) promotion and expansion of exports,
(b) exploitation of natural resources, which require heavy investment,
(c) acquisition of high technology,
(d) supporting and assisting production and services involving large capital.
(e) opening up of more employment opportunities,
(f) development of works which would save energy consumption and
(g) regional development.

In order to oversee and administer the Foreign Investment Law, the Myanmar Investment Commission (MIC) was formed and it acts as initial approving authority for investment proposals. The Directorate of Investment and Company Administration (DICA) serves as the Secretariat of MIC.

Foreign investors can set up their business either in the form of a wholly foreign-owned or a joint venture with any partner (an individual, a private company, a cooperative society or a state-owned enterprise). In all joint ventures, the minimum share of the foreign party is 35 percent of the total equity capital.

The minimum amount of foreign capital required to be eligible under the Foreign Investment Law is:

- For an industry                          US$ 500,000

- For a Services organization        US$ 300,00

Economic activities allowed under the Foreign Investment Law cover almost all sectors of the economy. It has been notified by the Myanmar Investment Commission (MIC). Any economic activity not included in the notification can be considered individually.

The State-owned Economic Enterprises Law defines 12 economic activities in which private investment is restricted and are reserved to be carried out solely by the State. However, according to Section 4 of the said law, the Government may in the interest of the State, permit by notification to carry out such activities.

6. Tax Incentives under the Foreign Investment Law

(i) Exemption from income tax for 3 consecutive years beginning with the year in which the operation commences    and a further tax exemption or relief for an appropriate period in case if its considered beneficial for the State.
(ii) The Commission may also grant:-

- exemption or relief from income tax on profit which is reinvested within one year.
- relief from income tax up to 50 percent on the profit from exports.
- right to pay income tax on behalf of the foreign employees and to deduct the from the assessable income of the enterprise.
- right to pay income tax of the foreign employees at the rate applicable to the citizens of Myanmar.
- right to deduct the research and development expenditure.
- right to accelerate depreciation.
- right to carry forward and set off losses up to 3 consecutive years, from the year the loss is sustained.
- exemption of relief from customs duty and other taxes on:-

(a) imported machinery and equipment for use during the construction period.
(b) imported raw materials for the first 3-years commercial production following the completion of construction.

7. Application Procedures for Foreign Investment

A promoter for foreign investment must submit a proposal in prescribed form to the Myanmar Investment Commission for consideration of issuing a permit. With the Proposal the following must be attached.

(i) Documents supporting financial credibility (audited final accounts of a most recent year of the person or the firm that intends to make investment).
(ii) Bank recommendation regarding the business standing.
(iii) Detailed calculation relating to the economic justification of the proposed project indicating inter alias:-

- estimated annual net profit.
- estimated annual foreign exchange earnings or savings and foreign exchange requirement for the operation.
- recumbent period.
- prospects of creation employment.
- prospects of increase in national income.
- local and foreign market conditions and the requirement, if any, for local consumption.

(iv)  If it is a hundred percent foreign investment, a draft contract to be executed with an organization determined by the ministry concerned.
(v)   If it is a joint venture, a draft contract to be entered into between the foreign investor and local counterpart.
(vi)  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.
(vii)  Other related draft contracts are also to be submitted together with the proposal.
(viii) The promoter may apply for the exemptions and relief from taxed stated in Chapter 10 Section 21 of the Union of Myanmar Foreign Investment Law.

(i)  A person who has brought in foreign capital can transfer the following:-

- foreign currency entitlement of him.
- net profit after deducting all taxes and provisions.
- foreign currency permitted for withdrawal by the Commission which may include the value of assets on the winding up to business.

(ii)  A foreign employee can transfer his salary and lawful income after deducting taxes and other living expenses incurred domestically.

Guarantee

Enterprises operating under the Foreign Investment Law shall have the State guarantee against nationalization and expropriation.

9. Importing and Exporting

An enterprise permitted under the Foreign Investment Law has to be registered as exporter/importer upon business requirement with the Export Import Registration Office under the Directorate of Trade, Ministry of Commerce.

The following persons or enterprises can be registered as exporter/importers:-

(a) A citizen or an associate citizen or a nationalized citizen of the Union of Myanmar if the applicant is a sole proprietor.
(b) Partnership firms
(c) Limited companies, inclusive of foreign companies and branches or joint ventures formed under      the Myanmar Companies Act 1914 and Special Company Act 1950.
(d) Co-operative societies, registered under the Co-operative Society Law 1992.

Myanmar products can be exported with the exception of some selected items of restricted items under the export license. All goods which are not prohibited by the respective Government departments can be imported under the import license.

Permitted foreign investment enterprises can import the following without import licenses.

(a) Capital investment items imported as foreign capital during the construction and initial investment period.
(b) Raw materials required for the first three year's commercial production.

Import under open General License (OGL) is also allowed to those organizations permitted under the Foreign Investment Law.

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