Attention from local and overseas companies continues to grow with all eyes on the rule changes applying to companies operating in Myanmar. The changes are within the Myanmar Investment Law 2016 (MIL) and the Myanmar Investment Rules 2017 (MIR).
The Government instructed the Myanmar Investment Commission (MIC) and Directorate of Investment and Company Administration (DICA) to draft these new rules.
These changes now makes it easier to invest in Myanmar
Followers of our blogs will have seen our many reports on these changes. The new Myanmar Investment Law 2016 (MIL2016), was signed into law in October 2016 and effected in practice from 1 April 2017 at the start of the new financial year. This replaced the Foreign Investment Law 2012 (FIL2012) and Citizens Investment Law 2013. In March 2017 the Myanmar Investment Rules (MIR) were issued.
Documents have been published on the web sites of MIC and DICA with the extensive details. For example, last July the draft rules extended to 183 pages. Naturally, our blog today cannot include all these details. Do not hesitate to contact us, FocusCore Myanmar, for specific data relating to your company and or a specific trading sector or zone. These changes are good news for investors and the Myanmar economy.
Some of the most important changes include:-
MIC Endorsements (A new process)
MIC Guidance Service (A new process)
Compensation for Expropriation
Designated Development Zones
and we also include the World Bank growth forecast for Myanmar.
Myanmar Investment Commission (MIC) Permits and Endorsements
Depending on certain conditions investors may now apply to the MIC for an Endorsement or a Permit. An Endorsement is a new form of MIC approval. Previously, MIC Permits were required for all investments*.
This new Endorsement process has been introduced to reduce processing time for approvals and cover investment applications for non-restricted business activities. These Endorsements also enable investors to benefit from land use rights as well as exemptions and reliefs such as customs free duty and income tax.
Business applications with investments below US$5M in non strategic and or non restricted areas will be now be processed via an Endorsement issued by state or regional departments and DICA.
*There are businesses not allowed for completion by foreign investors, these include:-
Security and defence related manufacturing, defence related munitions production, issuance of national postage stamps, establishment of mail boxes for the official national postal service, air-traffic control services, waterways navigation pilot services, management and conservation of natural forests and forest reserves (excluding activities focussing on reduction of carbon-footprint), exploration and prospecting. Businesses exclusions also include those which may cause hazardous waste; activities which may bring technologies, medicines, flora and fauna and instruments that are still being tested abroad or which have not obtained approvals for use; planting and cultivations except for investments made for the purpose of research and development; activities which may affect the traditional culture and customs of racial groups within Myanmar; activities which may affect public health; damage to the natural environment and ecosystem.
Investment in certain sectors is only allowed as a joint venture with a Myanmar citizen or citizen owned entity. A local minimum direct shareholding interest of at least 20% is required with approval from the relevant Ministries.
Under Notification 13 if the application relates to one of the “Promoted Sectors” there is the possibility that a 100% foreign-owned business may receive an Endorsement from the MIC or state or regional committee.
Guidance for investors
A new service allows a business to request non-binding guidance on their Permit application and for example also to learn if the activity is covered on the restricted list or is in a promoted sector.
Investment projects will be approved for sectors that the Government view as important for the economic growth of Myanmar. As you will have seen in our blogs, the range of sectors is extensive and all are growing rapidly.
The businesses that do require a Permit also include:-
Businesses considered strategic to Myanmar, (i.e. technology, energy, urban development, natural resources, media, and projects with funding over US$20M); activity which could lead to environmental or local area damage; work on state owned land and or properties.
Note – There are alternative rules relating to investments in Special Economic Zones (SEZ).
Previously investors could receive a 5 year tax break and tax exemption for re-invested profits and income tax relief up to 50 per cent on profits from exports. Now, tax exemptions are only allowed on Promoted Sector Investments and Development Zones. Some elements have not been changed as benefits exist for construction machinery and also imported goods used for product production destined for export.
Previously, long term leases of up to 50 years were only possible following the issuance of an MIC Permit. Now, any investor with a Permit or an Endorsement can apply for a lease of up to 50 years. (The guidance of two extensions of up to 10 years also applies).
As stated above regarding tax concessions in Special Economic Zones, there are also alternative lease periods applicable for SEZ designated areas.
Faster timescales for applications
These changes are designed to speed up applications with now the target of 70 working days for Permit applications. This excludes time used to request and receive additional information from the investor. For Endorsement applications the target is 40 days.
Compensation for Expropriation
Now compensation is recognised with procedures to invoke this action if certain project actions are deemed to be a risk, for example if a development is contrary to the public interest. The guidelines layout a process to be followed, stipulating that fair and adequate compensation should be paid to the investor.
This comes together with a new heading “An Investment Guarantee”. This states that the Government will not initiate expropriation steps that “could lead to the cancellation of a project”.
There is also a grievance procedure in place with the MIC, designed to resolve any disputes without recourse to legal process by the aggrieved parties.
Designated Development Zones
There are three zone classifications for areas and townships. These specify conditions allowing income tax exemptions.
Zone 1. These areas are the less developed regions and allow income tax exemption for 7 years.
Zone 2. Areas allowing 5 years income tax relief.
Zone 3. Areas allowing 3 years income tax relief. In this category there are zones in Mandalay and
There are categories and sub categories of various activities, including:-
Telecommunications; Information Technology; Electricity generation; Renewable energy; City development; Hotels and tourism; Construction of roads, bridges, railways, sea and river ports and dry ports. Health services; Scientific Research; Airport operations; Education services; Agriculture, forest conservation and plantation, livestock production; Transport services; Manufacturing (excluding cigarettes and alcohol); New industrial zones; New urban areas.
For many years investors were commenting on the golden opportunities arriving in Myanmar. These changes greatly enhance economic growth and make Myanmar one of the fastest growing areas in the world.
World Bank growth forecast for Myanmar
The World Bank has published forecasts for Myanmar’s economic growth at 6.4 percent
for 2017/18. In the previous fiscal year growth was 5.9 percent. Also, Government forecasts project GDP to grow at 6.8 percent. Foreign direct investment was over US$4.5 billion as at the end of November 2017.
FocusCore opened in Myanmar in early 2014 and we have seen ongoing growth not only in client numbers but also rapid changes for the population. Growth of job vacancies, and overall prosperity and people buying power. If you are considering investing in Myanmar contact us today. If you are not, consider all these details that highlight this once in a lifetime opportunity to join this expanding economy.