A Look Around ASEAN: Myanmar

Despite recent reports that Thai investment in Myanmar has stagnated,¹ the oncoming integration of the ASEAN Economic Community (AEC) in 2015 can only mean a greater flow of Thai capital into Myanmar and stronger economic ties between the two neighbors. In Myanmar, foreign investment is governed by a legal regime consisting of the Foreign Investment Law (Pyidaungsu Hluttaw Law No. 21/2012) enacted on November 2, 2012 (“FIL”), as well as the Foreign Investment Rules (Ministry of National Planning and Economic Development Notification No. 11/2013 – the “Rules”) and the Classification of Types of Economic Activities (Myanmar Investment Commission No. 1/2013 – the “Classification”) both enacted on January 31, 2013. A few salient points of this regime are as follows:

• The definition of a “foreigner” according to Section 2(e) of the FIL includes any company with so much as one share owned by a foreigner.
• Section 9 of the FIL allows foreign investment in three ways: (a) a one-hundred percent foreign owned company with permission from the Myanmar Investment Commission (MIC), (b) a joint venture between a foreigner and a citizen or government organization and (c) a business operated according to a “system” contained in a contract approved by the parties. Section 17(c) of the Rules explain that this refers to contracts such as “Build-Operate-Transfer” cooperation agreements with the government.
• The procedure to apply for permission from the MIC and the requirements for a proposal are outlined in Chapters 5 through 9 of the Rules. According to Section 20 of the FIL, a proposal must undergo preliminary review by the MIC and either be approved or rejected within 15 days. Afterwards, the actual consideration will be approved or granted within 90 days after submission. In the case where permission is granted, Section 21 requires the foreign business to sign a contract with a relevant government department.
• Section 4 of the FIL restricts or prohibits a list of businesses from foreign investment. Such businesses include those which affect traditional culture, public health, the environment, amongst other types of businesses. Section 4(f) defines a group of manufacturing and services businesses restricted to locals and is expanded upon in the Rules. Furthermore, according to Section 6, foreign investment which “can cause great effect on the conditions of security, economic, environmental and social interest of the Union and citizens” are required to apply for permission from the legislature (Pyidaungsu Hluttaw).
• The Classification further expands the list of restricted and prohibited businesses and divides them into categories of (1) prohibited businesses, (2) business allowed in the form of a joint venture with Myanmar citizens, and (3) business allowed with conditions. In regards to the third category, administrative practice in Myanmar appears to have prohibited foreign retail or wholesale trade since 2002. However, it is worth nothing that Schedule 2 of that category does allow “retail trading” if the foreign investor obtains permission from the relevant ministry. The conditions are that only a large retail outlet or department store is allowed and it cannot be in close vicinity to a local business. Furthermore, 40% local ownership is required. However, it remains to be seen if retail trading will actually be allowed in light of administrative practice.

Investing in Myanmar and other ASEAN countries can be an exciting prospect for Thai-based companies. Nevertheless, the bureaucratic regime in such countries can be particularly daunting and it is advised that potential investors obtain legal counsel when exploring opportunities in the ASEAN Economic Community as 2015 approaches.

 
_________________

¹ “Thai investment in Myanmar slowing”, 29 April 2014, The Bangkok Post.

Category: ASEAN