IntroductionThis month has marked some significant milestones for Myanmar (also known as Burma) which, as a former pariah state, has recently emerged as the new investment hotspot in Asia due to its rich natural resources and untapped markets.
Last month, Barack Obama became the first United States President to visit Myanmar. Obama’s visit follows on from the success of Myanmar’s significant political reforms and the lifting of US and EU sanctions. These developments will no doubt reassure US investors looking at this market.
Among these momentous changes, the long awaited new foreign investment law (“FIL”) was approved earlier this month by Myanmar’s President, Thein Sein.
Overview The FIL replaces the previous foreign investment law of 1988 (“1988 Law”) and ushers in policies and provisions aimed at encouraging foreign investment for the purposes of jumpstarting the development of the wealth, infrastructure and productivity in Myanmar.
The key changes to the FIL include a wider range of permitted forms of investment, greater flexibility on the structuring of joint ventures, enhanced tax and investment incentives, and an enhanced legal framework for land use, employment, foreign currency and the resolution of investment disputes.
The relevant regulatory authority under the FIL is the Myanmar Investment Commission (“MIC”) which functions under the direct control of the Myanmar Union Government Board. The MIC has broad powers to implement the objectives of the FIL, including the discretion to approve a foreign investment and dictate the terms of such approval. The MIC’s decisions in this regard are final and conclusive.
The MIC is expected to promulgate implementing regulations under the FIL within the next three months. These regulations may assist in determining the scope and range of the MIC’s wide discretion.
Whilst there remains some uncertainty surrounding the practical implementation of these changes, the FIL has been favourably received by foreign observers and the larger international investment community.
This purpose of this article is to summarise the key changes brought in by the FIL as well as identify the potential areas of ongoing uncertainty under the FIL and the process of foreign investment in Myanmar generally.
The areas where the FIL will continue to regulate foreign investment are:
However, these timeframes are discretionary and could be extended by the MIC.
Ongoing UncertaintyAlthough the FIL has been hailed as a positive step for investors, it still contains a number of broadly drafted or ambiguous provisions. The MIC’s interpretation and implementation of those provisions in practice will have a considerable influence on how the FIL and the MIC will impact foreign investment and the operation of businesses in Myanmar.
The policy position likely to be taken by the MIC in the exercise of its discretion regarding certain investment licence issues, such as the scope of the initial capital contribution to be made, is uncertain. It is also unclear what checks and balances will come into play to ensure that the MIC exercises its discretion consistently and that its decision making processes are transparent and free from influence. The commitment of the Myanmar Government to developing a consistent policy approach by the MIC will be critical to the MIC’s success.
Further, the FIL does not address the position of investments made under the 1988 Law. The FIL has retrospective application; however, it is not clear whether the “benefits” it provides, such as tax incentives, will be available to those investments initially made under the 1988 Law.
These issues can be managed and minimized by enlisting local assistance on the ground in Myanmar which will operate in a transparent, efficient and effective way.
Our K&L Gates Singapore office has the expertise and experience to assist clients in relation to the FIL and guide them through the potential minefield of issues arising in this jurisdiction. Should you have any questions about the FIL and/or any aspect of doing business in Myanmar, please contact us below.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. Any views expressed herein are those of the author(s) and not necessarily those of the law firm’s clients.