Trade & Investment Environment in Myanmar

U Aung Khin Myint Joint Secretary General www.captaung.com 9 May 2012

Outline
Myanmar in Brief

Policy and Economic Landscape

Trade Environment Investment Laws of Myanmar

Tax Incentives under the Foreign Investment

Law Special Economic Zones in Myanmar Where & Why Myanmar?

The Republic of The Union Of Myanmar

The Land: The largest country on the mainland of South east Asia. Total land area: 676,577 sq. km
50%
INDIA
KACHIN STATE

CHINA

SAGAING DIV ISION

mountains and (northern and eastern)

forests

BANGLADAHS
CHIN STATE Y A L A N D N IO A IS M V I D MAGWAY DIVISION KAYA STATE BAGO DIVISION SHAN STATE

Total coastline: 2,832 sq.km

Total international borders of 5,858 km

Human Resource: 60 million (2010) Growth Rate: 1.84% Literacy Rate: 90 %

B A Y O F B A N G L

LAOS THAILAND

Nay Pyi Taw

M K A YANGON O Y AYEYARWADY DIVISION N IN S S DIVISION T T A A T T E

GDP: 19,000 in billion Kyat (2009-10) Yangon GDP per capita: 571 thousand Kyats (2009-10)
ANDAMAN SE A

T A DN IV IN IS T H IO A NR Y I

Policy and Economic Landscape in Myanmar

Changes in Local : Changes in Region :

Policy Reforms

2015 AEC and AFTA

Kyaukphyu SEZ - to be developed

SEA GAMES 2013

ASEAN Chairmans hip 2014

Dawei SEZ- being developed Thilawa SEZ - in the process

Strategic Potential, GMS Economic Corridors, Deep Sea

Ports Special Economic Zones, Special Industrial Zones (Pa-an in Karen State) and Local Industrial Zones

POLAND

MYANMAR

GDP - composition by

sector: agriculture: 3.4% industry: 33.6% services: 63% (2011 est.) Labor force: 17.93 million (2011 est.) country comparison to the world: 34 Labor force - by occupation: agriculture: 17.4% industry: 29.2% services: 53.4% (2005)

GDP - composition by

sector: agriculture: 43% industry: 20.5% services: 36.6% (2011 est.) Labor force: 32.53 million (2011 est.) country comparison to the world: 19 Labor force - by occupation: agriculture: 70% industry: 7% services: 23% (2001 est.)
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2013

Trade Environment

13

Major export items

Natural Gas

Jade
Rice Pulses & Bean

Fish
Garment Timber Rubber Corn Sesame seed

Major Export Commodities in 201112

Others, US $ 342 mil Agricultural Export, US$ 2374 mil

Animal Products, US$ 91 mil

Industrial Goods, US$ 4047 mil

Marine Products, US$ 706 mil Base Metal Timber, US$ 642 mil and Ores, US$ 897 mil

15

Source: Ministry of Commerce

Top Ten Export Items of Myanmar (2010-2011)

No
1 2 3 4 5 6 7 8 9
16

Items Natural Gas Jade Matpe Garment Fish Rubber Teak Log Green Mung Bean Hardwood Log

Value ( US Dollar in Million) 2522.530 2204.926 458.635 381.058 305.992 302.010 292.257 291.348

282.021 194.426

10

Rice

Major import items

Petroleum Products Machines and Machineries Iron and steel construction material Motor Vehicles and spare parts Palm Oil Pharmaceutical Products Fertilizer Plastic Raw Materials Chemical Products

Major Import Commodities in 201112

Consumer Goods, US$ 1251 mil

Capital Goods, US$ 3722 mil

Intermediate Goods, US$ 4081 mil

18

Source: Ministry of Commerce

Top Ten Import Items of Myanmar (2010-2011)

No Items Value (US Dollar in Million)

1 2 3 4 5 6 7 8 9

Petroleum Products Machinery & Spare Parts Iron & Steel Construction materials Plastic Raw Materials Palm Oil Vehicles & Spare Parts Pharmaceuticals Ships, Boats Cement

1462.954 873.711 430.350 202.062 198.762 197.083 188.322 180.353 167.805

10

Fertilizers

162.563

Investment Laws of Myanmar

The Union of Myanmar Foreign Investment Law (FIL) was enacted on 30 November 1988. The Union of Myanmar Special Economic Zone Law was enacted in January 2011 The Dawei Special Economic Zone Law was also enacted in January 2011 subsequently.

FOREIGN INVESTMENT OF PERMITTED ENTERPRISES AS OF (31/3/2012)

Sr. No
Permitted Enterprises Particulars No. Approved Amount %

1 2 3 4

China Thailand Hong Kong Republic of Korea

34 61 38 49

13948.896 9568.093 6308.495 2941.289

34.27 23.51 15.50 7.23

5
6 7 8 9 10 11 12 13

U.K*
Singapore Malaysia France U.S.A Indonesia The Netherlands Japan India

52
72 41 2 15 12 5 24 6

2759.785
1804.013 1026.961 469.000 243.565 241.497 238.835 216.220 262.000

6.78
4.43 2.52 1.15 0.60 0.59 0.59 0.53 0.64

14
15

Philippine
Russia Federation

2
2

146.667
94.000

0.36
0.23

Investments in Myanmar
16000 14000 12000 10000 8000 6000 4000 2000

Permitted Enterprises No.

Permitted Enterprises Approved Amount

Foreign Investment of Permitted Enterprises as of (31-3-2012) (US$ in Million)

Permitted Enterprises Sr. No. Particulars

No. 5 109 66 164 45 19 25 16 3 7 2 6

467

Approved Amount 18873.720 14063.072 2814.360 1760.701 1064.811 1056.453 324.358 313.272 193.113 173.101 37.767 23.686
40699.048

% 46.37 34.55 6.92 4.33 2.62 2.60 0.80 0.77 0.47 0.43 0.09 0.06
100.00

1 2 3 4 5 6 7 8 9 10 11 12

Power Oil and Gas Mining Manufacturing Hotel and Tourism Real Estate Livestock & Fisheries Transport & Communication Industrial Estate Agriculture Construction Other Services
Total

Investments in Myanmar
Hotel and Real Estate 2% Tourism 3% Manufacturing 3% Mining Transport & Industrial Communicatio Estate n 1% 1% Agriculture 1% Livestock & Fisheries

6%
Power 49%

Oil and Gas 34%

Yearly Approved Amount of Foreign Investment

19998.965

6065.675

4369.481

2800 1400 449 280 30 100 400 700 800 40 58.150 217.688 19.002 86.948 91.170 158.283 984.764 719.702 329.580 205.720

Form of Investment
Foreign investor can set up

their business either in the form of: wholly foreign-owned (100% foreign) Joint Venture In all joint ventures, the minimum share of the foreign party is 35% of the total equity capital. US$ 500000

100% Foreign Owned Any Myanmar Partner An Individual A Private Company A Cooperative Society State Owned Enterprise

35%

Manufacturing
Both -in Kind or in Cash

US$ 300000

Services

Duties and Power of MIC

MIC was formed on 3th August, 1994 Duties and Power of MIC to scrutinize the proposal to check the proposal is financial credibility, economic justification of the business enterprises and appropriateness of technology to ensure that the proposed project is environmentally friendly to grant approval by the issuance of a Permit with stated terms and conditions to monitor and evaluate foreign investment after approval has been given to relax and amend the terms and conditions previously defined if necessary to give suggestions and recommendations ,where necessary to facilitate and promote foreign investment to take necessary and prompt action in respect of issues regarding promotion of foreign investments

APPLICATION PROCEDURES FOR FOREIGN INVESTMENT

Submit proposal to the Myanmar Investment Commission (MIC) Preliminary appraisal of proposal together with the comments from the relevant Ministries Latest audited financial accounts

Bank reference and recommendation of investors business standing

Economic justification of the proposal project Approval from the MIC, Trade Council and the Cabinet

Draft Contract to be executed with the State organization for the wholly foreign owned

MIC grants and approves issuance of a Permit to carry out business

Draft contract between the partners for the joint-venture

Apply for Permit from Ministry of National Planning and Economic Development

Draft land lease agreement

Draft Memorandum and Articles of Association Register the enterprise with the Registrar of Companies An application for exemptions and relief defined under Section 21 of the FIL

Tax Incentives under the Foreign Investment Law

The MIC 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 same 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.

Tax Incentives under the Foreign Investment Law (Cont.)

Exemption/Relief of Customs Duties
- Imported machinery & equipment - Imported raw material - construction period - first 3 years of commercial production

Right to Transfer Foreign Currency

The investor may transfer the following currencies abroad through the bank prescribed by the Commission in the relevant foreign currency : (a) foreign currency entitled to by the person who has brought in foreign capital; (b) foreign currency permitted for withdrawal by the Commission to the person who has brought in foreign capital; (c) net profit after deducting relevant funds relating to various taxes from the annual profits received by the person who has brought in foreign capital; (d) legitimate balance after causing to pay the taxes due and after deducting living expenses for himself and his family in the manner prescribed, out of the salary and lawful income obtained by the foreign service personnel by performing service in the State; (e) money entitled to the investor after liquidating the invested business;

(f) damages obtained lawfully by the investor.

Guarantees
The FIL provides an irrevocable state guarantee that an

enterprise permitted by MIC under the FIL shall not be nationalized during the permitted period or the extended period (if any).
It also provides repatriation of profit (after all deduction of all

taxes and the prescribed funds) as well as legitimate balance of salary and lawful income of foreign personnel (after payment of living expenses and taxes).
In the case of termination or dissolution of the business,

repatriation of foreign capital can also be allowed.

Change in Progress
Reorganization of MIC Revising of Foreign Investment Law

Release of Notifications
Streamlining Procedure

Simplifying Formality
Setting up of OSS

29.3.12

Reorganization of MIC
According to the Notification No(82/2011),in order to monitor the provisions of the

existing Investment Laws ,the government of the Republic of the Union of Myanmar reorganizes the MIC as follows:
Union Minister Ministry of Industry Union Minister Ministry of Rail Transportation Union Minister Ministry of Finance and Revenue Union Minister Ministry of Electric Power No(1) Attorney General of the Union Union Attorney Generals Office Union of Minister Ministry of National Planning and Economic Development Deputy Minister Ministry of Rail Transportation Chairman

Member Member Member Member Secretary Joint Secretary

Revising of Foreign Investment Law

In order to be adaptable to the advancing era and develop the whole economic

infrastructure, FIL is being revised .

Existing Law
No specific definition on investment No specific definition on grantee of land lease or grantee of land used Not mentioned on restricted activities Export Promotion No description on rights and obligation of investor 3 years tax holidays No description on land use Official exchange rate No description on administrative penalty No description on dispute settlement

Revised Law
Specific definition on investment Specific definition on grantee of land lease or grantee of land used Mentioned on restricted activities Export promotion and import substitution Description on rights & obligation of investor 5 years tax holidays Description on land use Market exchange rate Description on administrative penalty Description on dispute settlement 29.3.12

Notifications
With the aim of facilitating investment procedures and getting better opportunities in doing business, Government issues two notifications relating to Land used and Foreign Currency.
The Transfer of Immoveable Property Restriction Law (Pyithu Hluttaw Law No. 1, 1987) - No person shall lease to a foreigner or a company owned by a foreigner immoveable property for more than a year at a time Republic of the Union of the Myanmar Notification of Concession Rights for Land Used relating to FIL (Notification No. 39/2011) - Investor has a right of the grantee of land lease or land used from government owned land, governmental department, organization owned lands and citizen owned private lands
29.3.12

Notifications
With the aim of facilitating investment procedures and getting better opportunities in doing business, Government issues two notifications relating to Land used and Foreign Currency.
Republic of the Union of the Myanmar Notification of Relating to Foreign Currency relevant with FIL (Notification No. 40/2011)

Existing FIL

-Foreign capital brought in has to be evaluated at official exchange rate

-No rights to make account transfer for payment transition

-Foreign capital brought in can be exchanged with prevailing market price -Investor has the rights to make account transfer for payment transition
29.3.12

Myanmar starts new FX regime at 818 kyat per dollar (2 April 2012)

Streamlining Procedure
Reduce unnecessary documents in formality
Enhance coordination with investment related ministries Provide technical suggestion to investors Promote public private relations Investors can get investment permit within two weeks if

documents are completed.

Setting up of OSS
One Stop Service in company registration has been provided

since 18th May, 2011 and if the documents are completed, the process is finished within one day. For clear information and transparency purpose to the Myanmar citizens and foreigners who inquire about the investment information in Myanmar, One Stop Services Team has been formed since July 2011. OSS comprise senior officials from Myanmar Investment Commission, Ministry of Finance and Revenue, Ministry of Commerce and Ministry of Construction. OSS Meeting is held on every Friday for answering the queries of investors, scrutinizing the investment proposals and assisting to solve the difficulties on investment issues, etc.

Incorporation of Company in Myanmar

Under section 27 A of the Myanmar Companies Act, a

foreign company, whether a hundred percent owned or a joint-venture and branch/representative office, is required to obtain a Permit and Registration.
However, a joint-venture with the state equity formed

under Special Company Act 1950 is exempted from obtaining a Registration.

Incorporation of Company in Myanmar (Requirements)

1) Company Name and Address in your country 2) Intended activities to be performed 3) At least two people of their passport endorsed

by Myanmar Embassy 4) Each Peoples Bank confirmation letter mentioned the balance of amount showing at least USD 50,000 (for services Company) and at least USD 170, 000 ( for Industrial Company) from their bank endorsed by Myanmar Embassy
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Branch/representative office (Requirements)

1)

2)

3)

Instead of the companies Memorandum and Articles of Association, a copy of the Head Office's Memorandum and Articles of Association or of the Charter, Statute or other instruments constituting or defining the constitution of the company, duly notarized and consularized by the Myanmar Embassy concerned in the country where the company is incorporated. The Annual Report for the last two financial years (or) if it is the copies of the Head Office Balance Sheet and Profit and Loss accounts for the last two financial years, it is to be notarized and consularized by the Myanmar Embassy concerned in the country where the company is incorporated. Where the original Memorandum and Article of Association and other relevant documents are not in English language, authentication of the translation into English.

Promoted Fields/ Sectors

Agriculture Livestock and Fishery Forestry Mining Industry (Foodstuff, Textile, Personal Goods,

Household Goods, Leather Products and the Likes, Transport Equipment, Building Materials, Pulp and Paper, Chemicals, Chemical Products and Pharmaceuticals, Iron and Steel, Machinery and Plant) Construction Transport and Communication Trade
Economic activities mentioned in section 3 of the

State-owned Economic Enterprises Law, provided permission has been obtained under section 4 of the said Law.

Special Economic Zones in Myanmar

Dawei Special Economic Zone Thilawa Special Economic Zone Kyaukphyu Special Economic Zone

- being developed - in the process - to be developed

Special Economic Zones in Myanmar

Kyauk Phyu

Yangon Thilawa

Dawei

Dawei SEZ Project Location

Kunming

India

Middle East / Europe

Dawei
Africa

Asia Regional Hub

Strategic Location

Kunming

Chennai

Dawei

Southern Economic Corridor & Indian Ocean Gateway

In the SEZ plan, SEZ and industrial zones will be as follows; Special Industrial Zone (for FDI)- 2300 acres Local Industrial Zone- 430 acres Singapore Myanmar Development (SINMARDEV) Industrial Zone -247 acres Sea ports and container yard Thilawa Special Industrial Zone 3,170 acres

Thilawa SEZ Project Location

Yango n

Where Myanmar is?

On the right track politically and economically

On the runway to take off which ensures the benefit for investors Amid abundant opportunities

Why Myanmar?

To enhance economic relation through investment which will

trigger win-win cooperation To expand benefit through locational advantages To promote business through diversified opportunities

Welcome your Investment! Ready to Assist!

Thank You Very Much For Your Kind Attention!