business law chapter-5..foreign investment.pdf

8/14/2019 Business Law Chapter-5..Foreign investment.pdf

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Contents

Foreign Investment Law 2012

Chapter V Pages

5.1 Definition 2

5.2 Economic Activities Concerned 6

5.3 Objections 9

5.4 Basic Principles 11

5.5 Form of Investment 12

5.6 Formation of the Commission 14

5.7 Duties and Powers of the Commission 15

5.8 Duties and Rights of Investor 20

5.9 Application for Permit 25

5.10 Insurance 26

5.11 Employment of Staff and Worker 27

5.12 Exemptions and Relief 30

5.13 Guarantees 34

5.14 Right of Land Use 35

5.15 Foreign Capital 37


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5.16 Right to Transfer Foreign 37

5.17 Matter relating to Foreign Exchange 39

5.18 Administrative Penalties 40

5.19 Settlement of Dispute 41

Chapter VForeign Investment Law 2012

Foreign investment law 2012 is adopted by Pyi Daung Su Hluttaw as Pyi

Daung Su Hluttaw Law No 21 with the following definitionsgivenhereunder:

5.1 Definition(a)Statemeans the Republic of the Union of Myanmar;()

(b)Commission means Myanmar Investment Commission formed under thislaw;

()

(c)Union Government means Union Government of the Republic oftheUnionof Myanmar;

()


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(d)Citizen includes an associate citizen or a naturalized citizen. The saidexpression also includes an economic organization formed with citizens only;

()

(e)Foreigner means a person who is not a citizen. The said expression alsoincludes an economic organization formed with foreign investment only;

()

(f)Promoter means any citizen or any foreigner proposed regarding aninvestment to the Commission;

()

(g)Proposal means the prescribed application submitted by a promoter to theCommission for approval of an intended investment and the accompanying draft

contract, financial documents and documents relating to company;

()

(h)Permit means the order in which the approval of the Commission of aproposal is expressed;


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()

(i) Foreign Capitalincludes the following which are invested in an economicenterprise by any foreigner under a permit:-

()

-

(1) foreign currency;

() (2) property actually required for the enterprise and which is not availablewithin

the state such as machinery, equipment, machinery components, spare parts

and instruments;

()

(3) rights which can be evaluated such as licences, patent rights, industria

design, trademarks and copyrights;

()

(4) technical know-how;

()

(5)re-investment outof the benefits accrued to the enterprise from the aboveor out of share of profits;


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()

(j) Investormeans a person or an economic organization making an investmentunder a permit;

()

(k)Bank means any bank permitted by the Union Government in the State;()

(l) Investmentmeans every kind of asset, owned or controlled, by an investor,including but not limited to the following: -

()

-

(i) movable and immovable propertyand other property rights such asmortgages, liens or pledges;

()

(ii) shares, stocks, bonds and debentures of a company;

()

()

(iii) claims to money or to any contractual performance related to a business

and having financial value;


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()

(iv) intellectual property rights which are conferred pursuant to the laws;

()

(v) rights relating to exploration and extraction of natural resources

includingbusiness concessions conferred by law or under a contract.

()

(m) Person entitled toland lease or land useis entitled to lease or use landinaccordance with the prescribed terms after causing payment of fees prescribed

by the Government to be made for land lease or land use.

()

5.2 Economic Activities Concerned 3. This law shall deal with economic activities prescribed by notification by

the Commission with the prior approval of the Union Government.

4. The following investment activities may be considered as restrictive or

prohibited economic activities-


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-

(a)activities harm to of traditional culture and customs of national races

()

(b) activities harm to public health

()

(c)activities harm to natural environment and ecology;

()

(d)activities to carry dangerous or toxic wastes to the state;

()

(e) activities to produce dangerous chemicals in factory or use dangerous

chemicals under international agreements;

()

(f)production and services prescribed by the Commission which may be

conducted by citizenprescribed by rules;

()

(g) activities carried technology, pharmaceuticals, and articles from abroad

under testing or is not subject to approval to use;


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()

(h) agriculture and short and long term agriculture which may be conducted

bycitizen prescribed by rules;

()

(i)livestock and breeding which may be conducted by citizen prescribed by

rules;

()

(j) fisheries at Myanmar marine fisheries water which may be conducted by

Citizen prescribed by rules;

()

(k)foreign investment done between ten miles of territory by demarcating the

state boundary and the boundary of other state except as economic zone

established with the permission of the Union Government.

()

5. The Commission may permit any economic enterprise which is restricted

or prohibited under section 4, the state and citizen to operate in the interest of

national races with the approval of the Union Government.


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6. The Commission shall recommend heavy foreign investment which is

largely beneficial to the conditions of security, economics, environment and

social to Pyidaungsu Hluttaw through Union Government.

5.3 Objectives7. The law purposes to explore abundant resources of state and people use

adequately and to export and sell the extra; to create more employment

opportunities for citizen as economic activities increase more; to develop human

resources; to promote the infrastructure such as bank and monetary activities,

high classed roads, highways communicated between two states, national

electronic and power production activities and high technologies including

updated information and technology; to develop communication networks,

transport activities with internationally standardized train, ship, aircraft and

academic fields, all round growth of the state; to strengthen competitiveness

with citizen and foreigner; to emerge economic activities and investment in line

with international standard.


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5.4Basic Principles 8. Investment shall be allowed based on the following principles:-

-

(a)Facilitating main objectives of national economic development plan and

economic activities which have not yet been operated owing to insufficiency of

finance and technology;

()

(b) Opening up of the more employment opportunities;

()

(c) Promoting expansion of exports;

()


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(d) Establishing enterprises for import substitution;

()

(e) Production involving large capital;

()

(f) Production with high technology in acquisition of high skill and technology;

()

(g )Supporting and assisting production and services involving huge capital ;

()

(h) Development of works which would save energy consumption;

()

(i) Regional development;

()

(j) Growing renewable energy resources like new energy and bio-based energy;

()

(k) Development of advanced industries;

() (l) Environmental protection and conservation;

()

(m) Enhancing to exchange of information and technology;

()

(n) Helping not to endanger state sovereignty and public safety;

()

(o) Development of knowledge and technology;


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()

(p) Development of bank and banking transaction in accordance with

international standards;

(

)

(q) Emerging required modernized services for state and citizen;

()

(r) Being sufficient energy and resources for local use for short and long terms.

()

5.5 Form of Investment9. Investment may be made in any of the following form :

-

(a)investment made by a foreigner to the extent of one hundred per cent foreign

capital in economic activities permitted by the Commission;

()

(b) joint-venture made between a foreigner and citizen or State;

()

(c)performance of contractual arrangement agreed by both.

()

10. (a) In doing investment under section 9:-

() -

(i)a company shall be formed;


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()

(ii) if a joint-venture is formed the ratio of the foreign and local capital shall

be in accordance with the agreement;() ()

(iii) the Commission shall prescribe at least amount of capital in foreign

investment depending on the nature of activity with the approval of the Union

Government.

()

(iv) if a joint-venture between foreigner and citizen is formed in prohibited or

restrictive activities,the equity ratio may be in accordance with the rule

prescribed.

()

10.(b) In carrying out the business under sub-section (a), due to termination of

business before the expiry of its term, in liquidation on the termination of

business, existing laws of the State shall be complied with.

() ()


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5.6 Formation of the Commission (11)(a) The Union Government-

() -

(1) shall form the Myanmar Investment Commission , with regard to the

investment business to carry out the functions in this law, with a suitable

member of Union level as chair, expertise from Union Ministry concerned,

Government department, organizations and non-governmentalorganizations, and

suitable persons as members.

()

(2) In forming the Commission, shall assign the deputy chair, secretary,

associate secretary among members.

()

(b) Members of the Commission who are not in civil service are entitled to the

salary, expense and honorarium allowed from Ministry of National Planning

and Economic Development.

()


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5.7 Duties and Powers of the

Commission Duties and powers of the Commission are described in Section 12 as

follows:() -

(a)scrutinizing a proposal take into consideration facts in conformity with the

basic principles in Chapter-IV, financial credibility, economic justification of

the business enterprise and appropriateness of technology;

()

()

(b) taking necessary and prompt action in respect of complaints made by

investors on failure to receive fully, benefits entitled to under this law;

()

(c) scrutinizing the proposals in accordance with existing laws;

()

(d) reporting its performance to the Pyidaungsu Hluttaw through Union

Government every six months;

()


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(e) recommending to the Union Government from time to time measure

necessary to facilitate and promote foreign investments;

()

(f) prescribing the type of investment, amount of the investment value and the

term of the business with the prior consent of the Union Government;

()

g) coordinating with the Region or State Government economic activitiesestablished with the permission of the Union Government for the growth of

the Region or State;

()

(h) conducting to know immediately to the Commission if natural mineral

resources or antiques not relating to the permitted enterprise and which are not

included in the original agreement are found above or under the land which he

is entitled to lease or use;

()

(i) scrutinizing business activities whether investor abides by the provisions of

the law, rules, procedures, orders, directives issued under this law and


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conditions of the permit or not. If not so, to abide by the law, rules, procedures,

orders, directives issued under this law and conditions of the permit and taking

action the business activities which the investor did not abide by;

()

(j) prescribing economic activities which do not need to grant tax exemption

and relief;

()

(k) carrying out the duties from time to time assigned by the Union

Government.

()

The powers of the Commission 13. The powers of the Commission are as follows:

-

(a) accepting the proposal which will promote the interests of the State and

which is without prejudice to any existing law;

()


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(b) issuing a permit to a promoter on a proposal being accepted.

()

(c) allowing or rejecting to scrutinize an extension or amendment of the term ofthe permit or the agreement is submitted by those concerned;

()

(d) requiring at any time a promoter or an investor to furnish such evidence or

facts;

()

(e) determining any order if there occurred evidence strongly relating to

proposal to the Commission for getting permit, agreement attached with the

proposal, documents, or conditions stated in the permit;

()

(f) allowing or rejecting to prescribe the bank which shall transact financialmatters under this law.

()

14. The Commission may, from time to time,form committees and bodies as

may be necessary in carrying out the purposes contained in this law.


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15. The Commission shall submit its performance reports to the UnionGovernment meetings.

16. The Commission shall submit on the situation of the finished

implementation and development to the Union Government one time for three

months.

5.8 Duties and Rights of Investor17. The duties of the investor are as follows:

-

(a)abiding by the existing laws of the Republic of the Union of Myanmar;

()

(b)carrying out and forming company by investor under Myanmar existing

laws;

()

(c ) abide by the provisions of this law, rules, procedures, orders, directives

issued under this law and conditions of the permit;


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()

(d) using the land which he is entitled to lease or use in accordance with the

stipulation prescribed by the Commission and terms prescribed in contract;

()

(e) carrying out, with the approval of the Commission, rent, mortgage or

transfer the share and business concerning the land and building to another

person for investment business within the term granted to operate in accord with

the stipulations;

()

(f) not modifying or altering, without permission, apparently modification

of the topography or the contour of the land for which he obtained lease or land

use;

()

(g)informing immediately to the Commission if natural mineral resources or

antiques not relating to the permitted enterprise and which are not included in

the original agreement are found above or under the land which he is entitled to


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lease or use. Continuing to operate on such land if the commission permits and

shifting to the substituted area if not;

()

(h)carrying out for not causing environmental pollution and destruction in

respect of business in accordance with existing laws;

()

(i)registration of the transfer of the shares of business in accordance with law,

company or organization, after the prior approval of the Commission and return

to the permit if he sells all shares to any foreigner or citizen in the case of

foreign company;

()

(j)registration of the transfer of the shares of business in accordance with law,

company or organization, after the prior approval of the Commission and after

receiving the permit if he sells all shares to any foreigner or citizen in the case

of foreign company;


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()

(k)carrying out proper delivery the high skill and technology to enterprises,

department and organization concerned in accordance with contract;

()

18. The rights of the investor are as follows:-

-

(a)making sale, exchange or transfer by other way the capital with the approval

of the Commission in accordance with law;

()

(b) if being foreign company, totally sale all share or some share to foreigner/

citizen or foreign company / citizen company;

() / /

(c)carrying out the extension of the business stated in the original proposal or

increasing the foreign capital with the approval of the Commission;


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()

(d)submitting to the Commission to review and scrutinize for acquiring his

benefits fully in accordance with the existing law;

()

(e)applying to the Commission for acquiring his benefits in accordance with the

law and for causing action to be taken in respect of his grievances ;

()

(f)submitting to the Commission to grant more benefits for invention of new

technology, increase of the quality of product and reduction of environmental

pollution;

()

(g)entitlement to more exemption or relief from taxes and period mentioned in

Chapter 12 by the Commission with the permission of the Union Government

for the purpose of development through the country if the investor carries out

the investment in remote area.


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()

()

5.9 Application for Permit 19.A promoter or investor desirous of makingan investment shall submit a

proposal to the Commission for approval in accordance with stipulation.

20. The Commission-

-

(a) if a proposal submitted under section 19 is obtained, may carry out

accepting or refusing within 15 days after necessary scrutinizing.

()

(b) if the proposal is accepted, shall carry out approving or refusing a promoter

within 90 days.

()


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21. If a promoter or investor obtains the permit issued by the Commission he

shall establish investment business contracting necessarily with government

department, government, organization or individual, organization concerned.

22. The Commissionmay allow as may be necessary when the investor applies

for extension or reduction or amendment of the tenure of the permit in

accordance with law.

5.10 Insurance 23. The investor shall affect insurance with any insurance business which is

entitled to operate insurance business in respect of the prescribed types of

insurance.

5.11 Employment of Staff and Worker

24. The investor-

-


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(a)in employing citizen skilled workers, technicians and staff for expertise

works, shall employ at least 25 percent of citizens at the expiry of the first two

years, 50 percent at the expiry of the second two years and 75 percent at the

expiry of the third two years from commencement year of the business. But in

the case of intellectual property based businesses the Commission may extend

and alter the suitable time limitation.

()

(b) shall arrange and provide necessary training for the improvement of the skill

of the employees and staff in appointing under subsection (a);

() ()

(c) shall employ citizens only at the works where expertise is not required;

()

(d)shall carry out labour recruitment through the Work and Labour Recruitment

Office, local labour recruitment agents or by own arrangement;


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()

(e) shall employ, in employing citizen skilled workers, technicians and staff, by

signing the employment agreement mutually between the employer and

employee in accordance with the existing labour laws and rules;

()

(f) shall manage and carry out rights relating to national staffs which are not

discriminated like foreigner staffs proportionately at expertise level.

()

25. The foreigners working in the investment business under permit shall apply

the work permit and stay permit issued by the Republic of the Union of

Myanmar.


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26. The investor-

-

(a)shall conclude the employment agreement in service in accordance with the

stipulations ;

()

(b) shall coordinate, in determining the rights and duties of the employer and

employee or terms and conditions relating to employment contained in the

employment agreement, minimum wages, leave, holiday, overtime fees,

compensation for dismissal and workmen's compensation, social security and

other insurance relating to workers including the rights contained in the existing

labour laws and rules;

()

(c) shall settle the disputes arising between the employers, employees,

employer and employee, employee and technician or staff in accordance with

existing laws concerned.


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()

5.12 Exemptions and Relief 27. The Commission shall, for the propose of promoting foreign investments

within the State, grant the investor exemption or relief from taxes mentioned in

subsection (a) out of the following exemptions or relief from taxes. In addition

the Commission may grant any or more than one or all of the remaining

exemptions or reliefs from taxes:-

()

-

(a)in respect of any enterprise for the production of goods or services,

exemption from income- tax for a period extending to 5 consecutive years,

inclusive of the year, of commencement of productions of goods or services; in

case where it is beneficial for a further reasonable period depending upon the

success of the enterprise in which investment is made;

()


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(b)exemption or relief from income- tax on profits of the business if they are

maintained in a reserve fund and re- invested therein within 1 year after the

reserve is made;

()

(c)right to accelerate depreciation in respect of machinery, equipment, building

or other capital assets used in the business at the rate fixed by the Commission

to the extent of the original value for the purpose of income- tax assessment;

()

(d)if the goods produced by enterprise are exported, relief from income- tax up

to 50 percent on the profits accrued from the said export;

()

:

(e) right to pay income- tax on the income of the above-mentioned foreigner at

the rates applicable to the citizens residing within the country;

()


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(f) right to deduct from the assessable income, such expenses incurred in respect

of research and development relating to the enterprise which are actually

required and are carried out within the State;

()

(g)right to carry forward and set- off up to 3 consecutive years from the year the

loss is sustained in respect of such loss sustained within 2 years immediately

following the enjoyment of exemption or relief from income tax as contained in

subsection (a) , for each individual enterprise;

() ()

(h)exemption or relief from customs duty other internal taxes or both on

machinery, equipment, instruments, machinery components, spare parts and

materials used in the business, which are imported as they are actually required

for use during the period of construction;

()


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(i)exemption or relief from customs duty or other internal taxes or both on such

raw materials imported for the first 3 years' commercial production following

the completion of construction;

()

(j)if the business is extended during the term allowed and expansion of original

investment amount is operated with the approval of the Commission,

exemption or relief from customs duty other internal taxes or both on

machinery, equipment, instruments, machinery components, spare parts and

materials used in the business, which are imported as they are actually required

for use for the extended business;

()

(k)In respect of the export items produced, the exemption and relief from

commercial tax.

()

5.13 Guarantees


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28. The Union Government guarantees that economic enterprise formed under a

permit shall not be nationalized during the term of the contract or during an

extended term, if so extended.

29. The Union Government guarantees that economic enterprise operating under

a permit shall not be terminated without sufficient cause before the expiry of the

permitted term.

30On the expiry of the term of the contract, the Union Government guarantees

an investor of foreign capital the right to withdrawrelating to the type of foreign

currency invested.

5.14 Right of Land Use 31. The Commission shall may permit the investor the term of land lease or land

use which the investor actually needs depending on business, type of industry

and amount of investment for initial 50 years.


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32. The Commission, if desirous to continue to operate, after the expiry of the

permitted term under section 29, may extend consecutive term of 10 years

depending on the amount of investment and type of investment business and

further 10 years of extension after the expiry of the said term.

. The Commission, if desirous to continue to operate, after the expiry of the

permitted term under section 29, may extend consecutive term of 10 years

depending on the amount of investment and type of investment business and

further 10 years of extension after the expiry of the said term.

33. The Commission, in order to develop economy of the state more, taking

initial agreement from the person entitled to lease or use with the approval of

the Union Government may allow to invest the land.


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34. The Commission may prescribe from time to time rental fees on land

owned by government department and organization with the prior approval of

the Union Government.

35. The investor is entitled to carry out cultivation business with contract

agriculture system based on seasonal crop on the land which citizen may only

operate by joint venture together with citizen.

36. The Commission may prescribe more rights to lease or use land located in

economically backward and difficult to communicate areas for the purpose of

development through the country.

5.15 Foreign Capital 37. The Commission shall register foreign capital in the name of investorin the

type of foreign currency accepted by the bank. The Commission shall state the

types of foreign capital.


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38. In the event of termination of business the person who has brought in

foreign capital may withdraw foreign capital which he is entitled to withdraw as

prescribed by the Commission within the time stipulated.

5.16 Right to Transfer Foreign 39. The following shall be transferable abroad in the relevant foreign currency

through the bank prescribed by the Commission, at the prevailing official

rateofexchange :-

-

(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;

()


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(c) net profits after deducting from the annual profits received by the person

who has brought in foreign capital, all taxes and the prescribed funds;

()

(d) legitimate balance, after causing payment to be made in respect of taxes

and after deducting in the manner prescribed, living expenses incurred for

himself and his family, out of salary and lawful income obtained by the foreign

personnel during performance of service in the State.

()

5.17 Matter relating to Foreign Exchange 40. The investor-

-

(a) transfer relevant foreign currency with stipulated exchange rate abroad

through the bank which is entitled to operate foreign bank business in the state.

()


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(b) shall open a foreign currency account in the type of foreign currency

accepted by the bank which is entitled to operate foreign bank business in the

state , and a kyat account and carry out all financial transactions relating to the

business enterprise.

()

41. In an economic organization formed under a permit staffs and foreigners

shall open a foreign currency account in the type of foreign currency accepted

by the bank, and a kyat account in the bank which is entitled to operate foreign

bank business in the state, and carry out all financial transactions relating to the

business enterprise.

5.18 Administrative Penalties 42. The Commission may pass any or all of the following administrative

penalties on an investor who violates the provision of this Law, rules,

procedures, orders and directives issued under this Law or any condition of the

permit : -

Section 42 allows the Commission to penalize in the case of violation. The

Commission may pass any or all of the following administrative penalties on an


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investor who violates the provision of this Law, rules, procedures, orders and

directives issued under this Law or any condition of the permit : -

()

-( a ) warning ; ( b ) temporarily suspending the exemptions and reliefs from

taxes; ( c ) revoking the permit ; ( d ) entering the name of the enterprise on the

no black list of economic enterprises on which no permit will be issued in

future.

()

()

()

()

Settlement of Dispute5.19 43. Section 43 governs the settlementof investment disputes. In the event of a

dispute concerning investment between Parties concerning the interpretation or

application of this law, (a) shall settle peacefully when a dispute arises between

the parties concerned (b) if not settle according to Section 43 (a) (1) if the

agreement does not consider the measure, shall settle to comply with the


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existing law of the State. (2) if the agreement considers the measure shall settle

to comply with the measure agreed . -()

() () -

()

()

KEY TERMSForeign Investment Law -

Foreigner - Promoter -

Proposal -

Permit -

-

joint-venture -


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Foreign Capital -

exchange rate -

- -

-

Exercise Questions1.Define the term foreign capital.

2. What do you understand by the term foreign capital?

3. Define the term Investment under Foreign Investment Law.

4.State the objectives of Foreign Investment Law.

5. How willyou settle the investment dispute under Myanmar Investment Law.

6. Explain the administrative penalties of Myanmar Investment Law.

7. What are the basic principles to be complied with in making the

foreign investment? (Chapter 5)


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8. State the aims and objectives of enacting the Foreign Investment

Law of Myanmar. (Chapter 5)

9. What do you understand by the term "Foreign Capital"? (Chapter 5)

10. State clearly how a foreign investment may be organized under the

Foreign Investment Law of Myanmar. (Chapter 5)

11. State the exemptions and reliefs which can be entitled by the

investor. (Chapter 5)

12. Mention how many types of economic activities allowed for

Foreign Investment and state briefly on each of them.

(Chapter 5)

13. What are the particulars to be stated by the promoter in the

application for the economic activity in which foreign investment is to be

made?

(Chapter 5)

business law chapter-5..foreign investment.pdf

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