Updates on the Foreign Investment Law

Ms. Tin Aye HanDeputy Director

Directorate of Investment & Company Administration

14-9-2012

Myanmar in brief FDI in Myanmar Investment laws of Myanmar Foreign Investment law Conclusion

Contents

The Land: The largest country in mainland South East Asia

Capital : Nay Pyi Taw

(14 Regions and States)

Total land area : 676,577 sq km

Total Coastline: 2832 Km

Climate: summer, rainy and cold season

Border countries: Bangladesh 193 km,China 2, 185 km, India 1,463 km, Laos 235 km,

Thailand 1,800 km

(40% of World Population)

Population : 60 million

Working Age : 37.35 million (62.25%)

Myanmar in brief

Foreign Investment of Permitted Enterprises as of (31/8/2012)(By Sector) (US$ in Million)

Sr.

No.

Particulars 

Permitted Enterprises

No. Approved Amount

%

1 Power 5 19067.498 46.402 Oil and Gas 113 14181.972 34.513 Mining 66 2814.360 6.85

4 Manufacturing 179 1830.131 4.455 Hotel and Tourism 45 1064.811 2.596 Real Estate 19 1056.453 2.577 Livestock & Fisheries 25 324.358 0.798 Transport & Communication 16 313.906 0.769 Industrial Estate 3 193.113 0.47

10 Agriculture 9 182.751 0.4411 Construction 2 37.767 0.09

12 Other Services 6 23.686 0.06  Total 488 41090.806 100.00

Investment in Myanmar

Power46.40%

Oil and Gas34.51%

Mining6.85%

Manu-fac-

turing4.45%

Hotel and

Tourism

2.59%

Real Estate2.57%

Livestock & Fisheries0.79%

Transport & Communication0.76%

Industrial Estate0.47%

Agriculture0.44%

Construction0.09% Other Services

0.06%

Foreign Investment of Existing Enterprises as of (31/8/2012)(By Sector) (US$ in Million)

Sr.

No.Particulars

Existing Enterprises

No. Approved Amount

%

1 Oil and Gas 62 13474.728 43.38

2 Power 4 13037.498 41.973 Mining 8 2289.162 7.37

4 Hotel and Tourism 30 814.475 2.625 Manufacturing 90 627.720 2.026 Real Estate 7 275.000 0.897 Industrial Estate 2 179.113 0.588 Agriculture 6 154.070 0.50

9 Transport & Communication 7 137.676 0.44

10 Livestock & Fisheries 7 64.946 0.2111 Other Services 4 7.061 0.02

  Total 227 31061.449 100.00

Investment in Myanmar

Oil and Gas43.38%

Power41.97%

Mining7.37%

Hotel and Tourism2.62%

Manufacturing2.02%

Real Estate0.89%

Industrial Estate0.58%

Agriculture0.50%

Transport & Communication0.44%

Livestock & Fisheries0.21%

Other Services0.02%

Foreign Investment of Existing Enterprises as of (31/8/2012)(By Country) (US$ in Million)

Sr. No. Particulars

Existing Enterprises

No. Approved Amount %

1 China 14 14064.303 45.282 Hong Kong 23 6278.436 20.213 Republic of Korea 42 2891.685 9.314 Thailand 25 2460.333 7.925 U.K * 22 2246.973 7.236 Singapore 40 1515.027 4.887 France 1 499.926 1.618 Malaysia 16 433.616 1.409 India 7 269.000 0.87

10 Japan 14 114.247 0.3711 Russia Federation 2 94.000 0.3012 Panama 2 55.101 0.1813 Viet Nam 4 49.796 0.1614 Mauritius 2 30.575 0.1015 Indonesia 3 22.200 0.0716 Republic of Liberia** 2 14.600 0.0517 Philippine 1 6.667 0.0218 Australia 1 5.819 0.0219 The Netherlands 2 4.335 0.0120 Germany 1 2.500 0.0121 Canada 2 1.310 0.0022 Austria 1 1.000 0.00

  Total 227 31061.449 100.00

FDI Flows to Myanmar by ASEAN Countries (As of , August 2012)

Source: DICA

ThailandSingapore

MalaysiaIndonesia

PhilippineViet Nam

Brunei Darussalam

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000 9568.093

1852.224

1031.285

241.497 146.667

49.796 2.040

US $ in Million

FDI Flows to Myanmar by Other Asia(As of , August 2012)

Source: DICA

China

Hong Kong

Republic of Korea

Japan

India

U.A.E

Bangladesh

Sri Lanka

0 2000 4000 6000 8000 10000 12000 14000 16000

14142.674

6371.495

2963.104

216.94

273.5

41

2.957

1

US $ in Million

FDI Flows to Myanmar by EU(As of , August 2012)

Source: DICA

U.KFrance

The NetherlandsAustria

GermanyDenmark

0

500

1000

1500

2000

2500

3000 2799.185

469.000

238.835 72.500

17.500 13.370

US $ in Million

FDI Flows to Myanmar by Region- wise(As of , August 2012)

Source: DICA

ASEAN

Other Asia

EU

Other Countries

0 5000 10000 15000 20000 25000

12891.602

24012.670

3610.390

576.144

US $ in Million

13

Secretariat Office of the MIC

Scrutinizing the Investment Proposals

Assisting To Solve The Difficulties On Investment

Issues

Provide information and coordinate with the relevant Ministries

Chairman Office of the Central Working Body of the SEZ

Promotion and implementation of investment in the regional SEZs;  

To coordinate among the State/ Regional Govt., concerned Ministries , Management Committee ,developers, investors

Information dissemination about the development of SEZ regionally to attract the

local and foreign investors;  

Processing the proposals submitted by the Developer or Investors;  

Reporting regularly to Chairman of the Central Committee of Myanmar Special Economic Zone,

Business Administration

and Registration

Business

Registration

Business Administration

Responsibilities of DICA

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.

Investment laws of Myanmar

Existing FIL

Form of organization 100 % foreign-owned Joint Venture ( Any Myanmar Partner

or An Individual or A Private Company or A Cooperative Society or State Owned Enterprise)

New FIL

Form of organization 100 % foreign-owned(permitted activities by

MIC) Joint Venture (Any

Myanmar Partner or Organization/ State owned Enterprise)

Other form of Business Contract which is mutually agreed by both parties

Foreign Investment law

Existing FIL

Minimum Foreign Capital

- Manufacturing - US$ 500,000

- Services - US$ 300,000

Both in Kind

in Cash

New FIL

Minimum Foreign Capital Depends on type of

business nature and sector

If JV, 35% of total capital If JV (restricted/prohibited

activity), Foreign capital - 50:50 Both in kind in cash

Foreign Investment law (Cont;)

Existing FILTax Incentives 3 years tax holiday Further tax exempt ion/ relief for an

appropriate period in case if it is considered beneficial for the State

Exemption or relief from customs duty or other internal taxes or both on importation of machinery & equipments during construct ion period.

Importation of raw materials for production for the first 3 years.

New FIL Tax Incentives 5 years tax holiday Further tax exemption/ relief for an

appropriate period in case if it is considered beneficial for the State .

Exemption or relief from customs duty or other internal taxes or both on importation of machinery & equipments during construct ion period.

Importation of raw materials for production for the first 3 years.

Foreign Investment law (Cont;)

The 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. exemption or relief from custom duty or other internal taxes or both on

machineries, equipments , etc if the investment amount is increased and the original investment business is expanded during the permitted period.

exemption or relief from commercial tax on the goods produced for export.

Foreign Investment law (Cont;)

The investor has the right to transfer the following currencies abroad through the bank which has the right to carry out foreign banking in the relevant foreign currency at the stipulated exchange rate :

(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 all taxes and relevant funds from the annual profits received by the person who has brought in foreign capital;

(d) legitimate balance after causing payment 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;

Right to transfer foreign currency

Allows investors to employed expatriate technicians, expert, staff & skill labour as follows as follows : -

(a) First 2 years 75%

(b) Second 2 years 50%

(c) Third 2 years 25%

Limitation of time can be increased for appropriate period for knowledge based activiites.

Employment of Expatriates

Investors are allowed to lease the land either from the

government or from the private

- for 50 years as initial

- to be extended 2 times, each time allow 10 years

Land lease

22

Land Lease Agencies of the government/State organizations/Private

Related Ministries

Ministry of Construction/Private – Industrial Zone

Related City Development Council/Committee

State/ Region Government

Environmental Conservation and Forestry Ministry

Related Township General Administration Department

Enterprises operating under the Foreign Investment Law shall

have the State guarantees

- against nationalization

- to transfer the entitled Foreign Capital to investor on the

expiry of the term of the contract

- against termination of investment during the permitted

term

Guarantee

- No description on rights & obligation - Description on rights & obligation

of investor of investor

- 3 years tax holidays - 5 years tax holidays

Existing Law Revised Law

No specific definition on investment Specific definition on investment

No specific definition on grantee of land lease or grantee of land used

Specific definition on grantee of land lease or grantee of land used

Not mentioned on restricted activities Mentioned on restricted activities

Export Promotion Export promotion and import substitution

No description on rights and obligation of investor Description on rights & obligation of investor

3 years tax holidays 5 years tax holidays

No description on land use Description on land use

Official exchange rate Market exchange rate

No description on administrative penalty Description on administrative penalty

No description on dispute settlement Description on dispute settlement

25

Documentary Requirements for Investment Proposal

An application for exemptions and relief's defined under Section-21 of the FIL.

Draft Memorandum and Articles of Association if it is a limited company;

A draft land lease agreement(if required);

A draft contract (100% or JV with a State organization or private company )

Detailed calculation relating to the economic justification of the proposed project;

Bank reference and recommendation regarding the potential foreign investor’s business standing;

Business profile with supporting documents

26

Procedure for foreign investment permit

Preliminary MIC meeting

MIC scrutinizes the proposal from technical, financial and economical aspects and then asks recommendation letters from respective State/Regional Government, and other comments from concerned Ministries

Submit investment proposal to MIC together with required documents through concerned Ministry

Discuss with concerned Ministry for interested area to be implemented

MIC Meeting

Issue Permit

27

Bilateral Investment Promotion & Protection Agreements

Concluded Under negotiation

Philippines Russia

Vietnam Bangladesh

Lao PDR Mongolia

China Japan

India Korea

Thailand Iran

Kuwait

For clear information and transparency purpose to the Myanmar Citizens and foreigners who inquire about the investment information in Myanmar, Coordination Team has been formed since July 2011.

CT comprise senior officials from Myanmar Investment Commission, Ministry of Finance and Revenue, Ministry of Commerce and Ministry of Construction.

CT 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.

Investors can get investment permit within two weeks if documents are completed.

Setting up of Coordination Team (CT)

Labour Intensive Industries Resource-based Value-added

Industries Heavy and Hi-tech industries

Priority area

Pay attention to the benefits of indigenous people

dignity of the State sovereignty environment

MIC’s policy

protection to investors, environmental protection, social impact protection, transparency and accountability in

financial matters, job creation, corporate social responsibility (CSR)

and technology transfer.

Criteria

Mr. Aung Naing Oo

Director General

Office Building No. (32), Yarza Thingaha Road, Nay Pyi Taw, Myanmar

Tel : 95-67-406121

Fax : 95-67-406123

e-mail : dica.mnped@mptmail.net.mm

majanoo@gmail.com, tayehan@gmail.com

Website : www.dica.gov.mm

www.mnped.gov.mm

Contact Point

Thank You for your kind attention