what you need to know before doing business in myanmar

7/28/2019 What You Need to Know Before Doing Business in Myanmar

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MYANMAR What YouNeed to Know BeforeInvesting

By: Kelvin Chia Yangon Ltd

Copyright: Kelvin Chia Yangon Ltd

This document is intended only for IE Singapore and should not be distributed to any otherperson or entity.


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Part of the network of law firms of Kelvin Chia Partnership ( KCP ),a regional law firm headquartered in Singapore with offices andtransactional experience throughout Southeast Asia

Established in 1995: the oldest foreign legal consultancy firm based

Introduction:Kelvin Chia Yangon Ltd

Full range of corporate and commercial services Substantive experience in transactional work, particularly in cross-

border issues and in Myanmars key industry sectors Assists and advises clients on investment structures and the setting

up of investment vehicles, including provision of corporatesecretarial services Seamless combination of international and local legal expertise with

local Myanmar team working in conjunction withforeign/international lawyers from the KCP network


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Todays Agenda

1. Current MyanmarInvestmentFramework

2. Key Steps inInvesting inMyanmar

3. SignificantIssues/Aspects

4. Q & A Session


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as t e new ore gn nvestment aw een enacte

Should I wait for it to be passed before investing?

Is there an existing legal framework for investing now?


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General Legal Frameworkfor Investing in MyanmarKey mainframe laws to consider:

State-Owned Economic Enterprises Law (SOEEL)

Foreign Investment Law (note: MIC permit)

Companies Act (note: permit to trade and registration)

Note: Relevant rules, regulations, notifications and internaldirections/policies, as well as industry/sector-specific laws, shouldalso be considered.


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General Legal Frameworkfor Investing in Myanmar IS THE INDUSTRY/SECTOR CONCERNED RESERVED TO STATE-OWNED ENTERPRISES?

Reserved industries/sectors are listed in the SOEEL.

12 industries/sectors are listed in the SOEEL.

If a reserved industry/sector, then foreign investment may still bepossible with the approval of the Myanmar Government.

Joint venture between state organization/enterprise; citizenand/or foreigner

Any person or economic organization subject to prescribedconditions

Other forms of collaboration, e.g. , production sharing


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Reserved industries/sectors under theSOEEL Extraction and sale of teak Forest plantations Exploration, extraction and

sale of petroleum andnatural gas, and

Postal and telecommunicationsservices

Air and railway transport services Banking and insurance services Broadcasting and television

of the same Exploration, extraction and

export of pearls, jade and

precious stones Certain kinds of breedingand production of fish andprawn

Exploration, extraction or exportof metals

Electricity generation services Manufacture of products relating

to security and defense

Note: There may be additional reserved sectors whichare not otherwise on the list ( e.g. , education, trading).


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SOME KEY POINTS TO CONSIDER UNDER CERTAIN CURRENT INTERNAL POLICIES/DIRECTIONS

General Legal Frameworkfor Investing in Myanmar

Industrial (manufacturing)

Services/Construction

Trading

Currently, trading activities are reserved to Myanmar nationals andcompanies wholly owned by Myanmar nationals.


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The Myanmar InvestmentCommission

Formed under the Foreign

Investing under the ForeignInvestment Law (FIL) maincriteria for investment:

Support the national economic developmentplan

Opening up of more employmentopportunities

Increase exports Production for import substitution

General LegalFramework for Investing

in Myanmar

Investment Law Reviews investment

proposals Issues MIC Permit and

Decision

investment To develop high-skill technology anddevelop advance technology for production

Development of the manufacturing andservices sector requiring heavy capital

Businesses which would save energy consumption

Exploration/Production of new energy andrenewable energy

Development of modern industries Conservation of the environment


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Incentives under the ForeignInvestment Law (1988)

*

Tax Holiday

If they are maintained in a reserve fund and re-invested

therein within 1 year after the reserve is made

Exemption of Tax on Profits which areReinvested

up to 50 percent on the profits accrued from exported goods

Reduction of Tax on Profits from Export


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Incentives under the ForeignInvestment Law (1988)

Carry forward losses

If losses are sustained within two years after the

initial tax holiday

Imported Equipment and Materials used in business for the period of construction and for thefirst 3 years of commercial production*

Tax exemption on Imports


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Given the existing investment framework, what are the key steps/procedures for investing?

Do I have to go to the MIC or not?


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Key Steps in Investing in Myanmar 1. Define your intended business activity in Myanmar

2. Identify the relevant ministries/authorities in charge of the business sector/activity

.(need for endorsement/no objection for the investment applications)

4. Determine the appropriate entity to be established in Myanmar

Note: Sourcing for local partners and land ahead, where applicable, isalso critical.


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Key Steps in Investing in Myanmar DEPENDING ON THE NATURE AND REQUIREMENTS OF

THE PROPOSED BUSINESS ACTIVITY/INVESTMENT, AN INVESTOR MAY TAKE EITHER OF TWO ROUTES IN GENERAL:

rou e w erm

Industrial (manufacturing) Reserved sectors Services

Companies Registration Office (CRO) route (without MIC Permit)

Only for services company and branch/representatives offices Note on branch/representative offices in Myanmar


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Key Steps in Investing in Myanmar

Under the ForeignInvestment Law

Under theCompanies Act

eservesectors/industrial

Long-term lease Import licence

Tax incentives/ guarantees

Minimum capitalrequirement

companies/branches

One-year lease No import licence

No taxincentives/guarantees

Minimum capitalrequirement


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MyanmarInvestment Commission

Approval

Regulated by theForeign InvestmentLaw which is

administered by theMIC

MIC and Incorporation

Registering Company or Branch Office

with the CRO

Applying for aPermit to Trade With the CRO

(Business License)

s a s ng

a Company

s a s ng

a Branch Office

Regulated by theMyanmar Companies Actand Administered by theDirectorate of Investmentand Company Administration under theMinistry of NationalPlanning and EconomicDevelopment

ExecutiveCommittee

CabinetCommittee


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Is the MIC a one-stop shop? Ministerial support/Ministerial submissionHow long is the MIC application process?

What are the documents to be submitted to the MIC? Economic Justification/Draft ContractsIs there any situation where I do not have to go to the MIC?


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Corporate VehiclesType of

vehicles Activities

Is an MICPermit

required

What is theminimum

capitalization

Are taxIncentives

available

Tax Status

PrivateCompany

Industry Yes US$500,000 YesResidentforeigner

PrivateCompany

Services

Depending onthe needs of the business land

lease andimport of goods

US$300,000 with an MICPermit

Yes Residentforeigner

US$50,000 without an MIC

PermitNo

Residentforeigner

Branchoffice

Representativeoffice/ Services

No US$50,000 NoNon-resident

foreigner


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Is a wholly foreign owned entity allowed for investments?

Can I enter into joint ventures? Minimum 35% foreign shareholding requirement Joint ventures may be preferred/encouraged in certain sectors


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Key Challenges for Joint Ventures

Sourcing for appropriate local partners

Conducting due diligence

Structuring the joint venture- Current restriction on direct acquisition of shares in wholly Myanmar-owned local companies)

- Onshore versus offshore

Dispute resolution


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Significant Issues/Aspects

Land

Employment

Foreign Exchange

Dispute resolution


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Dealings in Land Foreigners may not purchase/own land

Foreign-owned companies with an MIC permitmay obtain long-term leases (up to 60 years intotal; longer period is possible in SEZ)

Under Notification 39/2011, foreigners maylease land from private entities (withgovernment approval)

Foreigners and foreign-owned companieswithout an MIC permit may lease residentialand commercial units for not more than a year

at a time.


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Employment (under the new draftFIL)

Unskilled labour: 100% Skilled labour: 25% during the first 5 years, 50% during the next 5

years, 75% in the third 5 year period

Local hiring requirements

Provide training for citizens for skilled positions

Training

Overtime wages, leaves and holidays, workmen compensation,social security, etc.

Note on proposed minimum wage law

Applicable regulations


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Termination and Retrenchment

Length of Employment

Notice Pay Severance payment

Less than 3 months -

One months salary

1 to 3 years Two months salary

More than 3 years Four months salary

Notice: No legal requirement Customary to give one months notice


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Foreign Exchange Restrictions

Taking currency outof Myanmar

Receiving paymentsoutside of Myanmarand then using them

Transacting inforeign exchangein Myanmar

Remitting money out of Myanmar


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Repatriation with MIC Approval What may be remitted Conditions for remittance

Net profits after taxes By permission from theMIC

Remaining funds aftertaxes

Capital where thecompany is liquidated

Damages

Annual Audit /Reportsubmitted to MIC

Application to remit must be based on the audit report

MIC will specify approvedamount


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Dispute Resolution

Myanmar Arbitration Act Myanmar not a party tothe New York

Myanmaronven on

implications Note on developments

re: potential entry ofMyanmar into the NewYork Convention

Arbitration Act

New York Convention

Developments


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For more information on investing in Myanmar, please contact:

Marlon Wui, Partner, Kelvin Chia Partnership

[email protected] +65-6408-7921

U Than Maung, Senior Associate/Advocate, Kelvin Chia Yangon [email protected] +951-255-399

We also invite you to learn more about Kelvin Chia Partnership andits regional capabilities by visiting our website at:

www.kcpartnership.com

Singapore Tokyo Shanghai Bangkok Hanoi Ho Chi Minh City Yangon Phnom Penh Pyongyang


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Thank you forlistenin !

We look forward to assisting you inMyanmar soon.

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