Updates on the Foreign Investment Law

Ms. Tin Aye Han Deputy Director Directorate of Investment & Company Administration 14-9-2012

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

Myanmar in brief
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%)

Foreign Investment of Permitted Enterprises as of (31/8/2012) (By Sector) (US$ in Million) Sr. No. 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 Permitted Enterprises Approved % Amount 19067.498 46.40 14181.972 34.51 2814.360 6.85 1830.131 1064.811 1056.453 324.358 313.906 193.113 4.45 2.59 2.57 0.79 0.76 0.47

Particulars

No.

5 113 66
179 45 19 25 16 3

9 2
6 488

182.751 37.767

0.44 0.09

23.686 0.06 41090.806 100.00

Investment in Myanmar
Hotel and Tourism 2.59% Manufacturing 4.45% Mining 6.85% Power 46.40% Real Estate 2.57% Transport & Industrial Estate Communication Fisheries 0.47% Construction Livestock & 0.76% 0.79% 0.09% Agriculture 0.44% Other Services 0.06%

Oil and Gas 34.51%

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

Sr. Particulars No. 1 Oil and Gas 2 Power 3 Mining 4 5 6 7 8 9 Hotel and Tourism Manufacturing Real Estate Industrial Estate Agriculture Transport & Communication

Existing Enterprises Approved No. Amount 62 13474.728 4 13037.498 8 2289.162 30 90 7 2 6 7 7 4 227 814.475 627.720 275.000 179.113 154.070 137.676

%
43.38 41.97 7.37 2.62 2.02 0.89 0.58 0.50 0.44

10 Livestock & Fisheries 11 Other Services Total

64.946 0.21 7.061 0.02 31061.449 100.00

Investment in Myanmar
Real Estate Industrial Estate 0.89% 0.58% Manufacturing 2.02% Mining 7.37% Oil and Gas 43.38%

Agriculture 0.50%

Hotel and Tourism 2.62%

Livestock & Other Services 0.02% Fisheries 0.21%

Transport & Communication 0.44%

Power 41.97%

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

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Particulars China Hong Kong Republic of Korea Thailand U.K * Singapore France Malaysia India Japan Russia Federation Panama Viet Nam Mauritius Indonesia Republic of Liberia** Philippine Australia The Netherlands Germany Canada Austria Total No. 14 23 42 25 22 40 1 16 7 14 2 2 4 2 3 2 1 1 2 1 2 1 227 Existing Enterprises Approved Amount 14064.303 6278.436 2891.685 2460.333 2246.973 1515.027 499.926 433.616 269.000 114.247 94.000 55.101 49.796 30.575 22.200 14.600 6.667 5.819 4.335 2.500 1.310 1.000 31061.449 % 45.28 20.21 9.31 7.92 7.23 4.88 1.61 1.40 0.87 0.37 0.30 0.18 0.16 0.10 0.07 0.05 0.02 0.02 0.01 0.01 0.00 0.00 100.00

10000 9000 8000

9568.093

US $ in Million

7000
6000 5000

4000
3000 2000 1000 0 1852.224 1031.285 241.497 146.667

49.796

2.040

Source: DICA

FDI Flows to Myanmar by Other Asia

US $ in Million

Sri Lanka Bangladesh U.A.E India Japan Republic of Korea Hong Kong China 0

1 2.957 41 273.5 216.94 2963.104

6371.495 14142.674 2000 4000 6000 8000 10000 12000 14000 16000

Source: DICA

FDI Flows to Myanmar by EU

2799.185
3000 2500 2000 1500 1000 500

US $ in Million

469.000 238.835 72.500 17.500 13.370

Source: DICA

FDI Flows to Myanmar by Region- wise

US $ in Million

576.144

Other Countries

EU

3610.390

Other Asia

24012.670

ASEAN

12891.602

5000

10000

15000

20000

25000

Source: DICA

Responsibilities of DICA
Secretariat Office of the MIC
Scrutinizing the Investment Proposals Business Registration Assisting To Solve The Difficulties On Investment Issues
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

Chairman Office of the Central Working Body of the SEZ

Promotion and implementation of investment in the regional SEZs;

Provide information and coordinate with the relevant Ministries

Business Administration

13

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 law

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

Foreign Investment law (Cont;)

Existing FIL Minimum Foreign Capital
-

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

Manufacturing US$ 500,000

Services US$ 300,000 Both in Kind in Cash

Foreign Investment law (Cont;)

Existing FIL
Tax Incentives

New FIL

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.

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.

Right to transfer foreign currency

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;

Employment of Expatriates

Allows investors to employed expatriate technicians, expert, staff & skill labour as follows as follows : 75% 50% 25%

(a) First 2 years (b) Second 2 years (c) Third 2 years

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

Land lease

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 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

22

Guarantee

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

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 - No description on rights & obligation 3 years tax holidays of investor No description on land use - 3 years tax holidays 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 - Description on 5 years tax holidays rights & obligation of investor Description on land use - 5 years tax holidays Market exchange rate Description on administrative penalty Description on dispute settlement

Documentary Requirements for Investment Proposal

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

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

A draft land lease agreement(if required);

Draft Memorandum and Articles of Association if it is a limited company; Detailed calculation relating to the economic justification of the proposed project;

Bank reference and recommendation regarding the potential foreign investors business standing; Business profile with supporting documents
25

Procedure for foreign investment permit

Issue Permit

MIC Meeting

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

26

Bilateral Investment Promotion & Protection Agreements

Concluded Philippines Russia Under negotiation

Vietnam
Lao PDR China India Thailand Kuwait

Bangladesh
Mongolia Japan Korea Iran

27

Setting up of Coordination Team (CT)

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.

Priority area
Labour Intensive Industries Resource-based Value-added Industries Heavy and Hi-tech industries

MICs policy
Pay attention to the benefits of indigenous people dignity of the State sovereignty environment

Criteria
protection to investors, environmental protection, social impact protection, transparency and accountability in financial matters, job creation, corporate social responsibility (CSR) and technology transfer.

Contact Point
Mr. Aung Naing Oo Director General Office Building No. (32), Yarza Thingaha Road, Nay Pyi Taw, Myanmar Tel Fax e-mail : 95-67-406121 : 95-67-406123 : dica.mnped@mptmail.net.mm majanoo@gmail.com, tayehan@gmail.com Website : www.dica.gov.mm www.mnped.gov.mm