What You Need to Know Before Doing Business in Myanmar
Transcript of 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
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Thank you forlistenin !
We look forward to assisting you inMyanmar soon.