Monday, June 27, 2016

  • Contents
  • Burma export overview
  • Challenges
  • Growth potential
  • UK and Burma trade
  • Opportunities for UK businesses in Burma
  • Start-up considerations
  • Legal considerations
  • Tax and customs considerations
  • Business behavior
  • Entry requirements
  • Contacts

1. Burma export overview

         Burma (also known as Myanmar) has recently re-emerged onto the global stage after 50 years of isolation. It’s a country of over 50 million people in a strategic location between China and India with plentiful natural resources. Economic growth in 2014 to 15 was 8.5%, making Burma the fastest growing country in south east Asia.
          Contact a UKTI Burma export adviser for a free consultation if you are interested in exporting to Burma. Burma is catching up on decades of underdevelopment and this presents opportunities for British companies in a broad range of sectors. However, this is a challenging market. British companies should be aware of the risks of doing business in Burma and develop a long term business plan which takes them into account.
          British government policy recognises the country as Burma. However, many businesses refer to the country as Myanmar, particularly when dealing with the government. The Burmese government relocated the official capital from Rangoon to Naypitdaw in 2006. All government ministers and officials are located in Naypitdaw. A number of UK companies have already established successful operations in Burma:
           Standard Chartered Bank, the first western financial institution to open a representive office in Burma, have recently been appointed by the government as sovereign credit rating advisors BG Group, Shell and Ophir have all been awarded exploration licenses companies such as Cape, Wood Group Kenny and Bibby offshore have established in Burma to support the oil and gas sector GSK are distributing vaccinations Unilever have 2 manufacturing facilities and are commited to a third Aggreko are providing temporary power to Burma’s industrial zones Rolls Royce have sold gas turbine engines to Burma’s power plants Dulwich college is building a brand new campus in Rangoon due to open in September 2016 Benefits for UK business exporting to Burma include:
-strong historical and trading links with the UK with a recognition of British brands increasing demand for products, equipment and services resulting from incoming foreign investment and a growing middle class strong economic growth to date and positive future forecasts Potential strengths of the Burma market:
-access to 40% of the world’s population living in bordering countries abundant natural resources commitment to political and economic reform with strong international donor backing proven agricultural capacity

2. Challenges

           Like all developing markets Burma presents a number of challenges for British business. These are all manageable with the right approach, timescale and attitude. The British government supports the Myanmar Centre for Responsible Business which provides practical advice to UK companies seeking to do responsible, sustainable and transparent business in Burma.

2.1 Political risks

          British companies should not ignore the political risks associated with Burma. Risks are posed by: the transition to democracy from an authoritarian military regime demands for constitutional change ongoing peace process between government and ethnic armed groups inter-communal tensions between Buddhist and Muslim communities The 2015 elections will be an important milestone in Burma’s reform process.

2.2 Sanctions

         The European Union (EU) lifted trade sanctions against Burma in April 2013. However, an arms embargo is still in place.
         There are still some US sanctions which can affect British companies. These are primarily focused on financial institutions and specific individuals. The US Treasury’s Burma sanctions page has full details. You should seek legal advice if you have any concerns.

2.3 Corruption

         Burma is ranked 156th in Transparency International’s Corruption Perceptions Index. However this is based on some out-of-date data.
         Corruption exists at all levels of the economy. You should undertake extensive due diligence checks on local partners and distributors when doing business in Burma. You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.

2.4 Banking issues

          Burma’s underdeveloped banking sector means that: the economy is predominantly cash based credit cards aren’t widely used or accepted many UK banks refuse to process payments to or from Burma due to the perceived risk payments that are processed often take longer than normal only pristine dollars are accepted due to counterfeiting Letters of Credit are currently not widely accepted; 100% advanced payment is the normal payment process Steps you can take to deal with this challenge: speak to your bank as early as possible regarding your planned business with Burma consider making payments in EURO instead of USD consider using regional banks if possible allow extra time for payments to be processed agree payment terms with your customer or partner at an early stage of negotiations UK Export Finance (UKEF) currently offers limited cover to British companies wishing to do business with Burma. Contact UKEF directly to discuss your needs.

2.5 Institutional weakness

         There is a lack of capacity throughout Burma’s public and private sectors as a result of many decades of isolation. This means that public institutions are often slow and bureaucratic when dealing with business. You should be prepared for this and build time into your business plan to accommodate.
          The Burmese legal system is based on British common law. The current Burmese Companies Act is based on the British 1914 Companies Act. However the Burmese legal system lacks clarity and capacity. You should take steps to protect your business by: consulting a qualified lawyer with local experience securing contracts in both languages ensuring any contractual disputes provide for external arbitration in an alternative jurisdiction such as London or Singapore.

2.6 Human capital

          One of the biggest challenges facing British companies doing business in Burma is local capacity. Finding qualified local staff is difficult and expensive due to high demand and limited supply. There is an increasing number of returning Burmese who have education and experience overseas, but they are in high demand and expect to be paid to international standards. British companies will need to invest time and money in training staff.

2.7 Infrastructure 

          Burma’s physical and technical infrastructure has not been fully developed, which presents a number of challenges including: movement of goods around the country can be time consuming and expensive Internet and mobile phone connectivity is unreliable and patchy, particularly outside major urban areas underdeveloped financial infrastructure means banking processes are still predominantly manual and time consuming.

3. Growth potential

3.1 Economic growth

          Burma’s economic reform process has been underway for over 3 years and is beginning to show results. Economic growth in 2014 to 15 was 8.5% and the forecast for 2015 to 16 is similar. Burma’s Gross Domestic Product (GDP) is currently USD 59 billion and it has a GDP per capita of USD 869, making it the poorest country is south east Asia. McKinsey’s report ‘Myanmar’s Moment’ suggests Burma has the potential to quadruple GDP by 2030.

3.2 Free Trade Agreements (FTAs)

Burma has FTAs with:
Bangladesh
China
India
Israel
South Korea
Laos
Malaysia
Pakistan
Philippines
Sri Lanka
Thailand
Vietnam
The European Union (EU) is currently negotiating a bilateral investment agreement which should come into force in 2016.

4. UK and Burma trade

          Trade between the UK and Burma has been extremely limited over recent years due to sanctions. Following the lifting of sanctions, trade is now on the increase. UK goods exports to Burma increased from £13 million to £44 million between 2012 and 2013, a 239% increase. These figures do not include services exports such as legal, accountancy and consultancy services which are a significant component of the UK’s exports to Burma. It also fails to account for exports which are routed via third countries such as Singapore.
Main UK exports to Burma:
road vehicles
heavy machinery
transport vehicles

5. Opportunities for UK businesses in Burma

          UK Trade and Investment (UKTI) provides free international export sales leads from its worldwide network. Search for export opportunities. The diverse nature of Burma’s economy and its broad development needs, presents opportunities for British business in a broad range of sectors. However many of these opportunities will take time to realize.
          UKTI Burma has identified 4 priority sectors for UK business; these are sectors, which are believed to have immediate and achievable opportunities. However, there are opportunities in other sectors such as infrastructure, agriculture, aerospace and retail.

5.1 Energy

           Burma faces a major energy challenge: one of the lowest electrification rates in the world with only a third of the population able to access reliable and affordable electricity electricity demand forecast to increase by 700% by 2030 World Bank estimates USD 5.8 billion of investment required over the next 15 years to achieve universal electrification by 2030 Oil and gas A number of British companies secured onshore and offshore exploration licences in 2013 including Shell, BG Group and Ophir Energy. Further exploration licences are expected in 2016.
           The domestic supply chain in the sector is weak. This presents opportunities for British companies, particularly those with experience of operating in deep water. British companies have already entered the market in logistics, security and training.
Burma is the 10th largest producer of natural gas globally. Read our report on opportunities for British companies in Burma’s oil and gas sector. Electric Power Burma faces enormous power generation challenges.
           There are opportunities for UK companies in: upgrading of generation and transmission capacity short term power generation, particularly outside Rangoon Renewable energy 70% of Burma’s domestic energy is currently generated by hydropower which can be problematic due to its seasonal nature. The government is planning to diversify Burma’s energy mix, but has confirmed that renewable energy will remain an important contributor. Solar and wind energy both have great potential, but the infrastructure is currently not fully developed. Existing projects are small scale and off grid. American Private Equity group ACO has recently invested in Burma, building 2 150 MW solar energy plants near Mandalay. Solar and wind energy both have great potential, but the infrastructure is currently not fully developed. Existing projects are small scale and off grid. American Private Equity group ACO has recently invested in Burma, building 2 150 MW solar energy plants near Mandalay.
          Contact ukti.rangoon@fco.gov.uk for more information on opportunities in the energy sector. 5.2 Financial and professional services UK business has been active in Burma’s financial and professional services sector. They have supported major foreign investments in energy, telecoms, manufacturing and education as well as upgrading the capacity of local companies.
          The British government in collaboration with UK businesses is supporting the development of Burma’s financial sector through the UK-Myanmar Financial Services taskforce. UK companies have a competitive advantage due to: Burma’s legal system which is based on English common law a lack of local capacity and internationally qualified practitioners an affinity with British services companies due to a historical presence a recognition of British standards being world leading work of British Embassy on building local services capacity through the prosperity fund Many well-known British services companies have established a representative office in Rangoon. In most cases it’s required they work with local partners. The exact nature of this relationship varies depending on the sector.
          Opportunities for UK companies include: provision of services for inward investors into Burma such as legal advice, risk consultancy and tax/audit services upgrading of Burma’s financial infrastructure training to build local capacity new banking licences which are expected to be issued by the Central Bank of Burma after the 2015 election Contact ukti.rangoon@fco.gov.uk for more information on opportunities in the financial and professional services sector. 5.3 Healthcare and pharmaceuticals Historically Burma has spent less that 2% of its budget on healthcare.
          Spending has increased by 800% since the reform process began in 2010 when healthcare became a government priority. However Burma’s healthcare spending per capita remains the lowest in the region. It’s anticipated that government spending on healthcare will continue to increase after the election.
          It is projected that consumer spending will increase up to 4 times to USD 480 million by 2020 and the demand for medical devices will increase threefold. Burmese consumers are hungry for wider variety and better quality when it comes to healthcare.
          Opportunities for UK companies include: pharmaceuticals (distribution and manufacturing) medical devices
medical architecture,
infrastructure and equipment
training and international standards
UKTI Burma will publish a report on opportunities for British companies in Burma’s healthcare sector in November 2015.
Contact ukti.rangoon@fco.gov.uk for more information on opportunities in the life sciences sector. 5.4 Education and skills There is a demand for education and training at all levels and in all sectors. The skills gap has been identified as the second most severe barrier to economic development by Burma’s business community. This presents opportunities for:
British schools
training providers
qualifications bodies
equipment suppliers
English language trainers
Read UKTI Burma’s report on opportunities for British companies in Burma’s skills sector.
British companies in this sector have competitive advantages in that:
British education and qualifications are recognised as being of the highest international standard and far preferable to regional options the UK is the destination of choice for Burmese who are able to study overseas Burmese education modelled on pre-1962 British system so many senior civil servants and business people have a positive personal experience of British education The regulatory environment is evolving. A Comprehensive Education Sector Review was undertaken in 2012. This is currently being used to inform the National Education Sector plan and will shape the regulatory environment for foreign investors in this sector.
Contact ukti.rangoon@fco.gov.uk for more information on opportunities in the education and training sector.

6. Start-up considerations

          Any British company considering doing business in Burma must develop a presence on the ground, or appoint a local agent. The Burmese place great importance on establishing a personal relationship with their business partners.
          The 2 main routes to establishing a presence on the ground are: getting an investment permit issued by the Myanmar Investment Commission (MIC) under the 2012 Myanmar Foreign Investment Law (MFIL) establishing an incorporated local company or branch office under the Myanmar Companies Act (MCA) It is also possible to establish a representative office. This process is similar to setting up a branch office, but a representative office is not allowed to engage in revenue generating activities.
           If you decide to appoint a local agent or distributor you should be sure you have a clear agreement in both languages. If you are going to sign anything, get it translated first by an independent translator. You should not rely on your supplier’s translation. You should maintain regular contact with them ideally face to face.
Contact the UKTI team in Burma to help find tax and legal advisers before entering into agreements.

6.1 Setting up a company

            To date most British companies have established their presence in Burma as a branch office under the Myanmar Companies Act. Whilst this does not provide the tax breaks of investing under the MFIL, the process is much quicker and easier. It is the most appropriate route for those looking to establish a relatively small scale presence initially.
           The process has 2 stages: first you must acquire a permit to trade then you must register the company locally There is a capital requirement of USD 50,000. 50% of this must be remitted into a local bank account before the permit is issued and the remaining 50% within 12 months. It usually takes around 2 months to get the permanent registration certificate which lasts 5 years. However a temporary registration can usually be acquired in around 3 weeks. This lasts for 6 months and allows you to start doing business.
         The Directorate of Companies Administration (DICA) based in Rangoon in the Ministry of National Planning has responsibility for the registration process. The World Bank provides more details on the different stages of the registration process.

6.2 Investment permits

          Acquiring an investment permit under the MFIL is another route to market. This is only applicable in the case of sizeable capital investment; usually over USD 500,000. Up to 100% foreign ownership is allowed under the Foreign Investment Law (FIL), except for sectors where:
foreign investment is totally prohibited
foreign investment is restricted and requires the approval of the line ministry
foreign investment can only be up to 80% of a joint venture
The process for acquiring an MIC permit can take up to 6 months depending on the complexity of the investment and the volume of applications the MIC is receiving. Once the permit is issued there are a number of incentives available to the investor including:
tax holiday for up to 5 years up to 50% relief on profits accrued if good are exported customs duty exemptions on equipment required for construction duty exemptions on raw materials for the first 3 years exemptions from commercial tax on goods manufactured for export.

7. Legal considerations

        Burma’s legal environment is complicated and unclear, and the legal system is bureaucratic and corrupt. New legislation has been passed as part of the reform process, but it remains largely untested. Burma has recently joined the New York Arbitration Convention. However the implementing legislation has yet to be passed. Therefore British companies should seek to include external arbitration clauses in any legal agreement.
Contact the UKTI team in Burma to help find tax and legal advisers before entering into agreements.

7.1 Standards and technical regulations

         Standards and technical regulations are non-existent or unclear in the majority of sectors.

7.2 Intellectual property (IP)

         Burma has no specific legislation covering the registration and enforcement of intellectual property rights. It is a member of the World Intellectual Property Organization (WIPO). They have committed to working with the Burmese government to help draft new legislation, but this has not been produced as yet.
         It’s possible for British companies to register a trade mark under the 1908 Registration Act. This registration should be followed by the publication of a cautionary note in a local newspaper. Once this has been done enforcement is theoretically possible.

7.3 Labour law

          You must be compliant with Burmese labour law if you plan to employ Burmese staff. This means compliance with a variety of relevant pieces of legislation relating to different aspects of employment; holiday, training, compensation, maternity leave and others. A minimum wage of USD 2.80 per day for 8 hours work now applies to all businesses with more than 15 staff.
          UK companies setting up via the MCA are not subject to any restrictions on the numbers of foreigners they can employ. However, companies investing through the MIC must meet local employment quotas. 75% foreigners can be employed in year one, but this must be reduced to 25% after 5 years.

8. Tax and customs considerations

          UK companies doing business in Burma must be compliant with local tax law. You should seek tax advice from a qualified tax accountant.
Contact the UKTI team in Burma for advice on local accountants.
The UK and Burma have signed a double taxation convention.
There are tax exemptions for companies registered under the MFIL.

8.1 Corporate taxes

         Corporate tax is 25% for businesses incorporated in Burma under the MFIL or the MCA. It is 25% for non-resident foreign organisations, such as a branch office of a foreign company.

8.2 Commercial tax

        There is no Value Added Tax (VAT) in Burma. However, there is a commercial tax which is levied on most commercial transactions. The level varies from 5% to 120%, but is normally 5%. Commercial tax on cigarettes is 120%, beer and liquor is 60% and wine is 50%.

8.3 Capital gains tax

10% for resident companies
40% for non-resident companies such as a branch office of a foreign company

8.4 Personal taxation

         All Burmese citizens and resident foreigners are treated as tax resident and required to file a tax return. Any foreigner spending more that 183 days in Burma is considered resident.
Rates are progressive up to 25%; income on salaries over USD 30,000 is 25%.

8.5 Customs

         Export and import activities can only be carried out by Burmese companies or MFIL companies with MIC permits. Foreign companies registered under the MCA are not permitted to export or import. Customs duties range between 0% to 40%, based on the Myanmar tariff schedule of 2012. They tend to change regularly and often without notice. You must check the up-to-date rates with your forwarding agent.
         Import duty is levied at the rate of 0.5% of the assessable value. This is equal to the sum of the cost of the goods, insurance over the goods, freight charges and any landing charges imposed. Commercial tax is levied at 5%. Commercial tax rates on imports of 18 specially designated ‘luxury’ goods range from 8% to 100%.
         You can find more about import tariffs in the Market Access Database. 8.6 Documentation If you are looking to distribute your product in Burma you will need to appoint a local company who holds a certificate of import/export issued by the Ministry of Commerce.
         Correct paperwork is crucial. Check with your importer or agent on the documentation required when exporting products to Burma. Different products will require different documents due to rules set by the government authority.

9. Business behavior

        The official language is Burmese, but there are over 100 different regional dialects. The use of English is widespread among larger companies, but proficiency is limited within smaller companies. Do not assume you have been understood in meetings. It’s worth having an interpreter with you just in case.
You should adapt to Burmese codes of conduct including: always referring to people by their full honorific title and full name (‘U’ is the equivalent of ‘Mr’ and ‘Daw’ can be interpreted as ‘Mrs’, ‘Ms’ or ‘Madam’) dressing conservatively for meetings shaking hands if they are offered exchanging business cards at the start of a meeting, taking the time to look at them properly and keeping them on the table during meetings taking your lead from the host as to whether you remove your shoes on entering a Burmese office not pointing at anyone, or anything with your feet making ‘small talk’ which may take the form of personal questions in business meetings not interrupting, or raising your voice in meetings as Burmese will find this offensive and rude giving a token gift, such as something with particular relevance to the UK You need to make regular visits to build business relationships in Burma as communication via email does not work well in this market.

10. Entry requirements

          British national wishing to visit Burma need a valid passport and must obtain an appropriate visa. You can obtain a business visa valid for 70 days from: the Burmese Embassy in advance of your visit on arrival at Yangon, Mandalay or Naypyitaw airports If you are visiting for an exploratory visit only you might consider applying for a tourist visa which will allow a stay of 28 days. This can be done at the Burmese Embassy in advance of the visit or as an eVisa which takes around 3 days to process via the official website

10.1 Travel Advice

           If you are travelling to Burma for business, check the Foreign and Commonwealth Office (FCO) travel advice beforehand.

11. Contacts

          Contact the UKTI team in Burma for more information and advice on opportunities for doing business in Burma. You can also seek assistance from the British Chamber of Commerce Myanmar at info@britishchambermyanmar.com Contents Is there anything wrong with this page?
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Source: MYANTRADE Daily News(23.6.2016)

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