With the new investment law sailing through both houses of parliament this month, formal approval appears imminent, as a signature from the President's Office is all that is required to see it passed. The Myanmar Times
sat down with Myanmar Investment Commission secretary U Aung Naing Oo
this week to discuss what the new law means for both foreign and local
businesses and how the MIC plans to direct investment towards particular
sectors and specific parts of the country.
How will the new investment law make it easier for foreign investment?
If
you look at the new law there are actually two categories. One is MIC’s
permitted business and the other one is MIC’s approved businesses. The
idea is that if you also look at our previous, 2012 foreign investment
law, all investment needs to be approved by the MIC. Anyone who wants to
do business in Myanmar had to submit a proposal to Myanmar Investment
Commission, regardless of whether it is a small business or a big
business. And that would take a long time, because of the procedures. We
would also need to consult with the different government agencies and
that also took a long time. So in order to obtain a permit from the
Myanmar Investment Commission it takes, maybe, around three months. It
was very costly for inventors who had to consult with law firms in
preparation of their proposal to make sure. Also they need to consult
and discuss with the ministries for the ministries consent.
So
our idea is, after the propagation and the enactment of the rules for
the new investment law, the procedures will be much easier, for not only
foreign investors but for local investors as well.
Only a few
proposals will be screened and permitted by the Myanmar Investment
Commission. Some of the businesses will be approved by state and
regional governments. Some big business will be approved by the Myanmar
Investment Commission. The idea is to grant easier access for business.
There
were concerns from local business that Myanmar’s investment laws favour
foreign investors. How does the new law address these concerns?
Actually this is one of the reasons why we have merged two investment laws
into one. Previously, we had two laws for investment. One is for
Myanmar citizens and one is for foreign investors. What was happening
was that foreigners thought that our Myanmar citizens law favoured local
businesses and also the local business community thought that the
Myanmar Investment Commission was in favour of foreigners. They both
thought that there was no fair competition between local and foreign
businesses. Therefore, having one law makes it easier for us, and also
for foreigners and the local business community. At the time of the
propagation of the 2012 foreign investment law there were a lot of
concerns from the local business community, because they thought that an
influx of FDI meant the collapse of their businesses. We tried to make
it more secure for both of them by setting up some rules and also
releasing notifications. But this law is a single law, not only for
foreigners but also for local businesses.
If you look at the new
investment law, we have some reservations for local SMEs and local
businesses. So the law makes it very secure for local investors as well.
What‘s an example of that?
If
you look at, for example, land lease, according to the new investment
law foreigners can lease the land either from the government or from the
private owner for initially 50 years, and it can be extended two times.
It is the same situation that existed in the previous law, but we have
some reservations for the Myanmar business community. The MIC can
consider better lease privileges for Myanmar businesses. So this is one
of the privileges for local businesses. And if you look at one section
of the investment law, we reserve some special treatment or special
privileges for local SMEs, so the government can provide better support to local SMEs
for their development, in terms of training, in terms of providing some
technical support and market access. So they are some of the
reservations for the local business community.
What are the sectors that the government is trying to
encourage foreign investment into and how will the investment law enable
this?
If you look at one of the provisions in the new
law, especially the incentives, the government or the MIC will not allow
all investment in Myanmar to enjoy corporate income tax holidays.
We will allow only promoted sectors to enjoy corporate income tax
holidays and it depends on the location of their businesses – from three
years to seven years. Promoted sectors will be set by the government in
accordance with the law. We haven’t yet set which sectors will be the
promoted sectors. But definitely, number one, will be manufacturing,
particularly labour intensive manufacturing will be in the list of
promoted sectors. Number two is infrastructure development. Private
investment in infrastructure will be in the list of promoted sectors.
Agriculture and food processing will also be included. About 70 percent
of Myanmar’s population is either directly or indirectly involved in
agriculture so we have to promote agriculture for foreign investment. We
have also already made a public announcement to say that the MIC will
promote investment into industrial zones across the country.
So
those will probably be in the list of promoted sectors, but it totally
depends on the government policy. So the government might also consider
other areas apart from the areas that I have explained.
Is there an understanding of what regions and states investment will be encouraged into?
We
will consider incentives based on the development of different sates
and regions. There will be different incentives for corporate income
tax, but it will be up to the discussions in parliament.
If we focus only, however, on the states and regions it will not be effective. In any given region or state there are different levels of development,
from one township to another. Therefore we should not consider solely
the states and regions as a whole, but we need to consider development
of areas within the states and regions. If you look at Sagaing Region,
for example, some areas in Sagaing Region are much more developed than
northern parts of Sagaing Region, so we must treat them differently,
with different incentives. Therefore, when the new law is enacted it’s
not based on the states and regions – it is totally based on the area of
investment.
We will discuss this with the governments of the
different states and regions, to understand which areas they want MIC to
direct investment to understand which areas are developed or
underdeveloped or they want to develop.
So while you are
attempting to remove a lot of red tape, it sounds like there is still
potential for a lot of bureaucracy involved in the decision making. Is
it in danger of becoming too cumbersome?
I have to say
yes and no. This is a very new initiative, and we have to reduce a lot
of the red tape and simplify procedures, which we are not familiar with.
And also the state and regional governments are very new, so they don’t
have a lot of experience and exposure in decision-making or screening
investment. So that can be a bit cumbersome for us because we need to
educate the state and regional governments and to educate the local
business community on how they can make use of the investment law. And
also, we have to draft the rules to ensure the law progresses well, we
have to consult with the state and regional governments for many areas
and we have to consult with the ministries for setting up the promoted
sectors. So that can be a bit cumbersome for us.
But it is really
good for the business community for us to do all this. There will be
less red tape, easier access for business in Myanmar and it will help to
develop the economy.
So I have to say yes for us, but no for the business community.
This
law seemed to pass through parliament fairly quickly. You’re already
moving on to the corporate law. Things seem to be moving fast. This can
be challenging also how do you manage this?
Actually, we
expected to complete the whole process of the enactment of the new
investment law by the end of 2016. But thanks to the leadership of the
Lady [State Counsellor Daw Aung San Suu Kyi] the process has been
completed earlier than expected, which is really good for us because the
government will have more time for promotion of the law. Yes, we have
another law that is also important, which is the companies law.
Those two laws are really important for implementing better business in
the country. Now the investment law is in place we have go through the
process of drafting rules and go through the process of release of
notifications and many other things.
But the companies law, I
think we will be able to submit the law to the parliament in the
upcoming sessions so that the company law will be ready to be exercised
by the end of this financial year, before the end of March 2017. Our
idea is to complete all the legal framework improvement process before
the end of this financial year. We will then be able to exercise all the
new laws and new regulations by the beginning of the 2017-2018
financial year.
In the past there has been tension
between the MIC and the ministries about who has authority over what.
How is this being addressed now?
One of the key
considerations of the new law and the government is to streamline the
procedures and make everything more simplified for foreign investors.
Therefore, while we draft the new rules for the new investment law, we
will thoroughly consult with the ministries. We will try to reduce the
communication with the ministries once an investor applies to the MIC or
to the state or regional governments.
So according to the new
law there are a few areas of restrictions. Number one is that some
businesses will be totally reserved for the state. So no foreign or
local investors will be allowed to do business in the place of these
state-run businesses. Number two is we will ask foreign investors to set
up joint ventures with local partners. And number three is we will ask
the investor, either foreigners or local businesses, to seek approval
from a ministry. Without the ministry’s approval those businesses will
not be permitted.
What I mean is, we are trying to make a clear
demarcation between the ministries and the MIC. As long as the
businesses are under the jurisdiction of the MIC, we won’t consult with
the ministry. MIC will decide for itself on a business’s establishment.
Likewise, we will make it understood to the state and regional
government that they can also decide for themselves for businesses in
their respective regions and states. There will only be a few cases
where it will need to be screened and we will need to consult with the
line ministry.
One of the big problems for foreign or local
investors nowadays for their business is it takes a long time to consult
and get green lights from the ministries. Some ministries are quite
fast and some ministries are quite slow. So it takes too long for a
foreign investor, therefore we are trying to reduce the communication
with the ministries as much as possible.
Is there going to be changes regarding certain sectors that can and can’t be wholly foreign owned?
Yes,
the MIC will make that announcement subsequent to the release of rules
for foreign investment for the investment law. So we will clearly
identify which business needs a joint venture with a local partner,
which business will not be allowed to foreign investors. But apart from
the businesses in this list, all businesses will be allowed for foreign
investment 100 percent. We will try to have as few restrictions as
possible for foreign investors. We need to consult with the ministries,
local business community and government agencies before this list is
decided. We are trying to have all this completed by March 2017.
This interview has been edited for length and clarity.
Source>MyanmarTimes
2:56:00 PM
Myanmar Trade Office (Taipei)
