Burma

Bureau of Economic and Business Affairs
June 29, 2017

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Executive SummaryShare    

After years of economic isolation and a remarkable political transformation, Burma has begun to implement significant reforms to spur economic development and attract foreign investment. Following the nation-wide elections in November 2015, and the inauguration of a democratically-elected government in 2016, the U.S. government ended the Burma Sanctions Program on October 7, 2016, removing all economic sanctions on Burma. In November 2016, the U.S. government reinstated Burma’s Generalized System of Preferences trade benefit in recognition of the progress that the government had made in protecting workers rights and improving labor standards. In November 2016, the United States and Burma launched the U.S.-Myanmar Partnership to strengthen the bilateral relationship and expand areas of cooperation. Burma is now faced with the challenge of developing and implementing the legal and regulatory environment to attract foreign investment in support of its goal of inclusive economic growth.

Over the past several years, the government has addressed some of the long-standing obstacles to economic growth, including eliminating multiple exchange rates, reducing trade restrictions, reforming tax policy and administration, passing a new arbitration law and labor legislation in line with international standards, and easing some of the administrative hurdles to doing business in Burma. Significant progress in financial sector strengthening and economic reform legislation has attracted foreign investment. According to the World Bank, Burma experienced a 6.5 percent growth rate in 2016 and growth is expected to reach 6.9 percent in FY 2017/18. The government passed its new Myanmar Investment Law in October 2016, combining and replacing the Foreign Investment Law of 2012 and the Myanmar Citizens Law of 2013. The government is in the process of a relatively inclusive, consultative process to establish the law’s rules and implementing regulations. This year the Directorate for Investment and Companies Administration (DICA) established an Americas Desk to better support U.S. direct investment in Burma. In their Doing Business 2017 report, the World Bank ranked Burma 170 out of 190 countries on the ease of doing business, an increase from the 2016 ranking of 171, driven in part by improvements in regulations, costs, and procedures related to establishing a new venture, and an improvement in the construction permitting process. Burma’s financial sector, while still underdeveloped, has improved sufficiently to result in the June 2016 removal of Burma from the United States’ Financial Action Task Force watch list. In its first year in office, Aung San Suu Kyi’s National League for Democracy (NLD)-led government countered corruption throughout the government, and called for greater transparency and greater foreign investment in the country. In 2016, Myanmar ranked 136 of 175 countries on Transparency International’s Corruption Perception Index, an improvement from the 2015 ranking of 147 of 167 countries.

In contrast to previous decades, when the majority of the investment that Burma received went into natural resource sectors, since 2011 foreign direct investment (FDI) has largely gone to the transportation and communication, manufacturing, real estate, and tourism sectors.

Burma still faces challenges in a number of key areas, including access to finance, title over land, energy supplies, and availability of skilled workers. Transportation costs remain high, and the domestic banking sector has limited connectivity with the global financial system. The 2017 World Bank Doing Business rankings show Myanmar still struggles with enforcement of contracts, protection of minority investors, access to credit, and resolving insolvency. Addressing these key constraints is critical to ensuring a fair and transparent business environment in which all enterprises can grow and create jobs.

Moving forward, observers expect the manufacturing, agriculture, and tourism sectors to grow and attract more FDI, with support from the democratically-elected government, as Burma continues to reconnect to the global economy. Foreign investors are exploring investment opportunities in transportation and communication, manufacturing, real estate, and energy/power. With Burma’s location, natural resources, and political and economic reforms, many observers are optimistic about growth and opportunities in the next several years.

Table 1

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2016

136 of 175

http://www.transparency.org/
research/cpi/overview

World Bank’s Doing Business Report “Ease of Doing Business”

2016

170 of 190

doingbusiness.org/rankings

Global Innovation Index

2016

N/A

https://www.globalinnovationindex.org/
analysis-indicator

U.S. FDI in partner country ($M USD, stock positions)

2015

-11

http://www.bea.gov/
international/factsheet/

World Bank GNI per capita

2015

1,160

http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Towards Foreign Direct Investment

Burma is open to foreign investors. In 2016 passed the new Myanmar Investment Law (MIL) to attract more investment from both foreign and domestic businesses. The MIL is intended to simplify the rules and regulations for investment and bring Burma more in line with international standards. The government actively sought the advice of international experts and lawyers, and held public consultations to help draft rules and regulations that were released on April 1, 2017, when the law went into effect. Burma also has three Special Economic Zones (SEZs) to encourage development and investment, and is continuing to expand those SEZs as they reach capacity. In October 2016, President Obama terminated the Burma Sanctions Program, which had been largely eased through a series of general licenses since 2012.

The Myanmar Investment Commission (MIC) is a government-appointed body, with Burma’s President appointing MIC’s Chairman and its members. The MIC reports directly to Burma’s President. There is no evidence that MIC discriminates against foreign investors. The MIL includes a “negative list” of prohibited, restricted, and special sectors. In addition, the MIL includes provisions for penalties for early withdrawal before a granted license expires.‎

The Directorate for Investment and Company Administration (DICA) is Burma’s investment promotion agency and is the Secretariat of MIC, and falls under the newly merged Ministry of Planning and Finance. However, DICA reports directly to the Chairman of MIC. One of DICA’s roles is to encourage and facilitate both foreign and local investment by providing information, fostering coordination and networks between investors and continually exploring new opportunities in Burma that would benefit both nation and the business community. DICA also added an Americas Desk in 2016, which facilitates investment with the United States.

The government engages with chambers of commerce and foreign companies to maintain a dialogue with investors. DICA held three rounds of consultations with the public during the drafting period of the MIL rules and regulations. Comments and suggestions were considered and incorporated into the revisions, and open lines of communication were available to investors from all sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

On October 18, 2016, the new Myanmar Investment Law (MIL) was signed into law, combining and replacing the Foreign Investment Law of 2012 and the Myanmar Citizens Law of 2013. The MIL, and the new investment implementing rules and regulations, are applicable to new proposals effective April 1, 2017. The Ministry of Planning and Finance released three drafts of rules and regulations, containing provisions on types of investments, submission and approval of investment applications, long term lease agreements, and tax incentives. Section 42 of the MIL lists types of investment activities which only Burma’s government can undertake; which are not permitted for foreign investors; which are permitted only as a joint-venture with resident citizens or citizen-owned entities; and investment activities which are subject to specifically prescribed conditions (e.g. approval from relevant ministries).

When forming or registering a business in Burma, generally two options exist: (i) registration under the 1914 Companies Act only or (ii) registration as an MIC-company under the MIL (with registration under the 2014 Special Economic Zone Law for businesses located in a Special Economic Zone as a third option). Under the MIL, only investors involved in the following businesses must submit a Proposal to the MIC and apply for a permit: businesses/investment activities that are strategic for Burma; large capital intensive investment projects; projects which have large potential impact on the environment and the local community; businesses/investment activities which use state-owned land and buildings; and/or businesses/investment activities which are designated by the government to require the submission of a Proposal to the MIC. Additional details on these categories included in the implementing rules and regulations were released April 1, 2017. A new Companies Act is currently under review at Parliament which is expected to simplify requirements for small and family-owned businesses, improve corporate governance standards, facilitate increased transparency, and remove outdated regulations. The law will also allow foreign investors to hold up to a designated percentage of shares in Burmese firms.

The State Owned Economic Enterprises Law enacted in March 1989 and still in effect today, also regulates certain investments and economic activities. The previous government drafted a privatization law; the current government plans to merge this with a new SOE law, with discussions underway at the Ministry of Planning and Finance. As the government has encouraged more private sector development, however, SOEs are increasingly less important parts of the economy. While the 1989 law stipulated that SOEs have the sole right to carry out a range of economic activities, including teak extraction, oil and gas, banking and insurance, and electricity generation, in practice many of these areas are open to private sector development.

The 2016 Rail Transportation Enterprise Law allows, for instance, foreign and local business to make certain investments in railways, including in the form of a Private Public Partnership.

More broadly, the MIC, "in the interest of the State," can make exceptions to the SOE law. The MIC has routinely granted numerous exceptions including through joint ventures or special licenses in the areas of banking (for domestic investors only), mining, petroleum and natural gas extraction, telecommunications, radio and television broadcasting, and air transport services.

The Burmese military is associated with the Union of Myanmar Economic Holdings, Ltd. (UMEHL) and the Myanmar Economic Corporation (MEC), two large conglomerates with many commercial interests. As government policies continue to allow for greater private sector involvement in the economy, the market shares of these conglomerates has decreased.

Other Investment Policy Reviews

The OECD conducted an investment policy review of Burma in March 2014. The entire report can be found at: http://www.oecd.org/daf/inv/investment-policy/Myanmar-IPR-2014.pdf.

The World Trade Organization (WTO) conducted a trade policy review of Burma in March 2014. The entire report can be found at: https://www.wto.org/english/tratop_e/tpr_e/s293_e.pdf.

The World Bank’s Doing Business 2017 report includes an analysis of Burma’s investment sectors and business environment, and can be found at: http://www.doingbusiness.org/data/exploreeconomies/myanmar/

The World Bank also conducted an enterprise survey of Burma in 2014, the results of which can be found at: http://www.enterprisesurveys.org/data/exploreeconomies/2014/myanmar.

Business Facilitation

The DICA Web site (http://www.dica.gov.mm/) provides information on how to register a business in Burma. Registration is the first step a businessperson will be required to take before incorporating a company or making an investment in Burma, whether that person is a citizen of Burma or a foreigner. In accordance with the Myanmar Companies Act of 1914 and the Special Companies Act of 1950, a company may be registered in one of the following forms: as a private OR public company by Burmese citizens; as a foreign company OR branch of a foreign company; as a joint venture company; as an association/nonprofit organization. First steps include checking availability of the company name at DICA, obtaining company registration forms at DICA and paying a stamp duty, and submitting the forms and paying a company registration fee.

The MIC is responsible for verifying and approving investment proposals and regularly issues notifications about sector-specific developments. The MIC is comprised of representatives and experts from government ministries, departments, and governmental and non-governmental bodies. Companies can use the DICA website to retrieve information on requirements for MIC permit applications and submit a proposal to the MIC. If the proposal meets the criteria, it will be accepted within 15 days. If accepted, the MIC will review the proposal and reach a decision within 90 days. The MIC issued a statement in March 2016 granting authority to state and regional governments to approve any investment with capital of under USD5 million. Such investments no longer need to seek approval from the MIC.

This year, DICA established an Americas Desk to better support U.S. investment interest in Burma. To attract foreign and domestic investors, the MIC has released lists of townships which fall under three different zones/categories: least developed; moderate developed and developed. Investors will receive a tax break of seven years, five years or three years when they make investments in least developed, moderate developed, and developed zones respectively. A total of 166 townships fall under the least developed zone.

Outward Investment

Burma does not promote outward investment or restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

Burma has signed and ratified several bilateral investment agreements with China, India, Japan, Philippines, and Thailand. It has also signed bilateral investment agreements with Israel, Laos, South Korea, and Vietnam although these have not yet entered into force. Burma has engaged in investment treaty negotiations with Bangladesh, China, Hong Kong, Iran, Mongolia, Russia, and Serbia. Texts of the agreements or treaties that have come into force are available on the UNCTAD website at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/144

In 2013, the United States and Burma signed a Trade and Investment Framework Agreement. Burma does not have a bilateral investment treaty or a free trade agreement with the United States.

Through its membership in ASEAN, Burma is also a party to the ASEAN Comprehensive Investment Agreement, as well as to the ASEAN-Australia-New Zealand Free Trade Agreement, the ASEAN-Korea Free Trade Agreement, and the China-ASEAN Free Trade Agreement, all of which contain an investment chapter that provides protection standards to qualifying foreign investors.

Burma has bilateral trade agreements with Bangladesh, Sri Lanka, China, South Korea, Laos, Malaysia, the Philippines, Thailand, and Vietnam in the Asian region, as well as with a number of Eastern European countries.

Burma does not have a bilateral taxation treaty with the United States.

3. Legal RegimeShare    

Transparency of the Regulatory System

Burma lacks regulatory and legal transparency. In the past, all existing regulations were subject to change with no advance or written notice, and without opportunity for public comment. While there is no legal requirement to have public consultation, 75 percent of parliamentarians are elected representatives of their constituencies and respond to public engagement. In addition, many Ministries now engage in public consultation before promulgating bills or issuing new regulations. For instance, the 2016 Investment Law was presented to the public and open for comments, including the drafting of the rules and regulations, which went through three rounds of public consultations. An active and vocal civil society, alongside advances in press freedom, also results in more public discourse about proposed legislation and regulations than in the past. The government of Burma publishes information online on government websites and has established websites through which businesses can access trade information. The Ministry of Commerce publishes a weekly Commerce Journal and a monthly Trade News booklet, providing trade-related information, and in May 2016, launched the National Trade Portal and Repository. In the past three years, the government of Burma has also published new regulations and laws in government-run newspapers and "The Burma Gazette." Burma issued the Citizen’s Budget in September 2016, and provided a six month overview of budget execution in February 2017 for the 2016/17 fiscal year.

As part of the government’s commitment to transparency of its regulatory system, Burma became a candidate country in the Extractive Industries Transparency Initiative in 2014, and on January 2, 2016 Burma’s Extractive Industries Transparency Initiative (EITI) National Coordination Office, a global standard for the promotion of revenue transparency, submitted the country’s first EITI report covering three sub-sectors for 2013-2014 – Oil and Gas, Gems and Jade, and other minerals. The government announced its new EITI administrative body for the second and third reports of EITI process, in December 2016. Although the transition in government caused a delay in its next EITI report, it will publish its second report in March 2018. (See https://eiti.org/report/myanmar/2013)

International Regulatory Considerations

On May 26, 2016, the Ministry of Commerce launched its new National Trade Portal and Repository, an online platform that has all of Burma's Laws, processes, forms, and points of contact for trade. This portal meets Burma's requirements under Articles 12 and 13 of the ASEAN Trade in Goods Agreement. While Burma is not in compliance with WTO notification requirements, the government developed a WTO notification strategy, which will go into effect this year. This should increase the number and quality of notifications. More information on the Portal can be found at: http://www.myanmartradeportal.gov.mm/index.php.

Legal System and Judicial Independence

Burma’s legal system is a unique combination of customary law, English common law and statutes introduced through the pre-independence India Code, and post-independence Burmese legislation. Where there is no statute regulating a particular matter, courts are to apply Burma’s general law, which is based on English common law, as adopted and molded by Burmese case law. Every State and Region has a High Court, with lower courts in each district and township. High Court judges are appointed by the President while District and Township judges are appointed by the Chief Justice through the Office of the Supreme Court of the Union (Burma). The Attorney General’s Law Officers operate sub-national offices in each State, Region, district, and township.

The Attorney General enforces standards of due process in the criminal justice system and provides the government’s Law Officers (prosecutors) with a mandate to act as an independent check in the criminal justice system. The Ministry of Home Affairs, led by a minister appointed by the Commander in Chief, but reporting to the President, retains oversight of the Myanmar Police Force, which files cases directly with the courts. While foreign companies have the right to bring cases to and defend themselves in local courts, there are concerns about the impartiality and lack of independence of the courts.

In order to address the concerns of foreign investors regarding dispute settlement, the government acceded, on April 16, 2013, to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention.) On January 5, 2016, Burma’s parliament enacted the much-anticipated Arbitration Law, putting the New York Convention into effect and replacing arbitration legislation that was more than 70 years old. Since April 1, 2016, foreign companies can pursue arbitration in a third country. However, the Arbitration Law does not eliminate all risks. There is still little track record of enforcing foreign awards in Burma and inherent jurisdictional risks remain in any recourse to the local legal system. The new Arbitration Law, however, brings Burma’s legislation more in line with internationally accepted standards in arbitration.

Laws and Regulations on Foreign Direct Investment

The MIC plays a leading role in the regulation of foreign investment, and approves all investment projects receiving incentives, except those in special economic zones, which are handled by the Central Working Body, set up under the existing Special Economic Zone Law. Joint ventures between foreign investors and SOEs are the responsibility of the relevant line ministries. There is no evidence that the MIC discriminates against foreign investors.

The MIL outlines the procedures the MIC must take in considering foreign investments. Investment approvals are made on a case-by-case basis. The MIC evaluates foreign investment proposals and stipulates the terms and conditions of investment permits. To obtain an investment permit, the investor must submit a proposal in the prescribed form to the MIC, together with supporting documentation including details of intended activities and the financial credibility of the company/individual; an undertaking not to engage in trading activities; and annual reports for the last two financial years, or copies of the company’s Head Office’s balance sheet and profit and loss account for the last two financial years, notarized by the Burmese Embassy in the country where the company is incorporated. The MIC accepts or rejects an application within 15 days, and decides whether to approve the proposal within 60 days. In November 2015, the government’s Cabinet approved an Environmental Impact Assessment Procedure. The Chairman of the MIC gives the final approval.

The MIC does not record foreign investments that do not require MIC approval. Joint ventures with military controlled enterprises require MIC approval and abide by the same rules as other investments. Many smaller investments may also go unrecorded. Once licensed, foreign firms may register their companies locally, use their permits to obtain resident visas, lease cars and real estate, and obtain import and export licenses from the Ministry of Commerce. Foreign companies may register locally without an MIC license, in which case they are not entitled to receive the benefits and incentives provided for in the MIL. Many import and export licenses requirements have been removed since 2014; for more information see http://www.myanmartradeportal.gov.mm/?r=site/display&id=13

More information on the MIC and DICA can be found at: http://www.dica.gov.mm/en/apply-mic-permit

Competition and Anti-Trust Laws

A Competition Law was passed on February 24, 2015, and went into effect on February 24, 2017. The objective of the law is to protect public interest from monopolistic acts, limit unfair competition, and prevent abuse of dominant position and economic concentration which weakens competition. Specifically, the Competition Law sets a foundation for creation of a regulatory body with investigative and adjudicative powers, addresses the three standard pillars of competition law (agreements that restrain competition, abuse of dominance, and mergers) as well as unfair trade practices, and establishes a comprehensive penalty regime.

The law classifies four types of behavior as sanctionable violations: acts restricting competition (applicable to all persons); acts leading to monopolies (applicable only to entrepreneurs); unfair competitive acts (applicable only to entrepreneurs); and business combinations such as mergers. The law also restricts the production of goods, market penetration, technological development and investment, although the government may exempt restrictive agreements “if they are aimed at reducing production costs and benefit consumers,” such as reshaping the organizational structure and business model of a business so as to improve its efficiency; enhancing technology and technological advances for the improvement of the quality of goods and service; and promoting competitiveness of small and medium sized enterprises.

Burma is not party to any bilateral or regional agreement on anti-trust cooperation.

Expropriation and Compensation

According to the OECD’s 2014 IPR, Burma’s “expropriation regime . . . does not appear to protect investors against indirect expropriations.” In addition, it reports that Burma has not incorporated the principle of non-discrimination into its investment framework. Other than a constitutional safeguard that states that the government will not nationalize economic enterprises, there is no specific provision in Burma’s legislation against expropriation without compensation. The 2016 MIL prohibits nationalization and states that foreign investments approved by the MIC will not be nationalized during the term of their investment. In addition, the law guarantees that the government of Burma will not terminate an enterprise without reasonable cause, and upon expiry of the contract, the government of Burma guarantees an investor the withdrawal of foreign capital in the foreign currency in which the investment was made. Finally, the law states that “the Union [Burma] Government guarantees that it shall not cease an investment enterprise operating under a Permit of the Commission before the expiry of the permitted term without any sufficient reason.”

The new Company Act under review by Parliament is planned to replace a colonial-era Myanmar Companies Act from 1914 that is replete with antique stipulations – companies have to seek presidential approval to change their names, and court approval to change business objectives. In addition to simplifying requirements for small and family-owned businesses, improving corporate governance standards, and removing outdated regulations, the act also is expected to allow foreign investors to hold a certain percentage of shares in Burmese firms. The authorities hope this will make it easier for local companies to attract international funding and expertise. The new legislation will not automatically treat companies with a degree of foreign ownership differently. The Director General of DICA said foreign-owned companies will be defined as those where foreign ownership exceeds 35 percent, but that the Ministry of Finance and Planning can change this ratio as the economy develops. This law would also allow foreigners to buy shares on the new Yangon Stock Exchange for the first time.

Dispute Settlement

ICSID Convention and New York Convention

Burma is not a party to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID). On January 5, 2016 the Burmese parliament enacted the Arbitration Law, putting the 1958 New York Convention into effect (see international arbitration below).

Investor-State Dispute Settlement

To date, Burma has not been party to any investment dispute. In addition, Burma has not been party to any dispute settlement proceeding at the WTO.

International Commercial Arbitration and Foreign Courts

The new 2016 Arbitration Law is based on the UNCITRAL Model Law (Model Law), addressing arbitration in Burma as well as the enforcement of a foreign award in Burma. For example, the provisions relating to the definition of an arbitration agreement, the procedure of appointing arbitrator(s) and the grounds for setting aside an award, are mirrored in the Arbitration Law and the Model Law; however there are some differences between these two laws. For instance, while parties are free to decide on the substantive law in an international commercial arbitration, the Arbitration Bill provides that arbitrations seated in Burma must adopt Burmese law as the substantive law if those arbitrations do not fall within this definition. This may create uncertainty as to what can be defined as an international commercial dispute, such that parties are allowed to adopt any foreign law as substantive law under this provision. According to the Arbitration Law, foreign arbitral awards can be enforced if they are the result of a commercial dispute and were made at a place covered by international conventions connected to Burma and as notified in the State Gazette by the President. If the Burmese court is satisfied with the award, it has to enforce it as if it were a decree of a Burmese court. While observers note that there are still issues to be ironed out, the Arbitration Law brings Burma’s legislation much closer to international arbitration standards and legislation.

Bankruptcy Regulations

There is no bankruptcy law in Burma. Existing, antiquated insolvency laws – such as The Insolvency Act of 1910 and The Insolvency Act of 1920 – are rarely used.

4. Industrial PoliciesShare    

Investment Incentives

Different ministries and agencies promote investment into different sectors (e.g., the Ministry of Hotels and Tourism promotes responsible tourism investment), although DICA is officially mandated to coordinate investment promotion under the MIL. DICA is responsible for encouraging and facilitating foreign investment by providing information, fostering coordination and networks between investors, and continually exploring new opportunities in Burma that would benefit both the nation and the business community. Currently, DICA’s main office is in Rangoon, but it has nine branches throughout the country including Pathein, Monywa, Dawei, Taunggyi, Mawlamiyine and Mandalay, Hpa-an, Bago, Nay Pyi Taw. DICA is paying particular attention to attracting FDI in labor intensive industries; agriculture and its related industries including products manufactured from raw agricultural materials, agricultural construction, building and heavy equipment; and projects that benefit infrastructure including transportation, energy and manufacturing. DICA uses seminars, workshops, investment fairs and other events to promote the above investment, as well as its website: http://www.dica.gov.mm/en

Foreign Trade Zones/Free Ports/Trade Facilitation

The Myanmar Economic Zones Law also contains certain investment incentives. Under the law, investors located in a Special Economic Zone (SEZ) may apply for income tax exemption for the first five years from the date of commencement of commercial operations, followed by a reduction of the income tax rate by 50 percent for the proceeding five year period. If profits during the next third five year period are re-invested within one year, investors can apply for a 50 percent reduction of the income tax rate for profits derived from such re-investment. On August 27, 2015, the Ministry of National Planning and Economic Development issued new rules governing the SEZs, including the establishment of a One Stop Service Department to ease the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue the relevant certificates of origin, collect taxes and duties, approve employment permits and/or permissions for factory construction and other investments

Performance and Data Localization Requirements

Foreign investors must recruit at least 25 percent of their skilled employees from the local labor force in the first two years of their investment. The local employment ratio increases to 50 percent for the third and fourth years, and 75 percent for the fifth and sixth years. Investors are also required to submit a report to MIC with details of the practices and training methods that have been adopted to improve the skills of Burmese nationals.

Foreign investors are not yet required to use domestic content in goods or technology. Burma is currently developing laws, rules, and regulations on information technology (IT), and does not have in place requirements for foreign IT providers to turn over source code and/or provide access to surveillance.

5. Protection of Property RightsShare    

Real Property

The MIL provides that any foreign investor may enter into long-term leases with private landlords, or—in case of state owned land—the relevant government departments or government organizations, if the investor has obtained a Permit or Endorsement issued by the MIC. Upon issuance of a Permit or an Endorsement, a foreign investor may enter into leases with an initial term of up to 50 years (with the possibility to extend for two additional terms of ten years each). Longer periods of land utilization or land leases may be allowed by the MIC to promote the development of difficult-to-access regions with lower development.

However, a continuing area of concern for foreigners involves investment in large-scale land projects. Property rights of large plots of land for investment commonly are disputed because ownership is not well-established, particularly following a half-century of military expropriations; it is not uncommon for foreign firms to face complaints from communities about inadequate consultation and compensation regarding land that they are seeking to lease from the government or private parties.

In January 2016, the government published the approved National Land Use Policy. The policy includes provisions on ensuring the use of effective environmental and social safeguard mechanisms; improving public participation in decision-making processes related to land use planning; improving public access to accurate information related to land use management; and developing independent dispute resolution mechanisms. The policy is to be updated every five years as necessary and stipulates that a new national land law will be drafted and enacted using this policy. This policy will also be used as a guide for the harmonization of all existing laws relating to land in the country.

Burma’s parliament passed the Condominium Law on January 22, 2016. The law states that up to 40 percent of condominium units can be sold to foreign buyers on a building’s sixth floor and above. As per the new law, condominium owners shall have the shared ownership of both the land and apartment. However, new residential condominiums built in Rangoon will not meet the criteria stipulated in the law as most of the projects were built by foreign investors on government land under build-operate-transfer (BOT). Such private-public partnership investments cannot be considered condominiums under the new law. The Ministry of Construction is drafting rules to clarify the new law.

In accordance with the Transfer of Immovable Property Restriction Law of 1987, mortgages of immovable property are prohibited if the mortgage is held by a foreigner, foreign company or foreign bank.

Intellectual Property Rights

Burma is in the process of improving intellectual property rights protection. Patent, trademark, industrial design, and copyright laws and regulations are antiquated and deficient, and there is minimal regulation and enforcement of existing statutes. Consequently, there is no legal protection in Burma for foreign copyrights. In addition, Burma has no trademark law, although trademark registration is possible. Some firms place caution notices in local newspapers to declare ownership of their trademarks. After publication, the owners can take criminal and/or civil action against trademark infringers. Title to a trademark depends on use of the trademark in connection with goods sold in Burma.

Burma does not have in place a judicial court specifically dealing with intellectual property rights. Disputes related to the infringement of intellectual property rights are governed by common rules of civil and criminal procedure. Similarly, there is no institution in charge of supervising the administration, registration and enforcement of intellectual property.

Burma is attempting to address these legal deficiencies and the high level of piracy within Burma. After Burma joined ASEAN in 1997, it agreed to modernize its intellectual property laws in accordance with the ASEAN Framework Agreement on Intellectual Property Cooperation. The Ministry of Education, with advice from external stakeholders and experts, drafted four new intellectual property bills – on trademarks, copyrights, patents, and industrial design – with the aim of creating a modern, comprehensive legal framework for intellectual property rights and improving Burma’s business climate. In anticipation of the trademark bill passing, Burma has established a single national Intellectual Property Office with USAID assistance that will monitor compliance with intellectual property laws and be responsible for further developing intellectual policy and regulations. In addition, the WTO has delayed required implementation of the Trade Related Aspects of Intellectual Property (TRIPs) Agreement for Least Developed Nations – including Burma – until 2021.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders

For Intellectual Property Rights issues in Burma, please contact:

Peter N. Fowler, Regional IP Attaché
U.S. Patent and Trademark Office
American Embassy Bangkok, Thailand
Tel: (662) 205-5913
Email: Peter.Fowler@trade.gov

Information on the American Chamber of Commerce (AmCham) Myanmar Chapter can be found at: http://www.amchammyanmar.com/

Information on legal service providers available in Burma can be found at: http://burma.usembassy.gov/legal_assistance.html

6. Financial SectorShare    

Capital Markets and Portfolio Investment

Burma has very small publicly traded equity and debt markets. Banks have been the primary buyers of government bonds issued by Burma’s Central Bank, which has established a nascent bond market auction system. The Central Bank issues government treasury bonds with maturities of two, three and five years.

The Burmese government opened the Yangon Stock Exchange on December 9, 2015, and the first company was listed on March 25, 2016. Only a few other companies have subsequently been listed. Japan Exchange Group and Japan-based Daiwa Securities Group helped launched the bourse, owning a combined 49 percent of the stock exchange, with the remaining 51 percent owned by state-owned Myanma Economic Bank. On July 30, 2013, the Securities Exchange Law came into effect, establishing a securities and exchange commission and helping clarify licensing for securities businesses (such as dealing, brokerage, underwriting, investment advisory and company’s representative). Foreign entities will not be able to acquire Yangon stock exchange-listed shares until the Burmese government passes an updated Companies Law. To increase international and domestic appeal Burma also needs to adopt, implement, and enforce sound practices such as rules for company disclosures, transparency and corporate governance requirements, and share-holder voting rights.

Money and Banking System

Burma’s banks continue to face a number of significant regulatory restrictions that limit the growth of the formal financial sector. Burma’s Central Bank is tasked with supervisory and regulatory functions for the banking sector. The Central Bank’s policy objectives include domestic price stability, financial stability, and efficient payment systems, and it is responsible for approving new banks and supervising new and existing banks. In 2013, the Central Bank Law established the Central Bank as independent from the Ministry of Finance.

In October 2014, the government awarded limited banking licenses to nine foreign banks – all from the Asia-Pacific region – allowing each bank to set up one branch and provide loans to foreign companies. All nine banks began operations by the end of October 2015. In mid-December 2015, the Burmese government announced a second round of foreign bank licensing, designed to increase the presence of banks headquartered in a wider variety of countries, and in early March 2016 the Central Bank granted new licenses to banks headquartered in India, South Korea, Taiwan, and Vietnam. Foreign banks are restricted to providing loans to foreign entities and are required to partner with local banks in order to lend in local currency and lend to local companies.

In Burma’s banking sector, credit is extended through loans not exceeding 12-months, the maximum duration the Central Bank allows, and these are routinely rolled over with capitalization of interest, masking non-performing loans to banks, the Central Bank, and international financial institutions. Insufficient access to formal sources of credit is the most frequently identified obstacle to doing business in Burma, according to numerous business surveys. There are high levels of informality throughout the economy, with a pervasive, unregulated financial sector constituting the large majority of lending. Myanmar’s largest private bank, KBZ, and Japan-headquartered Sumitomo Mitsui Banking Corporation announced in February 2017, the beginning of a direct correspondent relationship between the United States and Burma via Sumitomo Mitsui’s New York branch office.

Foreign Exchange and Remittances

Foreign Exchange

Since 2012, the Central Bank of Burma runs a managed float of the Burmese kyat. Although the exchange rate is determined by daily dollar auctions at Burma’s Central Bank, the open market often sells foreign exchange at illegal rates outside of the 0.8 percent band around the Central Bank’s daily rate.

Remittance Policies

According to the MIL, foreign investors have the right of remittance of foreign currency. Foreign investors are allowed to remit foreign currency overseas through banks which are authorized to conduct foreign banking business at the prevailing exchange rate. Banks began introducing remittance services during 2012 and the volume of such formal transfer is low but growing, according to local bank managers.

Nevertheless, in practice, the transfer of money in or out of Burma has been difficult, as many international banks have been slow to update their internal prohibitions on conducting business in Burma, given the long history of U.S. and European sanctions that had isolated the country. The majority of foreign currency transactions are conducted through banks in Singapore.

The difficulties presented by the formal banking system are reflected in the continued use of informal sources of finance for loans and remittances by both the public and businesses. Although these informal sources tend to have higher interest charges, they offer an alternative to the limited loan services offered by banks, which provide almost exclusively short-term credit for trade on a limited basis and require collateral. Remittances are also often made through a well-developed informal financial network, commonly known as the “Hundi System.”

Burma is a “country of primary money laundering concern” in the 2017 International Narcotics Control Strategy Report. According to the report, Burma is not a regional or offshore financial center, and its economy is underdeveloped and its historically isolated banking sector is just beginning to reconnect to the international financial system. However, the report notes that Burma’s prolific drug production and lack of financial transparency make it attractive for money laundering. Burma enacted anti-money-laundering laws on March 14, 2014, and issued relevant rules on September 11, 2015. Burma’s Financial Intelligence Unit (FIU) is the agency to investigate and take legal action. The FIU is now a part of Burma’s police force under the Ministry of Home Affairs. The FIU is now building capacity to become an independent unit, in line with the recommendations of the Financial Action Task Force. In July 2016, Burma was delisted from the Financial Action Task Force list. While Burma is still designated as a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act, the U.S. Department of the Treasury issued an administrative exception to this finding on October 2016, similar to waivers issued for certain banks since 2012, and allowing corresponding banking relationships with the United States. For more information on the Department of Treasury exception, please see: https://www.fincen.gov/news/news-releases/fincen-issues-exception-prohibition-imposed-section-311-action-against-burma

Burma does not engage in currency manipulation tactics.

Sovereign Wealth Funds

Burma does not have a sovereign wealth fund.

7. State-Owned EnterprisesShare    

Revenue from SOEs contributes about 40 percent of the total revenue of Burma, while costs of SOEs amount to 35 percent of expenditures. In July 2016, the NLD announced 12 economic policies, including reform and privatization of SOEs which enables the private sector to take over to create employment opportunities. During 2017, Burma improved transparency by publishing the executive budget proposal for FY 2017-18 as sent to Parliament, and the commercial statements of SOEs for FY 2015-16, FY 2016-17 and FY 2017-18 on the Ministry of Planning and Finance website. The disaggregate figures of each SOE under the respective ministries are made the public, but are only available in the Burmese language.

Starting in 2012, the government of Burma began taking steps to reduce SOEs’ reliance on government support and to make them more competitive through joint ventures. This included reducing budget subsidies for financing the raw material requirements of SOEs. The government of Burma has taken any steps toward public private partnerships, corporatization, and privatization. Burma is not a party to the WTO’s Government Procurement Agreement (GPA).

SOEs can secure loans from state owned banks, with approval from the cabinet, at 4 percent interest. Private enterprises, unlike SOEs, are forced to provide land or other real estate as collateral in order to be considered for a loan. However, SOEs are now subject to stricter financial discipline, as the government has sharply cut direct subsidies to the SOEs, while opening markets for competition with the private sector. Furthermore, the government is removing the easy credit from state banks. SOEs historically had an advantage over private entities in terms of land access since, according to the Constitution, the State owns all the land.

Privatization Program

According to the government of Burma, the private sector accounts for a majority of the country’s GDP, with the State participating in telecommunication services, social and public administration, energy, forestry, construction, and electricity. The activities of the two military associated conglomerates, the Union of Myanmar Economic Holdings Limited (MEHL) and the Myanmar Economic Corporation (MEC), are not included in the budget data; these companies are not considered SOEs under Burmese law.

The new government has prioritized the privatization of SOEs, largely because many of these entities cost the government money. In May 2016, the NLD appointed new members to a Privatization Commission headed by a Vice-President. The Minister of Planning and Finance is the secretary of the commission. As one of the responsibilities of the commission, privatization can take the form of system-sharing, a public-private partnership, a private-private partnership, a franchise, a joint-venture, or sales of the SOE’s assets.

8. Responsible Business ConductShare    

Burma’s awareness of corporate social responsibility (CSR) is growing. However, many local companies (and some international firms) still equate CSR with in-kind donations or charitable contributions. In recent years the Union of Myanmar Chambers of Commerce and Industry (UMFCCI), Burma’s largest private sector association, has been promoting the United Nations Global Compact and CSR principles in general. Burma’s Cabinet approved the Environment Impact Assessment (EIA) Procedure in November 2015, requiring investors to not only accept social and environmental conservation, but to also highlight transparency and publicize their work in “real time”. Investors are required to self-monitor projects and report concerns to the relevant government departments. The 2016 MIL also requires EIAs for all investments. Since 2011, Burmese civil society organizations have become more vocal in protesting against companies or government sponsored projects which they view as violating social standards. As mentioned in section 8 - Transparency of the Regulatory System, Burma became a candidate country in the Extractive Industries Transparency Initiative in 2014, an indication of its growing commitment to responsible investment and CSR principles.

Burma has implemented the OECD Guidelines for Multinational Enterprises. According to DICA, the MIL itself is in response to the OECD call for a level playing field, by merging the previously separate domestic and foreign investment laws.‎

9. CorruptionShare    

The new government has prioritized fighting corruption, and has succeeded in countering high-level corruption to some extent. Low-level corruption, however, is still common in some areas, but business representatives report a sharp decrease in required payments. In its 2016 Corruption Perceptions Index, Transparency International rated Burma 136 out of 176 countries, an improvement from the 2015 ranking of 147 out of 168 countries. Areas where investors might face corruption are when seeking investment permits, during the taxation process, when applying for import and export licenses, and when negotiating land and real estate leases.

The government of Burma recognizes the international community’s perception of corruption in the country. In 2016, the government issued Anti-Corruption Rules detailing the powers and functions of an investigation board and Anti-Corruption Commission established by the 2013 Anti-Corruption Law. The rules also outline the obligations of banks in response to an investigation, but do not create an obligation for proactive reporting of corruption suspicion.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Burma signed the UN Anticorruption Convention in 2005, and ratified it December 20, 2012.

Burma is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Suzanne Yountchi, Economic Officer
U.S. Embassy/110 University Avenue/Kamayut Township 11041/Rangoon, Burma
Telephone: 95 (0)1 536 509 Ext. 4248
Email Address: BurmaBusiness@state.gov

10. Political and Security EnvironmentShare    

While violence or demonstrations rarely target U.S. or other Western interests in Burma, several ethnic armed groups are engaged in ongoing civil conflict with the government of Burma. Since 2011, the government has signed cease-fire agreements with 14 ethnic armed groups, though sporadic conflict can occur even with these cease-fire groups. On October 15, 2015 the government of Burma and eight ethnic armed groups signed a Nationwide Ceasefire Agreement (NCA); however, several ethnic armed groups did not sign this new agreement and conflict with the government of Burma has escalated in some parts of the country.

The government is sensitive to the threat of terrorism and is engaged with international partners. There is no evidence to suggest that terrorist organizations have operational capacity in Burma or are actively targeting Western interests. Burma experiences periodic, low-order bombings. These bombings are often perpetrated by ethnic armed groups or other anti-state actors and are usually designed to intimidate or harass. In 2016, there were bombings in northern, western, and eastern Burma, as well as some small explosions in supermarkets, an immigration office and a police station in Yangon. While some of the bombings caused casualties, nearly all targeted Burma government interests. Ethnic armed groups have used IEDs in Shan and Kachin States during attacks on government security forces, and the continued use of landmines by the Burma military and ethnic armed groups in the north, northeast, and southeast has led to an increase in landmine incidents over the past year. Civilians have also been killed in the north and northeast as a result of airstrikes and increased use of heavy weapons by the Burma military.

On October 9, 2016 three Border Guard Police outposts were attacked in northern Rakhine State by an apparently Rohingya-aligned movement, resulting in both police and civilian casualties. Attacks did not target civilians (either Burma or foreign nationals). The government characterized this event as a terrorist attack domestically, and Burma’s security forces conducted operations in the area, resulting in officially reported deaths of at least 17 members of the security forces and 69 attackers. During operations, it is estimated over 66,000 Rohingya crossed into Bangladesh to escape violence. Violence has not spread to other areas of Burma following these attacks, though certain states in Burma have also experienced ethnic or religious violence in the recent past. Burma has a minority Muslim population, and violence between Buddhists and Muslims has led to enhanced international scrutiny since intercommunal violence occurred in Rakhine State in 2012.

11. Labor Policies and PracticesShare    

In October 2011, the Government of Burma passed the Labor Organization Law, legalizing the formation of trade unions and allowing workers to strike. As of January 2016, roughly 2,369 enterprise level unions had been formed in a variety of industries ranging from garments and textiles to agriculture to heavy industry. The passage of the Labor Organization Law has engendered a nascent labor movement in Burma, and there is a low, yet increasing, level of awareness of labor issues among workers, employers, and even government officials.

Burma's labor costs are low, even when compared to most of its Southeast Asian neighbors. Skilled labor and managerial staff are in high demand and short supply, leading to high turnover. The military’s nationalization of schools in 1964, its discouragement of English language classes in favor of Burmese, the lack of investment in education by the previous governments of Burma, and the repeated closing of Burmese universities from 1988 to mid-2000’s have taken a toll on the country's youth. Most in the 15-39 year old demographic group lack technical skills and English proficiency. In order to address this gap, the Government of Burma’s Employment and Skill Development Law entered into effect in December 2013, and is being revised even further. The law also provides for compulsory contributions on the part of employers to a “skill development fund”, although this provision has not been implemented. According to the government, 70 percent of Burma’s population is employed in agriculture.

According to the World Bank’s 2014 “Ending Poverty and Boosting Prosperity in a Time of Transition” report on Burma, 73 percent of the total labor force in Burma was employed in the informal sector in 2010, or 57 percent excluding agricultural workers. Casual laborers represented another 18 percent, mainly from the rural areas. Unpaid family workers represent another 15 percent. According to the government’s labor force survey, the informal sector account for 75.6 percent.

On June 24, 2015 the National Committee appointed by Burma’s Minimum Wage Law in 2013 announced a new national minimum wage - 3600 kyat (USD2.80) - which went into effect on September 1, 2015. This wage is an increase from the 2009 wage of 1000 kyat (roughly USD1.17) per day. The minimum wage covers a standard eight-hour work day across all sectors and industries (i.e., there are no carve-out or separate wages for garment sector workers as had previously been debated), and applies to all workers except for those in businesses with less than 15 employees. While the minimum wage has been widely implemented, compensation for overtime work is still unclear. Labor compensation in Burma is still lower than some of its South East Asian neighbors.

The Burmese government, in an effort to align Burma’s labor regulations with international standards and increase trade and investment in the country, set out to abolish all antiquated labor laws and to introduce new labor laws and regulations. The government passed a number of labor reforms in 2015 and 2016 and amended a range of labor-related laws, such as the 2016 Shops and Establishment Law and the 2016 Payment of Wages Law. The government introduced to Parliament new laws on occupational safety and health and alien workers, which are currently under review. In November 2016, the U.S. government reinstated Burma’s Generalized System of Preferences trade benefit in recognition of the progress that the government had made in protecting workers rights.

In September 2016 the government institutionalized the National Tripartite Dialogue Forum (NTDF), as a venue to engage with employers and workers, especially in drafting legislation. The NTDF is currently reviewing drafts of the Settlement of Labor Disputes Law, Labor Organization Law, and revisions to employment contracts as part of the Employment and Skill Development Law.

On November 13, 2014, the Governments of the United States, Burma, Japan, Denmark, and the ILO formally launched the Initiative to Promote Fundamental Labor Rights and Practices in Myanmar (Initiative) and held the second Stakeholder’s Forum in September 2016. The overarching goal of the Initiative is to promote a culture of compliance with fundamental labor rights. The Initiative is intended to cultivate relationships between business, labor, and civil society stakeholders and the government of Burma.

12. OPIC and Other Investment Insurance ProgramsShare    

On May 21, 2013, the Overseas Private Investment Corporation (OPIC) signed an Investment Incentive Agreement with Burma. In 2014, OPIC announced that its financing and insurance programs are available for Burma and in October 2016 announced intent to double investment financing from $250 million to $500 million over the next five years. OPIC provides political risk insurance, debt financing, and private equity capital to support U.S. investors and their investments. OPIC can provide political risk insurance for currency inconvertibility, expropriation, and political violence for U.S. investments including equity, loans and loan guarantees, technical assistance, leases, and consigned inventory or equipment. OPIC debt financing in the form of direct loans and loan guarantees of up to $250 million per project are also available for business investments in Burma, covering sectors as diverse as tourism, transportation, manufacturing, franchising, power, infrastructure, and others.

On February 6, 2014, the Export-Import Bank of the United States (EXIM Bank) announced that it would open for sovereign-backed business in Burma to help finance short-term and medium-term U.S. export sales. Short-term insurance is available for sovereign transactions with repayment terms of 180 days or less, and up to 360 days for capital goods. Medium-term insurance, loan guarantees and loans are available for sovereign transactions with terms typically up to five years. The EXIM Bank is also able to provide long-term support in Burma, provided there are financing arrangements that eliminate or externalize country risks, such as asset-backed financings and structures that earn revenues offshore in a third country. In June 2015, EXIM approved its first transaction in Burma for the export of Cessna Caravan aircraft for Myanmar National Airlines.

On December 17, 2013, Burma became a member of the World Bank's Multilateral Investment Guarantee Agency (MIGA), which means that direct foreign investment into the country is eligible for the agency’s investment guarantees.

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2016

$56.86 billion

2016

N/A

http://www.mof.gov.mm/en
(Citizen Budget 2016-17)

Foreign Direct Investment

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2016

N/A

2016

N/A

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

2016

N/A

2016

N/A

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

2016

N/A

2016

N/A

N/A

* Data is from Burma’s December Central Statistical Yearbook (p. 198, Table 8.01)
 

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

9481

100%

Total Outward

N/A

100%

Singapore

4246

45%

N/A

 

N/A

China

3323

35%

N/A

 

N/A

Netherlands

438

5%

N/A

 

N/A

Malaysia

257

3%

N/A

 

N/A

Thailand

236

2%

N/A

 

N/A

"0" reflects amounts rounded to +/- USD 500,000.

 

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

Amount

100%

All Countries

Amount

100%

All Countries

Amount

100%

China

18371

31.12

N/A

 

N/A

N/A

 

N/A

Singapore

15881

26.91

N/A

 

N/A

N/A

 

N/A

Hong Kong

7461

12.64

N/A

 

N/A

N/A

 

N/A

Korea

3479

5.89

N/A

 

N/A

N/A

 

N/A

UK

3470

5.88

N/A

 

N/A

N/A

 

N/A

14. Contact for More InformationShare    

Suzanne M. Yountchi, Economic Officer
U.S. Embassy/110 University Avenue/Kamayut Township 11041/Rangoon, Burma
Telephone: 95 (0)1 536 509
Email Address: BurmaBusiness@state.gov