Burma’s economic reforms since 2011 have created opportunities for investment throughout the country. With a rich natural resource base, a young labor force, and prime geographic location, Burma’s economy has tremendous potential. Recent reforms — opening up retail and wholesale trade to FDI, allowing FDI into the insurance sector, and initial steps to streamline business regulation — should begin to attract more foreign investment and sustain higher growth levels. Many challenges remain, however, with Burma ranking 171 out of 190 — behind Iraq and Sudan — on the World Bank’s index for the ease of doing business. Electricity shortages, limited infrastructure, and weak institutions continue to hinder foreign investment. While still facing implementation challenges, Aung San Suu Kyi’s National League for Democracy (NLD)-led government has countered government corruption and called for greater transparency and foreign investment.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||132 of 180||https://www.transparency.org/cpi2018|
|World Bank’s Doing Business Report||2019||171 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2018||$55.9**||https://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/yearly_country.pdf|
|World Bank GNI per capita||2017||1,201||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
** In 2018, Burma changed its fiscal reporting period from an April to March reporting period to an October to September period. This amount only represents U.S. FDI between April and September 2018.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
Burma recognizes the value of investment to boost economic growth and development, and it is open to foreign investors. That said, implementation of liberal investment laws and policies are often slowed and sometimes blocked by local rent-seeking economic actors who benefit from the status quo. In 2016, Burma passed the Myanmar Investment Law (MIL) to attract more investment from both foreign and domestic businesses. The MIL simplified the rules and regulations for investment to bring Burma more in line with international standards. The MIL includes a “negative list” of prohibited, restricted, and special sectors. Burma also has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there, including one-stop-shop service.
The new Companies Law went into effect on August 1, 2018. Under the new law, foreign investment of up to 35 percent is allowed in domestic companies— which also opens the stock exchange to limited foreign participation. It also updates and streamlines business regulations. In tandem with the Companies Law’s entry into force, the government instituted online company registration through “MyCo” ( ). MyCo also includes a searchable company registry, which should improve transparency on corporate data and ease due diligence research. The Companies Law makes it easier to start and operate small businesses, and provides the government with tools to enforce corporate governance rules and regulations.
In April 2019, the government awarded licenses to five international insurance firms to offer wholly-foreign-owned life insurance options in the country.
In November 2018, the government created the Ministry for Foreign Investment and Economic Relations (MIFER) to facilitate investment. The Directorate for Investment and Company Administration (DICA), Burma’s investment promotion agency, was moved from the Ministry of Planning and Finance to MIFER. 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 the nation and the business community. In addition to DICA, MIFER also oversees the Foreign Economic Relations Department (FERD), which was transferred to MIFER from the Ministry of Planning and Finance.
In May 2018, the Ministry of Commerce issued Notification 25/2018, which opened up the wholesale and retail sector to direct foreign investment.
There is no evidence that the Myanmar Investment Commission (MIC) discriminates against foreign investors. In June 2017, the MIC announced ten prioritized sectors for foreign and Burmese investors: agriculture and livestock, power, education, health care, logistics, construction for affordable housing, export promotion industries, import substitution industries, aircraft and airports, and establishment of industrial estates and urban areas.
The government engages with chambers of commerce and foreign companies on investment.
Limits on Foreign Control and Right to Private Ownership and Establishment
The Myanmar Investment Law (MIL) went into effect in April 2017 and applies to all investment in Burma, both domestic and foreign. According to the MIL, some investments require a permit while others do not. The MIL also lists specific sectors where tax incentives are available. Under the MIL, foreign investors are now able to enter into long-term leases. The MIL revised restrictions on investment to liberalize investment. Section 42 of the MIL lists types of investment activities that only the Union government can undertake; that are not permitted for foreign investors; that are permitted only as a joint-venture with resident citizens or citizen-owned entities; and that 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 new Companies Law 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, investors involved in the following businesses must still submit a proposal to the MIC and apply for a permit: businesses/investment activities that are strategic for the Union; large, capital-intensive investment projects; projects which have large potential impacts on the environment and local communities; businesses/investment activities that use state-owned land and buildings; and/or businesses/investment activities that the government designates as requiring the submission of a proposal to the MIC.
The State-Owned Economic Enterprises Law, enacted in March 1989, is still in effect today. It regulates certain investments and economic activities. While the 1989 law stipulated that state-owned enterprises (SOE) 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 now open to private sector investment. For instance, the 2016 Rail Transportation Enterprise Law allows foreign and local businesses to make certain investments in railways, including in the form of public-private partnerships.
More broadly, the MIC, “in the interest of the State,” can make exceptions to the State-Owned Economic Enterprise Law. The MIC has routinely granted numerous exceptions including through joint ventures or special licenses in the areas of insurance, 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 runs the Myanmar Economic Corporation (MEC), two large conglomerates with many commercial interests.
Other Investment Policy Reviews
The Directorate of Investment and Company Administration (DICA) website ( ) provides information on how to register a business in Burma, which can be done online as of August 2018, or in person at DICA’s offices. Registration is the first step a businessperson must 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 Companies Law and the Special Companies Act of 1950, a company may register 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, or as an association/nonprofit organization. First steps include checking availability of the company name at DICA or on the online registry, obtaining company registration forms in person or online from DICA, submitting the forms, and paying a company registration fee. The new Companies Law eliminated the need for companies to get a “permit to trade,” removing an obstacle to businesses under the previous version of the law.
The Myanmar Investment Commission (MIC) is responsible for verifying and approving certain 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 March 2016 statement granting authority to state and regional investment committees to approve any investment with capital of under USD 5 million. Such investments no longer require approval from the MIC.
To attract foreign and domestic investors, the MIC has released lists of townships that fall under three different zones: underdeveloped, moderately developed, and adequately developed. Investors will receive a tax break of seven years, five years, or three years when they make investments in these respective zones. A total of 166 townships fall under the least-developed-zone category. In 2017, DICA expanded its presence throughout Burma to support companies and promote investment in of all the country’s states and regions.
Burma does not promote outward investment, but it does not restrict domestic investors from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
Burma has signed and ratified bilateral investment agreements with China, India, Japan, South Korea, Laos, Philippines, and Thailand. It has also signed bilateral investment agreements with Israel 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: .
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 border trade agreements with Bangladesh, India, China, Laos, and Thailand.
Burma has Avoidance of Double Taxation Agreements with the United Kingdom, Singapore, India, Malaysia, Vietnam and South Korea.
Burma does not have a bilateral taxation treaty with the United States.
3. Legal Regime
Transparency of the Regulatory System
Burma lacks regulatory and legal transparency. In the past, all regulations were subject to change with no advance or written notice, and without opportunity for public comment. Some ministries now engage in public consultation before finalizing bills for parliamentary consideration or issuing new regulations and this practice is becoming more widespread. For instance, the government solicited public comments on the 2016 Investment Law, including the drafting of the rules and regulations, which went through three rounds of public consultations. While there is no legal requirement to have public consultation, 75 percent of parliamentarians are elected representatives of their constituencies and are expected to respond to public engagement. An active and vocal civil society 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 2016, launched the National Trade Portal ( ). The government of Burma publishes new regulations and laws in government-run newspapers and “The State Gazette.” Burma has issued the annual Citizen Budget in the Burmese language since FY 2015-16. The Ministry of Planning and Finance has published quarterly budget execution reports, six-month-overview-of-budget-execution reports and annual budget execution reports on its website since FY 2015-16. The Burmese government also publishes its debt obligation report on the Treasury Department’s Facebook page. (See ). For more information on Burma’s regulatory transparency see .
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 in January 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. The government announced its new EITI authority, the administrative body for the EITI process, in December 2016. In 2018, the government published its second and third reports for FY 2014/15 and FY 2015/16 FY, and in March 2019 it published its fourth sector report. A forestry sector report is expected in 2019. (See .)
International Regulatory Considerations
The Ministry of Commerce’s National Trade Portal and Repository contains all of Burma’s laws, processes, forms, and points of contact for trade. This portal increases transparency in Burma and also 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 that should increase the number and quality of notifications. The Trade Portal can be found at: .
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 modified 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. The Union Attorney General’s Office law officers (prosecutors) 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 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 in 2013 to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). In 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 2016, foreign companies can pursue arbitration in a third country. However, the Arbitration Law does not eliminate all risks. There is still a limited track record of enforcing foreign awards in Burma and inherent jurisdictional risks remain in any recourse to the local legal system. The 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 when 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. 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 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 .
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 that weakens competition.
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
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 expiration 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 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.”
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). In 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.
Under the 2016 Arbitration Law, local courts should recognize and enforce foreign arbitral awards against the government unless a valid ground for refusal to enforce exists. Valid grounds for refusal include: one or more parties’ inability to conclude an arbitration agreement; the invalidity of the arbitration agreement, lack of due process, the award falls outside the scope of the arbitration agreement; the arbitration was not in compliance with the applicable laws; or the award is not in force or has been set aside.
International Commercial Arbitration and Foreign Courts
The 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 Law provides that arbitrations seated in Burma must adopt Burmese law as the substantive law. This may create uncertainty as to what can be defined as an international commercial dispute, since parties are allowed to adopt any foreign law as substantive law. 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 resolved, the Arbitration Law brings Burma’s legislation much closer to international arbitration standards and legislation.
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 Policies
According to the MIL, investors may enjoy corporate tax exemption for seven, five or three years depending on whether investment takes place in underdeveloped, moderately developed or adequately developed regions, although income tax exemptions shall be granted only to investments in promoted sectors such as agriculture, manufacturing, power generation, etc. The promoted sectors can be found at the DICA website: .
MIC permit holders are entitled to tax incentives and the right to use land. With a MIC permit, foreign companies can lease regional government approved land for initial periods of up to 50 years, and with the possibility of two consecutive ten-year extensions.
DICA is officially mandated to coordinate investment promotion under the MIC, although different ministries and agencies promote investment in different sectors (e.g. the Ministry of Tourism promotes responsible tourism investment). 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 communities. DICA’s head office is in Yangon and it has 14 branches throughout the country including Naypyitaw, Mandalay, Taunggyi, Mawlamyaing, Pathein, Monyaw, Dawei, Hpa-an, Bago, Magway, Loikaw, Myitkyina, Sittwe and Hakha. DICA uses seminars, workshops, investment fairs and other events to promote investment, as well as its website: .
Foreign Trade Zones/Free Ports/Trade Facilitation
The Myanmar Economic Zones Law also contains specific investment incentives. Under the law, investors located in an 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 succeeding five-year period. Under the law, if profits during the 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. In August 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, and 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. The 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 required to use domestic content in goods or technology. Burma is currently developing laws, rules and regulations on information technology (IT). It 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 Rights
The MIL provides that any foreign investor may enter into long-term leases with private landlords or – in the 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.
In September 2018, Burma amended the Vacant, Fallow, and Virgin Lands Management Law and required occupants of land considered vacant, fallow or virgin to go to the nearest land records office and register within a six-month period. The six-month deadline was intended to offer clear title to lands for investment and infrastructure construction. However, controversy exists over which lands were designated as vacant, fallow or virgin and whether the notification or registration period was sufficient.
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. The policy also establishes the National Land Use Council. Chaired by the Vice President, the council constitutes the highest authority within the government presiding over land issues, and is intended to ensure the policy and new national land law are implemented and used as a guide for the harmonization of all existing laws relating to land in the country.
A continuing area of concern for foreigners involves investment in large-scale land projects. Property rights for 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 local communities about inadequate consultation and compensation regarding land.
Burma’s parliament passed the Condominium Law in 2016. The law states that up to 40 percent of condominium units of “saleable floor area” can be sold to foreign buyers. Condominium owners shall also have the shared ownership of both the land and apartment. In 2017 the Ministry of Construction pasted the Condominium Rules, implementing and clarifying provisions of the Condominium law. One clarification per the rules is that state-owned land may be registered as condominium land (Rules 20 and 21).
In accordance with the Transfer of Immovable Property Restriction Law of 1987, mortgages of immovable property are prohibited if the mortgage holder is a foreigner, foreign company or foreign bank.
Intellectual Property Rights
Burma improved its intellectual property rights protection in 2019 by enacting three laws on intellectual property: the Trademark Law, the Industrial Design Law, and the Patent Law. A fourth law on copyrights has been passed by Parliament but has not yet been signed by the President. The laws improve protections for intellectual property owners by offering legal protections and implementing fines or legal actions in case of infringement.
The Trademark Law introduces a “first-to-file” system from the previous “first-to-use” system. Trademark holders who previously registered their trademark will need to re-register their marks. The new law also includes protections for “well-known” trademarks. Geographical indications will also be protected through registration. In anticipation of passage of the trademark bill, Burma established a single national Intellectual Property Office that will monitor compliance with intellectual property laws and be responsible for developing IPR policy rules 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.
Resources for Rights Holders
For Intellectual Property Rights issues in Burma, please contact:
Kitisri Sukhapinda, Regional IP Attache
U.S. Patent and Trademark Office
American Embassy Bangkok, Thailand
Tel: (662) 205-5913
Information on legal service providers available in Burma can be found at: https://mm.usembassy.gov/u-s-citizen-services/attorneys/
6. Financial Sector
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 in 2015, and the first company was listed on March 25, 2016. As of April 2018, five companies are listed on the exchange. Japan Exchange Group and Japan-based Daiwa Securities Group helped launched the stock exchange, owning a combined 49 percent of the stock exchange, with the remaining 51 percent owned by state-owned Myanma Economic Bank. In 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 representation). The Companies Law allows foreign investment of up to 35 percent in domestic companies and allows foreign investment in the stock market.
Money and Banking System
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. In November 2018, the Central Bank published new guidelines that permit locally licensed foreign banks to offer “any financing services and other banking services” to local corporations. Previously, the thirteen foreign banks in Burma were only allowed to offer export financing and related banking services to foreign corporations. No domestic banks currently have a correspondent bank account with a U.S.-based bank.
The Financial Institution Law was enacted in January 2016 and in July 2017 the Central Bank issued four regulations on capital adequacy ratio, asset classification and provisioning, large exposures and liquidity ratio requirements, aiming to align Burma’s banking standards with international Basel II standards. Since then Burmese banks have pushed back against the timeline of implementation of these regulations, arguing that special circumstances in Burma’s banking industry warrant special treatment.
Insufficient access to formal sources of credit is one of the most frequently identified obstacles to doing business in Burma, according to numerous business surveys.
Foreign Exchange and Remittances
The Burmese kyat has a free-floating exchange rate. Starting from February 5, 2019, the Central Bank calculates a market-based reference exchange rate from the volume-weighted average exchange rate of interbank and bank-customer deals during the day.
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 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 generally provide only 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” according to the 2017 International Narcotics Control Strategy Report. According to the report, Burma is not a regional or offshore financial center, 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 in 2014 and issued relevant rules in 2015. Burma’s Financial Intelligence Unit (FIU) is the agency responsible for undertaking investigation and legal action. The FIU is now a part of Burma’s police force under the Ministry of Home Affairs.
The FIU is building its 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 in October 2016, similar to waivers issued for certain banks since 2012, thereby allowing corresponding banking relationships with the United States. For more information on the Department of Treasury exception, please see:
Burma does not engage in currency manipulation tactics.
Sovereign Wealth Funds
Burma does not have a sovereign wealth fund.
7. State-Owned Enterprises
Revenue from SOEs contributes about 42 percent of the total revenue of Burma, while SOEs costs amount to 36 percent of expenditures. In July 2016, the NLD announced 12 economic policies including to reform SOEs and privatize SOEs to enable the private sector to create employment opportunities. The disaggregate figures of each SOE under the respective ministries are made public 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 moved in the direction of public private partnerships, corporatization, and privatization. Burma is not party to the Government Procurement Agreement (GPA) within the framework of the WTO.
SOEs can secure loans at four percent interest rates from state-owned banks, with approval from the cabinet. 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.
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-owned conglomerates of MEHL and MEC are not included in the budget data; while a common sense understanding of “state-owned” would likely include them, these companies are not considered SOEs under Burmese law.
The NLD government has prioritized the privatization of SOEs, largely because many of these entities cost the government money. In May 2016, the NLD appointed the new members of the Privatization Commission headed by a Vice-President. The Minister of Planning and Finance is the secretary of the commission. Privatization can take the form of system-sharing, public-private partnership, private-private partnership, franchise, joint-venture, and sales of assets in line with international standards.
8. Responsible Business Conduct
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 has implemented the OECD Guidelines for Multinational Enterprises.
The elected government has continued to prioritize fighting corruption, and resources have been allocated to facilitate the growth of the Anti-Corruption Commission (ACC) into an institution vested with the authority to lead that fight. In 2018, the government amended its anti-corruption law to give the ACC greater authority to scrutinize government procurements, and the ACC has used that authority to initiate criminal cases against a few high-ranking and some mid-ranking officials for financial impropriety and abuse of office. The ACC opened a branch office in Yangon in April 2019, and intends to open a branch in Mandalay in May 2019, as it continues to increase its investigative capacity.
The country, however, still lacks a framework that would effectively support a sustained and systematic fight against corruption. While there have been efforts to reduce some opportunities for higher-level corruption, the lack of transparency regarding military budgets and expenditures remains a substantial impediment to reforms. In addition, a large swath of the economy is engaged in illegal activities beyond the control of the government. These include the production, transportation and distribution of narcotics, and the smuggling of jade, gemstones, timber, wildlife, and wildlife products. There are efforts to promote accountability for government officials, but lack of resources for key government functions, including law enforcement, remains a driver for low-level corruption. In its 2018 Corruption Perceptions Index, Transparency International rated Burma 132 out of 180 countries, a slight decline in ranking from the previous year. Investors might face corruption 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, however, recognizes the importance of fighting corruption as a quintessential part of efforts to improve democratic governance.
Resources to Report Corruption
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
Anti Corruption Commission
Cluster (1), Sports’ Village, Wunna Theikdi Ward
Nay Pyi Taw
Phone : + 95 67 810 334 7
Email : email@example.com
10. Political and Security Environment
The government is sensitive to the threat of terrorism and is engaged with international partners on this issue. There is no evidence to suggest that international terrorist organizations have operational capacity in Burma or are actively targeting Western interests. Although both Al-Qaeda in the Indian Subcontinent (AQIS) and ISIS in the Philippines (ISIS-P) have called for attacks in Burma as a result of the Rakhine crisis involving the Rohingya people, these calls are so far largely seen as aspirational in nature. Additionally, crime in Burma is low compared to other countries within the region. 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, which occurs almost exclusively in the ethnic states. On October 15, 2015, the government of Burma and eight ethnic armed groups (EAGs) signed a Nationwide Ceasefire Agreement (NCA). Two additional armed ethnic groups joined the NCA in February 2018. However, several ethnic armed groups, including the most powerful ones, have not signed the NCA and some signatories continue to fight with the military and other EAGs.
While most of the major cities are quite safe, several areas of the country, particularly the ethnic states, routinely see conflict between the government and EAGs, as well as inter-ethnic violence between EAGs. One of the ways these conflicts manifest is in the use of landmines and attacks involving improvised explosive devices. These incidents generally target government security forces, but there have been collateral casualties among the civilian population. The continued use of landmines by the Burmese military and EAGs in the north, northeast, and southeast continue to routinely result in civilian casualties. Civilians have also been killed as a result of clashes between the military and the EAGs, as well as inter-ethnic conflicts.
On August 25, 2017, a Rohingya insurgent group attacked about 30 security outposts in northern Rakhine State. The government characterized this event as a terrorist attack, and Burmese security forces launched clearance operations throughout northern Rakhine State. Hundreds of Rohingya villages were burned, and there were widespread, credible allegations of abuses by security forces. An estimated 730,000 Rohingya fled to Bangladesh, and tens of thousands of non-Rohingya are displaced inside Rakhine State. In November 2017, the U.S. Secretary of State determined that the situation constituted ethnic cleansing. Violence has not spread to other areas of Burma as a result of the crisis in Rakhine State although, as noted above, certain states in Burma continue to experience ethnic or religious violence. Burma has a minority Muslim population, and violence between Buddhists and Muslims did occur in other parts of the country in 2013 and 2014 following intercommunal violence in Rakhine State in 2012. Since late 2018, there has been a marked increase in violence as a result of the ongoing conflict between the Burmese security forces and fighters from the Arakan Army (AA), an ethnic Rakhine, largely Buddhist, EAG. A number of townships in northern Rakhine and southern Chin are currently off limits for U.S. government travel due to the violence from this conflict.
11. Labor Policies and Practices
In October 2011, the Government of Burma passed the Labor Organization Law, which legalized the formation of trade unions and allows workers to strike. As of April 2019 roughly 2,900 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 the mid-2000’s have taken a toll on the country’s work force. Most people 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. The law 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 accounts for 75.6 percent.
A new national minimum wage went into effect in May 2018, raising the minimum daily wage from 3,600 kyat (USD 2.40) to 4,800 kyat (USD 3.20). The minimum wage covers a standard eight-hour work day across all sectors and industries, and applies to all workers except for those in businesses with less than 15 employees. While the previous minimum wage has been widely implemented, compensation for overtime work is still unclear.
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 and amended a range of labor-related laws, such as the 2016 Shops and Establishment Law and the Payment of Wages Law. Parliament passed a new Occupational Safety and Health Law in March 2019 and a Settlement of Labor Disputes Law in May 2019.
In November 2016, the U.S. government reinstated Burma’s Generalized System of Preferences (GSP) trade benefit in recognition of the progress that the government had made in protecting workers’ rights. The U.S. government reauthorized the GSP program globally in March 2018 through December 31, 2020.
In September 2016, a National Tripartite Dialogue Forum (NTDF) was created to provide a venue for the Ministry of Labor, Immigration and Population to engage with employers and workers, especially in drafting legislation. The NTDF meets regularly and is currently reviewing a draft of the Labor Organization Law as well as the Employment and Skill Development Law.
In November 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 third Stakeholder’s Forum in January 2018. 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 Programs
In May 2013, the Overseas Private Investment Corporation (OPIC) signed an Investment Incentive Agreement with Burma. 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. Most recently, in April 2019, OPIC signed an agreement providing USD 8 million in support for a microfinance enterprise in Burma.
In 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. In July 2017 EXIM Bank also authorized long-term transactions in the public sector.
In December 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 Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
* . In 2018, Burma changed its fiscal reporting period from an April to March reporting period to an October to September period. This amount only represents U.S. FDI between April and September 2018
**Accurate statistical data is limited in Burma, although this capacity is also being developed.
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 (2017)*||Outward Direct Investment|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Amy E. Roth, Economic Officer
U.S. Embassy/110 University Avenue
Kamayut Township 11041, Rangoon, Burma
Telephone: 95 (0)1 536 509
Email Address: BurmaBusiness@state.gov