WORLD NEWS

Myanmar investment commission reinvents itself

Sep 19, 2012, 12:29 PM

AP Business Writer

NAYPYITAW, Myanmar (AP) – Once feared for its obstructionism, the Myanmar Investment Commission has put on a fresh, investor-friendly face, and its bureaucrats are scrambling to deal with a deluge of interest even as a proposed investment law creates considerable uncertainty about how foreign companies will be treated in this long-closed Southeast Asian nation.

The new foreign investment law envisions broad powers for the already over-taxed investment commission, restricts foreign investment in 11 poorly defined areas and requires local hiring, according to a copy of the widely misunderstood legislation obtained by The Associated Press.

Investors have criticized the legislation, which has been approved by Parliament and awaits the president’s signature, as too vague. Some fear it contains measures that will scare off much-needed foreign investment.

Top officials from the investment commission have said the president is likely to send the law back to Parliament for amendment, rather than sign it in its current form. Myanmar’s main business lobbying group, the Federation of Chambers of Commerce and Industry, met over the weekend to debate the law, an indication that its terms remain up for discussion.

The Myanmar Investment Commission is housed in a pink concrete building down a narrow lane flanked by thick flowering bushes in the country’s out-sized capital Naypyitaw that former military rulers ordered purpose built. Tucked into dim offices on the ground floor, the commission is reinventing itself as the country emerges from decades of isolation that plunged one of Asia’s most fertile and resource-rich countries into grinding poverty.

“We do not have enough staff,” said Kyaw Zaw Maung, a thin, smiling man who took over as director of the commission seven months ago. He said his department is looking to hire 30 more people. Behind his desk a whiteboard scrawled with appointments _ Coca-Cola, Daewoo _ testifies to Myanmar’s rising star status among global investors.

The commission’s 20 employees sit at rows of wooden desks that face a large television snowy with static. There are papers everywhere, in plastic baskets on desks, in cardboard boxes, and clamped in folders in bookshelves. There is one shared computer in the director’s office.

From April through August, it approved 21 foreign investments, up from 13 during all of last fiscal year. The increase in investor interest is likely to intensify if the contentious new foreign investment law is passed in a form that’s palatable to companies overseas.

The legislation is a cornerstone of the economic reforms Myanmar is rushing to enact in the wake of sweeping political change. President Thein Sein has freed hundreds of political prisoners, eased press censorship and allowed Nobel laureate Aung San Suu Kyi and her party to contest special elections.

Economic reforms, however, have lagged. Many investors, particularly from the United States and Europe, are waiting for the investment law to be passed before putting money into a country that until recently was considered a pariah by the West.

“It’s important to have a good understanding of this investment law,” said Pierre Trouilhat, a senior projects manager at Nestle who is overseeing the company’s efforts to set up in Myanmar. “It’s the first thing our lawyer is going to ask us.”

Greater foreign investment is also a way for Myanmar to reduce its economic reliance on China, which grew during the country’s decades of international isolation. The majority of investments still come from China, which accounted for 45 percent of approvals from April through August of this year, followed by Hong Kong, Korea, Thailand and the United Kingdom, according to data provided by the commission.

Details of the new legislation, which would supplant Myanmar’s existing 1988 investment law, have been opaque and shifting. Factions in the government have tussled over how much to open up the economy, underlining a difficult balancing act of attracting overseas capital without decimating local business or alienating still powerful cronies of the former military regime.

“We would like to have a law which would benefit the majority of our people,” said Win Aung, president of Myanmar’s Federation of Chambers of Commerce and Industry. “Foreign direct investment alone will not contribute to the development of our country. Local businesses and industries are also important.”

A chief source of confusion has been a list of restricted activities, in which foreign investment apparently would be capped.

The latest version of the law reduces from 13 to 11 the number of “restricted” or “forbidden” areas for foreign investors, but also gives the Myanmar Investment Commission the power to restrict any manufacturing or services business it decides Myanmar nationals can do, according to a copy of the legislation.

Farming, livestock breeding, and fishing activities that can be undertaken by Myanmar nationals are singled out for restrictions in the new legislation. The remaining restrictions apply to ill-defined businesses that might harm people’s health, traditional cultures or the environment; deal in toxic waste or dangerous chemicals; import technology, medicine or equipment that has not been approved for use outside the country; and businesses that lie within 10 miles of the border.

In restricted sectors, foreign investors “can propose” a 50-50 joint venture, according to the legislation. This is up from 49 percent foreign ownership in a prior version, but the new wording has left some wondering whether a foreign investor could also apply for a majority stake in a restricted joint venture. In unrestricted sectors, the law permits wholly-owned foreign businesses or joint ventures with a minimum 35 percent foreign stake.

Kyaw Zaw Maung, the investment commission director, said he fears the restrictions are so broad they could force foreign garment manufacturers to enter into joint ventures, hindering the growth of a sector that could create tens of thousands of local jobs.

The legislation also requires foreign companies to hire locals. A quarter of skilled positions must be filled by Myanmar nationals during the first two years of operation, 50 percent during the second two years, and 75 percent thereafter. All unskilled positions must be filled by locals.

The law would sweeten tax incentives for foreign investors, increasing the minimum tax holiday from three years to five years, and would allow foreign investors to lease land for 50 years, extendable for two ten year terms. There is no minimum required investment. An earlier draft had stipulated a $5 million minimum, which critics said would benefit Myanmar’s large “crony” businesses by limiting competition from small and medium-sized businesses that are also a crucial engine of job creation.

The legislation would give the investment commission sweeping powers over licensing and regulating foreign business, including approving which bank a company does business with and empowering it to blacklist foreign companies or withdraw their tax incentives.

Serge Pun, a businessman who chairs the SPA group, which includes one of Myanmar’s few listed companies _ Singapore-traded Yoma Strategic Holdings _ called the law “wishy-washy,” and said it “breeds more confusion.”

Of particular concern to him is the provision for 50-50 partnerships in restricted sectors, which he said would likely lead to deadlock between the foreign and local partners.

“There’s still a lot of flaws,” Pun said. “Everybody wants everything to go at breakneck speed. I think it’s better for us to debate a little more.”

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

World News

Israeli Prime Minister Benjamin Netanyahu, chairs the weekly cabinet meeting in Jerusalem, Sunday, ...

Associated Press

Israeli Cabinet approves cease-fire with Hamas; deal includes release of 50 hostages

Israel’s Cabinet on Wednesday approved a cease-fire deal with the Hamas militant group that would bring a temporary halt to a devastating war.

18 days ago

Palestinians leave their homes following Israeli bombardment on Gaza City, Monday, Oct. 30, 2023. (...

Associated Press

Israeli airstrikes crush apartments in Gaza refugee camp, as ground troops battle Hamas militants

A flurry of Israeli airstrikes Tuesday on a refugee camp near Gaza City leveled apartment buildings, leaving craters where they once stood.

1 month ago

Moroccan boys, Rayan and Ali walk amidst the rubble of their home which was damaged by the earthqua...

Associated Press

Powerful quake in Morocco kills more than 2,000 people and damages historic buildings in Marrakech

A powerful earthquake has struck Morocco, toppling buildings in villages and cities not built to withstand such force.

3 months ago

State Farm Stadium Gold Cup soccer arrests 2023...

Serena O'Sullivan

Police arrest five people after State Farm Stadium brawl on Thursday

Two people were arrested for a State Farm Stadium brawl after Thursday's soccer matches between Qatar and Honduras plus Mexico and Haiti.

5 months ago

Members of the Wagner Group military company load their tank onto a truck on a street. (AP Photo)...

Associated Press

Russia says Wagner Group’s leader will move to Belarus after his rebellious march challenged Putin

Russian leaders say the Wagner Group leader who staged a short-lived rebellion will move to Belarus and not face prosecution.

6 months ago

Associated Press

How (and when) to watch King Charles’ coronation in the US

There are plenty of options to watch the regalia-heavy event that serves as a formal confirmation of King Charles' dual role as head of state and titular leader of the Church of England.

7 months ago

Sponsored Articles

Follow @KTAR923...

West Hunsaker at Morris Hall supports Make-A-Wish Foundation in Arizona

KTAR's Community Spotlight this month focuses on Morris Hall and its commitment to supporting the Make-A-Wish Foundation in Arizona.

...

Desert Institute for Spine Care

Desert Institute for Spine Care (DISC) wants to help Valley residents address back, neck issues through awake spine surgery

As the weather begins to change, those with back issues can no longer rely on the dry heat to aid their backs. That's where DISC comes in.

...

Midwestern University

Midwestern University: innovating Arizona health care education

Midwestern University’s Glendale Campus near Loop 101 and 59th Avenue is an established leader in health care education and one of Arizona’s largest and most valuable health care resources.

Myanmar investment commission reinvents itself