Foreign Investment Restrictions across ASEAN: An Overview of the Region’s “Negative Lists” – Part Three

Posted by Reading Time: 6 minutes

By: Dezan Shira & Associates
Editor: Steven Elsinga

This is the third installment in the series on FDI restrictions in ASEAN. Please click on the following to read Part One and Part Two

The final part of this series turns to the remaining three ASEAN nations: Malaysia, Laos and Myanmar. Of these, Malaysia is by far the most developed and has the most sophisticated and mature legal system. Here, we see that restrictions are mostly imposed due to domestic political reasons. Most investment restrictions specifically targeted at foreigners have been removed in recent years.

Laos and Myanmar are underdeveloped countries eager to attract foreign investment. As such, their investment policies are quite liberal on paper. However, as these countries are still in the early stages of developing a reliable rule of law, the situation on the ground may differ.


With the abolishment of the Foreign Investment Committee in 2009, Malaysia removed its all-round foreign equity ceiling of 70%. Despite the fact that the general cap is removed, foreign equity restrictions remain in certain sectors. These are imposed by the different Ministries, rather than by a central body. Apart from formalized regulation on the matter, Ministries may also impose equity restrictions as a condition to obtain a license.

A separate set of regulations is imposed to reserve equity in businesses for ethnic Malays or Bumiputera. The rationale is to increase business participation of the Bumiputera. While ethnic Malays are the majority racial group in Malaysia, they are underrepresented in the country’s business community, which is largely made up of ethnic Chinese and Indians.

In these cases, the restrictions on foreign equity are not in favor of nationals of Malaysia, but ethnic Malay. In other words, a foreign invested company where the non-foreign equity is held individuals who aren’t ethnically Malay would still fall foul of the law. The issue continues to be politically sensitive.

Areas which are subject Bumiputera reservations include banking and finance, water, batik production, agriculture, defense, energy and telecommunications.

In the manufacturing sector, 100 percent foreign equity is generally allowed. Most restrictions exist in the services sector. Many sectors have however been liberalized in recent years. Despite being liberalized, investment in the different service sectors remains subject to approval of the relevant Ministries, which have broad discretionary powers to impose conditions on a project, including foreign equity limits.

A limit on foreign equity of 70 percent remains for investment banks, insurance companies, and takaful (Islamic insurance) operators.

Distributive trading

One of the major restrictions that remain is on the broadly defined ‘distributive trade’. It is defined as “all linkage activities that channel goods and services down the supply chain to intermediaries for resale or to final buyers.” These include distribution companies, wholesale and retail stores – such as supermarkets, minimarts, convenience stores, fuel stations, wet markets and also restaurants.

Thirty percent of the equity in these companies needs to be reserved for Bumiputera, and the directors need to be Bumiputera as well. The company’s staffing policy needs to reflect the racial make-up of the country.

Service provision to this sector is subject to government approval, such as market research, management consulting, leasing machinery or equipment, real estate services, cleaning, supporting services for road transport, etc.

Professional Service_CB icons_2015 RELATED: Pre-Investment Services from Dezan Shira & Associates


Network Facilities Provision and Network Service Provision remains subject to a 70 percent foreign equity limit.

Oil and gas

Upstream oil and gas is controlled by Petronas, a state company. Foreign companies can provide oil and gas services in partnership with local companies. Here, foreign participants may not hold more than 49 percent of the equity.

Legal services

Foreigners may not set up their own legal services firms, foreign law firms may enter into partnership agreements with local firms or establish a local presence.


Laos has a very open foreign investment policy, and imposes few restrictions.

Prohibited sectors

  • Manufacturing of weapons and drugs
  • Military and defense training
  • Investigation and security services
  • Funerals and related services
  • Religious education
  • Manufacturing of cultural products that are damaging to national culture
  • Chemical substances and industrial waste that is hazardous to human health

Foreigners are prohibited from producing a number of Lao cultural handicrafts, as well as from fishing and operating fish farms (unless certain conditions are met).

Some sectors have a local equity ownership requirement:

  1. Production of beer and other alcohol
  2. Production of medicine
  3. Wholesale of beverages, tobacco, clothes and machinery

The exploitation of natural resources of generation of energy requires a joint venture with a local party.


Myanmar revised its Foreign Investment Law in 2015, distinguishing four categories.  The government has amended this list several times in the past few years. Investors should be aware that the conditions and requirements may change rapidly.

Both foreign and domestic investment is prohibited (government monopoly):

  • Logging and sale of teak
  • Forest plantations
  • Exploration, extraction and sale of oil and gas
  • Extracting pearls, gemstones and jade
  • Post and telecommunications
  • Air and rail transport
  • Broadcasting and television
  • Exploration, extraction and export of metals
  • Banking and insurance
  • Generation of electricity
  • Production of defense-related goods
  • Fish breeding and farming

The government may permit foreign companies to engage in these activities, deciding on a case-by-case basis.

Related-Reading-Icon-Asean Link RELATED: An Overview of IFRS Adoption in ASEAN – Part Three

Foreign investment is prohibited:

  • Small and midsize mining projects
  • Manufacturing traditional or religious products, including traditional foods and medicine
  • Forest conservation
  • Wholesale of semi-finished goods and scrap metal
  • Ambulance services
  • Energy generation under 10 megawatt
  • Publishing magazines and publications in the languages of Myanmar
  • Small scale agriculture and livestock breeding
  • Fishing
  • Drilling oil wells up to 1000 feet

Foreign investment only allowed in joint venture with a Myanmar party:

The foreign equity ceiling is placed at 80 percent.

  1. Large-scale mining
  2. Infrastructure development
  3. Tourism
  4. Producing and marketing of certain food and beverages
  5. Production of common agricultural seeds
  6. Production of plastic and rubber
  7. Aviation
  8. Development, rental and sale of real estate (residential, office and commercial)
  9. Packaging
  10. Processing of hides, skins and leather, and manufacturing of products that use these
  11. Paper processing
  12. Manufacturing and marketing of certain chemicals, aerosols, fuels, oxidants and raw materials for drugs
  13. Small and medium scale power generation

Investment requires prior approval:

Business activity in numerous industries is subject to licenses or Ministry approval as well.


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related-Reading-Asean Book Title

Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.


The 2015 Asia Tax ComparatorAB 1214 Cover small small
In this issue, we compare and contrast the most relevant tax laws applicable for businesses with a presence in Asia. We analyze the different tax rates of 13 jurisdictions in the region, including India, China, Hong Kong, and the 10 member states of ASEAN. We also take a look at some of the most important compliance issues that businesses should be aware of, and conclude by discussing some of the most important tax and finance concerns companies will face when entering Asia.