OECD and ASEAN Release Investment Policy Review of Myanmar
On December 9th, the Second ASEAN-OECD Investment Policy Conference was held in Jakarta, Indonesia, to discuss the continued facilitation and promotion of ASEAN investment for regional integration. The event brought together ASEAN investment policy makers, Organization for Economic Cooperation and Development (OECD) members, and industry leaders, to showcase ASEAN’s regional investment integration achievements since the first conference in 2010. Included at the conference was a discussion of the OECD’s Investment Policy Review of Myanmar, which marked the country as one to watch heading into 2015.
The ASEAN Economic Community (AEC) is the ultimate objective of the regional economic integration. Underpinning the AEC is the free flow of services and investment, and integration of ASEAN into the global economy. Therefore, for the AEC to be realized by December 2015, ASEAN member states must implement reforms intended to encourage investment and contribute to regional policy coordination.
The ASEAN-OECD partnership to strengthen investment policy and promotion in ASEAN is a key initiative aiding investment reform. Through OECD Investment Policy Reviews, ASEAN member states are building capacity within national administrations to implement reforms and achieve AEC targets. These reforms could serve to significantly strengthen ASEAN regional supply chains, allowing investors to spread their operations across different countries in the region to combat concentration risk with diversity.
Case Study: Myanmar
The conference agenda featured a special segment detailing findings of the OECD’s Investment Policy Review of Myanmar. The Myanmar government, in partnership with the OECD and ASEAN, undertook the review as part of a program of economic and democratic reform to attract responsible foreign investment.
Myanmar has undergone a period of rapid reform since emerging from economic isolation in 2011. The review enabled the government to assess the current investment policies and identify priorities for further reform. The government has since implemented a number of changes in line with OECD recommendations and ASEAN guidelines. The key changes affecting foreign investors include:
- Foreign Investment Law
In November 2012, the Foreign Investment Law No. 21/2012 (FIL) was enacted in order to repeal the restrictive 1998 law and incentivize foreign investment. In August 2014, the Myanmar Investment Commission (MIC) issued a series of notifications to amend the current FIL.
The notifications are good news for investors, indicating further liberalization, less restrictions, and positive changes to investment incentives.
- Notification No. 49/2014
This notification reduced the number of prohibited and restricted business activities for foreign investors, opening areas such as retail trading. However, the notification imposes a joint venture condition on business activities not previously burdened, such as the manufacturing of rubber and chemicals.
- Notification No. 50/2014
This notification revised the list of business activities that require an environmental impact assessment, aligning Myanmar with global procedural standards regarding environmental impact.
- Notification No. 51/2014
This notification contains a list of business activities that will not enjoy exemptions from commercial tax and/or customs duties. These include alcohol, cigarettes, and similar goods. This notification indicates that higher tax incentives will be offered for large capital investment in high-end technology.
- Myanmar Special Economic Zone Law 2014
In January 2014, the Myanmar Special Economic Zone Law (MSEZL) was enacted. The Central Body for the Myanmar Special Economic Zone has since set up several Special Economic Zones (SEZs) which provide tax and land incentives for foreign investors.
What to expect
At the launch of the review, Myanmar’s Union Minister of National Planning and Economic Development, Dr. Kan Zaw, praised the report and said that it would help to guide the government in solidifying investment climate reforms. The Myanmar government has already proposed and implemented a number of reforms in line with the OECD recommendations. Given the government’s positive response and active role in facilitating reform, investors can expect continued adoption of the OECD recommendations. Based on the review, investors can anticipate:
- Continued support for Small and Medium-Sized Enterprises
The MIC is endeavoring to help develop small and medium-sized enterprises (SME) to be supportive industries for foreign direct investment. This is reflected in the abolition of the minimum capital investment requirement for local SMEs and enabling startups with less capital to obtain permits.
- Further relaxation of foreign investment restrictions
The MIC has expressed a desire to relieve the administrative complexity of processing applications and award permits at a faster rate.
- Modification of laws
The MIC is in the process of merging the foreign and domestic investment legislation into one statute. Based on OECD’s recommendations to improve the investment environment, the Foreign Investment Law and the Myanmar Citizens Investment Law will be merged to equitize the business environment for foreign and domestic players.
The OECD Investment Policy Review of Myanmar was implemented as a part of the broader ASEAN regional economic integration policy, to achieve the AEC by 2015. Furthermore, regional integration underpins the ASEAN strategy to narrow the development gap between the ASEAN 6 and Cambodia, Laos, Myanmar, and Vietnam. Myanmar has made significant progress in investment reform, having transformed the business environment for both foreign and domestic investors in just three years. However, much regulatory and administrative uncertainty remains and Myanmar’s achievement of AEC targets will depend heavily on practical implementation of the new legislation.
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 firstname.lastname@example.org or visit www.dezshira.com.
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