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Trade & Investment in Myanmar Trade Regime Export Policy Import Policy Investment Environment Formation of Myanmar Investment more ...

Trade and Investment in Myanmar

Trade Regime

Since, Myanmar has changed it's economic course from a centrally planned economy into a market oriented system, a series of structural reforms had been introduced and new legal policy instruments given the private sector including foreign investors and businessmen, the right to do business and to make investment in the country were enacted.

The Government of the Union of Myanmar has recognized, in the context of the market-oriented economic system, the private sector as a prime-mover of the market mechanism and pays great attention for its development. All-out efforts are being made to encourage the active participation of private sectors in foreign trade and giving full support in every angle.

By these reasons, trade liberalization measures were introduced as follows:-

1. To be in line with the changing economic system, the private individuals or enterprises are allowed to carry out the export import business which was previously monopolized by the state.

2. Border Trade was regularized in order to develop and strengthen the bilateral trade relations with the five neighboring countries. Department of Border Trade was established and its 11 branch offices providing one - stop service for border trade matters in collaboration with various departments concerned.

3. Export and Import procedures were realigned.

4. Lowered the technical barriers to trade and simplified export/ import procedures geared towards trade facilitation and promotion.

5. Incentives are being given to exporters by allowing 100 % retention of export earnings for importation of goods.

6. Trade notifications are being issued by specifying necessary rules in conformity to the changing internal and external business environment.

7. Exemption of commercial tax and customs duty on the imported items like fertilizers, agricultural machineries and implements, insecticides and pesticides, medicines and raw materials.

8. The role of Chambers of Commerce and Industry had reactivated and reorganized the Union of Myanmar Federation of Chambers of Commerce and Industry - UMFCCI for the promotion of trade and industry of the private sector.

To be in line with the market oriented economy, the foreign trade policy of Myanmar is also a very independent one. We can trade with any country in the world except with some countries that are trade embargoed by the United Nations Resolutions or a few countries and territories which we have cut off diplomatic relations.

Myanmar believes in trade liberalization and also wants free and fair trade in the world. Myanmar was a founder member of the old organization, GATT and a member of the new organization, WTO. Hence, our foreign trade policies are generally governed by the rule-based multilateral trading system.

Export Policy

Myanmar's export policy is to export all exportable surplus and diversify foreign markets by using of natural and human resources. Increasing and diversifying exports and improving the quality of products are among the main objectives of the export promotion policy.

We give top priority for the development of agriculture as the base and all - round development of the economy as well. A number of new items in the manufacturing and processing sectors have been introduced in the past few years. Main export items include agricultural products, forest products, fishery products, metals & minerals, precious stones and industrial products.

The registered exporter / importer has the right to do trading business. The registered exporters / importers are allowed to enjoy 100 percent export retention money for the import of goods. There exists no export quota nor ceiling for any exportable product or any individual or organization.

Import Policy

Regarding the import policy, import is allowed against the export earnings with a view to promote export and to overcome the balance of trade deficit problems.

The private businessmen are encouraged to import capital goods, industrial machineries including raw materials and other essential items while the consumer choices can be fulfilled equally at the same time.

License should be applied for any export or import. The authority to issue export/import licenses and permits is dedicated to Directorate of Trade and Department of Border Trade under the Ministry of Commerce. Directorate of Trade is authorized to issue export/import licenses and permits for conventional export/import by overseas. The Department of Border Trade is authorized to issue export/import licenses for overland trade with the neighboring countries.

The validity of export / import license / permit issued by the Directorate of Trade is three months from the date of issue, and it cannot be extendable.

Export license fee is not payable on export of any commodity including agricultural crops. All the imports are subject to pay the license fees, customs duty and commercial tax.

Customs duty together with the commercial tax are collected at the point of entry and the time of clearance of imported goods. Raw materials and other essential imports are taxed at very low rates, while the highest rate is applied to luxury items.

Commercial tax is levied according to the Schedules appended to the Commercial Tax Act 1991, and the rates vary depending on the types of goods and services. For the items not exempted from commercial tax, the rates of tax on imported goods are 5%, 10%, 20% 25% according to the respective schedule of goods. Another schedule represents specific types of foods such as cigarette, liquor, etc. Carrying rates above 25%.

Assessment of Import Duty is based on the assessable value, which is the sum of CIF value and the landing charge (0.5 % of the CIF value) for the goods imported. The commercial tax together with the custom duty are collected at the point of entry and the time of clearance of imported goods.

There are three state banks namely Myanma Foreign Trade Bank - MFTB, Myanma Investment and Commercial Bank -MICB and Myanma Economic Bank - MEB, conducting foreign trade transactions of the Union of Myanmar. MEB opens branch offices at the border checkpoints for the commercial transactions of overland trade with the neighboring countries.

Investment Environment

Since the adoption of the market-oriented economic system, the Union of Myanmar Foreign Investment Law (FIL) was enacted on 30 November 1988, to induce foreign direct investment together with technology and also to mobilize its natural resources.

Policy objective underlying foreign investment is for:

1. Promotion and expansion of exports;

2. Exploitation of natural resources, which; require heavy investment;

3. Acquisition of high technology;

4. Supporting and assisting production and services involving large capital;

5. Opening up of more employment opportunities;

6. Development of works which would save energy consumption; and

7. Regional development.

Formation of Myanmar Investment Commission

In order to oversee and administer the Foreign Investment Law (FIL) and Myanmar Citizen’s Investment Law ( MCIL); the Myanmar Investment Commission (MIC) was formed with the Government jog the Union of Myanmar Notification No ( 7/94) on 3 August 1994. The commission was reformed with the Notification No.(59/99) on 3 December 1999. The Commission consists of five full time members and five part time members. All of the members are Ministers. The Myanmar Investment Commission (MIC) is an initial approving authority for foreign investment proposals just like Board of Investment (BOI) of Thailand and Economic Development Board (EDB) of Singapore. It undertakes the responsibility to Trade Council and Cabinet.

Allowable Economic Activities

In order to j provide more specific guidance to foreign investors; a notification listing the types of economic activities allowed for foreign investment kHz as been issued. It I s not an exhaustied list but it covers most activities with the exception of those reserved kinder the State-owned Economic Enterprises Law ( SEE Law). However, if a foreign investor is inbte3rested in an activity not specified in the notification or an activity defined in the SEE Law, he can apply to MIC stating his interest and reasons as to why it will be mutually beneficial to the State and to himself for the activity to be undertaken. If MIC is satisfied that the proposed activity will indeed be in the interest of our Nation, it may put up the application for approval from Trade Council and Cabinet.

Form of Organization

The FIL allows that foreign investment activities can be undertaken either in the form of wholly foreign - owned or a joint venture with any Myanmar partner, either an individual, a private company, a co-operative society or a State-owned enterprise. In all joint ventures, the minimum share of the foreign party is 35 percent of the total equity capital. BOT ( Built Operate and Transfer ) system is allowed for hotel and real estate project, while PSC ( Production Sharing Contract ) system is allowed for exploration and extraction of the natural resources.

Minimum Amount of Foreign Investment

Minimum foreign capital to be brought into Myanmar has been notified by MIC. It is US$ 500,000 for manufacturing and US$ 300,000 for services and it can be in kind and in cash. Duration of investment is at present, permitted by MIC according to the volume of investment.

Land Utilization

According to the existing land laws of Myanmar, a foreigner of foreign company cannot own land , but can lease for long-term period from the State for investment activities. The land lease rate is US$ 3 per qu.m per annum at the State-owned industry Zone.

Application Procedure

The potential investors shall submit a proposal to MIC in a prescribed form. The proposal has to be supported by the following documents:

1. business profile and documents supporting financial credibility such as the lasted audited accounts of the person(s) or the firm intending to make the investment,
2. bank reference and recommendation regarding the potential foreign investor’s business standing;
3. detailed calculation relating to t eh economic justification of the proposed project;
4. a draft contract to bed executed with a State organization that is responsible for the smooth operation of enterprise in the respective field if the project is wholly foreign - owned venture;
5. a draft contract between the partners if the project is joint-venture;
6. A draft land lease agreement (if required)
7. draft Memorandum and Articles of Association if the proposed joint-venture is in the form of a limited company and
8. an application for exemptions and relieves defined under Section 21 of the FIL.

Approval Process

The MIC Office makes a preliminary appraisal of the proposal. The proposal is then forwarded together with the views and comment to the MIC. Then MIC will scrutinize the proposal from the technical, financial, commercial, economic, social and j environment aspect within the framework of the policy objectives of t he FIL. After getting the approval from the Cabinet, MIC will issue the Permit with specified terms and conditions as required according to the type of business.

Incentives and Guarantees

As the FIL is aimed at bringing in more foreign capital into the country, it j offers investment incentives and j guarantees to foreign investors. An enterprise permitted by the FIL shall enjoy a tax holiday period of three years inclusive of the year the enterprise commences its commercial operation and also to reasonable period upon application. MIC may grant one or all of the following exemption and relieves:

1. exemption or relief from income-tax on reinvested profits within one year;

2. accelerated depreciation rates approved by the Commission;

3. fifty per cent relief from income - tax on profits accrues from exports;

4. the right to pay income - tax on behalf of foreign experts and technicians employed in the business, and the right to deduct such payment from assessable income

5. right to pay income - tax on the income of foreign employees at the rate applicable to Myanmar nationals,

6. right to deduct Research and Development expenditures from the assessable income

7. the right to carry forward and set off losses up to three consecutive years from the year the loss is sustained;

8. exemption or relief from customs duty or other internal taxes or both on import of machinery, equipment, instruments machinery components spare parts and materials used in the business during the period of construction and

9. exemption or relief on customs duty or other internal taxes or both on imported raw materials fro the first three years of commercial operation after completion of construction

The FIL provides an irrevocable State guarantee that an enterprise permitted by MIC under the FIL shall not be nationalized during the permitted period or the extended period ( if any). It also provides repatriation of profit ( after all deduction of all taxes and the prescribed funds) as well as legitimate balance of salary and lawful income of foreign personal ( after payment of living expenses and taxes). In the case of termination or dissolution of the business, repatriation of foreign capital an also be allowed.

Priority Area for Foreign Investment

Resource-based heavy investment, resource-based export-oriented value added projects, labor intensive export-oriented projects are being given priority for foreign investment in Myanmar

Foreign Investment Inducement

Since the time FIL has been enacted, MIC has permitted 400 projects from 29 countries up to the end of September 2006. The leading sectors are Power, Oil & Gas Manufacturing, Real Estate, Hotel and Tourism. Total amount of foreign direct investment in these projects is US$ 13.85 billion

Major investors are ASEAN countries with the amount of almost half of the total investment. Thailand ranks first with the amount of US$ 7375.623 million, UK ranks second with US$ 1587.974 million, Singapore ranks third with US$ 1341.223 million, Malaysia ranks fourth with US$ 660.747 million and Hong Kong ranks fifth with the amount of US$ 504.218 million.

Among the ASEAN countries, Singapore, Thailand, Malaysia, Indonesia, Philippine and Brunei Darussalam and + 3 members, such as, Japan, China and Republic of Korea are doing investments in Myanmar. Among the BIMST-EC countries, Thailand, India, Bangladesh and Sri Lanka are doing investment in Myanmar. The lists of Foreign Investment of permitted Enterprises by Sector-wise and by Country-wise are attached as ANNEXES.

Investment Opportunities

Agriculture

Myanmar is basically an agricultural country. The agricultural sector constitutes 41 per cent of the total GDP and 11 per cent of foreign exchange earnings. The vast potential of land resources are available with different weather and various soil conditions by the combination of technology can enhance the production of cash crops and industrial crops. Various types of cash crops and industrial crops are able to cultivate in Myanmar, such as rice, pulses and beans, maize, sesame, rubber, coffee, tea, sugarcane, jute, wheat, cotton, pepper, oil palm, various kinds of herbs, variety of fruits and vegetables, etc.

The investor, who wish to cultivate the perennial crops such as oil palm, rubber, is allowed to use up to 50,000 acres of uncultivated land by the land regulation.

The existing supply of those crops cannot meet the present position of demand and there is, therefore, high yield cultivation and value-added manufacturing of these cash crops and industrial crops with the investment of capital and high technology are the areas of the potential businesses in Myanmar.

The Government is also encouraging the development of agro-based industries by setting up of sugar mill, cotton industry, jute industry, rubber industry, seed industry, edible oil industry, food processing and animal feed plant.

Businesses other than agricultural production, such as agro-based industries by producing value-added agricultural products and processed food are also welcome. The establishment of recreation centers and resorts, golf clubs, motels around the several dams with beautiful landscape are also potential areas.

Livestock and Fisheries

Second prospective sector is livestock and fisheries sector. Myanmar is endowed with rich and varied marine and inland fishery resources, with a production potentials of 1.05 million metric tons per annum from marine source only. Inland water bodies such as natural lakes, reservoirs, river systems, ponds, etc. Cover an area of about 8.2 million hectares.

Under this sector, the significant nature is almost all of the production, processing and marketing of fishery / fishery related activities are carried out by the private sector. All state owned fishing vessels, carried vessels, ice plants, processing plants, cold stores, fishmeal plants, dehydration plants, etc. Are sold or leased to the private sector.

There is no state owned institution competing with the private sector in fishery and fishery related industry.

Myanmar has a long coastline with 2,832 kilometers, which provides a very good base for the development of shrimp and prawn culture. In order to cope with the increasing fishing activities in Myanmar, various laws such as Law Relating to the Fishing Rights of Foreign Fishing Vessels, Myanma Aquaculture Law, Myanma Marine Fisheries Law and Freshwater Fisheries Law have been enacted and procedures have been prescribed.

The foreign investors can undertakes economic activities in the livestock and fishery sector are, cattle breeding, veterinary pharmaceutical production, construction of ice plant, cold storage complex, fish meal plant, canning plant, dockyard and fishing port and fish-net making factory, development of shrimp hatchery, establishment of shrimp farm, bee keeping and bee products production.

Forestry

The third potential is forestry sector. Myanmar, since the immemorial time, has always been deeply committed to forest and biodiversity conservation and, as a consequence still possesses vast and varied natural forest rich in biodiversity.

The forest flora is diverse, varying from sub-alpines on the snow-capped mountains in the north, through dry and moist deciduous to tropical monsoon forests in the south with mangrove along the coastal areas and coral reefs offshore.

Myanmar is also home of teak which is recognized as one of the most valued and sought-after tropical timbers of the world and it is asserted that extensive and beautiful natural teak stands can be seen only in Myanmar today.

There are more than 7,000 recorded plant species of which 1,071 are endemic, about 100 species of bamboos, 30 species of rattan and 800 species of orchids. The diverse forest ecosystems in Myanmar are home to about 1,000 bird species nearly 300 mammal species and about 360 known species of reptiles.

Myanmar is, therefore, often cited as the last frontier of global biodiversity in Asia.

Production of value-added wood based items such as wood related products, wood carvings, parquet, tiles, plywood, doorframes and furniture are prosperous businesses under the forestry sector.

Mining

Myanmar ranks high among the Asian countries in terms of mineral potentials. However, the mineral resources are very much under-utilized and still exist a large potential to boost up to fulfill the growing needs of local and foreign markets.

The investment can be made either production sharing or profit sharing to encourage the foreign investors. To enhance the investment, the Myanmar Mines Law and the Myanmar Mines Rules were promulgated in 1994 and 1996 respectively.

With the intention of producing dimension stones for use in construction and decoration works, systematic geological survey and prospecting has shown an abundant occurrences of granite and marble deposits in Myanmar with various colors and patterns.

Jeweler manufacturing and Jade carving is the one of the areas of prospects with new discovery of large stone - tract which needs the new technology in gem cutting, polishing and manufacturing.

Energy

Oil and gas exploration under the energy sector is contributed highest in the foreign investment of Myanmar.Myanmar has very high potential in the development of oil and gas and hydro - energy sector. New discovery of off-shore gas fields developed by foreign investors are operating under the production sharing contracts. There is, therefore, a lot of potential can be seen in the establishment of downstream and related industries in this particular sector.

Manufacturing

As we all aware that, industrialization can only be enhanced the country’s economic development. Since Myanmar has adopted the market oriented economy, it is trying to increase the share of manufacturing sector in the national economy by encouraging and extending the scope for international industrial cooperation and economic collaboration with the private sector.

Since then, international standard industrial zones with infrastructure are established on joint-venture basis in cooperation with foreign investors. Foreign investors are also allowed to invest at the local industrial zones by permitting them a long term lease with the permission of the Myanmar Investment Commission (MIC).

Hotels and Tourism

Another prospective booming sector is tourism sector. Myanmar is a cultural destination with its rich cultural heritage and is also blessed with natural environment like snow-capped mountains, beautiful lakes, long rivers lush tropical forests, unspoilt beaches and archipelagoes.

There is a growing potential for the construction of international class hotels in major tourist sites. There are also many newly opened areas where there are required tourism related services. Besides, opportunities for the investment in developing golf courses, beach resorts, tourist village, amusement parks, recreational centers are still tremendous.

Information and Communication Technology

With a view to focus on the high acceleration of information and communication technology development all over the world, Myanmar has laid down the policy and encouraging the human resource development for the implementation of ICT plans to narrow down the gap of digital divide.
Myanmar still has the comparative advantage in wages compared to other developing countries. Existence of fairly trained and literate labor force attracts for this sector.

Others

In order to provide the required infrastructural facilities to the foreign investors, the industrial parks projects are established with the collaboration of foreign developers. A number of industrial zones developed in the satellite towns around the Yangon City, will serve as the production base for export promotion and expansion.