Foreign Investment Policy and Procedures
Foreign Investment Policy

Myanmar is striving to improve productivity, increase all round production, develop efficiency in trade and increase its trade volume following the liberalisation of its economy and adoption of a market oriented economic system since late 1988. Activities to induce direct foreign investment are being continued. Myanmar's policy on foreign investment is an important component of the overall restructuring and development policy of the government.

The main components of the policy are :-

a. adoption of a market oriented system for the allocation of resources.

b. encouragement of private investment and entrepreneurial activity.

c. opening of the economy for foreign trade and investment.

Policy objectives underlying foreign investment are for the promotion and expansion of exports. exploitation of natural resources which requires heavy investment, acquisition of high technology, supporting and assisting capital intensive production and services, opening up of more employment opportunities, development of energy conserving activities and regional development. The Foreign Investment Law in which a wide spectrum of incentives is provided has been enacted and Procedures Relating to the Law have also been prescribed.

Foreign investors are allowed to make investment either in the form of a hundred percent wholly foreign-owned enterprise, or partly-owned, or in the form of a joint venture with a private or public local entity. If it is a partly-owned concern or a joint-venture, the minimum foreign capital shall be 35 per cent of the total equity capital.

A foreign investor who invests and operates under the Foreign Investment Law has the right to enjoy appropriate economic benefits particularly in the form of tax incentives, as well as to repatriate profits and to withdraw the legitimate assets on winding up his business. There is also an unequivocal State guarantee against nationalisation and expropriation.

Eligible Economic Activities

Economic activities allowed under the Foreign Investment Law and notified by the Foreign Investment Commission cover almost all sectors of the economy. Activities not specified in the notification will be considered upon request. Previously, there were twelve economic activities defined in section 3 of the State-owned Economic Enterprises Law in which private investment was restricted and were reserved to be carried out solely by the State-owned Economic Enterprises. However, relaxation has now been made by the government for private investors to invest in these activities.

Types of Business Organizations

In accordance with section 5 of the Foreign Investment Law, a foreign investor can organise his activity in Myanmar in the following manner:-

  1. Wholly-owned by the foreign investor
    An individual foreign investor can establish his business as a sole proprietorship by bringing in one hundred per cent foreign capital. Similarly, a partnership firm or a limited company which is incorporated outside Myanmar can do business as a foreign branch by bringing in the total capital required by such a branch. Establishing a business in which citizens have interests
     

  2. A foreign investor can enter into a partnership with his local counterpart or set up a limited liability company with shares held by local investors. He can also join with any individual, firm, company, co-operative or State-owned enterprise from Myanmar to establish a joint-venture either as a partnership firm or a limited company. In all such cases the foreign capital to be brought in must be at a minimum 35 per cent of the total equity capital.

Foreign Investment Application Procedure
Submitting a Proposal

A promoter must submit a proposal in the prescribed form to the Foreign Investment Commission enclosing the following documents:-

  1. Documents in support of the investor's financial credibility (audited final accounts of a most recent year of the person or firm intending to make investment).

  2. Bank recommendation regarding the business standing.

  3. Detailed calculation relating to economic justification of the proposed project indicating inter alia estimated annual net profit; estimated annual foreign exchange earnings or savings as well as foreign exchange requirement for the operation, recoupment period; prospects of new employment; prospects of increased national income; local and foreign market conditions and distribution.
     

  4. If it is a hundred per cent foreign investment, a draft contract to be executed with the organisation determined by the Ministry concerned.

  5. If it is a firm, limited company or join tventure of any kind, a draft contract to be entered into between the foreign investor and local counterpart.

  6. If it is a limited company or a joint-venture in the form of a limited company, draft Memorandum and Articles of Association.

  7. Lease Agreement for lease of land or building to be entered into between the lessor and the lessee.

Appraisal of the Proposal

The Office of the Foreign Investment Commission makes a preliminary appraisal of the proposal. The proposal is then forwarded together with the views and comments to the Foreign Investment Commission. The Commission will scrutinise the proposal from the technical, financial, commercial, economic and social aspects within the frame work of the policy objectives. Upon approval by the Commission, a permit is issued to carry out business specifying the terms and conditions as required according to the type of business.

Application for a Permit to Trade from the Ministry of National Planning and Economic Development at the time of incorporation of the enterprise with the Registrar of Companies.

Basically any enterprise which has obtained a permit from the Commission can start its business constituting itself as a sole proprietorship, a partnership or a limited company or a branch office of a foreign company. A limited company which brings one hundred per cent foreign capital. a joint-venture limited company or a branch company is deemed as a foreign company under section 27 A of the Myanmar Companies Act, and accordingly it is required to obtain a Permit to Trade by applying to the Registrar of the Companies Registration Office of the Directorate of lnvestment and Company Administration of the Ministry of National Planning and Economic Development. However, a limited company which is a joint-venture with a State-owned Economic Enterprise formed under Special Company Act 1950 is exempted from obtaining a Permit to Trade.

  1. The application is to be accompanied by the following documents:-

  2. Required particulars entered in Form A of the Myanmar Companies Regulation, 1957.

  3. The Company's drafts Memorandum of Association, Articles of Association or other instruments defining the constitution of the company.

  4. Duly completed questionnaire form prescribed by the Capital Structure Committee of the Ministry of National Planning and Economic Development.

  5. List of economic activities intended to be performed in Myanmar. (A permission from the relevant Ministry if any).

  6. Estimated expenditures to be incurred in Myanmar for the first year operations.

In the case of a foreign branch the following shall be furnished in addition to the above mentioned documents:-

  1. Instead of the company's drafts Memorandum and Articles of Association, a copy of the Head office's Memorandum and Articles of Association or of the Charter, Statute or other instruments constituting or defining the constitution of the company, duly notarised and conservatised by the Myanmar Embassy concerned in the country where the company is incorporated.

  2. Copies of the head office balance sheet and profit and loss accounts for the last two financial years.

  3. Where the Memorandum of Association, Articles of Association and other relevant documents are not in English in the original, authentication of the translation into English.

The Ministry of National Planning and Economic Development will issue the Permit to Trade after considering the recommendation of the Capital Structure Committee. In the case of a company which has been issued a Permit from the Foreign Investment Commission, the terms and validity of the Permit to Trade shall be the same.

Registration
Registration of Business Organizations

  1. A sole proprietorship is not required to register at the Companies Registration Office.

  2. A partnership firm may be registered, but registration is not compulsory.

  3. A company limited by shares is required to register under the Myanmar Companies Act at the Office of Registrar of Companies Registration.

  4. A company with share contribution of the State shall be registered under the Special Company Act. 1950 and the Myanmar Companies Act. as a Special Company.

  5. A company which comes under the definition of foreign company shall apply and obtain a permit from the Ministry of National Planning and Economic Development before registration.

In applying for registration of a company or branch office of a foreign company, the following papers and documents shall be submitted.

  1. Two sets of Memorandum of Association and Articles of Association duly stamped and printed both in Myanmar and English

  2. Declaration of registration

  3. Declaration of legal and official version of the documents

  4. Declaration of the situation of registered office

  5. Translation certificate by a competent translator

  6. List of Directors and Managers for a Company incorporated in Myanmar

  7. List of person(s) authorised to accept services of process and notice in Myanmar on behalf of the Company (for a branth office of a foreign company)

For a Public Company the following additional documents shall be submitted before commencing the business

  1. List of persons to act as Directors.

  2. List of persons who have consented to act as Directors.

  3. Agreement to take qualification shares.

Registration Fees
  1. For a Partnership firm the registration fee is fixed at Kyats 45/- .

  2. For a Company Limited by shares the registration fee ranges from a minimum of Kyats 600/- to a maximum of Kyats 15,000/- depending upon the authorised capital of the Company (It is calculated according to Table "B" of the Myanmar Companies Act.)

Investment Climate

Myanmar is rich in natural resources. It has vast forests, numerous river systems with broad deltas, rolling mountain ranges, cultivable plains and highlands on geographical surfaces supplemented with rich underground resources of known minerals, renowned gems and many other minerals which have not yet been exploited commercially. It is a very attractive country for investors. Furthermore, its long historical lineage and rich cultural background makes it is a country worth visiting, a country with great potential for tourism. Myanmar has a tolerable climate that is absent of extremities and it is not prone to natural disasters. It has a moderate sized population of about 42 million with a high literacy rate. With a total land area of 676,577 square kilometers (261,228 sq. miles) it is the largest country on the mainland of South East Asia.

Myanmar has a long coastline with rich fishing grounds but they have been exploited very limitedly; the offshore fishing grounds are the least exploited. Hence vast potential still exists for investment in this area. As a form of liberalisation in fishery sector, fishing rights have been granted to foreign companies on contractual basis in specified areas within the exclusive economic zone of Myanmar territorial waters. Various laws and procedures relating to fishing rights, marine fisheries, aquaculture and fresh water fisheries have been enacted in the 90's so as to allow wider fishing rights to private individuals both local and foreign and also to form joint ventures.

The establishment of internationally competitive export industries is required for the purpose of promoting industrialisation. The textile, food and timber processing industries are expected to be promising ones, as well as other more value added ones that will enable to production and promotion of exportable commodities.

Since the promulgation of the Foreign Investment Law in November 1988, the Government of Myanmar has taken measures to encourage foreign investment and up to December 1993, the Commission has permitted 68 enterprises to invest in the agriculture, manufacturing, energy, mining. fishery, tourism and transport sectors.

 

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Prepared by THAN TUN WIN, Embassy of the Union of Myanmar , Brussels