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 Co., 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."
AP
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, you may contact us at: sbc.pte@gmail.com, provisionally. Many thanks.
No comments:
Post a Comment