2012-09-18 doing business in myanmar

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Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.

Doing Businessin Myanmar (ATC 310812)_(693980_7).DOC 1

30 August 2012

DOING BUSINESS IN MYANMAR

byMYANMAR LEGAL SERVICES LTD

A foreign investor looking at a project or transaction in Myanmar for the first time will find anoutdated legal framework and administrative practices governing most business transactions. The roleof the law, lawyers and the judiciary in Myanmar was established during the British colonial period,and continued after Myanmar gained independence in 1948 until 1962. In 1962 the governmentchanged the countrys economic policy to socialism. When the State Law and Order RestorationCouncil took power in September 1988, this marked a shift from a socialist to a more liberal andmarket oriented economic policy. The first Constitution of Myanmar was enacted in 1947; the secondin 1974 and the current one in 2008 effective from 31 January, 2011 (first convening of theParliament). A general election took place in 2010. By-elections in 44 districts were held on 1 April2012.

During the second session of Parliament in fall 2011, 15 new laws/amendments were enacted andduring the third session FebruaryMarch 2012, 11 new laws/amendments were enacted. See listingin Schedule 1. The fourth session of parliament convened on 4 July 2012 and is expected to last untilSeptember. Lawmakers are expected to debate bills on a minimum wage, corruption and mediacensorship as well as further economic reforms including reforms, and ratification of new foreigninvestment law.1

The laws and practices governing investing in Myanmar are undergoing rapid changes. The

Myanmar government is obtaining technical assistance and training in a number of key areas,including foreign exchange controls, finance and investment law reform and trade facilitation.

Foreigners Investing in Myanmar

A foreign investor may incorporate in Myanmar a 100% foreign owned company, establish andoperate as a registered branch of a company incorporated outside Myanmar; establish and operate as asole proprietor; and establish and operate as a 100% foreign owned partnership.

The incorporation of a foreign Myanmar company and registration of a Myanmar branch of a foreigncompany in Myanmar is subject to the procedures and requirements set out in the Myanmar

Companies Act and by the Directorate of Investment and Company Administration(DICA).

The Foreign Investment Law (1988 as amended) defines two types of foreign investment: 1) a soleproprietorship wholly owned by a foreign investor supplying 100% foreign capital, and 2) a jointventure in the form of either a partnership or limited company, in which the foreign capital investedmust be a minimum of 35% of the total equity capital.

Foreigners who invest in local companies or through nominees have no legal standing to

enforce their rights. Foreigners considering investment in Myanmar should only invest through

a Myanmar incorporated company in which they are controlling shareholders and directors

1 A new Foreign Investment Law (2012) was expected to be passed by the Parliament in its third session. However, although the Bill wasn published in the Myanmar Gazette on 9 March 2012, it has not been enacted. Myanmar Times August 20-26, 2012 reports that 54amendments to the pending draft FIL were approved by the Peoples Parliament.
http://www.myanmarlegalservices.com/http://www.myanmarlegalservices.com/


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duly registered at the Companies Registration Office in accordance with the Myanmar

Companies Act (1914) (or Special Companies Act (1950) if a joint venture with a government

enterprise).

On 27 February 2012, the Myanmar Investment Commission (MIC) passed an Order relating tonominee investments carried out by Myanmar Citizens. The order requires foreign investors to investin accordance with the Foreign Investment Law, not through the use of a local nominee; upon failingto do so, the concerned company will be blacklisted.

Foreigners may not purchase land or condominiums in Myanmar.

International Sanctions

Since 1997, investment in Myanmar was restricted by sanctions imposed by the US, EU, UKAustralia and Canada. The following is an overview of relaxations of sanctions in 2012;

United States:

Latest relaxations:o General License No. 14-c issued on 17 April 2012: Authorizes exportation of

financial services for not-for-profit activities.2o On 11 July 2012, the US further relaxed sanctions as follows;

OFAC General License No. 16 Authorizes the Exploration of FinancialServices to Burma, subject to certain limitations.

OFAC General License No. 17 Authorizes New Investment in Burma, subjectto certain limitations and reporting requirements.

New Executive Order Targeting Persons Threatening the Peace, Security orStability of Burma.3

European Union:

Latest relaxation: Council of the European Union Decision 2012/225/CFSP issued on 26April 2012All sanctions have been lifted with the exception of the arms embargo andequipment embargo that might be used for internal repression, which continues for 12months.4

United Kingdom:

Latest relaxation: Suspend assets freeze on nearly 500 people and restrictions on keyindustries.5

Australia:

Latest relaxation: Australia has lifted all travel bans on Myanmar citizens as reported on 7June 2012. There are no general trade sanctions. However the Australian government retainsthe capacity to impose sanctions if required by the circumstances, and still has prohibitions onweapons trading.6

2 United States Treasury Department website; http://www.treasury.gov/resourcecenter/sanctions/Programs/pages/burma.aspx; retrieved15 May 2012

3 United States Treasury Department, Office of Foreign Asset Controls website; http://burma.usembassy.gov/ retrieved 12 July 20124 Transcript of EU Decision can be viewed at http://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:115:0025:01:EN:HTML5

The United Kingdom Treasury Department website; www.hm-treasury.gov.uk/fin_sanctions_burma.htm; Note that the UK shares manypolicies on sanctions with the EU.

6 see http://www.channelnewsasia.com/stories/afp_asiapacific/view/1206240/1 /.html; Retrieved 8 June 2012


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Canada:

Latest relaxation: Prohibitions on import, export, investment, financial transactions, andtechnical data have been removed. Asset freeze and prohibition on transactions also remain

in effect for designated individuals, but the list of individuals is being reduced.7

Myanmar Legislation

Myanmar legislation includes 13 volumes of codified laws from the period 18411954 (known as theBurma Code), and numerous special laws, notifications, rules and regulations enacted from time totime. The Government also publishes a weekly Gazette detailing notifications, changes to existinglaws and new laws. Myanmar Laws enacted after 1988 are usually published both in Myanmar andEnglish.

The Attorney Generals Office published a compilation of Myanmar laws up to 2010. Englishversions were published up to 2009.

The Court System

According to the Constitution, Courts of the Union include (i) Supreme Court of the Union, HighCourts of the Region, High Courts of the State, Courts of the Self-Administered Division, Courts ofthe self-Administered Zone, District Courts, Township courts and the other Courts constituted by law,(ii) Courts-Martial, and (iii) Constitutional Tribunal of the Union.

The Supreme Court is the highest Court in the country without jurisdiction over the powers of theConstitutional Tribunal and the Courts-Martial. There is no jury system in Myanmar. Cases arenormally tried by a single judge; however, in special cases the Chief Justice of the Supreme Court can

instruct to form a panel of judges. The language of the Court is Myanmar, and procedures of all courtsare governed by the Civil Procedure Code, Criminal Procedure Code and the Courts manual, all ofwhich are available in Myanmar and English language versions.

Sources of Local Advice8

Myanmar Investment Commission: The MIC is the agency responsible for reviewing most types offoreign investment, and for coordination with other government agencies. MIC is a good source ofinformation for foreign investors. Before September 2011, in practice, in some commercial matters,the MIC submitted to the Trade Council (TC and afterwards named TISC) for final approval.Commencing from 1stSeptember 2011, the Government issued Notification No 82/2011 and formed anew MIC with the Minister of No (2) Ministry of Industry as Chairman, four members, one Secretary,

and one Joint Secretary. MICs objectives include to develop the States economy by promotinginvestment projects; to promote more opportunities for investment, technical knowhow and jobprospects; to prepare in advance to incorporate and cope up with ASEAN countries, and to be moreefficient on investment under the market oriented system. Notification relating to the formation ofTISC replacing TC, was repealed by this Notification No 82/2011. Currently, there is no TISC or TCabove MIC.

Legal Advice: Legal advice on business law in Myanmar can be obtained from local Myanmarlawyers. There are several local law firms that are affiliated with international law firms.

7 http://www.gazette.gc.ca/rp-pr/p2/2012/2012-05-09/html/sor-dors85-eng.html8 See website of DICA (Directorate of Investment and Company Administration, Ministry of National Planning and Economic

Development) www.dica.gov.mm, This website includes a Myanmar Investment Guide.


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A foreign investor wishing to carry on business in Myanmar through a locally incorporated limitedcompany may register the company under the Myanmar Companies Act, unless the company is aState-owned enterprise or involves the Government, in which case it must be incorporated under theSpecial Companies Act (1950) and be approved in accordance with the Foreign Investment Law.

Under the Myanmar Companies Act, a foreign company, whether a 100% owned, joint-venture or abranch/representative office, is required (with certain exceptions) to obtain a Permit to TradeCertificate before registration. Permits to Trade are currently renewable every three years (formerly,every two years). The Permit to Trade is applied for at Companies Registration Office and requiresapproval by MIC. A joint venture company with a State entity, formed under the Special CompanyAct 1950, is also required to obtain a Permit to Trade.

In the past, MIC promoted companies did not require a Permit to Trade Certificate. Currently, Permitto Trade Certificates are also issued to MIC promoted companies, which have to be renewed everythree years together with the Company Registration Certificate. MIC Permits are approved for a longterm and do not have to be periodically renewed.

There are three categories of companies for Permits to Trade purposes: Services Company, TradingCompany and Manufacturing Company. At present, no Permits to Trade for trading companies areissued or renewed. The government did not announce any notification of such prohibition.

A limited company has memorandum and articles of association. The articles of association mayinclude special voting rights and other minority shareholder protections. Care must be taken byforeign investors in prescribing the powers of the managing director, etc. There are no nationality orresidence qualifications applicable to directors unless otherwise prescribed in the articles ofassociation.

Imported Capital

There are two classes of imported capital which concern foreign investors. First is the minimumcapital required to register for a Permit to Trade. Since all foreign companies (excluding jointventures with a State entity) require a Permit to Trade to operate, this first class represents theminimum imported capital required to operate in Myanmar. Second is the foreign capital required toqualify for an MIC permit. Companies qualifying for an MIC permit are entitled to the incentivesoutlined in the FIL. Unlike the Permit to Trade, the MIC permit is not required to operate inMyanmar, so this second class represents the minimum imported capital to qualify for incentives. Amore detailed description of the Permit to Trade and the MIC permit can be found below:

Permit to Trade

A foreign Myanmar company, after obtaining a Permit to Trade from the CompanyRegistration Office, must import capital into Myanmar in foreign currency in an amountdetermined at the official exchange rate, with minimum capital for each category asfollows:

Ks 133,333,333 (approx. US$166,607) for an industrial company;Ks 66,666,666 (approx. US$ 83,333) for a trading company; andKs 40,000,000 (approx. US$ 50,000) for a service company.

50% of capital must be deposited into the Myanmar Foreign Trade Bank or the MyanmarInvestment and Commercial Bank in Yangon when the company submits its registration

application. The remaining 50% must be imported within one year. The capital may be heldin US$ accounts, and exchanged at market rates.


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MIC Permit

The minimum amount of foreign capital required to be eligible under the Foreign Investment

Law is:

For an industry US$ 500,000.For a service organization US$ 300,000.

Foreign capital may be imported in the following forms:

Any foreign currency acceptable to the MFTB or MICB

Machinery, equipment, machinery components, spare parts instruments, etc., that isnecessary for the enterprise ;

License, trademarks, patent rights and other rights which can be evaluated;

Technical know-how; and Re-investment out of profits accrued to the enterprise from the above or from share of

profit.

Special Company Act (1950)

This Act governs all companies in which the State has equity share capital. When its memorandumand articles of association has been approved by the government, a notification will be issued by theMinistry of Commerce, classifying such a company as a Special Company. The provisions ofMyanmar Companies Act apply in so far as they are not excluded.

Labor Laws

Existing labor laws in Myanmar include: Employment and Training Act (1950), EmploymentRestriction Act (1959), Employment Statistics Act, (1948), Factories Act (1951), Labour OrganizationLaw (2011), Leave and Holidays Act (1951), Minimum Wages Act, (1949), Oilfields Labour andWelfare Act (1951), Payment of Wages Act (1936), Social Security Act, (1954), Shops andEstablishments Act (1951), Workmens Compensation Act (1923) and Labour Dispute SettlementLaw (2012).

These laws governs labor relations problems and deal with such subjects as work hours, holidays,leaves of absence, woman and child labor, wages and overtime, severance pay, workmenscompensation, social welfare, work rules and other matters. There is a minimum wage only in certainfields (i.e. agricultural workers). A social security act established a fund with contributions byemployers, employees and the government.

These Labour laws were formerly announced as rules under the 1964 Law Defining the FundamentalRights and Responsibilities of the Peoples Workers (1964 Law). On 21st December 2011, a Lawrevoking the 1964 Law was passed. On 11th October 2011 the Trade Unions Act 1926 was repealedby the Labour Organization Law. The Labour Organization Law took effect on 9 March 2012. TheMinistry of Labour and the Attorney Generals Office have drafted a new Labour Law which is

expected to be submitted and passed by the Parliament in the near future.

The Myanmar Special Economic Zone Law (2011), Dawei Special Economic Zone Law (2011) andthe Bill of the New Foreign Investment Law prescribe special rules applicable to foreign employees,

work permits, and minimum percentages of employees which must be citizens.


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Myanmar has been a member of the ILO since 1948. A Myanmar tripartite delegation comprisingwith the representatives of Government, Employers and workers attend the ILO conference held inGeneva annually.

Immigration Law

Foreigners cannot enter Myanmar without a visa. A normal tourist visa is valid for 28 days.Foreigners doing business in Myanmar can apply for a stay permit for 3 months, 6 months or 9months. A foreigner wishing to remain in Myanmar more than 90 continuous days must apply to theImmigration Department for a Foreigners Registration Certificate, which can be extended for a stayof one year with a recommendation letter from the employing company, subject to obtaining arecommendation from the relevant Ministry.

Land Laws

Restrictions on land ownership

Before 30 September 2011, foreigners and foreign companies were not allowed to own landin Myanmar or lease land for a term exceeding one year unless specifically permitted by theGovernment according to the Transfer of Immovable Property Restriction Law of 1987.However, a company approved under the Foreign Investment Law could request a long-termright of lease from the government.

On 30 September 2011, the Government issued Notification No. 39/2011 (Notification onRight to Use of Land relating to the Republic of the Union of Myanmar Foreign InvestmentLaw). This Law allows a foreign company investing under a MIC Permit to lease land up toinitial 30 years based upon the permitted investment term, which is extendible for another 15

years twice with the permission of MIC.

Land for property development

Generally, land in Myanmar is owned by the State. Land administration is assigned tovarious government departments. While a foreign investor may not own land, land use rightscan be obtained in either one of the following two ways:

obtaining land use rights under a lease, from either the government or private citizens,approved by the government; or

land use rights are contributed to a joint venture by a government agency

Foreign investors may, however, invest in property development on a build, operate andtransfer (BOT) basis. The project can be a 100% wholly foreign owned project or a jointventure with a government partner. Many of the projects approved by the MIC are BOTprojects.

Mining Laws

Prior to 1990, the mining sector was open only for State investment. With the introduction of the FIL,foreign investment was introduced into the mining sector. As the old mining laws were out of date,the Government promulgated the Myanmar Mines Law 1994, Myanmar Gemstone Law 1995, andthe Myanmar Mines Rules 1996.


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Since the nature of the mineral industry is capital intensive and also requires technical know-how,foreign participation is needed and expected by the Ministry of Mines. 11

A foreign investor can apply to the Ministry of Mines in order to obtain a permit under the following

categories:

prospecting, exploration, large scale production or small scale production of metallicminerals;

large-scale production of industrial minerals; or

large-scale production of stone (decorative stones).

Oil and Gas Laws

Current legislation governing oil and gas includes: The Oilfields Act (1918), The Oilfields Rules(1936), The Petroleum Act 1934, The Petroleum Rules, 1937, The Essential Supplies and Services

Act 1947, The Water Power Act 1927, The Petroleum Resources (Development Regulation) Act1957, Law Amending the Petroleum Resources (Development Regulation) Act 1969, Oilfield(Workers and Welfare) Act 1951 and the Myanmar Petroleum Concession Rules, mostly based uponBritish Law Codes of the pre-independence and Indian statutes. Notifications are also issued fromtime to time as a guideline from the Ministry of Energy.

The State-owned Economic Enterprises Law (SEE Law) states that the Government has the sole rightto carry out the exploration, extraction and sale of petroleum and natural gas and production ofproducts of the same. However, the Government may, in the interest of the State, permit suchactivities to be carried out jointly between the government and any other organizations.

Although the abovementioned laws relating to petroleum are still applicable, in practice, investors

generally enter into production sharing contracts with MOGE, the terms and conditions of whichgovern the process so long as they are not contrary to the laws in force. The last round of bidding forblocks was opened on 9 July 2011, resulting in the award of 10 blocks to 8 companies in January2012.

Tax Laws

Myanmar tax structure comprises fifteen different taxes and duties under the four major heads,namely:

1. Taxes levied on domestic production and public consumption - excise duty; licence fees onimported goods; state lottery; taxes on transport, commercial tax and sale proceeds of stamps;

2. Taxes levied on income and ownership-income tax;

3. Customs duties; and

4. Taxes levied on utility of State-owned properties-taxes on land; water tax, embankment tax;taxes on extraction of forest products, minerals, rubber and fisheries.

11 See website of Ministry of Mines


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Income Tax Law (1974)12

In the past, a flat rate of 30% of net profits was applicable to enterprises operating under the Foreign

Investment Law and those formed under the Myanmar Companies Act. On 15 March 2012,notification 111/2012 was issued, prescribing an income tax rate of 25%.

Resident and non-resident foreigners

For income tax purpose, foreigners and foreign organizations are classified into "resident" and"non-resident" foreigners. A resident foreigner is:

(i) in the case of an individual, a foreigner who lives in Myanmar for not less than 183days during the income year;

(ii) in the case of a company, a company formed under the Myanmar Companies Act orany other existing Myanmar law;

(iii) in the case of an association of persons, other than a company, an association wherethe control, management and decision-making of its affairs are situated and exercisedwholly within Myanmar; and

(iv) any enterprise or individual permitted under the Foreign Investment Law.

A foreigner or a foreign organization which does not satisfy the relevant criteria listed aboveis classified as a "non-resident". A branch of a foreign incorporated company registered inMyanmar under the Companies Act is considered a "non-resident" for the purposes oftaxation.

Withholding Tax

The Ministry of Finance and Revenue issued Notification No 41/2010 on 10 March, 2010prescribed a withholding tax regime. Effective 1 April 2010, persons responsible fordisbursement of the following types of payments, other than under the head salaries must at

the time of payment deduct and remit tax in the currency the disbursement is made, at therates below:

1. Interest paid to non-resident foreigners: 15%2. Royalties: 15% on payments to residents, 20% to non-resident foreigners.3. Payments for purchase of goods and services: 2% on payments to residents, 3.5% on

payments to non-resident foreigners.

Commercial Tax (1990) 13

All enterprises with sales of taxable goods and services exceeding or expected to exceed theapplicable threshold in a year are required to pay commercial tax be registered with the TownshipRevenue Officer. The application for registration must be in the prescribed form and filed one monthbefore the commencement of business. Irrespective of the level of its sales at any time, a registeredenterprise is required to comply with all the provisions of the law including submitting returns, payingtax monthly and keeping records, until its name is removed from the register. Only registeredenterprises are allowed to deduct input taxes incurred on their purchases.

12 As amended by the Law Amending the Income Tax Law (1989); the Law Amending the Income Tax Law (1991); and, the Law

amending the Income Tax Law (2006).13 As amended by the Law Amending the Commercial Tax Law (1991). Rates range from zero (for exempt items), 5 to 25% for specified

goods, and 30 to 200% for luxury goods.


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Double Taxation Agreements (DTA)

Myanmar currently has double taxation treaties with the United Kingdom, Singapore, Malaysia,Vietnam, South Korea, India and Thailand. The DTA with Thailand came into force for fiscal years

beginning on 1 January 2012.

INVESTMENT PROMOTION LAWS

Foreign Investment Law (1988)14

The Foreign Investment Law (FIL) was promulgated in November of 1988, to encourage foreigninvestment in Myanmar. A draft new FIL is expected to be passed in the current ParliamentSession. The bill was announced in the Myanmar Gazette, but according to Myanmar Times 20-

26 August 2012, 54 amendments have been approved by the Peoples Parliament.

The MIC was formed in order to oversee and administer the FIL. In order to provide more specificguidance to foreign investors, the MIC issued a notification listing the types of economic activitiesopen to foreign investment. It covers many activities with the exception of those reserved for theState under the State-owned Economic Enterprises Law (SEE Law). However, if a foreign investor isinterested in an activity not specified in a notification or defined in the SEE Law, the investor canapply to MIC stating its interest and demonstrating that such an enterprise would be beneficial to theState. Upon satisfaction, MIC may approve the application.

The FIL offers a large range of incentives and guarantees to foreign investors. An enterprisepermitted by the FIL enjoys a tax holiday period of three years; inclusive of the year the enterprisecommences commercial operation.15 In addition, MIC may grant one or all of the followingexemptions and reliefs:

1. exemption or relief from income tax on the profits of the business kept in a reserve fund andreinvested in the business within one (1) year after the reserve is made;

2. accelerated depreciation in respect to machinery, equipment, building or other capital assetsused in the business, at a MIC approved rate;

3. relief from tax on up to 50% of the profits accrued from the export of goods produced inMyanmar;

4. right to pay foreign employees income tax and deduct such payments from assessableincome;

5. right to pay income tax on the income of the above mentioned foreigners at the ratesapplicable to the citizens residing within the country;

6. right to deduct from assessable income, expenses incurred in respect to necessary researchand development carried out within Myanmar;

7. carry forward and set off losses up to three (3) consecutive years after the year in which theloss was sustained;

14 As amended by the Notification No. 39/11 (the Notification of the Right to Use Land relating to the Republic of the Union of Myanmar

Foreign Investment Law (2011)) and Notification No. 40/11 (the Notification Concerning the Foreign Currency relating to the Republicof the Union of Myanmar Foreign Investment Law (2011)).

15 This tax holiday may be extended on application, provided that the MIC considers it appropriate.


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8. exemption or relief from customs duty licensing requirements and internal taxes on the importof approved machinery and materials during the initial period/period of construction; and

9. exemption or relief from customs duty, licensing requirements and internal taxes on the

import of raw materials imported within the first three years of commercial productionfollowing start up/completion of construction.

Right to Tr ansfer F oreign Cur rency

A person who has brought in foreign capital can transfer the following:

foreign currency entitlement of the person

net profit after deducting all taxes and provisions

foreign currency permitted for withdrawal by the MIC which may include the value of assetson the winding up of business.

a foreign employee can transfer its salary and lawful income after deducting taxes and otherliving expenses incurred domestically

Guarantee

Enterprises operating under the FIL have the State guarantee against nationalization andexpropriation. In the Bill of the new FIL, the guarantee is subject to an exception if the nationalizationor expropriation is in the natural interest, in which case the investor is to be compensated for themarket value of the investment.

Appli cation Procedures for Foreign I nvestment

A promoter for foreign investment must submit a proposal in prescribed form to the MIC. With theproposal the following must be attached.

Documents supporting financial credibility (audited final accounts of most recent year of theperson or the firm that intends to make investment).

Bank recommendation regarding the business standing.

Detailed calculation relating to the economic justification of the proposed project indicatinginter alia:

o estimated annual net profito estimated annual foreign exchange earnings or savings and foreign exchange requirement

for the operation.o recoupment periodo prospects of creating employmento prospects of increase in national income.o Local and foreign market conditions and the requirement, if any, for local consumption.

If it is a hundred percent foreign investment, a draft contract to be executed with anorganization determined by the Ministry concerned.

If it is a joint venture, a draft contract to be entered into between the foreign investor and localcounterpart.

If it is a joint venture in the form of a limited company, draft Memorandum and Articles ofAssociation and also a draft contract between the foreign and local investors.

The promoter may apply for the exemptions and reliefs from taxes stated in chapter 10 Article21 of the FIL.


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Special Economic Zone laws

On 27 January 2011 the Government promulgated the Myanmar Special Economic Zone Law, LawNo. 8/2011 (the MSEZL). This law also provides the land use for a foreign investors, withobjectives to base on the framework of maintenance, protection and safeguarding the sovereignty ofthe State in allowing to operate foreign investment businesses; to develop the momentum of theeconomy of the State by establishing and operating the Special Economic Zones; to develop theindustry and high technologies in the State; to improve the goods processing, trading and servicebusiness; to enable the citizens to train, learn and transfer the high technologies; to create moreemployment opportunities for the citizens; and to develop the infrastructure of theState.

To date, a special SEZ law has been enacted for only one zone in Myanmar, namely Dawei EconomicZone in Southern Myanmar under the Dawei Special Economic Zone Law (DSEZL). According tonews reports, addition SEZ zones will be announced: Pathienn, Myawaddy and Thilawa.

State-Owned Economics Enterprises Law (1989)

SEE Law provides that the following 12 activities may only be undertaken by a State-ownedeconomic enterprise, namely:

(a) extraction and sale of teak in Myanmar and abroad;(b) cultivation and conservation of forest plantation with some exceptions;(c) exploration, extraction and sale of petroleum and natural gas and production of

products of the same;(d) exploration, extraction or export of gems;

(e) breeding and production of fish and prawns in fisheries which have been reserved forresearch by the government;(f) post and telecommunications services;(g) air transport and railway transport services;(h) banking and insurance services;(i) broadcasting and television services;(j) exploration, extraction or export of metals;(k) electricity generating services other than those permitted by law and cooperative

electricity generating services; and(l) manufacturing of products relating to security and defense.

While the SEE Law restricts the aforementioned activities, it also gives the government the right to

grant the activities reserved to State-owned economic enterprises to joint ventures between thegovernment and any other person or economic organization.

Regulation of Manufacturing

A manufacturing business in Myanmar is regulated by the Ministry of Industry No. 1, which isresponsible for directing and promoting industrial investment and production of consumer goods andother light industrial products.

A variety of consumer goods such as textiles and garments, foodstuffs and beverages,pharmaceuticals, soap and toiletries, enamel wares, aluminum wares, steel products, cement, marbleand porcelain wares, rubber goods, leather, packing materials, pulp, paper and paints, jute carpet, etc.

are being produced by State-owned factories.


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Foreign investors may submit proposals to engage in these manufacturing activities under the FIL,either as joint ventures or wholly owned foreign enterprises. They can also enter manufacturingcontracts with existing factories to provide raw materials and spare parts in exchange for the finishedproducts after payment of processing charges in foreign currency. Foreign investors can also

participate in a buy-back system, under which they will supply machinery and equipment on adeferred payment basis. The cost of the machinery and equipment is then paid back in agreedquantities of finished goods annually at mutually agreed upon prices.

The Private Industrial Enterprise Law (1990)

The Private Industrial Enterprise Law and Procedures of 1990 enables the establishment of small,medium and large scale enterprises and promotes private industrial enterprises excluding thoseindustrial enterprises conducted as a joint venture with the State.

The Private Industrial Enterprise Law provides:

1. joint ventures with the Government/State-owned economic enterprises are specificallyexempted from the Private Industrial Enterprise Law;

2. all private individuals and entities (whether 100 percent foreign-owned, locally owned or ajoint venture) operating an enterprise which produces finished goods from raw materials usingany form of power in any building must apply for registration with the Ministry of IndustryNo. 1 in the manner prescribed by the Private Industrial Enterprise Law;

3. the Ministry may impose conditions on the registration (particularly with regard to technologytransfer and pollution controls) and the registered private industrial enterprise is required,among other things, to comply with the orders and directives issued by the Ministry from time

to time; and

4. the Minister of the Ministry of Industry No. 1 has wide discretion to suspend or cancel theregistration if it is necessary in the interests of the State. Also, the registration will become

invalid upon the enterprise being terminated under any other law.

Arbitration

Myanmar is a party to the Geneva Protocol on Arbitration Clauses of 1923, but is not a party to theNew York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, theICSID Convention or other international conventions relating to arbitration.

There is no public record of any international commercial arbitration cases having been conductedunder the English based, Myanmar Arbitration Act 1944. There have been very few internationalcommercial arbitration cases conducted in Myanmar. This probably reflects the economic policy ofMyanmar prior to 1988 of minimizing economic relations with foreign countries. Since 1988, therehave been a number of contracts between public and private sector Myanmar parties and foreigncompanies, in which a foreign governing law and foreign arbitration rules are prescribed.

Myanmar is a party to the ASEAN Investment Protection Agreement, 1987.

Myanmar became a member of ASEAN in 1997, and is obliged to ratify 14 key agreementsprescribed by ASEAN. The Protocol on Enhanced Dispute Settlement Mechanism (2004) is one ofthese agreements.


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The arbitration provision in the Myanmar Companies Act states:

(1) A company may by written agreement refer to arbitration, in accordance with the Arbitration

Act on existing or future differences between itself and any other company or person.

(2) Companies, parties to the arbitration, may delegate to the arbitrator power to settle any termsor to determine any matter capable of being lawfully settled or determined by the companiesthemselves, or by their directors or other managing body.

(3) The provisions of the Arbitration Act shall apply to all arbitrations between companies andpersons in pursuance of this Act.

The arbitration procedure must always be in accordance with the Arbitration Act, 1944.

As a matter of government policy, most contracts between State-owned enterprises and foreigncompanies specify Myanmar law as the governing law, and prescribe that disputes be settled byarbitration under the Arbitration Act. In general, the Attorney Generals Office (AGO) and MIC donot allow foreign arbitration provisions.

In practice at present time, disputes between the contracting parties in Myanmar are settled by theUnion of Myanmar Federation of Chamber and Commerce Industry in Yangon.

On 8th March 2012 at the third Parliament session, it was proposed to amend the Arbitration (Protocoland Convention) Act and the 1944 Myanmar Arbitration Act. It is concluded that the 1944 Act willbe kept for the purposes of domestic arbitration, to adopt the UNCITRAL Arbitration Rules, and toofficially join the New York Convention.

Investment Promotion Treaties

Myanmar has investment promotion treaties with China, India, Laos, the Philippines, Thailand andVietnam. The treaties with China, India, the Philippines and Thailand have come into force. Thetreaty with Thailand came into force on 8 June 2012.


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Schedule 1

New Myanmar Laws

(last updated 28 July 2012)

Subject: Laws approved and enacted by the Union Parliament (Pyidaungsu Hluttaw) in its secondand third session, August to November 2011 and February to April 2012.

No. Date of Approval Name of the Law Remarks

1. 29-9-2011 Law Revoking the Revenue Law Union ParliamentLaw No. 1/2011

2. 29-9-2011 Law Amending Myanmar Stamp Act Union ParliamentLaw No. 2/2011

3. 29-9-2011 Law Amending the Commercial Tax Law Union ParliamentLaw No. 3/2011

4. 29-9-2011 Law Amending the Income Tax Law Union ParliamentLaw No. 4/2011

5. 29-9-2011 Law Amending the Court Fees Act Union ParliamentLaw No. 5/2011

6. 5-1-2011 Law Amending the Union Election CommissionLaw

Union ParliamentLaw No. 6/2011

7. 11-10-2011 Labour Union Law Union Parliament

Law No. 7/2011

8. 18-10-2011 Law Amending the Peoples Parliament ElectionLaw


9. 18-10-2011 National Parliament Election Law Union ParliamentLaw No. 9/2011

10. 18-10-2011 Law Amending the Division Regional or StateParliament Election law


11. 4-11-2011 Law Amending the Registration of Political PartiesLaw


12. 21-11-2011 The Law Revoking the 1964 Law Defining theFundamental Rights and Responsibilities of thePeoples Workers


13. 30-11-2011 Microfinance Law Union ParliamentLaw No. 13/2011

14. 2-12-2011 Private Schools Registration Law Union ParliamentLaw No. 14/2011

15. 2-12-2011 Peaceful Demonstration and Peaceful

Grouping Law



17/17


No. Date of Approval Name of the Law Remarks

16. 25-2-2012 Ward and Village Administration Act Union ParliamentLaw No. 1/2012

17. 25-2-2012 Union Supplementary Budget Allocation Law(2012)


18. 20-3-2012 Union Election Commission Law Union ParliamentLaw No. 3/2012

19. 20-3-2012 National Planning Law Union ParliamentLaw No. 4/2012

20. 29-3-2012 Labour Disputes Settlement Act Union Parliament

Law No. 5/2012

21. 30-3-2012 Union Budget Law 2012 Union ParliamentLaw No. 6/2012

22. 30-3-2012 Ward and Village Administration Amending Act Union ParliamentLaw No. 7/2012

23. 31-3-2012 Families of Disabled or Deceased SoldiersSupporting Act


24. 1-4-2012 Environmental Law Union ParliamentLaw No. 9/2012

25. 2-4-2012 Vacant, Fallow and Virgin Land Management Act Union ParliamentLaw No. 10/2012

26. 3-4-2012 Farmland Act Union ParliamentLaw No. 11/2012