MYANMAR – What You

Need to Know Before

Investing

By: Kelvin Chia Yangon Ltd

Copyright: Kelvin Chia Yangon LtdThis document is intended only for IE Singapore and should not be distributed to any otherperson or entity.

• Part of the network of law firms of Kelvin Chia Partnership (“KCP”),a regional law firm headquartered in Singapore with offices andtransactional experience throughout Southeast Asia

• Established in 1995: the oldest foreign legal consultancy firm basedin Yangon

Introduction: Kelvin Chia Yangon Ltd

in Yangon• Full range of corporate and commercial services• Substantive experience in transactional work, particularly in cross-

border issues and in Myanmar’s key industry sectors• Assists and advises clients on investment structures and the setting

up of investment vehicles, including provision of corporatesecretarial services

• Seamless combination of international and local legal expertise withlocal Myanmar team working in conjunction withforeign/international lawyers from the KCP network

Today’s Agenda

1. Current Myanmar Investment Framework

2. Key Steps in Investing in Myanmar

3. Significant Issues/Aspects

4. Q & A Session

Has the new Foreign Investment Law been enacted?Has the new Foreign Investment Law been enacted?

Should I wait for it to be passed before investing?

Is there an existing legal framework for investing now?

General Legal Framework for Investing in Myanmar

Key mainframe laws to consider:

• State-Owned Economic Enterprises Law (“SOEEL”)

• Foreign Investment Law (note: MIC permit)

• Companies Act (note: permit to trade and registration)

• Note: Relevant rules, regulations, notifications and internaldirections/policies, as well as industry/sector-specific laws, shouldalso be considered.

General Legal Framework for Investing in MyanmarIS THE INDUSTRY/SECTOR CONCERNED RESERVED TOSTATE-OWNED ENTERPRISES?

• Reserved industries/sectors are listed in the SOEEL.

• 12 industries/sectors are listed in the SOEEL.

• If a reserved industry/sector, then foreign investment may still bepossible with the approval of the Myanmar Government.

• Joint venture between state organization/enterprise; citizenand/or foreigner

• Any person or economic organization subject to prescribedconditions

• Other forms of collaboration, e.g., production sharing

Reserved industries/sectors under the SOEEL• Extraction and sale of teak

• Forest plantations

• Exploration, extraction and

sale of petroleum and

natural gas, and

production of the products

• Postal and telecommunications services

• Air and railway transport services

• Banking and insurance services

• Broadcasting and television servicesproduction of the products

of the same

• Exploration, extraction and

export of pearls, jade and

precious stones

• Certain kinds of breeding

and production of fish and

prawn

services

• Exploration, extraction or export of metals

• Electricity generation services

• Manufacture of products relating to security and defense

Note: There may be additional reserved sectors whichare not otherwise on the list (e.g., education, trading).

SOME KEY POINTS TO CONSIDER UNDER CERTAINCURRENT INTERNAL POLICIES/DIRECTIONS

• General classification of business activities into the following:

General Legal Framework for Investing in Myanmar

• General classification of business activities into the following:

• Industrial (manufacturing)

• Services/Construction

• Trading

• Currently, trading activities are reserved to Myanmar nationals andcompanies wholly owned by Myanmar nationals.

The Myanmar Investment Commission

• Formed under the Foreign Investment Law

Investing under the Foreign Investment Law (FIL) – main criteria for investment:

• Support the national economic development plan

• Opening up of more employment opportunities

• Increase exports• Production for import substitution• Production of products which require heavy

General Legal

Framework for Investing

in Myanmar

Investment Law

• Reviews investment proposals

• Issues MIC Permit and Decision

• Production of products which require heavy investment

• To develop high-skill technology and develop advance technology for production

• Development of the manufacturing and services sector requiring heavy capital

• Businesses which would save energy consumption

• Exploration/Production of new energy and renewable energy

• Development of modern industries• Conservation of the environment

Incentives under the Foreign Investment Law (1988)

• 3 years from commencement of commercial production*

Tax Holiday

• 3 years from commencement of commercial production*

• If they are maintained in a reserve fund and re-invested therein within 1 year after the reserve is made

Exemption of Tax on Profits which are Reinvested

• up to 50 percent on the profits accrued from exported goods

Reduction of Tax on Profits from Export

Incentives under the Foreign Investment Law (1988)

• at the rate fixed by the MIC*

Accelerate Depreciation

• At rates applicable to citizens• Deductible from assessable income

Payment of taxes for Expat Employees

• Deductible from assessable income

R&D expenses

Incentives under the Foreign Investment Law (1988)

• Carry forward losses for 3 consecutive years

Carry forward losses

• Carry forward losses for 3 consecutive years• If losses are sustained within two years after the initial tax holiday

• Imported Equipment and Materials used in business for the period of construction and for the first 3 years of commercial production*

Tax exemption on Imports

Given the existing investment framework, what are the key steps/procedures for investing? steps/procedures for investing?

Do I have to go to the MIC or not?

Key Steps in Investing in Myanmar

1. Define your intended business activity in Myanmar

2. Identify the relevant ministries/authorities in charge ofthe business sector/activity

3. Establish contact with the relevant ministries/authorities3. Establish contact with the relevant ministries/authorities(need for endorsement/no objection for the investmentapplications)

4. Determine the appropriate entity to be established inMyanmar

Note: Sourcing for local partners and land ahead, where applicable, isalso critical.

Key Steps in Investing in Myanmar

DEPENDING ON THE NATURE AND REQUIREMENTS OFTHE PROPOSED BUSINESS ACTIVITY/INVESTMENT, ANINVESTOR MAY TAKE EITHER OF TWO “ROUTES” INGENERAL:

• MIC route (with MIC Permit)• MIC route (with MIC Permit)

• Industrial (manufacturing)• Reserved sectors• Services

• Companies Registration Office (“CRO”) route (without MIC Permit)

• Only for services company and branch/representatives offices• Note on branch/representative offices in Myanmar

Key Steps in Investing in Myanmar

• Under the Foreign

Investment Law

• Reserved

• Under the

Companies Act

• Service • Reserved

sectors/industrial

• Long-term lease

• Import licence

• Tax incentives/

guarantees

• Minimum capital

requirement

• Service

companies/branches

• One-year lease

• No import licence

• No tax

incentives/guarantee

s

• Minimum capital

requirement

Establishing Establishing

Myanmar Investment Commission

Approval

Regulated by the Foreign Investment Law which is administered by the MIC

MIC and Incorporation

Registering Company or Branch Officewith the CRO

Applying for a Permit to Trade With the CRO

(Business License)

Establishing a Company

Establishing a Branch Office

Regulated by the Myanmar Companies Act and Administered by the Directorate of Investment and Company Administration under the Ministry of National Planning and Economic Development

Executive Committee

Cabinet Committee

Is the MIC a one-stop shop? Is the MIC a one-stop shop?

Ministerial support/Ministerial submission

How long is the MIC application process?

What are the documents to be submitted to the MIC?

Economic Justification/Draft Contracts

Is there any situation where I do not have to go to the MIC?

Corporate Vehicles

Type of

vehiclesActivities

Is an MIC

Permit

required

What is the

minimum

capitalization

Are tax

Incentives

available

Tax Status

Private

CompanyIndustry Yes US$500,000 Yes

Resident

foreigner

Private

CompanyServices

Depending on

the needs of the

business – land

lease and

import of goods

US$300,000

with an MIC

Permit

YesResident

foreigner

US$50,000

without an MIC

Permit

NoResident

foreigner

Branch

office

Representative

office/ ServicesNo US$50,000 No

Non-resident

foreigner

Is a wholly foreign owned entity allowed for investments?Is a wholly foreign owned entity allowed for investments?

Can I enter into joint ventures?

Minimum 35% foreign shareholding requirement

Joint ventures may be preferred/encouraged in certain sectors

Key Challenges for Joint Ventures

• Sourcing for appropriate local partners

• Conducting due diligenceConducting due diligence

• Structuring the joint venture- Current restriction on direct acquisition of shares in wholly

Myanmar-owned local companies)

- Onshore versus offshore

• Dispute resolution

Significant Issues/Aspects

• Land

• EmploymentEmployment

• Foreign Exchange

• Dispute resolution

Dealings in Land

• Foreigners may not purchase/own land

• Foreign-owned companies with an MIC permit

may obtain long-term leases (up to 60 years in

total; longer period is possible in SEZ)

• Under Notification 39/2011, foreigners may

lease land from private entities (with

government approval)

• Foreigners and foreign-owned companies

without an MIC permit may lease residential

and commercial units for not more than a year

at a time.

Employment (under the new draft FIL)

• Unskilled labour: 100%• Skilled labour: 25% during the first 5 years, 50% during the next 5 years, 75% in the third 5 year period

Local hiring requirements

• Provide training for citizens for skilled positions

Training

• Overtime wages, leaves and holidays, workmen compensation, social security, etc.

• Note on proposed minimum wage law

Applicable regulations

Termination and Retrenchment

Length of Employment

Notice Pay Severance payment

Less than 3 months -

3 months to 1 year One month’s salaryOne month’s salary

3 months to 1 year One month’s salary

1 to 3 years Two months’ salary

More than 3 years Four months’ salary

Notice:• No legal requirement• Customary to give one month’s notice

Foreign Exchange Restrictions

Taking currency out of Myanmar

Receiving payments outside of Myanmar and then using them outside of Myanmar

Transacting in foreign exchange in Myanmar

Remitting money out of Myanmar

outside of Myanmar

Repatriation with MIC Approval

What may be remitted Conditions for remittance

Net profits after taxes By permission from the MIC

Remaining funds after taxes

Capital where the company is liquidated

Damages

MIC

Annual Audit /Report submitted to MIC

Application to remit must be based on the audit report

MIC will specify approved amount

Dispute Resolution

• Myanmar Arbitration Act

• Myanmar not a party to

the New York

Convention –Myanmar Arbitration

New Convention –

implications

• Note on developments

re: potential entry of

Myanmar into the New

York Convention

Arbitration Act

New York Convention

New Developments

For more information on investing in Myanmar, please contact:

Marlon Wui, Partner, Kelvin Chia Partnershipmarlon.wui@kcpartnership.com +65-6408-7921

U Than Maung, Senior Associate/Advocate, Kelvin Chia Yangon Ltd. utm@kcyangon.com +951-255-399

We also invite you to learn more about Kelvin Chia Partnership and its regional capabilities by visiting our website at:

www.kcpartnership.com

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Thank you for listening!listening!

We look forward to assisting you in Myanmar soon.