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Investment Climate Statement - Myanmar

December 2018

Mizuho Bank, Ltd.

Global Strategic Advisory Department

1

After reform to civilian government in 2011, the trade deficit increases every year due to easing of trade restriction and demand for import because of economic growth. Despite shrinking year-on-year due to export expansion and import declines in 2016, the trade deficit was still a large amount of US $ 4 billion.

Looking at export trends by country, it accounts for about 70% of the total in the three countries of China, Thailand and India.By the operation of the natural gas pipeline from Chao Pue located in the west to Yunnan Province of China, China has been on the upward trend since 2014.

( USD Mil, Customs basis )

Commodities share (2016) Trading partner share (2016)

Natural

gas

27%

Sewn

products

14%

Beans

12%

Sugar

6%

Fish,

shrimp,

crab

4%

Rice

4%

Others

33%

2015 2016 RatioYOY growth

rate

Natural gas 4,774 3,170 27% -34%

Sewn products 835 1,584 14% 90%

Beans 1,279 1,394 12% 9%

Sugar 208 695 6% 234%

Fish, shrimp, crab 388 478 4% 23%

Rice 606 438 4% -28%

Base metal, Ore 409 391 3% -4%

Jade 602 388 3% -36%

Corn 341 223 2% -35%

Wood, wood products 165 219 2% 33%

Others 1,825 2,692 23% 48%

Total 11,432 11,672 100% 2%

China

41%

Thailand

19%

India

9%

Singapore

8%

Japan

6%

Others

17%

2015 2016 RatioYOY growth

rate

China 4,494 4,767 41% 6%

Thailand 3,347 2,242 19% -33%

India 958 1,038 9% 8%

Singapore 567 891 8% 57%

Japan 430 663 6% 54%

Korea 266 335 3% 26%

Hong Kong 276 193 2% -30%

Germany 76 172 1% 126%

United States 62 150 1% 142%

Malaysia 163 144 1% -12%

Others 793 1,077 9% 36%

Total 11,432 11,672 100% 2%

( USD Mil, Customs basis )

Trade Overview (Export)

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from JETRO

China

34%

Singapore

14%

Thailand

13%

Japan

8%

India

7%

Others

24%

General machinery, transport

equipment

25%

Base metals and

their product

11%

Petroleum

products

10%

Electrical

equipment,

devise

8%Textile

5%

Pl…

Others

37%

2

Though used car imports from Japan is the main item comprised in “general machinery , transport equipment” which accounts 25% of total imports, motorbikes and truck imports from China is gradually increasing in recent years.

Imports from China (mainly General machinery, transport equipment, Base metals and their products ), Singapore (mainly Petroleum products) and Thailand (mainly General machinery, transport equipment)accounts over 60% of the total Import.

Import volume is anticipated to grow for the next few years, from high economic growth that leads high consumer market growth.

Commodities share (2016) Trading partner share (2016)

(USD Mil, Customs basis)

2015 2016 Ratio YOY growth rate

General machinery, transport

equipment5,753 3,892 25％ -32％

Base metals and their products 1,953 1,659 11％ -15％Petroleum products 1,817 1,642 10％ -10％Electrical equipment, devices 1,392 1,308 8％ -6％Textile 377 724 5％ 92％Plastic 520 582 4％ 12％Edible vegetable oil 581 548 3％ -6％Pharmaceutical products 294 350 2％ 19％Fertilizer 239 315 2％ 32％Chemical compound 235 257 2％ 9％Others 3,683 4,419 28％ 20％Total 16,844 15,696 100％ -7％

2015 2016 Ratio YOY growth rate

China 6,402 5,403 34％ -16％

Singapore 3,652 2,268 14％ -38％

Thailand 1,960 1,987 13％ 1％

Japan 1,532 1,255 8％ -18％

India 473 1,095 7％ 132％

Malaysia 521 691 4％ 33％

Indonesia 586 593 4％ 1％

South Korea 412 474 3％ 15％

Vietnam 263 355 2％ 35％

USA 102 214 1％ 110％

Others 941 1,361 9％ 45％

Total 16,844 15,696 100％ -7％

(USD Mil, Customs basis)

Trade Overview (Import)

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from JETRO

3

The industrial structure of Myanmar has significantly changed in last 16 years with the economic growth of Myanmar. The primary sector dropped their share from 44% to 28%, where as the second secondary sector grew 14points.

Affected by the development of Thilawa SEZ and local manufacturer growth, etc, the manufacturing sector increased their share from 10% to 23%.

Transportation and communication sector had a slight increase of 11points, though did not strongly affect the total third sector ratio.

Industrial base GDP ratio

2000 2016

Primary sector

44％Secondary sector 16％

Third sector

40％

Agriculture, Foresting,

Fishing

42%

Mining

2%

Manufacturing

10%Construction

5%Electricity, Gas,

Water

1%

Wholesale, Retail,

Hotel, Restaurant

21%

Transportation,

Communication

7&

Public

administration

10%

Finance, Insurance

2%

Agriculture,

Foresting, Fishing

27%

Mining

1%

Manufacturing

23%Construction

6%

Electricity, Gas, Water

1%

Wholesale, Retail, Hotel,

Restaurant

18%

Transportation,

Communication

18%

Public

administration

5%

Finance, Insuarace

1%

Primary sector

28％Secondary sector 30％

Third sector

42％

Industrial Structure

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from ADB

4

19,999

4,645

1,320

4,107

8,011 9,481

6,650 5,718

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014 2015 2016 2017

（US$ mil）

Foreign Direct Investment

Since the coming into office of the civilian government led by President U Thein Sein, enforcement rules of foreign investment

law were announced in 2013, which improved process of approval for investment. After that, investment from foreign

enterprises had increased.

With a large number of investment into manufacturing, transportation and communication and real estate development

industries, the amount of FDI had grew up to around USD 9.5 billions in 2015.

However, with the formation of government by the National League for Democracy in 2016, approval for investment was

suspended for a certain period. Furthermore, due to poor infrastructure and still uncertain regulations, FDI in Myanmar loses

their appeal and continues to decrease for two years in a row (2016, 2017).

FDI position

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from DICA

Hydro electronic power PJ

From China : 8Billion

Gas, Mining PJ from Hong

Kong: 5Billion

Natural gas PJ from

Thailand: 2Billion

Singapore

51%China

28%

Hong Kong

10%

Japan

7%

India

2%

The

Netherlands

1%

Malaysia

1%

5

Foreign Direct Investment

While Singapore occupies most share of all FDI, many enterprises from each country invest into Myanmar through Singapore

subsidiaries.

By industry, investment into manufacturing sector has increased while much of that traditionally concentrated in the sector

related to energy and natural resources. Though money flow still mainly goes into sewing industry, more money flows into a

wider range of sectors such as food and automobile assembly.

FDI by country

2012

Singapore

42%

China

27%

The

Netherlands

10%

Japan

7%

South Korea

5%

UK

4%

USA

3%Thailand

2%2017

FDI by sector

US$ mil 2010 2011 2012 2013 2014 2015 2016 2017

Agriculture 138.8 9.7 20.3 39.7 7.2 134.5

Livestock & Fisheries 5.6 96.0 26.9 8.3 96.7 27.7

Mining 1,396.1 19.9 15.3 32.7 6.3 28.9 1.3

Manufacturing 66.3 32.3 400.7 1,827.0 1,502.0 1,065.0 1,179.5 1,769.2

Power 8,218.5 4,344.0 364.2 46.5 40.1 360.1 909.9 405.8

Oil & Gas 10,179.3 247.7 309.2 3,220.3 4,817.8

Construction

Transport & Communication 0.6 1,190.2 1,679.3 1,931.0 3,081.2 901.6

Hotel & Tourism 300.0 435.2 357.9 288.4 403.6 176.8

Real Estate 440.6 780.7 728.7 747.6 1,262.0

Industrial Estate 10.0 34.0

Other services 14.8 18.5 357.3 236.0 231.3 1,005.0

Total 19,999.0 4,644.5 1,419.5 4,107.1 8,010.5 9,481.3 6,649.8 5,717.8

Manufacturing, 30.9% Real Estate, 22.1%

Transport &

Communication

15.8%

Power,

7.1%

Hotel & Tourism, 3.1%

Other, 21.0%

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from DICA

ティラワSEZ

(2,400ha)

Myanmar-Japan Thilawa Development Ltd

Area Zone A 約400ha （construction in progress : Zone B）

Share of capital

Myanmar (private company) : 51％

Japan (Marubeni、Sumitomo Co、Mitsubishi Co、JICA、Mizuho bank and others) :

49%

ConstructionPenta-Ocean Construction (consortium with Myanmar construction company

ground‐breaking ceremony on November 2013

Location South area from Yangon township about 23kim, 50 minutes by automotive

Basis laws Myanmar Special Economic Zone Law

Investment Incentive for SEZ

Free Zone

Business

Promotion Zone Business

Corporate

Tax

Exemption term7years from

start business5years from start business

Tax Relief of 50% Next 5years Next 5years

Tax Relief of 50% for reinvestment

profit

Next 5years

after 50% tax

relief

Next 5years after 50% tax relief

Duty

Import of construction material ,

production facilityExemption

5years: Exemption

After exemption term, Tax Relief of 50%

for another 5 years

Import of raw material Exemption Exemption

Land-use Max. 75 years Max. 75 years

Minimum

capital

Manufacturing USD750,000 USD300,000

Service USD500,000 USD300,000

a

b

a:Opening ceremony in Thilawa SEZ b：Development site

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from Public information

Major Industrial park and SEZ ～ Thilawa SEZ(1/2)

6

Major Industrial park and SEZ ～ Thilawa SEZ(2/2)

1. Conduct research service requested from METI(December 2012 ～March 2013)

Conduct feasibility study for Thilawa SEZ (total 2,400ha) including study on structure, investment promotion

2. Conduct research service in regard to JICA PJ(October 2013〜2014)

Support for JICA PJ of Thilawa SEZ (excluding Zone A) including development planning, income and expenditure planning, F/S

Private companies

in Japan

Myanmar Japan Thilawa

Development

JV between Japan and Myanmar

Send manpower (Managing Director,

Deputy CFO, etc) from Japan side

Myanmar

chamber of

commerce

Government in Japan Government in MyanmarMinistry of National

Planning and Economic

Development

Send Deputy CFO

Negotiation

Support

Government

in Myanmar

Thilawa SEZ

Management

Committee

Capital

Investment*/Send

manpower

Capital

Investment

Capital

Investment/Send

manpower

Capital

investment

Advisor

(Feasibility

Study)

*including

Mizuho

Thilawa PJ supported by MizuhoGovernment

in Japan

Support

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from Public information

Collaboration

7

Accounting/Tax Information

Myanmar government adopt MFRS(Myanmar Financial Reporting Standards) based on IFRS(International Financial Reporting Standards)

All companies in Myanmar must subject accounting audit by certified public accountant approved by Myanmar Accountancy Council. However, in fact companies which don’t make financial statement are found in Myanmar.

Accounting systems

【Book currency】 USD or MMK

【Utilizing Accounting firm】 All companies must subject accounting audit

Most foreign companies in Myanmar contract

major accounting frim (e.g. PwC, KPMG)

Accounting audit is conducted by certified

public accountant approved by Myanmar

Accountancy Council

Number of certified public accountant : approx.

400

Double taxation agreement（DTA）

Singapore Malaysia Thailand Japan

DTA with Myanmar Conclusion Conclusion ConclusionNot-

Conclusion

Capital

gain

taxation

In Myanmar10％ Exemption Exemption 10％

In partner

countryExemption Exemption

Corporate tax

(20％)

Corporate tax

(20％)

Withholdi

ng Tax

Dividend from

Myanmar0％ 0％ 0％ 0％

Dividend to

Japan0％ 0％ 10％ 0％

Interest from

Myanmar

10％(8％ in case of

financial institute)

10％ 10％ 15％

CFC RuleApplication

(17％)

Not

application

(25％)

Application

(20％)N/A

sovereign rating

(Local currency/ Foreign

currency)

AAA / AAA A / A- A- / BBB+ AA- / AA-

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. From Investment guideline in Myanmar, Organization for Small & Medium

Enterprises and Regional Innovation HP

8

Restriction of Investment in Myanmar

The new Myanmar Investment Law 2016 (MIL2016) was signed into law in October 2016 and effected in practice from

1 April 2017.

The MIL2016 now governs new investment proposals and replaces the Foreign Investment Law 2012 (FIL2012) and

Citizens Investment Law 2013.

Specific contents of restricted investment businesses are listed in Negative list (Notification No. 15/2017 ).

Prohibited Investment Business

a. Investment businesses which may bring or cause the

hazardous or poisonous wastes into the Union;

b. Investment businesses which may bring technologies,

medicines, flora and fauna and instruments which are still

being tested abroad or which have not been obtained

approvals to use, plant and cultivate, except the investments

which made for the purpose of research and development;

c. Investment businesses which may affect the traditional

culture and customs of the ethnic groups within the Union;

d. Investment businesses which may affect the public;

e. Investment businesses which may cause an enormous impact

to the natural environment and ecosystem;

f. Investment businesses which manufacture goods or provide

services that are prohibited under the applicable laws.

（Refer：Myanmar Investment Law, Chapter Ⅹ, 41 )

Source: Compiled by the Global Strategic Advisory Department of Mizuho Bank, Ltd. from DICA and MIC website and others

Myanmar Investment Law(2016)

Restricted Investment Business

a. Investment businesses allowed to carry out only by the

Union;

b. Investment businesses that are not allowed to carry out by

foreign investors;

c. Investment businesses allowed only in the form of joint

venture with any citizen owned entity or any Myanmar

citizen; and

d. Investment businesses to be carry out with the approval of

the relevant ministries.

（Refer：Myanmar Investment Law, Chapter Ⅹ, 42 )

※Specific contents are listed in restricted investment activity

list (Notification No. 15/2017 )

9

Business Alliance with Max Myanmar Group

On 29th November 2016, Mizuho Bank signed a memorandum of understanding for business cooperation with Max

Myanmar Holding, aiming facilitating Foreign Direct Investment in Myanmar.

Max Myanmar is one of most major conglomerate in Myanmar with business in energy, construction, highway, hotel,

cement, agriculture, trade and other sectors.

MOU with Max Myanmar

(The Global New Light of Myanmar 1 Dec 2016)

10

11

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