Aung Naing Oo, secretary of the Myanmar Investment Commission and director-general of the Directorate of Investment and Company Administration, said Myanmar is on the right track to attract both foreign and local investors. The law was approved by the Lower House on September 28.
“Now, we have established a very good foundation for enabling [a good] business environment here. This law mainly aims at ensuring a level playing field for all the investors,” he said.
He said the inflow of foreign direct investment (FDI) slowed in the first half of this year, but got better in the second half. He expected growth to continue in the last three months thanks to Myanmar’s improving political climate.
“We are pretty sure to enjoy more FDI. For example, we received only US$300 million [Bt10.4 billion] in the previous government’s first year of office. We already reached that level within four months under the new government’s term,” he said.
Local businesses, economists and international lawyers welcomed the approval as an encouraging move possibly leading to rapid inflows of investment in the near future.
Aung Thein, joint secretary-general of the Union of Myanmar Federation of Chamber of Commerce and Industry and managing director of Nibban Electronics, said the law mainly focused on ensuring inclusive growth across the country, as it would encourage investing in remote areas rather than populated cities.
“The new law reduces the tax holiday of doing business in bigger cities from five years to three years. If an investor wants to do business or set up a factory in small towns, he will enjoy a five-year tax incentive, and if he invests in remote areas, he will enjoy a seven-year tax holiday. So, investors have more options now,” he said.
“The FDI Law offers better tax incentives than the Myanmar Citizen Investment Law. On the other hand, foreign investors might also think that Myanmar gives preference to its citizens.
“The government wants to balance them to ensure all the investors feel like they are operating in a level playing field.”
According to Aung Thein, local businesses want the government to take national interest into serious consideration.
Joint ventures
For example, in some areas where local businesses perform well, foreign firms should enter joint ventures with local firms.
“It is too early to comment on whether the new law will help grow local businesses and industries. We need to keep an eye on the upcoming rules of the law,” he said.
Economist Aung Tun Thet urged local businesses to be well prepared for more intense competition in the market.
“It is now time for local businesses to prepare a lot to take all the opportunities that have been offered to us. We should not forget that we are playing on the same ground against international players with higher talents. So, how to play the game to yield the best result is really important,” he said.
The economist said local firms should take advantage of their on-the-ground experience and knowledge of the Myanmar market. In his view, the enactment of the law could help to reach the government’s target of sustaining FDI at $8 billion per annum, but more efforts were needed to achieve that goal.
Jo Daniels, managing partner of Baker & McKenzie Myanmar, said many of the benefits of the new law still hinge on the enforcement efforts of the Myanmar Investment Commission (MIC). She added that adopting policies and investing in infrastructure were equally important to move Myanmar forward.
“The development is good and very important for the country. Foreign companies look to a new jurisdiction. They also look at the risks … I would say that stability is very important for attracting FDI,” she said.
Thomas Chan, tax executive director of KPMG in Myanmar, noted that Myanmar still is a challenging place to invest in. He said that the new investment law seeks to lighten the load on the MIC as well as speeding the approval process.
The new law specifies two types of submissions to the commission. One is for non-restricted industries or investments that merely involve a long-term lease on facilities. Another is the same as the current investment proposals to the MIC, which will most probably take a longer time as it will be scrutinised in greater detail.
“The current commission is still taking a longer time than in the past to approve investment proposals, a cause for some frustration amongst certain investors. As there have been a number of changes to the commission members, delays are expected but also overall efficiency,” he said.