Welcome to the first edition of our Myanmar update for 2019. We have distilled the top news items into this summary 'speed read'.
Myanmar – Insurance sector to open up to foreign participants
In January, the Ministry of Planning and Finance announced plans which will allow foreign insurers to enter and operate in Myanmar.
In relation to life insurance, it was announced that up to three licences will be awarded to 100% foreign owned entities through a competitive tender. In addition, foreign life insurers with a life/composite representative office in Myanmar are permitted to form joint ventures with local life insurers.
In relation to non-life insurance, foreign non-life insurers with a composite /non-life representative office in Myanmar are permitted to form joint ventures with local non-life insurers.
In both types of joint ventures, the foreign party’s shareholding is to be capped at 35%.
The deadline for submission of proposals for 100% foreign owned insurers is 1 March 2019. In relation to joint ventures, the initial deadline for expression of interest is 11 February 2019 and completed forms are required to be submitted by 26 April 2019.
The liberalisation represents a big opportunity for foreign participants to access an untapped market and for the domestic population to benefit from international insurance products.
For further information please refer to the Financial Regulatory Department’s website.
Equity investment from foreign banks or financial institution
The Central Bank of Myanmar (CBM) by way of a notice released on 29 January 2019 (the “CBM Notice”) clarified that the local private banks are permitted to accept up to 35% equity investment from the foreign banks or financial institutions. The CBM Notice also provides that the local private banks must submit and report to the CBM if it wishes to implement such equity investment.
When reporting to the CBM, the following must be included: (i) the equity investment ratio; (ii) terms and conditions; and (iii) all relevant documents.
The CBM Notice also states the local private banks are required to comply with Section 61 of the Financial Institutions Law 2016 before accepting an equity investment from the foreign banks or their subsidiaries which hold banking licences in Myanmar.
On January 30, the Trademark Law and Industrial Design Law were passed into legislation to protect intellectual property in the country. Each law will take effect only after a notification is issued by the President of Myanmar.
The move is a positive one for businesses in Myanmar, which have long relied on outdated colonial-era laws to protect their intellectual property rights.
The Trademark Law implements the first-to-file system from the previous first-to-use system. This means that trademark holders who registered under the first-to-use system will need to re-register their marks under the current first-to-file system.
Intellectual property laws are important for local and foreign businesses and are expected to encourage more investments. There are currently 60,000 registered trademarks in Myanmar, according to the Intellectual Property Proprietors’ Association.
CBM publishing reference exchange rates
To control excessive short-term volatility of the exchange rate, effective 5 February 2019, the CBM will publish a market-based reference exchange rate of the Myanmar kyat (MMK) against the US dollar (USD). This will be based on the volume weighted average exchange rate of interbank and bank-customer exchanges during the day. The publication time of the reference exchange rate will also be changed to 4pm, when all data for the day is available.
The CBM’s statement noted that “The CBM is moving forward to a new step of development: to determine reference exchange rate as a market-based weighted average rate in line with the international best practices of central banks.”
Prior to 5 February 2019, the CBM exchange rate was calculated based on the cut-off rate of its two-way interbank foreign exchange auction. The auction was introduced in 2012 and has facilitated the development of a foreign exchange market from just USD10 million in 2013-14 to USD2 billion in 2017-18. Under the auction system, the CBM relies on the last business day’s weighted average rate to set the exchange rate in the morning. This method creates a misalignment from the current market exchange rate, particularly after long holidays or weekends.
“The reference exchange rate is an indicative rate and participants in the foreign exchange market are not required to use it in their foreign exchange transactions,” the statement said.
Committee to review constitutional amendments
On 6 February 2019, Myanmar’s Union Parliament approved the formation of a committee to discuss proposed amendments to the constitution. This follows the submission of a proposal by the National League for Democracy, which suggested amendments to the constitution on the basis that certain parts of the 2008 constitution is undemocratic.
Some of the proposals under discussion include (i) amendments to the nomination of Defence Services members of parliament, and instead enabling the people to elect such members; and (ii) the removal of certain restrictions on voting and qualifications to run for office.