Summary: Welcome to the second edition of BLP's monthly Myanmar update in 2018. We have distilled the top news items into this summary 'speed read'.

Myanmar approves significant new power projects

Myanmar’s Ministry of Electricity and Energy ("MOEE") recently approved four power plants, which together are expected to generate 3,111 megawatts ("MW") of power. Myanmar currently generates 3,189MW of electricity, which is produced by 17 hydropower and 15 natural gas plants. It has been estimated that Myanmar will require double that figure by 2020 in order to meet increasing demand from both households and businesses, which the new plants are intended to meet.

The 2017 Roland Berger business survey (discussed in December edition of 2017 Myanmar Postcard) found that the provision of a stable electricity supply was a key concern for businesses operating in Myanmar, which currently face frequent blackouts. The Myanmar government has acknowledged that the electricity supply is an important factor affecting economic growth and has set a target of 2030 for complete electrification of the country. It is estimated that currently, only 37.85% of households have access to electricity.

Three of the four new plants (Kan Pauk in Tanintharyi Region (1,230 MW), Mee Laung Gaing in Ayeyarwady Region (1,390 MW), and Ahlone in Yangon Region (356 MW)) will be fuelled by liquefied natural gas ("LNG"), which will be imported by Myanmar for the first time. The fourth plant (at Kyaukphyu, Rakhine State (135 MW)) will be fuelled by natural gas. There are also plans to set up ‘mini-grids‘ in rural areas not yet linked to the national power grid. Last year, French utility company EDF signed an agreement with Magway’s regional government to supply electricity via a mini-grid to 8,000 households.

Joint ventures between (1) Total and Siemens A.G, (2) Zhefu and Supreme Co and (3) TTCL Public Co, and Sinophydro and Supreme Co won the contracts to implement the projects. According to MOEE, the total cost of the four new plants will amount to $5.6 billion.

Draft YCDC Law submitted to Yangon Regional Parliament

A draft of the Yangon City Development Law (“YCDC Law”) 2018 - which is a revision of the Yangon City Development Law 2013 - was submitted to the Yangon Regional Parliament on 2 February 2018.

The draft statute covers 32 sectors and has 398 sections concerning the development of Yangon, intending to drive its growth into a stronger business city and promote the city as a business hub for Myanmar. It was prepared by the Yangon City Development Committee with the help of 31 government-appointed experts and 9 members of parliament and is intended to replace the existing 1922 City of Rangoon Municipal Act and supplement the 2013 YCDC Law.

The growing population of Yangon has given rise to social problems such as squatters, a shortage of drinking water, illegal use of electricity, illegal building construction, traffic accidents and pollution. Accordingly, the draft YCDC Law focuses on addressing these issues with a view to boosting further economic and social development.

The law is now being discussed, and after it is enacted the regional government will hold elections for municipal committees. We understand that as soon as the bill is passed in the Yangon Regional Parliament, it will be disclosed to the public.

Committee to manage Yangon industrial zones to be formed

Yangon Region Chief Minister U Phyo Min Thein announced that a supervision committee will be formed to manage the development of industrial zones in the Yangon Region. The committee will include officials from the relevant ministries under the Yangon Regional Government.

Currently, the industrial zones are being managed by a committee of private sector entrepreneurs and it is considered that the management needs to be subject to greater scrutiny and oversight.

The Yangon Regional Government is facilitating the upgrading of the 29 industrial zones by arranging water, electricity and road infrastructure. Priority will be given to local businesses in the industrial zones for projects to provide electricity, clean water and wastewater treatment.

Low-cost housing projects are being implemented for the safe relocation of squatters in the industrial zones. These include offering long-term payment instalment plans for squatters and the provisions of loans to genuine small and medium size entrepreneurs.

Further, the Yangon Regional Government has plans to develop a special economic zone at Dala township, after the Yangon-Dala bridge is completed and requisite approvals are granted.

Withholding tax may be abolished from April 2018

Media sources report that Myanmar’s Inland Revenue Department will cease to levy all forms of withholding tax for private companies with effect from the new fiscal year commencing on 1 April. The announcement came during meetings of the Yangon Regional Government, the Union of Myanmar Federation of Chambers of Commerce and Industry and other commercial bodies held to obtain private sector feedback in anticipation of new tax legislation and regulations for the 2018-2019 fiscal year. The measure is hoped to stimulate the economy, especially the promotion of exports which is a key area of focus in the Ministry of Planning and Finance’s strategy. This proposed development follows the Inland Revenue Department’s recent [informal] removal of the additional 2% withholding tax applicable to exporters.

It is not yet clear whether the proposed withholding tax changes would come into effect as part of the 2018 Union Tax Law, a draft of which was released on 13 February 2018. The 2018 Union Tax Law is not yet before Parliament but will, if passed, come into effect from 1 April, in a similar fashion to other taxation changes in preceding years.

Presently, a withholding tax rate in the range of 2% to 2.5% applies to the purchase of goods and services depending on the tax residency of the parties involved. Withholding in the range of 10% to 15% applies to royalties paid, whereas a 15% withholding tax applies to interest payments made to non-Myanmar tax residents. Reduced withholding tax rates will apply if a double-taxation treaty is invoked.