Summary: Welcome to the sixth edition of BLP's monthly Myanmar update in 2017. We have distilled the top news items into this summary 'speed read' of the year.
1. Insurance market liberalisation – blueprint
Daw Sandar Oo (Director General of the financial regulatory department under the Ministry of Planning and Finance and Managing Director of state-run Myanma Insurance) has announced that a blueprint for insurance market reforms will be published by the Ministry of Planning and Finance within the next three months. The expectation is that this will open the insurance market to foreign insurers, allowing them to underwrite and sell policies in Myanmar. The plan for the liberalisation will become clearer once the blueprint is published.
Myanma Insurance previously held a monopoly across the insurance market until 2013, when the government allowed local private-sector companies to enter the market. Licences have been issued to 11 businesses so far. Foreign entities are only allowed to open representative offices (however there is scope for activities in the Thilawa Special Economic Zone), and currently there are 24 foreign companies with such offices in Myanmar. The plan to allow foreign insurers access to the market undoubtedly represents a further significant liberalisation in this sector, which only four years ago was exclusively the remit of a state-run insurance company.
Daw Sandar Oo also said that the government aims to "achieve in the near future a well-structured, competitive insurance market”. She went on: “The comprehensive insurance liberalisation plan has already been finalised, with the assistance of the World Bank group, and also it has been approved by our cabinet.” Members of the BLP team advised on the foreign bank and telecommunications licensing and have been involved in tenders run by government and state-owned enterprises. BLP is also currently advising a number of the licensed foreign banks on commercial aspects of their branch set-ups, including leasing and employment arrangements, regulatory matters and potential lending transactions.
We will keep you updated with further developments in the coming weeks.
2. Formation of new Myanmar Investment Commission
The new Myanmar Investment Commission (“MIC”) was officially established on 6 June 2017. The Myanmar Investment Law and Investment Rules have brought in significant changes to the investment framework in Myanmar and set out the role of MIC.
The new MIC comprises 13 persons and is headed by the Union Ministers for the Ministry of Planning and Finance (H.E. U Kyaw Win) as chairman and the Ministry of Commerce (H.E. Dr Than Myint) as vice-chairman. The three new members appointed are the Deputy Minister for the Ministry of Agriculture, Livestock and Irrigation (U Hla Kyaw), the Permanent Secretary of the Ministry of Electricity and Energy (U Khin Maung Yee), and the Permanent Secretary of the Ministry of Labour, Immigration and Population (U Myo Aung). The reshuffle also removed one member from MIC.
U Aung Naing Oo and Daw Mya Thuzar continue their roles as secretary and joint secretary.
3. Memorandum of Understanding to facilitate Singapore investment into Myanmar
A Memorandum of Understanding (“MOU”) was signed on 8 June 2017 between the Singaporean trade promotion agency, International Enterprise (“IE”) Singapore and MIC.
It is hoped that this MOU will assist the leveraging of additional investment capital from Singapore – already the second largest international investor into Myanmar – into areas such as urban and housing projects, utilities, transport and logistics, manufacturing, oil and gas and professional services.
IE Singapore in particular cited the progress made on the newly-passed Myanmar Investment Law as a positive element to create a conducive business environment for foreign investors.
4. Yangon Chief Minister’s delegation visits Europe
A delegation led by Yangon Chief Minister H.E. U Phyo Min Thein started its European visit on 16 June 2017. The delegation plans to visit Belgium, Germany, Italy, Spain, Sweden and the Czech Republic over a period of 15 days.
The delegation first visited Brussels and BLP attended a networking reception hosted by Roland Berger and the European Chamber of Commerce. The Chief Minister presented his plans for further development for Yangon. The plans focus on trade and logistics, industrial development, urban public transportation, sustainable urban development and energy sector development.
5. New import laws on liquefied natural gas
The Ministry of Electricity and Energy (“MOEE”) has announced its plans to draft new laws on liquefied natural gas (“LNG”) in cooperation with the Myanmar Oil and Gas Services Society (“MOGSS”).
The newly-drafted laws and rules will set out the role and procedures of import for each ministry, which it is hoped will offer greater convenience. It is expected that MOEE will allow private businesses to participate in the LNG business.
This follows the new Myanmar Investment Law and Rules that have allowed private investment into Myanmar’s oil and gas industry. Private businesses have entered the market as new competitors in the storage and distribution of petroleum products.
MOGSS also expressed that energy policies would be drawn up in compliance with economic policies, to greater benefit Myanmar’s economy. This follows MOEE’s announcement that it suffered losses of US$400 million in the electricity sector in the last fiscal year due to the subsidies it provided. MOEE is looking to manage these losses by introducing LNG as an alternative option to generate electricity.
The details of the new import laws have yet to be made public.
6. Announcement on real estate stamp duty
The Inland Revenue Department released an announcement in June urging the public to pay full stamp duty on instruments for real estate transfers. This announcement is further evidence that authorities in Myanmar are focused on improving revenue collection.
Stamp duty on a conveyance relating to property, whether moveable or immoveable, is collected in accordance with Section 3A of the Myanmar Stamp Act and Table 23 of the Stamp Duty Table. Since 1 October 2016, stamp duty charged under Table 23 has been reduced to 2% (compared to 5% prior to 2014). An additional stamp duty of 2% is charged if the property is located in Yangon, Mandalay or Nay Pyi Taw (in accordance with the Yangon Development Trust Act, Mandalay City Development Law and Nay Pyi Taw Development Law).
7. Announcement of the Securities and Exchange Commission of Myanmar
The Securities and Exchange Commission of Myanmar (“SECM”) released an announcement on 1 June 2017 stressing certain regulatory requirements under the Securities Exchange Law 2013 (“SEL”).
Under the SEL, prior to a public offering, a company is required to make a submission on how it intends to offer securities to the public and seek SECM’s approval. Furthermore, the offeror company is required to publish and announce its articles and memorandum of association together with a prospectus (containing important information about the company). SECM emphasised that the public are advised to undertake a careful review of such documents and information prior to making investments.
SECM also announced that it has not yet permitted any foreign company to open a representative office in Myanmar or carried out any activities under paragraph 45 of the Security Exchange Rules. Under paragraph 45, SECM may authorise the opening of a representative office (in Myanmar) by a company that operates securities business in a foreign country. The rules further stipulate that such an office is prohibited from carrying out a securities business but may carry out specific activities approved under a permit from SECM.
8. Clamp down on use of foreign currency in local transactions
U Win Thaw, Director General of the Foreign Exchange Management Department, has reiterated the position that Myanmar’s official local currency the Kyat, and not US dollars, should be used in all local business transactions. As previously covered in our January 2017 postcard, the Central Bank of Myanmar had first issued this instruction in May 2015 and again in January 2017.
However, both government bodies and private business are reluctant to switch to local currency and the use of US dollars remains prevalent.
Consequently, U Win Thaw has said that the Central Bank of Myanmar is exploring options for local banks to exchange kyats for dollars more conveniently, and is also considering enforcing its rules by penalty across the various industry sectors, in collaboration with the relevant ministries. In this regard, we note that some businesses are now insisting for local suppliers to invoice them in kyats.
9. JICA loans to small and medium enterprises
Further to a K41.5 billion loan to private small and medium enterprises (SMEs) last year, the Japan International Corporation Agency (JICA) will continue offering credit to SMEs, with a K1.3 billion loan this time.
JICA will, through the state-owned Myanmar Economic Bank, first lend to selected local banks, who will then on-lend to SMEs. Local banks are free to set their own terms and conditions, but cannot offer loans to certain industry sectors.
SMEs form a large proportion of the private business entities in Myanmar and the growth of SMEs will fuel Myanmar’s economic growth. The JICA loans will improve SMEs’ access to finance, not just by providing low-interest, long-term loans to SMEs, but also by facilitating the capacity development of local banks.
10. World Bank urges liberalisation of accounting and auditing sector
A new World Bank Report on Observance of Standards and Codes (the “Report”) has urged for progress to be made to liberalise the accounting and auditing sector in Myanmar, citing it as a key factor in Myanmar’s ability to capitalise on foreign direct investment. The Report – produced by the World Bank to help member countries strengthen financial systems by improving compliance with internationally recognised standards and codes – cited the following as key steps to be taken:
- Finalising the statutory framework under which companies in Myanmar operate, including the enactment of the Companies Law and finalising the rules and regulations to implement the Securities Exchange Law and Financial Institutions Law;
- Ensuring that the Myanmar Accountancy Council (the regulatory body) and the Myanmar Institute of Certified Public Accountants (the professional accountancy organisation) operate separately and independently of each another;
- Aligning the Professional Training Qualification programme with relevant international standards and benchmarks;
- Adopting the latest International Financial Reporting Standards suite of standards, citing a lack of updates of the Myanmar Financial Reporting Standards since 2009; and
- Adopting the latest international auditing standards (it is anticipated the latest version of the clarified International Standards on Auditing will be adopted sometime in 2017).