On 2nd November 2012, President Thein Sein signed into law the long-awaited new Foreign Investment Law. We will circulate a more detailed summary once the text of the new law becomes available.
In the meantime, according to press reports, which should be treated with a degree of caution, highlights of the amended law include the following:
- no maximum foreign ownership level for particular industry sectors is set forth in the new law. Subject to the discretionary approval of the Myanmar Investment Commission ("Commission"), foreign investors may own up to 100% of the investment project.
- it is expected that generic regulations will be published in due course indicating the criteria that will be applied by the Commission in agreeing foreign ownership ratios in particular industries. Restrictions are expected to be applied where foreign investment may damage the culture and tradition of ethnic minorities or endanger public health, or where it relates to the handling and disposal of hazardous chemicals and toxic waste.
- the provision in the draft law that would have allowed nationalization subject to the payment of compensation has been withdrawn, and an undertaking is included that an enterprise established under the new law will not be nationalized during its original or extended term. However, some ambiguity remains, because another provision of the new law reportedly provides that an enterprise will not be suspended without substantial cause during its term.
- a 5-year tax holiday is included, as expected. Other forms of tax relief may be available. Foreign-owned manufacturing businesses may be entitled to tax relief of up to 50% on profits earned from exports. There is also reportedly a tax relief on profits reinvested in the business within a year.
- where the foreign investment is in the high-tech sector, foreign companies are required to hire local employees with the relevant skills. Locals must make up at least 25% of the workforce in the first two years, 50% in the next two years and 75% in the third two-year period. Such companies must also provide training to locals. What is regarded as "high-tech" for this purpose will require definition.
- foreign investors will be able to lease land from the government or from authorized private owners for a period of 50 years, with two 10-year extensions also being possible. This is also as expected.
The new law therefore appears to be more liberal than versions that were latterly being considered by the Parliament in Naypidaw. However, as ever, the devil will be in the detail, and it is possible that the generic regulations to be promulgated under the law will bring in restrictions that are not contained in the law itself. The introduction of the law should therefore be viewed as the start of a process and not as an end-point. In addition, it seems clear that the Myanmar Investment Commission will have a high level of discretion, meaning that the investment approval process will necessarily be unpredictable.