Further to our Legal Update dated 9 November 2012 ("Myanmar's Foreign Investment Law: Summary of Amendments"), we have now had sight of an unofficial translation of the long-awaited new Foreign Investment Law, signed into law by President Thein Sein on 2 November 2012.
Certain activities are designated as restricted or prohibited, and the Myanmar Investment Commission ("Commission") may only permit these activities with the permission of the Union Government when doing so would be deemed to be in the best interest of the State and its citizens. Other than these, the Commission may allow foreign ownership of any level in its discretion. The restricted and prohibited activities include:
- any that would adversely affect public health or the environment or that would involve bringing hazardous or toxic waste material into Myanmar;
- the use or production of hazardous chemicals;
- service and manufacturing activities reserved for Myanmar nationals under foreign investment rules ("Rules") to be promulgated within 90 days of the date of the new law (2 November 2012);
- the use of technologies, medicines, or accessories (as well as any activities) that are still at the testing stage or are not yet permitted to be used abroad;
- agriculture and livestock breeding;
- activities within 10 miles of the national boundary except in designated Economic Zones
The new law lays down objectives and basic principles, and any activities that promote these objectives and follow these principles are more likely to be approved.
- Objectives include: natural resource exploitation, infrastructure development, human resource development, job creation, educational development.
- Principles include: the promotion of exports, import substitution, large investment projects, the development of advanced technology, energy-saving, the development of modern industry, environmental conservation, the exchange of information and technology, improving knowledge and technical know-how, developing banking services, promoting modern service provision, securing energy resources.
- The Commission has the discretion to set the minimum investment amount with the approval of the Union Government. The amount will depend on the nature of the business activity.
- In the case of a JV between a foreign investor and a Myanmar citizen in a restricted activity, the foreign ownership ratio may be proposed according to a ratio to be prescribed in the Rules. The law no longer specifies that the foreign investor must supply a minimum of 35% of the capital of the JV.
- The law contains a guarantee against nationalization, and a guarantee that approved investment activities will not be terminated during the contract period "without sufficient cause". It also guarantees that, after the expiry of the investment period, the investor can remit overseas its investment gains in the same foreign currency that it brought in at the outset.
- The law permits investment contracts to stipulate a dispute resolution procedure.
- The law imposes duties on foreign investors, which should be carefully reviewed before any investment is made.
- A 5-year tax holiday is included, as expected. Other forms of tax relief may be available.
- 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. In underdeveloped and remote areas, the Commission may, with the consent of the Union Government, allow a longer period.
Until the Rules are promulgated, it will not be possible to form a complete picture of the new foreign investment environment in Myanmar.