The Myanmar Companies Law 2017 (MCL) – end of the transition period
MCL came into effect on 1 August 2018 and while the majority of the provisions came effect on the same date certain provisions only comes into effect at the end of the transition period. Under the MCL, the “transition period” is defined as the period of 12 months from the date of commencement of the MCL (being 1 August 2018) and accordingly the transition period will end on 1 August 2019. With effect from the end of the transition period:
- A private company registered under the previous companies legislation in Myanmar must have at least one director who is ordinarily resident in Myanmar and a public company registered under the previous Act must have at least one Myanmar citizen director who is ordinarily resident in Myanmar (Section 4(a)(v) and (vi) and section 469 of the MCL).
- An overseas corporation registered under the previous companies legislation in Myanmar must appoint an authorised officer (defined as a person ordinarily resident in Myanmar who is appointed by an overseas corporation to act as its representative for the purpose of the MCL) (Section 469 of the MCL).
- Existing objects are automatically removed unless a notice in the prescribed form confirming the passing of a special resolution to maintain them has been filed with DICA (Section 12(e) of the MCL).
- Existing share warrants are deemed to be surrendered and cancelled unless an extension has been applied for during the transition period (Section 82(a) of the MCL).
- All managing agent arrangements that were extended come to an end by the end of the transition period (Section 476(a) of the MCL).
Please refer to BCLP's Myanmar Companies Law Guide for more details.
Myanmar announces first power tariff hike in five years
The Ministry of Electricity and Energy announced on 25 June 2019 (following a parliamentary approval in April), that electricity rates are to increase significantly for both residential and business users, as well as buildings used for religious establishments, from 1 July. This will be the first time prices have been raised for 5 years. Rationale for the price increases include:
- the government is supplying electricity currently to the public at a loss (a loss of K507 billion in the fiscal year 2017-18, and K630 billion in 2018-19), and at rates which are the lowest in ASEAN (according to data from the Ministry of Planning and Finance); and
- raising prices is seen as critical to financial viability. Demand for electricity power is growing 11% a year (according to estimates published in a World Bank report in June) and the government is aiming to encourage private-sector investment (including foreign money) into the state-dominated power sector. According to the World Bank, Myanmar needs approximately US$2 billion in annual spending on electric power infrastructure.
Though current Government loss in the supply of electricity is set to be narrowed under the new tariffs, the increase in price is not expected to cover production and distribution costs completely. Nevertheless, by striving towards ensuring a more stable supply of electricity (through attracting investments, and improving infrastructure), Myanmar hopes the tariff hike will be a positive step forward for the country’s development in the future.
For a comparison between existing and new tariff prices, please see the following table:
Myanmar’s tourism sector was given a boost on 6 July with the announcement that the ancient capital city of Bagan had been added to the UNESCO World Heritage List of cultural and natural sites which are of outstanding universal value. The list began in 1978 and includes more than 1,100 sites worldwide.
With thousands of temples spread across the landscape, Bagan already attracts a large number of tourists visiting Myanmar. The temple city was cited by UNESCO for its exceptional range of Buddhist art and architecture. The International Council on Monuments and Sites put forward the application for listing, making reference to the adoption of a new heritage law and plans to reduce the impact of hotels and tourism developments within the site itself.
It is hoped that the inscription of Bagan on the list will enhance efforts to conserve and manage the site, with local governance being essential to the stable growth of the destination. The passing of the Myanmar Tourism Law last year, which empowers regional governments to assist with the management and investment into destinations, should also facilitate the promotion of sustainable tourism. A pledge from the government that all existing hotels and guesthouses within the archaeological site itself would be moved to a dedicated hotel zone by 2028 has been received well by existing operators who see community engagement and effective management of the environmental impact as the keys to a successful future of the site.
Foreigners now allowed to trade on the Yangon stock exchange
The Securities and Exchange Commission of Myanmar (“SECM”) issued a notice on 12 July 2019 regarding permission to allow foreign investors to trade in listed shares in companies listed on the Yangon Stock Exchange (“YSX”). The SECM notice states that the YSX will announce the date on which foreigners may start acquiring shares of listed companies. Analysts predict that such trading will commence by the end of the year although no specific start date was confirmed.
Authorities are likely to require two to three months to draw up the detailed regulations to govern the trading of shares by foreign investors, including rules to supervise and ensure that the trading limits are not exceeded. A research analyst at the business information firm Frontier Myanmar Research (FMR) was quoted as saying that he understands that the SECM’s regulations are likely to allow only foreign investors who are residents in Myanmar to trade.
When implemented, it is expected that the reform will spark the interest of retail investors based in Yangon. However, it is likely to have limited impact on institutional investors which are likely to only be attracted by significantly more listings and diversification of the sectors represented by the listed companies.
The YSX was incorporated in December 2014 through the joint investments by Myanma Economic Bank, Daiwa Research Institute and the Japan Exchange Group and its first initial public offering took place in January 2018. Since then, a total of five companies have listed on the YSX with a daily trading volume of around US$35,000 and a market capitalisation of around US$400 million.