On 2 November 2012, President Thein Sein signed into law Myanmar’s new Foreign Investment Law (the new FIL), replacing the previous Union of Myanmar Foreign Investment Law of 1988. Pursuant to the new FIL, the Foreign Investment Rules and the Classification of Types of Economic Activities Notification (collectively, the Rules) were published on 31 January 2013. The Rules provide further guidance on the new FIL by expanding upon the rights and duties of foreign investors under the new FIL, as well as clarifying the types of activities for which foreign investment is prohibited or restricted.

We outline below some of the measures implemented pursuant to the new FIL and its associated Rules.

(a) Corporate Ownership

The new FIL permits foreign investment through 100% foreign-owned investment companies (except in certain restricted areas), joint ventures, or pursuant to a contract (which the Rules interpret to mean a private-public joint venture contract with the Myanmar government). The Myanmar Ministry of National Planning and Economic Development (the NPED) has set percentage limits for investments in certain restricted areas where a joint venture with a Myanmar citizen or entity will be required. For instance, the new FIL prohibits investments in “farming agriculture”, factories that produce or businesses that use hazardous chemicals, and activities that “can affect public health” or “cause damage to the natural environment and ecosystem”. Activities “which can cause great effect on the conditions of security, economic, environmental and social interest of the Union and citizens” must be submitted to the Myanmar Parliament before a permit is granted.

Further, the Rules provide, amongst others, that foreign investment is prohibited in sectors including defence, the administration of electric power, small or medium-scale mineral production and Myanmar-language publishing and media.

The Rules also limit foreign investment in a joint venture with a Myanmar citizen to a maximum of 80% of the total equity for a range of restricted sectors, such as infrastructure development and construction, residential and commercial developments, and air transportation services. Foreign investment in such restricted sectors may be subject to specific conditions and approvals, including clearances from the relevant government ministries and regulatory offices.

(b) Land Use

In general, Myanmar law prohibits foreigners from owning land and imposes restrictions on foreigners leasing land. The new FIL provides for a welcome exception by permitting foreigners to lease land for a term of up to 50 years with an option to extend the lease for 2 additional terms of 10 years each. Previously, the law did not define the concept of land lease periods but in practice, leases tended to cover a 30-year initial term, which was extendable for 2 additional terms of 5 years each.

Additionally, the Rules stipulate that investors can, on an individual basis, obtain initial land tenancies of more than 50 years where they invest in less-developed regions of Myanmar, thereby giving them a degree of long-term security.

(c) Tax Relief

Foreign investors will be entitled to income tax exemption for a period of 5 consecutive years (as compared to 3 years under the previous law), although the Myanmar Investment Commission (the MIC), which administers the new FIL, may reduce this period for some investments. Other incentives include accelerated depreciation and exemptions from certain customs duties. There are also other forms of tax relief which may be available, depending on the investment, if deemed in the national interest.

(d) Remittance of Profits

Under the new FIL, foreign investors will be able to invest their capital in foreign currency and to remit such amounts out of Myanmar, in addition to any profits made after the payment of taxes, at the prescribed exchange rate and through Myanmar banks which are authorised to handle foreign currency bank accounts.

(e) Local Equity

Equity in an enterprise established under the new FIL can be transferred to other foreigners or Myanmar citizens. However, such transfers are subject to approval by the MIC, which can be withheld on a broad range of grounds.

(f) Employment of Foreign Nationals

It is noteworthy that the new FIL distinguishes between skilled and unskilled workers, and provides that the latter must be Myanmar nationals. Furthermore, the new FIL stipulates a minimum quota of Myanmar citizens in skilled jobs, which will increase over time, although the timeframe may be increased by the MIC for businesses based on knowledge. The Rules, however, are silent on the jobs that will be classified as skilled.

The new FIL, bolstered by the Rules, represents a step forward in the route to economic liberalisation by facilitating investments in Myanmar. By seeking to clarify the broad regulatory framework and offering more incentives for foreign investment, the new FIL seeks to address certain concerns about Myanmar held by overseas investors.

An unofficial English translation of the new FIL can be found on the website of the Directorate of Investment and Company Administration, of the NPED, at

https://www.mnped.gov.mm/images/stories/pdf_file/DICA/InvestmentLaw/new%20fil%20englishmyanmar.pdf.