Myanmar, formerly known as Burma, is often referred to as Asia’s last significant frontier economy. The EU lifted its Myanmar sanctions in April 2013 in response to a dramatic series of reforms which were put in place since Myanmar's military stepped aside and a quasi-civilian government was installed in 2011. Only the EU arms embargo remains in place. There is a surge of interest from European companies now to invest in and trade with Myanmar.
Myanmar has significant natural resources and a young and mainly literate workforce. It borders the important economies of China, India and Thailand. Investments into the country have mainly two objectives: firstly, to take care of Myanmar’s many immediate needs (e.g. infrastructure, energy, telecommunication) arising from the country’s emergence from economic isolation and, secondly, to lay the foundation for sustainable growth in the future.
Myanmar is currently overhauling its legal framework and implements step by step laws and regulations, which are necessary to attract foreign investments. One milestone, in this regard, was the replacement of the “old” Foreign Investment Law, dating back to 1988, with a new one in November 2012 (the “FIL”). While the new FIL improved certain tax incentives, long-term land lease options and other incentives, it also imposed restrictions and prohibitions on foreign investments in certain market sectors and for certain business activities. For foreign investments under the FIL a permit issued by the Myanmar Investment Commission (“MIC”) is required. The MIC shall consider certain criteria (e.g. development of local employment opportunities, knowledge transfer, promotion and expansion of exports, support and development of the local infrastructure, development of a modern and energy efficient industry) of the foreign investment when deciding whether to approve the investment under the FIL or not.
Generally it is possible to incorporate a company in Myanmar with 100% foreign shareholding, but as stated above, restrictions, requiring a certain percentage of local shareholding, apply, or even prohibitions of any foreign shareholding exist for certain business activities and industries.
When forming or registering a business in Myanmar, generally two options exist for foreign investors: (a) registration only under the Companies Act (“CA”), or (b) registration also under the FIL. While registration under the FIL allows for enjoyment of tax incentives, long term land lease options and other incentives, the conditions to be met are higher in terms of required share capital, percentage of employment of local staff in skilled positions (25% in the first 2 year period, 50% in second 2 year period and 75% in third 2 year period) and other criteria to be met, when compared with registrations under the CA. Industrial/manufacturing activities require a registration under the FIL, while for services companies it is generally sufficient to register under the CA only.
Special rules apply to joint ventures with Myanmar government entities, which can be formed under the so called Special Companies Act dating back to 1950.
The relevant business structures for foreign investors are private limited companies, branch or representative offices of a foreign company. Other available business forms such as general partnerships or public limited liability companies are hardly relevant for foreign investors.
Corporate Services Team Myanmar / Yangon: People
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