03.07.2017
I. IntroductionII. Trade RestrictionsIII. Liberalization of TradeAnnexes
Trading activities within the Republic of the Union of Myanmar are governed by numerous laws and regulations, as well as ministerial policies and practices. Since late 2001, most trading activities were prohibited for foreign investors in the Republic of the Union of Myanmar, both through limited approval of imports under the Export and Import Law 2012, as well as the enforcement of the unofficial ban on trade by the Ministry of Commerce.
Trading activities within the Republic of the Union of Myanmar are governed by numerous laws and regulations, as well as ministerial policies and practices. Since late 2001, most trading activities were prohibited for foreign investors in the Republic of the Union of Myanmar, both through limited approval of imports under the Export and Import Law 2012, as well as the enforcement of the unofficial ban on trade by the Ministry of Commerce.
In 2015, the Ministry of Commerce eventually started to change its policy, allowing selective relaxation of this general prohibition. In January 2015, the Ministry of Commerce announced a limited lift of its trade prohibition by permitting joint ventures operating car showrooms as well as the import and sale of new automobiles. In November 2015, the Ministry of Commerce allowed the import and trade of specific products, namely fertilizers, seeds, pesticides and hospital equipment, followed by a similar notification for constructions materials in 2016. Foreign investors interested in engaging in such trading activities were, however, still required to operate as joint ventures with a Myanmar partner. In May 2015, the Management Committee of the Thilawa Special Economic Zone followed by allowing certain wholesale trading activities to 100% foreign-owned companies incorporated in the newly established Thilawa Special Economic Zone.
The recent enactment of the Myanmar Investment Law 2016 is expected to further lift the ban on trade. On 10 April 2017, the Myanmar Investment Commission issued a list of restricted investment activities (Notification No. 15/2017), according to which retail and wholesale trading services are now generally allowed. Such trading activities do however require the approval of the Ministry of Commerce. It is therefore expected that the company in question shall meet certain criteria, such as a minimum investment, minimum warehouse floor space and possibly the provision of aftersales services (potentially monitored through the issuance of a separate “trading license”).
Please find a summary of the most important changes and unofficial translations of the latest Notifications No. 14-17 and Notification No. 36/2017 below.
1. Foreign Investment Law 2012
Before the enactment of the Myanmar Investment Law 2016, foreign investments were generally governed by the Foreign Investment Law 2012 and its subordinate regulations and notifications.
Before the enactment of the Myanmar Investment Law 2016, foreign investments were generally governed by the Foreign Investment Law 2012 and its subordinate regulations and notifications.
Already with the enactment of the Foreign Investment Law 2012, it was expected that foreign investment would be governed by the new law, and ministerial restrictions be limited within the boundaries stipulated in the Foreign Investment Law 2012. Notification No. 1/2013 dated 31 January 2013 provided that retail and wholesale trade would require recommendation from the Ministry of Commerce. However, no foreign investments in the trade sector were approved by the Ministry of Commerce.
Notification No. 49/2014 to the Foreign Investment Law 2012 dated 14 August 2014, which replaced Notification No. 1/2013, no longer provided for any restrictions on trading activities. Furthermore, Notification No. 49/2014 explicitly stipulated that all business activities not listed in the notification should be allowed for 100% foreign-owned companies. In practice, however, this relaxation of the foreign investment restrictions was never adhered to by the Ministry of Commerce, which – with very few recent exceptions – did not allow the incorporation of foreign-owned trading companies. (Similarly, other Ministries continued to impose additional ownership restrictions on activities not listed in Notification No. 49/2014.)
Notification No. 26/2016 of the Myanmar Investment Commission dated 21 March 2016, which replaced Notification No. 49/2014, also did not provide for any explicit restrictions on trading activities, such as distribution and sale of goods.
Neither the Sale of Goods Act 1937 nor the Contract Act 1872 provided for any restrictions on foreign-owned companies to sell goods within the Republic of the Union of Myanmar.
The Export and Import Law 2012 superseded the Control of Imports and Exports (Temporary) Act 1947. The rules and regulations, notifications and instructions of the Control of Imports and Exports (Temporary) Act 1947 are, however, still exercised as long as they are in compliance with the Export and Import Law 2012.
Pursuant to the Export and Import Law 2012, the import and export of goods require a specific license from the Ministry of Commerce. Until 2001, the Ministry of Commerce did issue Certificates of Exporter/Importer Registration and import permits for the purpose of trading activities within Myanmar to both foreign- and local-owned companies.
In late 2001, the Ministry of Commerce changed its policies and ceased the issuance and renewal of Certificates of Exporter/Importer Registration to foreign-owned companies for the purpose of trade. Foreign-owned companies had to execute an undertaking that they would not resell imported goods in order to be issued a Certificate of Exporter/Importer Registration.
In 1989, the Ministry of Commerce issued Order No. 2/89 under the Control of Imports and Exports (Temporary) Act 1947.
Pursuant to the Order, only Myanmar citizens or Myanmar-owned companies may act as agents and facilitate trade with foreign suppliers (i.e. business representatives), and had to register with the Ministry of Commerce. Foreign-owned entities would thus be only allowed to act as a service provider for Myanmar-owned companies involved in distribution and trade.
It should however be noted that the Ministry of Commerce does in practice allow the registration of foreign-owned companies as business representatives of overseas suppliers.
In practice, the restriction on import and export of goods for the purpose of trade was further expanded by the Ministry of Commerce and consequently has been treated as a general prohibition of trading activities by foreign-owned companies (with certain exceptions, such as the sale of goods locally produced by the foreign-owned company).
Since the prohibition had never been officially decreed, it was enforced by the Ministry of Commerce and the Ministry of Planning and Finance by restricting the issuance of Trade Permits to foreign investors intending to carry out trading activities.
As a consequence, Trade Permits of foreign-owned companies that were allowed to carry out trading activities were not renewed after 2002, unless the foreign-owned company amended its registered business activities and executed an undertaking not to carry out any trading activities within Myanmar; new foreign-owned companies were only incorporated upon execution of an undertaking not to carry out any such activities.
All of the current relaxations, as well as the relevant criteria to be met, e.g. for car showrooms importing and selling new vehicles, are issued by the Ministry of Commerce under sec. 13 (b) Export and Import Law 2012:
In March 2015, the Ministry of Commerce issued Notification No. 20/2015 concerning the import and sale of motor-vehicles in the Republic of the Union of Myanmar. Pursuant to this notification, foreign- and Myanmar-owned joint venture companies could, subject to certain conditions, be permitted to import and sell new motor-vehicles.
This notification has been revised several times, latest by Notification No. 16/2017.
In November 2015, the Ministry of Commerce issued Notification No. 96/2015 concerning the import and sale of agricultural products and hospital equipment of primary importance to the agricultural sector and public health of the Republic of the Union of Myanmar. According to this notification, foreign- and Myanmar-owned joint venture companies may be permitted to engage in the trading of those particular goods.
In July 2016, a further notification was issued concerning the import and sale of construction materials. This notification also requires foreign investors to enter into a joint venture with a Myanmar partner.
In February 2017, before the implementation of the new Myanmar Investment Law 2016, the Ministry of Commerce issued four new notifications with respect to the import and sale of machines, new and used motor-vehicles in sales centers and showrooms, as well as construction machinery and project equipment. However, these notifications also require foreign investors to enter into a joint venture with a Myanmar partner.
In May 2015, the Management Committee of the Thilawa Special Economic Zone issued the Instruction on the Scope of “Trading” Activities Permitted for Investors in the Thilawa Special Economic Zone (Instruction No. 2/2015). Pursuant to this instruction, foreign investors in the Thilawa Special Economic Zone are permitted to carry out import and wholesale trading activities throughout the country, subject to certain requirements.
Foreign-owned companies intending to trade their own products produced overseas have to meet the following conditions:
Minimum investment of USD 2 Million (excluding leasing costs for the land);
Foreign-owned companies intending to act as distributors of third-party manufacturers have to meet the following conditions:
Wholesale includes the direct sale to end-users in the case of industrial material in bulk as well as the direct sale of industrial machinery and equipment with a sales price over USD 500,000.
The term “value adding” is defined widely and includes:
In practice, the trade prohibition has thus effectively been abolished for foreign investors operating in the Thilawa Special Economic Zone.
1. Notification No. 15/2017 to the Myanmar Investment Law 2016
On 18 October 2016, the Pyidaungsu Hluttaw enacted the Myanmar Investment Law 2016, repealing and replacing the Foreign Investment Law 2012 and the Myanmar Citizens Investment Law 2013. Pursuant to sec. 100 (b) Myanmar Investment Law 2016, the Myanmar Investment Commission may issue orders, notifications, directives and procedures implementing this law, such as sec. 42 Myanmar Investment Law 2016, according to which certain types of investment businesses shall be stipulated as restricted investment (i.e. investment businesses allowed to carry out only by the Union; investment businesses that are not allowed to carry out by foreign investors; investment businesses allowed only in the form of joint venture with any citizen-owned entity or any Myanmar citizen; and investment businesses to be carried out with the approval of the relevant ministries).
Recent legal reforms addressed the unofficial ban on trade.
On 18 October 2016, the Pyidaungsu Hluttaw enacted the Myanmar Investment Law 2016, repealing and replacing the Foreign Investment Law 2012 and the Myanmar Citizens Investment Law 2013. Pursuant to sec. 100 (b) Myanmar Investment Law 2016, the Myanmar Investment Commission may issue orders, notifications, directives and procedures implementing this law, such as sec. 42 Myanmar Investment Law 2016, according to which certain types of investment businesses shall be stipulated as restricted investment (i.e. investment businesses allowed to carry out only by the Union; investment businesses that are not allowed to carry out by foreign investors; investment businesses allowed only in the form of joint venture with any citizen-owned entity or any Myanmar citizen; and investment businesses to be carried out with the approval of the relevant ministries).
In February 2017, the Myanmar Investment Commission published a draft of the list of restricted investments in accordance with rule 17 Myanmar Investment Rules 2017. The draft list contained sections similar to Notification No. 26/2016, which was previously published under the Foreign Investment Law 2012. One of the most notable changes was a reference to retail trading in the form of a joint venture with a Myanmar resident citizen or citizen-owned entity. Wholesale trading was not mentioned at all.
On 10 April 2017, the final list of restricted investment activities (Notification No. 15/2017 to the Myanmar Investment Law 2016) was issued by the Myanmar Investment Commission, which provides for an even further liberalization. According to this list, both wholesale and retail trading are permitted to foreign investors, subject to the approval of the Ministry of Commerce. The requirement of a joint venture with a Myanmar partner is no longer stipulated.
Upon enquiry with the Ministry of Commerce, it was announced, that it is intended to allow trading for both joint ventures, as well as 100% foreign-owned companies. The criteria for such trading activities are currently being drafted, to be issued within the next months.
Excluded are mini-markets and convenience stores (No B 15 of Notification No. 15/2017 to the Myanmar Investment Law 2016), defined as retail trading business having a floor area of less than (100x100) 10,000 square feet or 929 square meters. Pursuant to the verbal information provided, criteria for the approval of all other trading activities may include the following, with higher thresholds to apply for 100% foreign-owned investments:
On 12 June 2017, the Ministry of Commerce issued Notification No. 36/2017, effectively commencing with the implementation of the announced liberalization of trade.
Notification No. 36/2017 provides, that chemical fertilizers, seeds, pesticides, hospital equipment and construction materials as prescribed by the Harmonized System Code (HS Code) in accordance with international trade procedures and regulations of the World Trade Organization may in future be imported and sold by any foreign-owned company, including 100% foreign-owned companies, for wholesale or retail.
Annexes: Unofficial Translation Notification No. 36/2017 (12 June 2017)
Annexes: Unofficial Translation Notification No. 36/2017 (12 June 2017)
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