On Day Two of the Invest Myanmar Summit 2019, U Aung Naing Oo, Director-General of the Directorate of Investment and Company Administration provided an in-depth summary of the reforms that have been passed by the
More on his presentation can be found in the Library.
Invest Myanmar Summit 2019
29 January 2019
Myanmar Convention Centre 2, Nay Pyi Taw, Myanmar
Good morning Excellencies, distinguished guests, ladies, and gentlemen. It is my honour to be here this morning to talk a little bit about the updated investment situation, particularly the investment environment in Myanmar. So first of all, allow me to express my gratitude to the UMFCCI for organising such an important event on its centennial anniversary. And also, this is a great opportunity for not only the Government, and local and foreign investors in Myanmar.
So when I was asked to make a presentation for this event, I considered what sort of presentation should I make. I eventually decided that it should not be too policy-oriented, and it shouldn’t be too much in-detail within the timeframe of half an hour — now twenty-five minutes. And also, I decided my presentation should be in-between the policies and practical implementation.
So allow me to start with the outline of my presentation.
My presentation includes three outlines and number one is reforms, which we are undertaking, some outcomes of the reforms, the agenda and the updated investment environment. So allow me to start with some of the reforms.
Why do we need reforms? The answer, as well as our ultimate goal for the reforms, is to [make] Myanmar an investable nation for both local and foreign business communities. If you look at our investment environment in the past, it was a bit difficult to make business in Myanmar, although it is not easy nowadays. But what we think is that we need to consider some of the salient agenda for these reform programmes, and then we came up with the simplifications. We must make everything related to business establishment simplified, and we also need to consider how we can help facilitate businesses in Myanmar.
Since we need a lot of investment, we must open more. Whenever we consider [opening up the country], we must have a liberalisation programme for doing business in Myanmar. And protection is one of the important factors for all businesses in the country.
Those are four key areas that we consider. But in addition to those four key factors, we also need to consider some value-added factors, for example, decentralisation. Since Myanmar is preparing to be a federal union country in the future, so we should start with our development programmes, which include the economic federal programmes. We need to enhance transparency in the country and predictability is one of the most important factors for investors in the country. So those are the reasons why we started the reform programmes.
How did we do it? First, as the Union Minister [H.E. U Thaung Tun] explained, and the State Counsellor yesterday [spoke about], we started with the legal framework reforms. When we think about the legal framework, we need to look at the previous investment laws and Companies Law. The 1988 Investment Law was outdated, and we revised it in 2012. We then conducted the investment policy review in Myanmar in collaboration with the OECD in 2013 and 2014. There were a number of policy options, recommended by the OECD to the government, which is to have a unified investment law in Myanmar. Previously, we had two laws for investment, the Myanmar Citizen Investment Law and Myanmar Foreign Investment Law. They have been merged into a single law, the Myanmar New Investment Law and subsequent rules. And as everyone knows here, our Companies Act in 1941 was a bit obsolete — we needed to modernise the law. We needed to pave [the way] for the business community so that doing business is easier in the country. Therefore, we revised our Myanmar’s Company Act to Myanmar’s New Companies Law and regulations. Other laws relevant to doing business in Myanmar are still in the pipeline to be improved and some have already been improved.
If we really want to have a better reform we must streamline the procedures. We must enhance the after-care services. Whenever we think about promotion or investment, yes we do need a lot of new investors to come in and invest, but at the same time we also need to consider those who have already invested in the country — how can we help them to operate their business properly and in a more facilitated manner. Therefore, we also consider enhancing the after-care services for all investments in the country.
We make entry easier for businesses, and also we need to use technology for easier access to Myanmar. This is why electronic means is one of the policy considerations for us under the regulatory framework. And for institutional regulatory reform, my office has already been expanded to the States and Regions. The capital cities of every state and region already
And what has changed? The way we simplify doing business — investors now have two options. Previously, each and every business proposal needed to be screened and approved by the MIC, regardless of whether those are big projects or small projects, whether those amount of investment are small or big. According to our new system, there are two options.
The first gateway is MIC-related to the business. If you read our Investment Law, section 36 clearly states that there are some businesses that needs to be screened by the MIC. For example, if the investment is strategic for the country, if the investment is capital-intensive, if the investment would have some negative impact on the environment and society of Myanmar, and if the investment is to acquire a government-owned land or building. These sort of investments need to be screened by the MIC, and they will be allowed to do business in Myanmar. The MIC will be issued a permit, then they can start the business.
Another way is that there are two [types of investments which do not require MIC permits]. If the investment is not relevant to the section 36 of the New Investment Myanmar law, you don’t need any approval from MIC, you can set up your business here and get automatically approved by the law. But, if you consider to enjoy some incentives bound by the investment law, your business needs to be endorsed. [For] those investment, there are two channels. One is ‘Below threshold’. ‘Below threshold’ means if the investment is up to USD $5 million or MMK 6 billion, those can be endorsed by the States and Regional Governments, and then you can start your business.
Then the other one is if the amount for the investment is more than above the threshold which is more than USD $5 million or MMK 6 billion, you need to be endorsed by the Myanmar Investment Commission, and then you can start the business. For those who don’t need to get any approval from MIC, they can register their business online and they can start their business. So this is the way we try to simplify access to Myanmar for business establishment.
Another one is the facilitation. So facilitation as I’ve told you, is one of the important factors for all investors in Myanmar. Therefore we put some important provisions in our new Investment Law. If you read section 16 of the New Investment Law, there is a clear revision on the setting up of the one-stop-shop. The one-stop-shop will be responsible for the enhancement of facilitation for investors in Myanmar.
Previously, it was a bit difficult for investors. They needed to go from one office to another to obtain permissions or a license. For example, if they want to export or import, they need to go to the Ministry of Commerce, and also they need to go to the Customs department for customs clearance and also they need to go to the Immigration Department for visa extension.
But now, all these departments are put into the same building, under the same roof. So, investors nowadays do not need to go anywhere, just go straight to our one-stop-shop office and they can apply for everything they are required to do according to the law and regulations. And then, [there is] the Investor Assistance Committee, which is the new initiative for all investors in Myanmar.
Our dream is to set up investment enforcement in Myanmar but to be frank, we are not that ready to set up investment enforcement in the country. Therefore, we started with setting up the Investor Assistance Committee [to] handle all the grievances of the investors. If the investors feel unhappy with the rules and regulations, or if they feel they are not being treated well, or losing their rights, they can come and complain to the Investor Assistance Committee, which is chaired by one of the MIC members in the Head Office. We have an Investment Monitoring Division.
The role of the Investment Monitoring Division is not just monitoring whether those business are going well, but they are also responsible for facilitation of businesses in the country. Whoever encounter any difficulties or problems, they can come and meet with officials from our office from the Investment Monitoring Division and they will facilitate everything which will help resolve the problems and difficulties you are encountering.
For transfer of funds, we make it easier for transfer of funds for foreigners, so transfer of money back and forth, in between the home country and host country is getting much easier than ever before.
Liberalisation, as I’ve told you, according to the 1988 Foreign Investment Law, we’ve had a positive list approach. The positive list approach means a few businesses are put on the list. Whoever wants to [set up] businesses need to look at the list. If their business is included in the list, it will be allowed.
But now we change the positive list approach to the negative list approach. Nowadays, all businesses which
We also need to ensure protection for the investors. If you read our Law’s Section 46, we provide national treatment to all investors. There will be no discrimination between local and foreign investors. There will be no discrimination amongst the investors, to which we call the Most Favoured Nation treatment (MFN) in Section 47B. And the law provides fair, equitable treatment (FET) according to Sections 46 and 48.
We guarantee for investments, there will be no expropriation directly or indirectly. Previously, we did not have such investment expropriation protection because previous laws only protect nationalisation. But our new law fully protects the investments from expropriation directly or indirectly. Investor grievance mechanisms are also included in our law, and we will move forward to set up investment grievance mechanisms in Myanmar. We are willing to work with the IFC for setting up IGM in Myanmar in the months to come.
And also decentralisation: I have already elaborated a bit about this and we have now the State and Regional Investment Committee, which is a delegation of MFC’s authority to the States and Regional governments. Previously, MFC was the sole authority for making all investment decisions in Myanmar. But from the start of April 2017, MFC has delegated its authority to the States and Regional government. We have the States and Regional Investment Committee, chaired by the Chief Ministers of the respective states and regions. Those [projects], as I have explained, up to USD 5 million or MMK 6 billion [in] amount of investment, can be endorsed by the States and Regions Investment Committee.
Transparency is one of the value-added reform programmes by us. Previously, there were a lot of hidden agenda but nowadays, there will be no more hidden agendas at the MIC. We disclose everything; what we have done, everything we are doing, and statistics. We upload each and every detailed statistic in our website, which is to be updated every month. You can view updated investment statistics every month, and investment news are released through the website or Facebook or local media. Sometimes, we even make announcements in the local newspaper and through press conferences.
And within 24 hours when the MIC meeting is concluded, we invite all the media in the country and we explain what the MIC meeting committee has decided and what sort of businesses
Predictability is also important. Previously, it was a bit difficult to understand. If an investor applies to MIC, even we cannot tell him or her that when the project will be approved, and how long you will need to wait.
Therefore, in our new law, there are clear timelines for the MIC routine. For example, in Section 48, if someone who submit the proposal to MIC, after submission of proposal, he can know that his proposal has been accepted by the MIC or not within 15 days. If it is rejected by the MIC, we will inform them within 15 days. If it is accepted by the MIC, we will complete the whole process in 60 days — this is for permitted businesses. For endorsement, we will inform the investor if there is any rejection in 15 days, and we will process everything within 30 days. Likewise for tax exemption or reliefs. So if there is a rejection, the investor can be informed within 15 days or all the processes will be concluded within 30 days. Land use [applications will have the same timeframe as] tax exemption or relief.
What we have done is, we have a specific timeframe for processes. Therefore, the investor can easily understand when his or her business can be approved by the MIC, and when he or she can obtain a permission from MIC, clearly.
Then I also need to touch on a little bit about the changes to our new Companies Law. Our new Companies Law is now one of the most modernised laws in the region. So there are a lot of new initiatives. Previously, if you want to incorporate a new company here, you need two shareholders at least two directors. But we no longer require such. We can now allow
We did need some Memorandum of Association or Article of Association [during] incorporation of a company. Now those MOA and MO has been replaced by the Companies Constitution. And previously, we needed the partial value, and required all companies to have the authorised capital. Now we have abolished such requirements, according to our new law. Foreigners are allowed to own up to 35% [of shares] in a local company. That means although there are foreign ownership in the local company up to 35%, that company will be treated as a local company.
That means there will be no restriction for that company to do business in Myanmar. Although there are some restrictions for foreign companies; with 35%[ foreign-owned] Myanmar
And, according to our new Myanmar Companies Law, we also require at least one Myanmar resident director. The Myanmar resident director need
And also, the previous law required physical meetings for making decision. But our new law doesn’t require any physical meetings for making the resolutions of a company. That can be a video conference or a written resolution. You can accept those sort of resolutions in the company.
And also, we put in [another] new initiative – an solvency test is also included in our new Companies Law. We make sure the corporate governance provisions were put in our new Companies Law. Directors’ duties and responsibilities which were left out in the previous law are now in our new companies law and DICA, my office, has a small role to enforce the companies in Myanmar. Those are some of the few key changes in the Myanmar Companies Law.
And what are the outcomes of our reform?
The first outcome is the processing time. If you look at the slides: Before the new Investment Law was enacted, there will be eight steps to get permission from MIC and that took an average of 90 days from the submission of the proposal to obtaining a permit from MIC.
Nowadays, according to the new system, thanks to our new Investment Law, there are only four steps for the process and procedures. And that will take an average of 40 days for getting permission from MIC for permit. For endorsement, there are only three steps and fifteen days’ processing time for investment in Myanmar.
Previously, MIC was
[That] was the beginning of the new Investment Law. But if you look at the right side [of this slide], you can see nowadays the number of businesses approved by the States and Regional Investment Committee is more than that of MIC. What I want to highlight is this approval process really works in Myanmar. This is one of the outcomes of the New Investment Law.
And we have liberalised the business environment. If you look at our previous situation, before 2017, when our new Investment Law is enforced, there were joint venture requirements. 94 business and sectors required joint ventures with local partners but now, thanks to the new Companies Law, thanks to the notification 15/2017, only 22 sectors [still] require joint venture to set up. That means over 72 sectors have already been liberalised, [removing the] requirement of the joint venture in Myanmar.
As I explained before, retail, wholesale, education, foreign banks and insurance business are fully liberalised in the country. This is one of the examples how we are liberalised for the businesses in the country. And [on this] slide, I am going to show how this liberalisation works. Thanks to the new Investment law, and the efforts made by the States and Regional governments, nowadays [they] are able to make decisions faster and efficiently.
And MyCo — MyCo Myanmar is companies online. A lot of people know this is an online registration system. Actually MyCo is not only an online registration [platform] for companies, [it] also provides online filing. So if you want to provide an annual report, you don’t need to send the physical document to our office. Just go online and [upload] the report, and you don’t need to go to our office; [it will be filed] on the electronic platform.
MyCo also includes digital payment as well, so you don’t need to pay the money to our office. Go online and all payment can be made [there].
And more importantly, MyCo has [an] automated alert system. We want to make sure all companies in Myanmar are fully compliant with the law. Therefore there will be automated alerts. For example, if you need to provide [your annual] return to our office, one month ahead, you will receive alerts from our office automatically [stating that] you will need to provide your annual return [on] so and so date one month ahead. And two weeks ahead, and on the due date, there will be another alert to the companies in Myanmar. So this is the way MyCo is created.
MyCo is not a registration platform just for companies, MyCo allows electronic filing, electronic payment, and has an automated alert system. So this is one of the outcomes of the system, [and] you can see the significant improvement of registration year after year.
My highlight is, after MyCo [was set up] — which is not included in the slides — MyCo has been effective and fast.
From 1 August 2018 to last night, the number of registered companies is precisely 10,000 in nearly 6 months. 10,000 companies have been registered through MyCo last night, and over 43,343 old companies have been re-registered online. Therefore, in nearly 6 months, altogether over 53,343 companies have been using or have already registered online in our system. So this is how we make it easier, and how MyCo is working pretty well for all companies, providing facilitation and an efficient registration process.
Up there is my last slide. As my Minister [H.E. U Thaung Tun], this morning explained, we are in the process of drafting a standard operating procedure. SOP is not just so called SOP, our SOP will be streamlined, simplified and more efficient, so that we will create a good ecosystem for all investors to be facilitated by the SOP for doing business in Myanmar.
We will also enhance efficiency of the one-stop service in Myanmar. There will also be better performing services in the months to come. Andour new Ministry, the Ministry of Investment and Foreign Economic Relations, will enhance the rule of coordination amongst the ministry to create a better ecosystem for doing business in Myanmar.
Our ultimate goal is to do everything online, so we will have a single window as Minister [U Thaung Tun] this morning mentioned, we will have an electronic platform for [a] single window for applying [for] all required permits or other licenses online. This is our next step.
MIC is now preparing to accept online applications for investment proposals and endorsement applications in our office. So MIC’s online application [system] will be in place in a few months; we are now in the process.
This is the good news I just want to share with you and finally, I just want to tell you is – although there are a lot of difficulty and issues to do business in Myanmar, we are committed to improving ourselves, to help all investors to have a better, facilitated investment environment in Myanmar as our dream is to [help] our country to be an investable destination for all investors.
If you encounter any problems or any difficulties, remember the MIC office. We are in Yangon, and we will be at your disposal. Thank you so much.