In this article we’ll take a look at some of the changes made between the initial draft version of the law (which was less than appealing) and the final version. As we have said before, the old 1988 Foreign Investment Law was actually quite good, so how does this new law measure up? Based on the information we’ve seen, this is a solid investment law. It seems specifically designed to attract the maximum amount of foreign investment to Myanmar, an encouraging sign for investors. Let’s take a look at some of it’s stipulations.
1. 100% foreign ownership in unrestricted industries
Unlike in neighboring countries such as Thailand, foreigners can own 100% of a company registered in Myanmar. This is a major selling point for international investors who may not feel comfortable getting into business with a local partner they barely know. This is especially attractive for specialized companies, such as technology firms, who don’t necessarily need local expertise but want to sell their products in the country. The law states that foreigners can own 100% of companies in unrestricted areas – so what areas are restricted? Although details are still murky, restricted industries are likely to include agriculture, security, and trading. This does not mean that foreigners are restricted from investing in these sectors, it simply means that they must have a local partner.
2. Majority stakes in joint ventures
The draft legislation of the Foreign Investment Law first stipulated that foreigners could only own 49% of joint ventures in Myanmar. This proved to be unpopular, so the figure was change from 49% to 50%. The 50% figure caused a lot of confusion from foreign investors, because this would make dispute resolution very difficult. We’re happy to see that in the final draft of the law this provision has been dropped entirely. The law states that foreign investors and their joint venture partners must negotiate company equity themselves, meaning that foreign investors can take a stake larger than 50% if their local Myanmar partner agrees. In this way, the Myanmar government has stepped aside and allowed businesses to decide their own fates. Nice!
3. Five year tax holidays
Under the provisions of the 1988 Foreign Investment Law, investors were granted a three-year tax holiday. This three year tax holiday has been increased to five years under the new legislation. We haven’t yet seen the exact conditions of this tax holiday, but suffice to say it is very attractive.
4.Guarantees against nationalization
There is a guarantee against economic nationalization written into Myanmar’s Constitution (article 36d), but this guarantee is further bolstered by the new Foreign Investment Law. As we explain in the Myanmar Investment Guide, the Constitution is being taken very seriously in Myanmar, with rule of law being the cornerstone of President Thein Sein’s agenda. We expect that the Foreign Investment Law will carry a large amount of weight, and that its provisions will be strictly protected. Bottom line: your business will not be taken by the government.
5. Long-term leasing of land
Since 1988 it has been common for the Myanmar Investment Commission to allow approved companies to lease land for 30 years. The land available for lease has traditionally been government owned land. Provisions in the new foreign investment law allow foreign investors to lease land for up to 50 years with two 10 year extensions available after that 50 year period. Critically, foreign companies can now lease land from approved private citizens, which means the amount and variety of land available has increased significantly.
Although the foreign investment law has been delayed for a long time, we think that the Myanmar government has got it right this time. When the full text of the law is printed, we’ll offer a full analysis for investors, so be sure to check back in with us soon!