How Does Myanmar’s Constitution Affect Investors?

The Constitution and the Military
While the 2008 Constitution is certainly a step in the right direction on many fronts, one of its main issues is that it enshrines military rule by stipulating that 25% of the seats in both assemblies be occupied by personnel from the military. So how does the fact that the military is strongly represented in the legislature affect the business interests of foreign investors?

The first thing that we have to acknowledge is that every country needs a military to protect its national interests (unless it’s Costa Rica!) and Myanmar will always have some semblance of a military presence. In fact, strong militaries that don’t intervene in economic activity or violate human rights are generally seen as beneficial by investors because they offer stability. The Myanmar military, however, is a special case because of its history of human rights abuses and intolerance.

What most investors want to see is the military step back and become a stabilizing body that promotes peace and allows basic freedoms. In an encouraging sign, the military has done almost exactly that since the first session of Parliament in 2011. Soldiers in Parliament have been relatively quiet – they are rarely interviewed by the press about legislative issues and have kept a low profile. We have seen very little economic interference by the military in the past year.

While some investors have expressed worry over the 25% allocation, it is important to note that the NLD and other opposition parties combined now have an approximately equal number of seats as the military. As Myanmar continues to mature politically we expect the number of opposition party candidates to increase, and many are hopeful that changes to the Constitution in regards to the allocation of seats for the military will occur in the future. Investors should remember that President Thein Sein, one of the most pragmatic people in the new government, is a former military man.

The Constitution as it Relates to Business
Although several laws coming out of the new Parliament have a more direct impact on business, the Constitution contains several articles that businessmen should understand. Articles 35 and 36 of the Constitution spell out the basic economic system for Myanmar. Article 35 states explicitly that Myanmar will engage in a market economy, and article 36 explains that the government will not:

• Nationalize economic enterprises
• Demonetize the currency

Article 36 also states that the government will take measures to prevent monopolization and ensure fair competition. It goes on to state that the government will promote the development of investments in Myanmar.

These two articles of the Constitution are important for businessmen because they mean that as long as the Constitution is respected, a foreign business will not be taken over by the government. The stipulation about monopolization is also important because there are near-monopolies in Myanmar today, which can perhaps be challenged by foreign firms in the future.

Article 37 of the Constitution is also important for business. We’ve included this article in its entirety here:

37. The Union :
(a) is the ultimate owner of all lands and all natural resources above and below the ground, above and beneath the water and in the atmosphere in the Union;
(b) shall enact necessary law to supervise extraction and utilization of State owned natural resources by economic forces;
(c) shall permit citizens right of private property, right of inheritance, right of private initiative and patent in accord with the law.

As you can see from article 37, all land in Myanmar is owned by the State. The State allows individuals to use the land, but that does not mean that they actually own it. We’ll address this issue in more depth in the legal chapter, but understand that under current law, individuals do not actually own physical land in Myanmar.

You may think 37(c) stipulates that citizens can own property (meaning land), but after a careful reading of the Myanmar language version of this article, property in this case actually just means things- like cars or houses- not actual land. Article 37 (c) is also important because it provides patent protection. Patent and copyright laws are not strictly enforced in Myanmar at present, but foreign firms now have the Constitution as a legal precedent in this area.

A similar article in the Constitution is Number 372:

372. The Union guarantees the right to ownership, the use of property and the right to private invention and patent in the conducting of business if it is not contrary to the provisions of this Constitution and the existing laws.

This article helps to clarify article 37 in some ways because it states ‘the use of property’ which is exactly the right that people have in Myanmar – the right to use land, not to own land.
Foreign investors worried about the nationalization of their assets in Myanmar should have some of their fears alleviated by the articles in the Constitution we’ve highlighted above. We’ve seen many people across the country taking the Constitution very seriously, so we expect that it will become a hallowed document in the future and that its articles will be protected by the legislature. Although the parliament can always amend the Constitution, it is extremely unlikely that they would strip out legal protections for private enterprises.