PositioningMyanmarasanattractivenewinvestmentdestinationinSoutheastAsia

8th MeetingoftheAsia-PacificForeignDirectInvestment(FDI)NetworkUnitedNationsConferenceCentre,Bangkok,Thailand25-26September2018

Contents• MyanmarInvestmentPosition• ReformoftheMyanmarInvestmentLaw• ChallengesonPositioningMyanmarasaninvestmentdestination

Myanmar Population 53.90million 2015GDP $62.60billion 2015GDPgrowth 7.3% 2015Inflation 10.8% 2015

Measure YearIndex or

Rank YearIndex or

RankTI Corruption Perceptions

index2014 156 of

175 2016 136 of 176

World Bank’s Doing Business Report “Ease of

Doing Business”

2015 177 of 189 2017 170 of

190

4

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]

TotalASEAN[00]

Totalcountries

[99]BruneiDarussalam Cambodia Indonesia LaoPDR Malaysia Myanmar Philippines Singapore Thailand VietNam

2013 -57.98 725.47 298.85 1,274.90 8,721.11 18,443.8 104.61 426.67 2,150.03 12,107.0 1,186.80 2,620.90 -41.71 3,859.79 3,523.00 57,452.4 528.21 15,935.9 2,078.59 8,900.00

2014 141.20 568.18 372.48 1,726.53 13,083.7 21,810.4 137.94 913.24 2,283.98 10,875.3 683.62 946.22 137.10 5,814.57 4,868.50 73,472.4 -940.73 4,975.46 1,547.08 9,200.08

2015 86.65 171.32 425.41 1,700.97 9,228.63 16,642.1 221.83 1,079.15 2,931.35 10,179.9 2,230.65 2,824.48 57.30 5,639.16 3,041.00 62,747.1 433.60 8,927.58 2,153.46 11,800.0

2016 -64.66 -150.44 635.77 2,279.67 9,907.49 3,920.65 196.64 1,075.69 2,098.71 11,290.2 1,682.89 2,989.48 608.26 8,279.55 6,519.40 77,456.2 1,958.84 3,063.24 2,306.61 12,600.0

2017 535.27 460.15 603.49 2,732.15 11,873.4 23,063.6 171.16 1,695.38 2,165.88 9,447.21 2,090.62 4,340.74 718.70 10,049.3 3,957.80 62,016.7 1,913.26 9,100.91 2,531.17 14,099.9

-10,000.00

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

ASEANFDIINFLOW2013-2017

MyanmarFDIin-FLOWANDFDISTOCK(UNCTAD,2016)

15624.516121.4

16705.717651.9

20475.9

1117.7496.9 584.3 946.2

2824.0

-

5000.0

10000.0

15000.0

20000.0

25000.0

2011 2012 2013 2014 2015

InwardStock

Inflow

5

InvestmentFocusSectors

OilandGas Manufacturing Infrastructure Agriculture Tourism

6

ReformoftheMyanmarInvestmentLaw

ReformoftheMyanmarInvestmentLaw•DrivenbyDICA• SupportedbyInternationalFinanceCorporation/WorldBankGroup• SupportedbyDFIDUKandDFATAustraliaandJapanGovernment• TheASEANComprehensiveInvestmentAgreement(ACIA)astheBenchmark

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PotentialBenefitstoMyanmar

MyanmarInvestmentLaw

BenchmarkedwithACIAstandards

IncreasedLiberalisation,ProtectionandFacilitation

IncreaseinInvestors’Confidence

TransferofKnowledgetoMyanmar

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ReasonsforReform

DualLaw:ForeignInvestmentLaw2012andCitizenInvestmentLaw2013

Toimproveon:InvestorProtectionMarketAccess

EntryProceduresInvestmentIncentives

Toreducecomplexandlengthyentryprocess,toincrease

transparency

ReformtheIncentiveSchemefromBlanketapprovalto

targetedincentive

TableofComparisonsofPositionBeforeReformCore

InvestorProtectionGuaranteeMyanmarFIL Myanmar-China

InvestmentTreatyMyanmar– IndiaInvestmentTreaty

Myanmar–Philippines

InvestmentTreaty

ACIA

NationalTreatment Noexpressprovision Yes Yes Yes Yes

MostFavoredNation Noexpressprovision Yes Yes Yes Yes

FairandEquitableTreatment(FET)

Noexpressprovision Yes Yes Yes Yes

ProtectionagainstExpropriation

Yes,butinadequate. Yes Yes Yes Yes

Currencyconvertibilityandtransfer

Yes,butinadequate. Yes Yes Yes Yes

DisputeSettlementProvision Yes,butinadequate Yes Yes Yes Yes

MarketAccesspriortoReform• OECDIPR:MyanmarranksverypoorlyintermsofmarketaccessessentiallybecausetheNegativeListisverylong.

• TheconsolidationoftheFILandCILintoonesinglelawoninvestmentofferstheopportunitytoreviewtheNegativeListandremovesomeoftherestrictions.

• Bestinternationalpracticeistohaveashort,clear,transparentNegativeList thatstateswithoutambiguitywhatarethevariousrestrictions.Usually3typesofrestrictions:

1. Prohibitionstoinvest:sectorswheredomesticand/orforeigninvestorscannotinvest.Idealistohavethesameforbothdomesticandforeign.

2. ForeignInvestmentCeilings:sectorswhereforeignparticipationislimitedtoacertainpercentageofownership.Idealistohavenoorveryfewsectorswithforeigninvestmentceilings(ineffectamandatoryjointventure)

3. Performancerequirements orspecialapprovalprocesses forforeigninvestors.Idealistohaveasfewsuchrestrictionsaspossible.

Bestpracticeistoestablishaperiodicreview oftheNegativeList.

PriortoReform:MyanmarSetsOutMoreStepsforInvestmentApprovalThanNeighboringCountries.

Investmentapproval Post Investmentapproval

DICA Relevantministries/regionalgovernments

MIC Municipality Otherrelevantministries

PermittoTrade

CompanyRegistration

InvestmentApproval

InvestmentEndorseme

nts

ConstructionPermit

OperationalLicenses

CommercialOperationsApproval

InvestmentIncentivesApproval

LeasingApproval

ExportLicensesif

BusinessisanExport

Company

TheMyanmarInvestmentLaw2016,October2016

OBJECTIVES(CHAPTER2)

• AppliestobothDomesticandForeignInvestors

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ProtectInvestorsandtheirInvestments

DevelopResponsibleBusiness

DevelopBusinessesandInvestmentsthatmeetInternationalStandards

KEYDEFINITIONSANDSCOPE

Ø "Enterprise":Ø (1)anylegalentityconstitutedorestablishedinaccordancewiththe

applicablelawsincludingcompany,trust,partnership,soleproprietorship,jointventure,businessassociationorsimilarorganisations

Ø (2)abranchofficeofsuchlegalentityestablishedinaccordancewiththeapplicablelaws.

Ø “DirectInvestment”:Ø Aninvestmentwheretheinvestorshavetherighttocontrolorinfluenceor

manageofsuchassetswhichareinvestedbytheinvestorswithintheUnioninaccordancewiththelaw.

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Keydefinitionsandscope(cont’d)

Ø “Investment”(S.4)Investmentincludes:a) anEnterprise;b) movableandimmovablepropertyandrelatedpropertyrights

etc;c) shares,stocks,bondsanddebentures;d) Intellectualpropertyrightsetc;e) claimstomoneyandtoanyperformanceundercontract

havingafinancialvalue;f) rightsundercontractsetc;andg) Assignablerightsgrantedbytherelevantlawsorcontract

includingtherightsofexploration,prospectingandextractionofnaturalresources.

3

SCOPEOFTHELAW(CH.3)

AnyExistingornewDirectInvestment

Notapplicabletoanypendingdisputeoranysituationthatended

beforethedateoftheLaw

AnymeasureadoptedormaintainedbytheUnion

GovernmentandGovernmentorganisationsexceptmeasuresunder

Ch.21(Generalexceptions)andCh.22(SecurityExceptions).

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RoleoftheMyanmarInvestmentCommission

MyanmarInvestmentCommission

(MIC)

Directorateof

Investmentand

CompanyAdministration(DICA)

6

ØMICMandateandFunctionsØ investmentpromotionagency;Ø investmentfacilitation;Ø Investmentapprovals;Øadviseoninvestmentpoliciesincludingpromotedsectorsandrestrictedsectors(negativelist);

Ø investmentgrievancemechanism.

AdmissionofInvestment

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InvestmentinAnyAllowedSector

EnterpriseRegistration

Endorsement MICPermit

ApprovalNotificationforEndorsement

NotificationforInvestorsnotinbothcategories

INVESTMENTSREQUIRINGMICPERMITs(s.36)

• (a)Businesses/investmentactivitiesthatarestrategicfortheUnion;• (b)Largecapitalintensiveinvestmentprojects;• (c)Projectswhichhavelargepotentialimpactontheenvironmentandthelocalcommunity;• (d)Businesses/investmentactivitieswhichusedstate-ownedlandandbuilding;and• (e)Businesses/investmentactivitieswhicharedesignatedbytheGovernmenttorequirethesubmissionofaproposaltotheCommission.

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Restrictedsectors(Negativelist)

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ProhibitedSectors(S.41)

• Hazardous/poisonous

• UntestedtechnologiesunlessR&Dbusiness

• Damagetoenvironment

• AffectPublicHealth• Prohibitedunderotherlaws

Restricted(S.42)

• LimitedtoGovernment(e.g.powertransmission)

• RestrictedtoForeignInvestors

• JVbetweenforeignandcitizeninvestors

• NotificationbyMIC(e.g.Notification26),subjecttoreviewifneedtoliberalise,amendorremove

Special(s.46)

• Significantimpactonsecurity,economiccondition,theenvironmentandnationalinterest

• ApprovalfromParliament

InvestorRightsandProtections

Fair&EquitableTreatment(s.48)

NationalTreatment(s.47(a)andMostFavoredNation

Treatment(s.47(b))

RighttoUseLand(s.50)

RighttoEmploy

Expatriates(s.51)

InvestmentGuarantee

(s.52)

TransferofFunds(s.56)

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INVESTMENTGUARANTEE(CH.14)• Conditions for an expropriation (S.52):• for public purposes;• in a non-discriminatory manner;• The investors are to be provided with prompt, adequate and effectivecompensation; and

• In accordance with due process of law.

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Direct Expropriation Indirect Expropriation

• Formal transfer of legal title• Outright seizure of the investment of

the foreign investors

• A measure or series of measuresthat has similar effect to directexpropriation even without formaltransfer or outright seizure of thelegal title over the investment.

• This is decided on a case-by-casebasis.

EXEMPTIONSANDRELIEF

RemovalofBlanketIncentives

NotificationsonZones/InvestmentActivities

AllowsforspecialtreatmentofdomesticSMEs

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SETTLEMENTOFDISPUTES(CH.19)

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DisputeBetweenInvestorandState(ClaimsforBreachoftheInvestmentLaw)

AmicableSettlement

Unabletoreachasettlement

DomesticCourt/Tribunalinaccordancewiththelaw

Otherformsifstipulatedinanagreement(international

arbitration)

GRIEVANCEMECHANISM(S.82)MICtoestablishandmanageagrievancemechanismtoinquireandresolveissuesbeforetheybecomelegaldisputesandtopreventtheoccurrenceofdisputes.

ChallengestoPositionMyanmarasanAttractiveInvestmentDestination

AdvantagesofMyanmarIntheMiddleofIndiaandChina,Bangladesh.ASEANand40%ofworldpopulation

Neighbours economiesworthUSD15trillionor20%ofworld’sGDP

BigDomesticMarket RichinNaturalResources,fertileland

DynamicandenthusiasticPopulation

InclusiveReformProcess– Increased

transparencyandpublicparticipation

KeyChallengestoMyanmar

LegacyIssues:Investmentsapprovedbeforethe2016Law

Regionaldevelopmentinviewofnewapproach

forFederalism

HumanCapacity,ExpertisetoimplementtheLawandtoprovidesupporttoInvestors

CreatingFocusSectors:Physicalinfrastructure,

exportoriented,responsiblebusiness,

jobs

Bringinginformalactivitiesintoformal

sector(e.g.agriculture,bordertrade)

AccesstoLand

Overdependenceonresourcesector(80%);

telecomandmanufacturingonly7%