Myanmar’s Market is developping very fast

 

The historic visit of U.S. President Barak Obama in Burma in 2012 confirms that Myanmar has found its place in the concert of nations, and it is time for investors to benefit from the incredible business opportunities presented by this country. Why invest in Burma? Consider first a country that has the same size as Thailand but a GDP 10 times lower than a market of 70 million people where everything is to be done, and with a workforce that is very cheap. Add that it is a country rich in raw materials including oil and gas , but also a country expected to become a major tourism destination (hence the need for investment in the hotel sector). These strengths are reinforced by the central position of Burma between China, India and Thailand, and the fact that China has no ports on the Indian Ocean, and wants to create a huge corridor highway and road to link Yunnan to Myanmar ports.

But how to invest in Myanmar?

The spirit of the law !

To understand the spirit of the Law on Foreign Investment in Burma, there must be a parallel with Thailand. Thailand businessmen have a choice between investing in the form of a 100% foreign business in sectors that are open to foreign investment or as a minority partner ( 49% ) in areas that are reserved for Thai. Being specified that for a minority foreign investment, there are no special formalities, but simply to create a Thai company in which one or more Thai shareholders will own 51 % of shares.

This lack of formality in connection with foreign minority investment led to endless abuse and most operating companies with a structure consisting of 51% Thai shareholders and foreign shareholders 49% use what is called of nominee shareholders (which is of course illegal).

Historically Burma wanted to avoid being in the same situation as Thailand and to develop a system (which already exist under the old law on foreign investment), where any investment with majority or minority foreign ownership are controlled.

A Burmese citizen who wishes to establish a company should just save this company under the Companies Act of Myanmar. But this society can have neither shareholders nor foreign directors. In other words, a foreign businessman who wants to invest in a “local” form would end up investing in a company in which he would have absolutely no control and there would no more legal protection that does no sense.

 

100% foreign investment

The Law on Foreign Investment provides many options in terms of legal structure offering the choice to invest in the form of a company 100% foreign or of a joint venture with Burmese citizens or the government, being specified that foreign investors can now have the majority of the capital and shares of the joint venture thus created (which was not possible under the old law ) . Of course there are restrictions and the Law on Foreign Investment Burmese contains a list of prohibited activities. There are currently 11 economic sectors whose access to foreigners is prohibited or restricted including activities that adversely affect ( destroy ) culture and ethnic traditions , activities harmful to human health or harmful , or hazardous to the environment ; import experimental technologies , pharmaceuticals that have not yet been approved abroad; manufacturing activities or services reserved for Burmese citizens under notifications to be published later, but agricultural activities , livestock activities and fishing activities that can be performed by Burmese citizens , activities in an area of ​​ten miles from the border of Myanmar unless it is performed in a special economic zone .

However, and with a sense of pragmatism that does honor him, the Burmese government has closed any doors permanently as he is aware of the vital importance of foreign investment for the country.

To this end the government has included in the Law on Foreign Investment several ” loopholes ” that give the Myanmar Investment Commission the discretion to approve foreign investment in sectors that are closed priori their clauses.

For example, Article 5 of the Act provides that “the Commission may approve an investment in a banned or restricted access area is under section 4 if it gives benefice for the country and especially for these citizens.”

The law contains two other escape clauses , one authorizing the Commission to authorize foreign investment in the agricultural sector ( normally reserved for citizens ), and the other authorizing the Commission to extend the duration of the first term of a contract land lease beyond the maximum duration of 50 years.

Because of these escape clauses , no economic sector is not completely closed to investors if they are able to demonstrate to the Commission that their investment project will also serve the interests of the country and citizens of Myanmar.

voyage en birmanie

Tax and other benefits !

The benefits provided by the law on foreign investment are numerous but they are not granted automatically and can only be obtained through an application for investment license from the Investment Commission of Myanmar. A company for the benefit of a permit investment can benefit from the following advantages, among others :

  • A tax holiday period of five years extendable (including the year or the company starts commercial operation )
  • and / or a tax exemption on profits allocated to a reserve account and reinvested in the year following the establishment of the reserve ,
  •  and / or the possibility of accelerating the depreciation of machinery , equipment, buildings or other assets at a rate determined by the Commission,
  • and / or for exporting companies the possibility of a tax exemption for a maximum of 50% accumulated in connection with export earnings goods produced in Myanmar ,
  •  and / or the right of a company employing foreign experts to pay tax on the income of these foreign employees and to deduct such payments from taxable income,
  • and / or the right to company to pay tax on the income of foreign experts at the rates applicable to resident citizens ,
  • and / or the right to deduct from their taxable income, expenses incurred for research and development in Myanmar
  • and / or the right to delay and compensate for losses incurred up to three consecutive years ,
  • and / or the right to obtain an exemption from customs duties on imports of machinery and approved during the initial period,
  • and / or the right to obtain an exemption from customs duties on imports of raw materials during the first three years of production from the commencement of commercial operations and materials.

 

No doubt these exemptions from taxes, customs duties and other relief make Burma very competitive, which in the long run will weaken the position of Thailand as a preferred destination for foreign investment in the South East Asia!

Sources :

  • this official website

More information about Chinese tourists to myanmar on Marketing China

 

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