A planned amalgamation of two of Myanmar’s investment laws is set to proceed smoothly ahead of the ASEAN Economic Community in 2015, making it easier for both foreign and local investors to conduct business under a more modern and comprehensible framework, a senior government said.
The current rules, which are set under the 2012 Foreign Investment Law and the Myanmar Citizens Investment Law passed earlier this year, were written and passed in only a matter of months in order to establish a legal framework that could support growing business prospects both from foreign local investors. As a result, the rushed laws have created an imbalance between what businesses can and cannot do, detracting investors.
U Aung Naing Oo, the director general of the Directorate of Investment and Company Administration, said that government has learned its lesson from the turbulent passage of the Foreign Investment Law in 2012, which experienced lengthy delays in Parliament, and that the amalgamation plan would likely be formally approved soon by the Myanmar Investment Commission.
“I will report [the plan] at the upcoming [MIC] meeting and then we will start the process,” U Aung Naing Oo said, adding that consultations will then be held with parliament and the private sector, and DICA will receive international technical assistance on the project.
“I’m fully confident [parliament will approve it] because MPs already asked our directorate to give them advice on how to create a better environment for doing business.”
A number of sources told The Myanmar Times that informal talks between the government and key MPs have
already begun to smooth the passage of a bill through parliament.
The Ministry of National Planning and Economic Development will hope to avoid a repeat of the delays to the Foreign Investment Law, which parliament took more than six months to approve. After shuttling a number of times between the two houses of parliament and the President’s Office, and undergoing numerous changes, some of which were later reversed, the law was finally enacted in November 2012.
U Aung Naing Oo said the merger of the two laws would level the playing field between foreign and local firms.
“If we have only a single law we can make sure there is fair and equitable treatment for all and create a more attractive environment for foreign investment,” he said.
“We received some suggestions [to amalgamate the laws] from the OECD [The Organisation for Economic Co-operation and Development] and other international institutions,” he said. “Myanmar is the only country in ASEAN that has two laws for investment. All the rest of [the countries of] ASEAN have one law.”
The current set-up of having two laws favours foreign companies in some contexts and local companies in others, he said.
“In terms of arbitration, the Foreign Investment Law allows investors to settle disputes outside Myanmar but there’s no such provision in the Myanmar Citizens Investment Law.”
The directorate is receiving technical assistance from the International Finance Corporation (IFC), the private sector lending arm of the World Bank.
IFC resident representative Charles Schneider said the combining of the laws is one of a number of steps the government is undertaking to encourage more investment, such as greater protections for both foreign and domestic investors, and measures to streamline and simplify the investment process.
But a “big factor” in the amalgamation is the regional integration requirements when Myanmar joins the ASEAN Economic Community in 2015.
“[After joining] you can’t have special treatment for domestic businesses and treat foreigners adversely,” Mr Schneider said. “[The economic community] is not only trade relations, it’s also investment. That’s one of the reasons to do this now – it’s part of the integration process. But it’s also being done because it’s what you need to do for the reform process to keep moving forward.
“An indicator of the success [of efforts to improve the investment climate] is whether investors continue to invest when they are here. It’s like marketing: When you sell the first time, do they come back? It’s a similar concept with investment. Investors won’t put everything down at the beginning, and investor protections give them more reason to grow their investment.”
Alessio Polastri, a managing partner at Polastri Wint & Partners, said bringing the two laws together would be “a positive step” that would likely lead to “better interaction between foreigners and locals”.
However, he stressed it was important to wait and see how the single piece of legislation is implemented.
“Investing is already a difficult task. If the law does not help but, on the contrary, complicates the situation, investors will think twice before proceeding.”
Source: Myanmar Times