MIC to take action against foreign investment registering locally

A crackdown is coming to foreign investment circumventing rules by registering under the names of Myanmar citizens, according to Myanmar Investment Commission (MIC) secretary U Aung Naing Oo.

The commission first announced in early 2012 there would be a grace period for foreign investment to re-register properly and promised future action against offenders which did not re-register. This action never materialised, though about 30 businesses have properly re-registered as foreign investment in the intervening period.

Many of the offending businesses are thought to be in the garment sector, according to U Aung Naing Oo.
“When we [the MIC] inspected, as far as we know about 50 percent of companies [in the garment industry] were foreign investments registered under the names of Myanmar citizens,” he said.

Many foreign companies registered as local firms to skirt regulations on foreign investment. Under existing rules, any foreign ownership, down to foreigners owning one share of an otherwise Myanmar-owned company, makes the company foreign-owned.

Foreign companies are prevented from doing business in several industries and also face restrictions in areas like land and vehicle ownership that do not apply to local firms.

An updated Companies Act is in the works which could change these rules, but for now many foreigners have chosen to register their companies through Myanmar citizens, such as spouses, to avoid being declared a foreign company.

MIC has not taken action against these foreign companies using Myanmar names to register because they employ many local citizens, said U Aung Naing Oo. However, MIC’s patience is wearing thin, and it plans to take actions such as withdrawing tax relief and placing companies on lists preventing activities.

“We have kept our door open for companies to change their registration,” he said. “We are going to take action against offending businesses soon – in the future there will not be any forgiveness for them. They’ve had over two years.”

In March 2012, MIC officials held a press conference, where U Aung Naing Oo announced that if a company is registered under the name of a Myanmar wife, changing to foreign investment will require giving the wife a 50pc share. He also announced a stipulation that foreigners hiding investments behind Myanmar “heirs” would be required to give them a stake.

However, if the foreigner has registered the business under a Myanmar citizen’s name who is not his spouse or heir, the registration could be changed to 100pc FDI without giving up a share in the business, he said in 2012.

Lower house member Thura U Aung Ko said in parliament earlier this year that it’s not only garments but also gems and metal mining, tourism, real estate, agriculture, fisheries and food manufacturing that attract foreigners, often from nearby Asian countries, registering their businesses often through their Myanmar spouses.

Although there are many businesses still closed to foreigners, observers say restrictions have been relaxed over time.

Economist U Hla Maung said restrictions were much more onerous under the former military regime.

“With that situation, how could foreigners do business without registering their business through a local person?” he said.

U Hla Maung said that foreigners often do not exploit the situation, adding they are at the mercy of the Myanmar person the company is registered under.

Many Myanmar people have also lived abroad and taken foreign citizenship, meaning to register businesses in specific industries, they often register through Myanmar citizens to avoid being labeled as foreign investment.

“Former citizens cannot do business here as a local investment, so they do it through their relatives’ names,” he said. “We can see many top businessmen who have become rich through foreigner support.”


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