Myanmar to ease restrictions on foreign investors

Reforms to Myanmar’s corporate law would allow foreigners to participate in the Yangon Stock Exchange. YANGON — Myanmar is determined to pass by the end of the year a series of bills designed to ease restrictions on foreign capital as the newly established civilian government steps up efforts to attract outside investment.

The government had mulled similar amendments ever since the rule of former President Thein Sein, whom de facto leader and State Counselor Aung San Suu Kyi replaced in late March. The legislation drawn up by the Directorate of Investment and Company Administration will be submitted to the central government, and the parliament is expected to approve the measures by year’s end, DICA Director General U Aung Naing Oo told The Nikkei. He is also responsible for drafting the bills. The Myanmar Companies Act considers a corporation foreign if even one share of stock is bought by a foreigner. That designation triggers a barrage of restrictions against such companies.

The new rules would require at least 35% foreign ownership before a company would receive that designation. Myanmar does not presently allow foreign investors to acquire stakes in domestic firms, but the legislation under consideration would likely establish a cap at 35% ownership.

The new rules would also grant foreigners access to the Yangon Stock Exchange, the country’s first bourse launched in late March, Aung Naing Oo said. Under the status quo, companies belonging to certain industries, such as agriculture, fishing or trade, must in principle be fully funded by domestic capital. The new rules may open those sectors to firms in which foreign investors hold small stakes. In addition, the government is expected to relax requirements on long-term land leases. Foreign investors currently need to receive special permission for such deals.

The changes would likely require amendments to relevant laws. Myanmar is also slated to merge laws governing paperwork for foreign investment and domestic investment. Aung Naing Oo sees the revisions to the companies act and the Foreign Investment Law bringing about a dramatic improvement in Myanmar’s investment environment.

The country is looking to digitalize investment filings within two years, and DICA will double the number of domestic offices, Aung Naing Oo said. DICA currently runs eight offices, but is slated to open seven more by the end of fiscal 2017. People will be able to complete all their investment paperwork at one location, said Aung Naing Oo.

The Suu Kyi-led government seeks to bring in $6 billion in annual foreign investment over the next five years. Aung Naing Oo expressed high hopes for Japanese investment, saying that such funds contributed heavily to the economic development of Thailand, Vietnam and other nations. Source: Nikkei Asian Review Title: Aeon’s Myanmar debut marks milestone in reform MOTOKAZU MATSUI, Nikkei staff writer August 14, 2016 7:00 am JST A new joint venture will take over Orange stores like this one in Yangon. YANGON — The approval of Japanese retailer Aeon to open up shop in Myanmar is a hallmark of the country’s economic reforms, a result of efforts by the new government overseen by Aung San Suu Kyi and a byproduct of its membership in the Association of Southeast Asian Nations. The company will be the first foreign entity to operate retail stores in the country. It will work with the operator of 14 Orange supermarkets in Yangon and Mandalay, in the country’s north.

That is a rather sizable network for Myanmar, where chain stores have still yet to take root. Orange is one of the country’s top three retail chains. As early as this year, the chain will be renamed Aeon Orange. Aeon announced a joint venture arrangement with Orange operator Creation (Myanmar) Group of Cos. on Aug. 1.

The new company will take over existing stores, with 10 new outlets to open within five years. Aeon’s expertise could sharply modernize Myanmar’s retail industry, which offers limited fresh food and has been slow to employ merchandise management systems. The Chiba Prefecture-based company started offering retail financial services in Myanmar back in 2012, and has been waiting for an opportunity to launch retail stores.

The process dragged on for four years amid the country’s unique red tape. Myanmar has no law banning market access by foreign retailers. But since 2003, the Ministry of Commerce had put investment requests by foreign companies on hold. Even after the country began its democratization process in 2011, which enticed many overseas businesses, no foreign retail businesses were given approval. Similar restrictions on foreigners were put up for investing in Myanmar companies and for trade, because authorities were too afraid of stepping on other departments’ toes by issuing approvals. Such practices had taken root mainly because the country had lagged behind in efforts to draw up systematic investment regulations under decades of military rule.

Domestic businesses also vocally resisted. Myanmar’s homegrown retail leader, City Mart Holdings, is one of them. Win Win Tint, who heads the company, repeatedly pressured the government, saying that market liberalization is not acceptable when domestic companies are held back by the fundraising “handicap” of the country’s weak financial markets. Still, Aeon got the green light. And the new government launched in March, under State Counselor Suu Kyi, looks to have played a major role.

She pledged improved transparency in economic systems and rule of law in the run-up to the general election last fall. Arbitrary decision-making — a negative legacy of the military regime — came under the scalpel. The Commerce Ministry was known among foreign companies for its frequent rules-tweaking notices. As a result, Myanmar’s liberalization of its retail market represents a real milestone in reform, says a law firm specializing in international regulations.

The other driver of reform was other Southeast Asian countries. Aung Naing Oo, director general of the Directorate of Investment and Company Administration (DICA), explained the approval of Aeon’s operations as an “obligation” stemming from the country’s membership in the ASEAN Economic Community. The community was formed in late 2015 to integrate the regional economy. Tariffs have been removed for the bulk of trade within the region, but efforts to eliminate nontariff trade barriers have made only halfway progress — as reforms in Myanmar and some other member states lag behind. Singapore, the biggest foreign investor in Myanmar in fiscal 2015, repeatedly exerted pressure, along with other ASEAN members. Now, Central group of Thailand and many other retailers from the region are likely to set up shop in Myanmar.

The Myanmar government is expected to ease regulations this year on stock trading by foreign investors. Laws defining what constitutes a domestic company will be updated so that foreign stakes of less than 35% will not change that  standing.

 

Source: Nikkei Asian Review

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