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MIC Suspends New Investments in Timber Businesses

Permission for to start new timber-based businesses will be temporarily suspended in Myanmar, the Myanmar Investment Commission (MIC) said in a November 16 statement, which was made public by the Directorate of Investment and Companies Administration (DICA) this week.

To preserve the country’s forests and limit illegal logging activities, the MIC will temporarily stop issuing permits for new investments involving timber extracted from Myanmar and used as raw materials in the course of business.

“Under the current Forestry Law, timber production has been suspended. That is why we have temporarily stopped granting permission for investments in new businesses involving raw timber extracted from natural forests in Myanmar,” said a senior official from DICA, who asked to remain anonymous.

Businesses utilising raw timber produced from private forest plantations or imported timber will be allowed to continue receiving capital for expansion. Currently, some of the domestic timber-related businesses operate by importing raw timber from Africa and Latin America.

Window of opportunity

The temporary investment suspension could actually present an immediate opportunity for existing timber businesses to get ahead.

“MIC’s announcement is intended for new investors. Existing businesses can buy raw materials monthly at auctions conducted by the Myanma Timber Enterprise (MTE). As new businesses are limited, we can enjoy the advantage of having fewer competitors and we are grateful for that,” said U Soe Win, Secretary of the Myanmar Timber Merchants Association.

But business conditions will nevertheless become more challenging for the timber industry as a whole in the coming years.

“The best thing now is that the mega companies cannot produce timber in protected forests. Everyone has to buy at the MTE auctions. But when it runs out of timber, gaining access to raw timber for production will be a real challenge for these businesses. Everyone will have to choose whether to import the timber or buy from private plantations,” said U Sein Win, chair of the Myanmar Forest Product Merchant Federation.

Forest conservation

The MIC’s move comes amid a government effort to conserve Myanmar’s natural forests, which have suffered from extensive logging activities over the years.

But industry insiders reckon there are other ways to encourage forest conservation. “Timber imported from foreign countries is usually of poorer quality. However, they are also relatively cheaper compared to locally-sourced logs. Therefore, some of us import raw timber and use it to produce finished goods, which are exported,” said U Soe Win.

The way he sees it, “if Customs reduces the taxes involved in the timber-related goods trade, we will have more cash flows to invest in conserving the local forests. Myanmar needs a lot of time to develop private forests like other countries.”

According to business classifications released by the MIC on March 21, 2016, extraction of natural resources in forest land and forested areas at the disposal of the government had been permitted with recommendations from the Ministry of Natural Resources and Environmental Conservation.

 

Source: Myanmar Times

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