New Myanmar Investment Commission
On 7 June 2016, the Myanmar Investment Commission (MIC) was reconstituted, including the appointment of 11 new members. This is a reduction from the previous 13 member MIC appointed on 28 May 2014. MIC holds responsibility for reviewing foreign and domestic investment proposals and forms part of the Ministry of Planning and Finance.
U Kyaw Win (Union Minister, Ministry of Planning and Finance) is now chairman of MIC with U Than Myint (Union Minister, Ministry of Commerce) holding the vice chairmanship. U Aung Naing Oo (also the Director General of DICA) remains secretary of MIC with Daw Mya Thu Za (a retired deputy director general of DICA) also continuing in the role of joint secretary.
The remaining members comprising the new MIC are the permanent secretaries of the Ministries of Natural Resources and Environment Conservation (U Khin Maung Yee), Commerce (U Toe Aung Myint) and Planning and Finance (U Tun Tun Naing); U Tun Tun Oo (Union Attorney General, Office of the Union Attorney General); U Htay Chun (a retired deputy director general from the Directorate of Investment and Company Administration (DICA)); Hyat Chun (Securities and Exchange Commission) and U Kyaw (a retired director of the General Administration Department).
The private sector is now represented by U Aye Lwin, the Joint Secretary General of the Union of Myanmar Federation of Chambers of Commerce and Industry.
The appointment of the new MIC should facilitate the approval of investment proposals, many of which have been stalled since April after the dissolution of the previous MIC following the end of the former government’s term at the end of March. It has been reported that MIC will shortly hold an internal meeting to consider the hundred-odd queue of investment proposals. It has also been reported that the new MIC will consider Myanmar’s trade policy more closely when assessing applications.
U Aung Naing Oo has been quoted as saying that the new MIC will focus on setting effective rules and regulations including modifications to the Myanmar Companies’ Act and work to consolidate the two existing investment laws (the Foreign Investment Law and the Myanmar Citizens Investment Law). MIC hopes to submit revisions to these laws to Parliament within the next three months and have requested Parliament to prioritise and approve any such revisions.
First parliamentary sitting of new government completes
On 10 June 2016, the first sitting of the new Parliament completed, following a four month period of 40 sitting days. In this period 16 new bills were introduced, of which 9 were passed. Parliament also formed several standing committees and various other committees to consider issues such as finance and investment and civic and economic rights.
The next sitting of Parliament is to commence in mid-July. The National League for Democracy’s (NLD) new economic policies are expected to be released this month. It is understood that these will include measures to ease foreign investment restrictions and end monopolies in certain sectors.
New economic steering committee
On 16 June 2016, President U Htin Kyaw announced the appointment of a new economic steering committee with a mandate to review trade, monetary, fiscal and investment policies. The committee comprises of 11 members from the public and private sectors and is headed by U Kyaw Win (Union Minister, Ministry of Planning and Finance). U Than Myint (Union Minister, Ministry of Commerce) will hold the vice chairmanship and Daw Sandar Oo (director general of the financial regulatory department, Ministry of Planning and Finance) will hold the role of committee secretary.
The committee is to meet monthly and will submit reports to Parliament. The committee is further intended to co-ordinate with a government policy and planning think tank, which is in the process of being established, as well as liaising with ministries and the private sector.
Multilaterals committed to investing in Myanmar
There has been a recent increase in multilateral lending activity in Myanmar. On 14 June 2016, the Asian Development Bank announced that it would increase annual sovereign concessional lending for projects in Myanmar from approximately US$150 million to $350 million from 2017. This increased lending will be focussed on infrastructure development and it also intends to expand its offering of guarantees, loans and equity investments in and to the private infrastructure and finance sector in Myanmar.
The US has also focussed its attention in this sector through its Overseas Private Investment Corporation, which completed its first financing in Myanmar in June 2016- a US$250 million investment into the telecommunications company Apollo Towers Myanmar Limited. In mid-April 2016, International Finance Corporation provided US$40 million of mezzanine financing to Myanmar Industrial Port, one of the two major container ports in Myanmar. This was the first phase in a US$200 million multi-lender financing package to fund capacity expansion at the state-owned Yangon port.
Whilst these announcements are encouraging, in our experience, limited recourse financing in Myanmar still remains challenging. Perfection of lenders’ security package remains difficult and inconsistent, as is obtaining a consistent and economically efficient approach to the necessary stamp duty assessments.
Work to commence on new insurance laws
It has been reported that a parliamentary committee has been established to draft new insurance laws. The scope of any new laws is not yet clear but the insurance market in Myanmar has several areas which could be enhanced.
Whilst the Myanmar insurance market is now open to private domestic insurers, domestic insurers remain limited in the types of products and coverage they can offer, including only being able to provide insurance cover up to a certain monetary ceiling. Any large projects would therefore be obliged to insure with Myanma Insurance. Myanma Insurance, which until 2012 was the sole permitted domestic insurer, is still permitted to offer a much wider range of policies and coverages. The Insurance Business Supervisory Board currently provides mandatory premium pricing and policy wordings so insurance firms struggle to differentiate themselves and consumers face limited choice.
Myanmar domestic insurers are also not currently permitted to act as insurance brokers with foreign firms offering reinsurance. Myanmar domestic insurers are limited in that all risk must sit on their balance sheets in Myanmar and are subject to strict capital adequacy requirements.
Foreign insurers are currently not permitted to offer insurance in Myanmar, but several do have permission to work in the Thilawa Special Economic Zone. Many other foreign insurers have already set up representative offices in Myanmar but are not yet active.
In mid-May 2016, the Yangon regional government required construction to halt on all construction projects of nine stories or higher, affecting approximately 200 projects. These projects had received partial approval under the previous government. The construction halt is said to be an effort to tackle planning-law breaches, safety problems and corruption in new high-rise developments.
The Yangon regional government has formed a new committee to review the proposed high-rise construction projects. The committee comprises of Daw Nilar Kyaw (Yangon Regional Minister for Electricity, Industry and Transport) and representatives from the Yangon Heritage Trust, Myanmar Construction Entrepreneurs Association, the Myanmar Engineers Association and the Association of Myanmar Architects, among others. It is understood that the new committee has already commenced inspections of the suspended projects and that the Yangon regional government hopes to begin the process of re-issuing construction permits soon.
New leasing law
It is reported that work will soon commence on the drafting a new leasing law regulating the leasing of equipment and vehicles in Myanmar. Leasing transactions of this nature are currently mostly unregulated, including any legal framework addressing defaults and repossession of goods in leasing or hire purchase arrangements. The International Finance Corporation is reported to be assisting with the formulation of this new law.
Leasing in developing countries assists with access to equipment and the like as the lessee avoids the capital expenditure of purchasing equipment up front. Leasing transactions also help lessees to build a credit history where they otherwise may not have one.
Brexit – special mention
Following last Friday’s historic vote for the UK to leave the European Union, the country now faces the largest overhaul of its legal system for generations, with tens of thousands of laws potentially affected. As preparations begin to determine the UK’s future trading relationship with the EU, there are many steps that businesses can now take to protect their interests. We are assisting clients with identifying the areas in which their businesses have exposure or opportunities and assisting them with strategies to influence the relevant stakeholders. For more information, please visit the Brexit: what happens now? page on our website.