1. Parliament resumes
Parliament has now returned from its break and reformed for the second Parliamentary session since the National League for Democracy (NLD) came to power.
The government is set to announce its economic policy on 29 July according to Tun Tun Naing, the permanent secretary of the Ministry of National Planning and Finance. No policy details have been released yet, but economic advisers have told the media that policies would follow those proposed by the NLD last year.
Policies are therefore likely to emphasise efficiency in government, and to promote infrastructure and agricultural development while appealing to foreign direct investors. Last month President U Htin Kyaw also stated that the government would increase spending on education, health and social security.
Separately, the government is likely to review laws on problematic issues such as double taxation, the right to peaceful assembly, and the structure of city development committees.
2. Yangon construction update
In June 2016, we reported that the Yangon regional government required a construction halt on all construction projects nine stories or higher. Over 200 construction projects have been affected by this suspension, while the Yangon City Development Committee (YCDC) reviews these projects for planning law breaches and safety problems. To date, YCDC has ordered modifications to 12 buildings, requiring developers to reduce building heights, change car park designs, and/or improve on fire protection.
YCDC is also limiting new applications for building permits to buildings of up to three stories. At the same time, new building rules and regulations are being developed by the Yangon regional government. According to the YCDC secretary, Daw Hlaing Maw Oo, the YCDC plans to shortly hold a press conference to explain the review and the new building rules.
3. Myanmar Investment Commission update
Following the reconstitution of the Myanmar Investment Commission (MIC) last month, U Kyaw Win, the Minister of Planning and Finance, has assumed the role of Chairman. The Permanent Secretary of Mr Win’s Ministry was also appointed to the Commission.
This places MIC more firmly under the control of the Ministry of Planning and Finance, which will ensure that MIC’s decisions are fully aligned with the Government’s investment priorities.
MIC is intending to relax investment restrictions to encourage investment in numerous areas including manufacturing.
Separately, MIC’s practice will change due to the move to devolve decision-making for some smaller applications to the States and Regions. The draft Investment Law will be submitted to Parliament for discussion during the current sitting, and is likely to bring a more fundamental shift for MIC.
4. Myanmar removed from Financial Action Task Force money laundering watchlist
The Financial Action Task Force (FATF), an inter-governmental body established to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system (AML/CFT), has removed Myanmar from the ‘watch list’ of nations with weak AML/CFT regimes. This is expected to help boost investment from international investors and banks.
Myanmar spent almost five years on FATF’s ‘black list’ from June 2011 until 19 February 2016. The ‘black list’ is designed to highlight nations who have serious AML/CFT deficiencies. The country was temporarily placed on the less serious ‘grey list’, but has now been removed entirely from the ‘watch lists’.
Myanmar’s new non-high-risk status follows the US administration’s revisions to sanctions on Myanmar. For more detail, please see our recent article on the revisions to US sanctions in Myanmar and their envisaged impact on foreign investors.
5. Foreigners working in Myanmar will soon require a work permit
Deputy General of the Labour Ministry, U Nyunt Win, has stated that foreign workers in Myanmar will soon be required to obtain work permits in order to continue working in the country. The permits will be able to be renewed on an annual basis, however all Non-Myanmar nationals will potentially have to leave the country every four years and reapply for a new work permit from their home country.
Permits will only be granted to skilled workers in good health, who have a letter of recommendation and a regionally or internationally recognised degree related to their occupation. Permits will therefore not be available to manual labourers.
This initiative is seen as an attempt to reduce illegal labour, most notably from China and Vietnam, and eventually to see the transition of jobs and skills from foreigners to local Myanmar nationals. The move has been welcomed by local businesses.
6. Offshore supply base projects update
There is a growing need in Myanmar for offshore supply bases (OSBs) to support companies beginning exploration and drilling programmes and there are a number of private sector led initiatives to create OSBs. The Myanma Oil and Gas Enterprise (MOGE) recognises this need and between May and June 2015, 52 companies attended talks with MOGE to discuss the establishment of a joint venture to develop OSBs in Myanmar. We understand that MOGE is still considering the best route to issue a formal tender.
Some of the main issues MOGE could take into account to expedite the process are deciding whether a single or multiple base is most commercially viable, the location of the OSB(s), whether a joint venture or a concession arrangement is more suitable and creating a regulatory framework that supports the objectives of the project. This will also help to ensure that the project can be structured to maximise bankability.
7. Myanmar Business Forum establishes Power Working Group
The Myanmar Business Forum (MBF) has established a Power Working Group, as a platform for the private sector to propose reforms to government in order to improve the business environment. The Myanmar Government has established a Special Taskforce to coordinate with MBF working groups. The Group is made up of developers of thermal and renewable power, along with a limited number of lawyers (including BLP), consultants and policy experts active in the field.
The Myanmar Government has released various power tenders, the most recent being a tender for private companies to supply 300MW of power per day to Yangon for a five year period (details of which can be found here). However, many of these projects lack the features to attract international investors. The Power Working Group intends to identify regulatory changes and practical workable solutions, based on experiences in other emerging markets, which could help stimulate greater investment into the power sector by creating more bankable projects.
8. Project Landmark masterlease signed
On 23 July 2016, the Ministry of Transport and Communications via Myanma Railways signed 2 new separate master leases for the Landmark development - an integrated real estate development set over 2.44 million square feet of floor space across 10 acres. The site will feature luxury residences, office towers, a business hotel and serviced apartments, and connecting retail. The development is a collaboration between Yoma Strategic Holdings Ltd., The Hongkong and Shanghai Hotels Ltd., Mitsubishi Corporation, Mitsubishi Estates, the International Finance Corporation, the Asian Development Bank, and First Myanmar Investment Company Limited. BLP has been advising the sponsors and this is an important milestone for this strategic project, which is targeted to be completed before the end of 2020.
9. Visiting UK Minister for International Trade looks at life after Brexit
Myanmar recently welcomed UK Minister from the Department for International Trade, Mark Garnier MP, on a mission to promote trade and investment links between the two countries. As well as being his first overseas trip since being appointed as a Minister in Britain’s newest Department, he had the honour of being the first UK Minister to visit Myanmar since the change of Government here last April. Mr Garnier spoke about the impact of Brexit and how this provided impetus for UK Government and business to forge new and deeper trade and investment relationships with different economies around the world.
BLP chaired a roundtable on Investing in Myanmar’s infrastructure, organised by the UKTI as part of the Minister’s programme. Senior members from the banking, business and advisory communities in Yangon had a fruitful discussion, sharing insights with Mr Garnier on the opportunities available and the challenges faced by investors. The Minister heard suggestions as to how the UK could support projects and reforms in this key area and he provided examples of the advantages that British business and expertise could bring to the country. With the British Government, through the Foreign & Commonwealth Office (FCO), UK Trade & Investment (UKTI), Department for International Development (DFID), UK Prosperity Fund and other agencies already doing much to promote Britain’s interests and contribute the Myanmar’s development, it is hoped that the Minister’s visit helps to stimulate more UK investment into this fast growing market.
10. Relaxation of restrictions on trading in construction goods
The restriction preventing foreign companies from trading in Myanmar has been further relaxed under notification 56/2016 issued by the Ministry of Commerce on 7 July 2016. Foreign companies are now permitted to form joint ventures with local partners to engage in retail and wholesale trading of construction material.
Previous notifications by the Ministry of Commerce already allow foreigners with local joint venture partners to open car showrooms and to trade in chemical fertilisers, seeds, pesticides and hospital equipment. The Special Economic Zone in Thilawa provides foreign companies with an alternative opportunity to engage in trading.