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BLP'S Myanmar Postcard- Our top picks for November/December 2016

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Summary: Welcome to the latest edition of BLP's monthly Myanmar update. We have distilled the top 10 news items into this 'speed read'. Please get in touch for more information.

1.Update: Myanmar Investment Law

As reported in October’s Postcard the Myanmar Investment Law 40/2016 has recently been enacted repealing and replacing with one unified law both the Myanmar Citizen Investment Law and the Foreign Investment Law. With the implementing rules not having been finalised yet, the previous Foreign Investment Rules are being followed for a transitional period to 31 December 2016. The new Myanmar Investment Law differs from the previous laws in a number of important ways, including the better targeting of incentives and a more streamlined investment application process.

BLP is supporting the MIC and the IFC in the drafting of the Myanmar Investment Rules. The MIC has just released a briefing paper outlining its priorities in drafting the Rules and is requesting submission of any comments and suggestions from the public. Please review the paper (find it here) and send in your thoughts.

Chris Hughes, managing partner of BLP’s Yangon office, was recently a panellist at an Investment Law Seminar organised by the Australia-Myanmar Chamber of Commerce. Fellow Panellists included U Aung Naing Oo, the Director General of DICA and Secretary of the Myanmar Investment Commission (MIC), responsible for drafting the new Myanmar Investment Rules and Charles Schneider of the International Finance Corporation was the moderator. U Aung Naing Oo confirmed the government’s intention for the new rules to be fully implemented prior to the start of the next financial year, starting on April 1. He also clarified that until 31 December 2016, applicants for MIC Permits can apply under and still obtain the tax incentives available under the previous law (which for some investors will not be available under the new law).

2.Update: Myanmar Companies Law

The draft Myanmar Companies Law has already been reviewed and commented upon at different levels of government and is currently getting its final approval from the National Economic Coordination Committee, after which it will also need the final approval from Cabinet and Parliament before becoming enacted as law. It is the Government’s intention for the law to be enacted prior to the next financial year, starting April 1 2017.

The new law is going to modernise the regulatory framework providing more flexibility in how a company can be run as well as clarifying and defining the roles of the directors and shareholders. DICA, the corporate regulator is leading the reform of the company law, with members of the BLP team having been engaged to undertake the drafting of the new law and lead the consultation process. Shareholders and directors of companies in Myanmar should review the law to determine how they can benefit from its changes, as well as become aware of what the obligations of the company and its officers are. Click here for our review of the Myanmar Companies Law and how it may affect your company. We would be happy to discuss any questions you may have in more detail.

3.Update: Construction

• The Yangon City Development Committee (YCDC) announced earlier this month that it has completed its controversial review of high rise buildings, which has caused significant uncertainty in the sector over the last few months. YCDC announced that it will also start accepting applications for new high rise developments which it had stopped accepting since July this year. New applications will be reviewed in accordance with the existing rules and regulations, however, new rules and regulations are in the process of being drafted. The new rules are expected to include building coverage ratios, floor area ratios, provisions for the protection of heritage areas and height restrictions.

• Following a difficult year for contractors and developers with YCDC suspending all high rise construction, causing significant losses for the industry, Contractors have now officially set up their own industry association, the YCDC licenced Contractors Association to represent the interest of its members.

• The Thilawa SEZ announced that in connection with the development of the next phase of the project it is considering running a tender for the construction of condominiums which is to form part of the 80 acre residential zone within the SEZ. The residential zone will eventually include worker housing, hotels and other retail and commercial developments.

• JICA has announced that it will run a tender process for the construction of a new bridge connecting Yangon and Thanlyin over the Bago river. Construction of the bridge is expected to commence in the 2017-2018 financial year with a budget of USD280million.

4.Update: Power

•In addition to the a 300 MW power supply tender which was won by a Myanmar US consortium (see October’s Postcard, the Myanmar Electric Power Generation Enterprise (EPGE) is also intending to enter into a 300 MW power supply agreement with Karpowership, owner of the Turkish owned Karadeniz Powership Onur Sultan. Managing Director of EPGE U Khin Maung Win told The Myanmar Times that a Letter of Acceptance has been signed and that the vessel is expected to arrive in Yangon by April 2017. The Power Purchase Agreements are currently under review by Government and are expected to be signed in December.

• The Nam Mar Lone hydropower project with a projected 600 MW generating capacity was scrapped by mutual agreement between the Government and the developer after a reassessment of the dam found it not to be a financially viable project as well as facing difficulties due to land issues.

• A report on the controversial Chinese-backed Myitsone dam was submitted to the government on 11 November by a committee tasked with reviewing hydro-power projects. Details of the report have not been made public, but according to newspaper articles it is believed that the report recommended the cancellation of the project. The Government and the committee is expected to continue reviewing the project for the time being.

• BLP Chaired the recent Myanmar Power Summit in Yangon where speakers from Government and a range of international and local players discussed current issues in the sector. The potential of LNG as an alternative fuel source, particularly over the next decade until new domestic sources of gas are in commercial production, was debated and there was also a good discussion about Myanmar’s National Electrification Plan and current grid constraints. Procurement models for new power generation were also discussed, including the importance of using international standard, bankable documentation and purchasing structures to attract the necessary levels of investment from offshore.

5.State bank restructuring

The struggling Myanmar Agricultural Development Bank (MADB) has been placed under the control of the Ministry of Finance and Planning as part of a restructuring plan which may include corporatising and selling shares in the bank. The role of state banks as a whole is under scrutiny, with there being discussion on whether their focus should shift away from commercial banking so that they do not compete directly with private banks operating in Myanmar. State banks still hold 46% of the banking assets in the market. The World Bank is assisting the government in reviewing the role that state banks should play in the economy as part of the financial sector development plan, with funding support also coming from UK aid agency DfID.

6.Japan to Lend $867m to Yangon for Water Treatment Plants

With one third of residents in Yangon not having access to municipal water sources, development of water infrastructure is a priority for YCDC. The Greater Yangon Water Supply Improvement Project will be split into phases, with the first phase estimated to cost USD239m and is for the development of the Lagunpyin water supply station to increase supply capacity. Construction is expected to commence in June 2017 with the project being completed in 2018. The tender for completing the works for the project is currently underway.

7.Yoma spun-off tourism related businesses through reverse take-over

We recently acted for a group of Vendors including YOMA Strategic Holdings Ltd and First Myanmar Investment Company Limited in relation to the reorganisation and proposed spin-off and listing of their tourism-related assets on the Singapore stock exchange through the reverse takeover of Catalist-listed SHC Capital Asia Limited. The sale and purchase agreement with SHC was signed and announced on 24 October 2016 and the listing will occur upon the satisfaction of the conditions set out in the agreement. This transaction when completed will create the first Singapore-listed, Myanmar-focused tourism company. The transaction is being led by Singapore-based partner Manoj Purush and associate Debra Leong, with support from multiple offices including Hong Kong, Myanmar and London. More information about the deal can be found here:

8.Women in Energy conference

BLP sponsored the Women in Energy, Asia seminar on 8 November, held at the Fullerton Hotel Singapore. Panellists, including Singapore based BLP partner Nomita Nair, discussed the opportunities and challenges of investing in Myanmar with a particular focus on the energy sector. A discussion on the current political transition since the change of government early this year identified that while there was a willingness by the Government to work with investors to develop the power sector in Myanmar, uncertainties relating to government policy and capacity bottlenecks being experienced by regulators are posing difficulties for investors interested in the sector.

With the increasing importance of the role of regional governments in approving power sector projects, panellists discussed the importance of improved cooperation between government at the Union and state levels to ensure that projects are successful. Implementing PPP models was seen as a potential strategy for reaching the estimated USD40bn of funding required for Myanmar to achieve its electrification targets. Other challenges discussed included what can be done about the forecast fuel supply gap from 2021 – 2025 and what needs to be taken into account when determining what the future energy mix of the country should be. A link to the full summary can be accessed here.

9.Launch of BLP Yangon’s corporate services group

BLP Yangon has officially launched its corporate services group, comprising a dedicated team of professionals with extensive experience in helping investors establish and operate their businesses in Myanmar. The aim of the Group is to support market entry through assistance with incorporations and initial investment permitting as well as assist on the ongoing operational and compliance matters that each business will face, including maintenance of corporate books, annual filings, ongoing permitting, registration of employment contracts, adaption of standard form commercial agreements and policies. Click here to find out more about our corporate services group.

10.Myanmar Trade and Investment Conference and Delegation in London 28-30 Nov

The UK Department for International Trade recently organised the visit of a high level Government and business delegation from Myanmar to Britain, led by Myanmar’s Minister for Construction. The centrepiece of the visit was a conference on trade and investment in Myanmar, which was opened by UK Minister for International Trade Mark Garnier. The conference was organised around key sectors and themes of energy, infrastructure, financial services (banking and insurance) and education. BLP facilitated the infrastructure theme where the estimated $300 billion plus short-medium infrastructure funding requirement was discussed by panellists including Myanmar’s chief investment promotion official U Aung Naing Oo, the Permanent Secretary of the Ministry of Transport and Communications and the Head of Infrastructure at British development bank CDC.

A two day program of meetings and site visits followed the conference, with the energy sector group traveling to Scotland to visit power stations and specialist port facilities servicing the offshore oil & gas industry and meet with a range of training providers who can help with the development of Myanmar’s oil and gas sector supply chain. The infrastructure group travelled to view the successful Liverpool ports redevelopment project while the financial services team held meetings at the Bank of England and with a number of other major banks and insurance companies.

The visit helped raise awareness about Myanmar’s changing investment climate and opportunities and challenges in each of the focus sectors, as well as highlighting areas where British expertise and investment could help develop these.

11.English law on China’s Belt & Road

Chinese outward-bound investment and trade is undergoing dramatic developments due to the great opportunities created by China’s massive Belt & Road initiative. Myanmar plays a strategically significant role in the initiative with allowing access to the Indian Ocean and Bangladesh. As part of our focus on the initiative we have produced a new book which examines reasons why English law is so widely used in Belt & Road deals and the competitive challenge from Chinese law as an alternative. This book examines in detail: •the typical deal structures used on transactions under the initiative;

•the many choices of governing law and jurisdictions for dispute resolution;

•why English law is so widely used in Belt & Road deals; and

•dispute resolution methods to issues that may arise when different governing laws and jurisdiction clauses are being used on projects)

For a full summary and link to the book, please refer to the following article.

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