Ministries and Ministers - Post-election update
The new president of Myanmar, U Htin Kyaw, was sworn-in on 30 March 2016 pledging to prioritise peace, reconciliation, and the establishment of a democratic constitution.
Following the inauguration, the National League for Democracy (NLD) also announced its cabinet and regional Chief Ministers, as well as other key positions. Read for our lists of these appointments.
Daw Aung Sang Suu Kyi will remain in a powerful position within government. Her ministerial positions grant her a place on Myanmar’s National Defence and Security Council, and she will remain leader of the NLD despite the constitution barring senior Government officials from party activities. Daw Suu has also been granted the newly created role of State Counsellor.
The government passed the State Counsellor Bill, which creates the role of State Counsellor, on 6 April. The position will allow Daw Suu to deal directly with government ministries, departments, organisations and associations, and makes her accountable to Parliament. However, the role is only advisory, and Daw Suu does not have authority to make decisions herself.
It was reported that the military MPs opposed the vote, proposing 13 amendments and arguing that the Bill was unconstitutional as it grants Daw Suu both legislative and executive powers. However, the NLD-dominated parliament overwhelmingly voted to pass it unamended.
Separately, the list of regional Chief Ministers includes two women, the first female regional Chief Ministers in Myanmar’s history. This is suggestive of a more progressive approach from the NLD.
Myanmar Investment Commission (MIC) produces updated List of Restricted Business Activities
The MIC has published an updated list of restricted business activities (Notification No. 26/2016). This replaces the previous list (Notification No. 49/2014).
The list now prohibits activities which may damage rainforests, sacred places and places where traditional worship is done, pasture land, hillside cultivation, farm land and water resources. This is consistent with an increased environmental focus, but the wide drafting has caused concern among some commentators that the restriction could be used to limit or block investment across a range of sectors. The MIC has confirmed that the restriction is intended to monitor the location of a project, rather than the activity itself. Even so, some feel that the rule may put the onus on investors to prove that projects comply. A more workable long-term approach may be to develop stronger frameworks for the assessment, conditioning and ongoing monitoring of a project’s environmental impact over time, with this backed up by consistent conditions in the investment permit, rather than as an assessment which may need to be made at the project application stage.
Some commentators have also expressed concern that the insertion of the phrase “service businesses that do not have investment nature must be conducted under the approval of relevant Ministry” (unofficial translation) may increase regulation of service businesses, which generally do not fall under the Foreign Investment Law and MIC’s control at present. The new requirement sits alongside an amendment requiring permission from the relevant Ministry for service businesses which the MIC judges “are not suitable as an investment”. Commentators have queried whether this adds an extra burden on investors, requiring them to speak to Ministries as well as the MIC. However, our view is that this is likely to be only intended to clarify MIC/DICA’s role.
There have also been a number of minor changes including:
(a) a new category requiring investors manufacturing, selling or distributing vaccines to enter into a joint venture (JV) with the government and to comply with World Health Organisation standards; and
(b) removal of JV restrictions on seed production, rubber manufacturing, and ecotourism businesses.
These changes reflect a cautious liberalisation and show the priority which is being attached to development of the health and agricultural sectors.
We expect that the list will be further reviewed when the new Foreign Investment Law is considered by Parliament, likely to be this year. As there is still uncertainty around the interpretation of some restrictions, it is important that investors engage with the MIC at an early stage when planning investments.
Anti-bribery and corruption guidelines published
On 1 April 2016 the NLD government circulated to all government departments guidelines for the acceptance of gifts. This forms part of the government’s wider anti-bribery and corruption drive. View our analysis of the guidelines.
Central Bank of Myanmar (CBM) releases Mobile Financial Services Regulations
The CBM has released regulations for mobile financial service providers (MFSPs), opening up the sector to non-banking financial institutions. The regulations set out the application requirements and MFSPs’ duties. An unofficial translation is available on the CBM's website.
MFSPs can offer various services including money transfers, domestic payments, and the payment and withdrawal of funds. They are not permitted to make or receive international transfers. Companies applying for a licence must pay a fee of K300m (c.US$2,500) and must have funds of at least K3 billion (c.US$2.5m).
The new regulations are intended to promote access to banking services, particularly in rural areas where the population often has limited access to traditional banking. The government has set a target of access to financial service for 40% of the population by 2020.
Fourth telecoms licence awarded
Our February Postcard reported that seven companies had expressed interest in Myanmar’s fourth telecoms licence.
Viettel, a Vietnamese mobile operator, has now been announced as the preferred foreign operator to own a minority stake in a joint venture company which will receive the fourth telecoms license. The joint venture will be formed together with Myanmar National Telecom Holding Public Limited (a consortium of 11 Myanmar companies), as well as a subsidiary of the military-run Myanmar Economic Corporation.
Since the award of the telecoms licenses to foreign operators Telenor (Norway) and Ooredoo (Qatar) two years ago, mobile phone penetration has grown from 9.5% to around 78%. The government has targeted 90% penetration by 2020, and has reportedly tasked the JV with improving coverage in rural areas where access is still limited.
Yangon Stock Exchange (YSE) open for trading
YSE opened for trading on 25 March 2016. Out of the six companies reported in our March Postcard as being eligible to list, First Myanmar Investment Co., Ltd. was the only company with shares available to trade on the opening day. Myanmar Thilawa SEZ Holdings Public Limited is expected to start trading early in the second quarter of 2016. YSE is reportedly aiming to attract between 30 - 50 companies onto the market in the next five years. Trading is currently restricted to domestic investors, but commentators have suggested that as the market develops in due course the regulations may be relaxed to open up the market to foreign investment.
Directorate of Investment and Company Administration (DICA) de-registers 1,355 firms
In September 2015, companies regulated by DICA were requested to update it as to whether they were still active and carrying on a business.
On 8 April 2016, DICA deregistered 1,355 companies for failing to respond to this request. Of the deregistered companies, 1,095 are domestic companies and 260 are foreign entities. The list of de-registered companies (in mixed Burmese and English) is available on DICA's website.