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Myanmar Postcard - Our Top Picks for August 2018

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Summary: Welcome to the eighth edition of our monthly Myanmar update in 2018. We have distilled the top news items into this summary 'speed read'.

Myanmar to permit foreign banks to provide import financing

The Central Bank of Myanmar (“CBM”) has announced its plans to further open up its financial services sector by allowing 13 foreign banks who currently hold banking licences (“Existing Foreign Banks”) to provide import trade financing services.

Currently, the Existing Foreign Banks operating in Myanmar are only permitted to provide export trade financing services but this move by the CBM will now allow such foreign banks to provide the full suite of trade financing services. A move that is hoped to facilitate trade and help maintain the price of imported products.

There are also plans in place for the CBM to allow importers to open accounts at foreign banks and to allow the banks to expand their services. This comes in response to the foreign banks’ requests for licenses to provide more services.

Presently, the Existing Foreign Banks are the only foreign banks allowed to operate in Myanmar and their services are restricted to providing export financing and wholesale banking. While the CBM is still reviewing these requests, the director general of the CBM’s Governor’s Office, U Win Thaw, has said that as the CBM relaxes more of its regulations, foreign banks will eventually be able to provide retail banking services, such as savings accounts and loans.

U Win Thaw added that in the future, equal treatment will be given to foreign banks and local private banks, which will allow more foreign banks to open branches in Myanmar and participate in the economy.

Myanmar to increase taxes on alcohol and cigarettes

The Myanmar government has submitted its Union Taxation Bill for the 2018-2019 fiscal year which includes higher tax rates on alcohol and cigarettes.

The deputy minister of the Ministry of Planning and Finance, U Maung Maung Win, said that the taxes have been raised to adjust for inflation and GDP growth, and will help the government generate higher tax revenues.

The total estimated tax revenue for the 2018-2019 fiscal year is approximately MMK7.5 trillion. More than half of this revenue is expected to come from income and commercial taxes and the rest will come from special commodities taxes on alcohol, cigarettes and vehicles, as well as customs, oil and gas extraction.

The new bill will take effect on 1 October 2018, with the price for a packet of cigarettes increasing from MMK400-MMK801 to MMK600-MMK1,001. The tax per packet of cigarettes will increase from MMK4-MMK16 to MMK6-MMK21.

The taxes on alcohol will be divided into 16 price tiers but there will be no difference in the rates for beers and wines. For the lowest tier, the minimum price per litre will be increased from MMK750 to MMK1,000, with the taxes paid per litre increasing from MMK91 to MMK122. For the highest tier, the price per litre will be increased from MMK26,000 to MMK29,000, with the taxes paid per litre increasing from MMK5,100 to MMK6,703.

MIC now allows up to 80% of foreign investment in the Agriculture sector

U Than Aung Kyaw, the deputy director of the Myanmar Investment Commission (“MIC”), was cited by the Myanmar media as saying that the MIC now allows foreign investments of up to 80% in joint ventures (“JV”) with local businesses in the agricultural sector.

Previously, foreigners were only allowed to invest up to 49% of a JV. The change in law is expected to bring more foreign investment into the country’s agriculture sector. Currently, local and foreign investment in Myanmar’s agriculture sector adds up to less than 1% of the total investment across all sectors. This is an extremely low figure for a sector that contributes around 40% towards the country’s gross domestic product.

Additional guidelines for investments in the Education sector

The Directorate of Investment and Company Administration (“DICA”) has released a list of further guidelines and specifications on 10 August 2018 following the MIC Notification No. 7/2018 which was issued in April. As covered briefly in our 2018 April edition of Myanmar Postcard, the notification now allows 100% foreign investment in many types of education services in the form of private schools across the sector.

The 17 points guidelines provides more details on the types of investments, qualifications and code of conduct for teachers and students.  

Rakhine State and UN findings update

The United Nation’s (“UN”) independent international fact finding mission on Myanmar military’s actions against crackdown on the Rohingya has finalised its report a year after the violence in the Rakhine State. It calls for international prosecution of Myanmar’s military leaders, including Senior General Min Aung Hlaing, for the genocide against the Rohingya.

The full report, which is due to come out on 18 September 2018, recommends the UN Security Council to refer Myanmar’s military leaders to the International Criminal Court in the Hague or for an ad hoc international criminal tribunal to be created to investigate the actions of the perpetrators.

Although the Myanmar government refutes the report as one-sided, international pressure is mounting and already, Facebook has banned 20 Myanmar individuals and organisations, including Senior General Min Aung Hlaing, and more than 50 other Facebook Pages from its platform. The United States’ (“US”) State Department, which has prepared its own report, also confirmed that the UN report is consistent with its own and this could mean that much tougher US action is imminent against Myanmar.

Rakhine State and the International Criminal Court Pre-Trial Chamber Decision

On 6 September 2018, Pre-Trial Chamber I (the "Chamber") of the International Criminal Court ("ICC"), decided by majority that ICC may exercise jurisdiction over the alleged deportation of the Rohingya people from Myanmar to Bangladesh.

This ruling was delivered following a request submitted by the prosecution team pursuant to article 19(3) of the Rome Statute of the ICC (the “Rome Statute”). The Chamber ruled on this basis that the Court has jurisdiction over the crime against humanity of deportation allegedly committed against members of the Rohingya people. The reason given was that an element of this crime (the crossing of a border) took place on the territory of a State party to the Rome Statute (Bangladesh). The Chamber further found that ICC may also exercise its jurisdiction with regard to any other crime set out in article 5 of the Rome Statute, such as the crimes against humanity of persecution and/or other inhumane acts.

The Chamber's decision can be viewed here.

In response the Office of the Myanmar President released a statement on 7 September 2018. Myanmar reiterated its position, that not being a party to the Rome Statute, it is under no obligation to follow the ruling of ICC. The statement also pointed out the signing of several bilateral agreements (regarding the matter) between Myanmar and Bangladesh and the two countries’ collaboration to repatriate those displaced from their homes.
 

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