New trade agreement between Hong Kong and ASEAN
A new Free Trade Agreement (“FTA”) between Hong Kong and the Association of Southeast Asian Nations (“ASEAN”) and a related Investment Agreement are set to increase opportunities for trade and business between Hong Kong and Myanmar. The two agreements cover a range of trades in goods and services, technical co-operation and mechanisms for dispute resolution.
The FTA provides that Hong Kong will drop tariffs on a number of goods originating from ASEAN member states by 1 January 2019. ASEAN member states will correspondingly lower their tariffs on a number of items, though subject to a slower timeline. The changes will no doubt bolster an already positive increase in trade between Myanmar and Hong Kong: during the first nine months of 2017, trade from Hong Kong exports to Myanmar increased by 57.7% whilst return imports rose by 26.2%. The agreements also provide for enhanced market access and non-discriminatory treatment for services and increased protection for investments; and aim to provide greater transparency and fair domestic regulations amongst the countries involved.
Hong Kong’s Secretary for Commerce and Economic Development, Mr Edward Yau, said that “the FTA and Investment Agreement build on the close business relationship between Hong Kong and ASEAN and enhance access to opportunities related to the Belt and Road Initiative”. As we reported in our September edition of 2017 Belt and Road Insights, as part of its agenda, the Hong Kong Government is driving for closer collaboration on Belt and Road project between Hong Kong and ASEAN.
YSX online trading platform update
The Securities and Exchange Commission of Myanmar (“SECM”) is testing online trading and six securities companies have been granted approval for it, according to a Yangon Stock Exchange (“YSX”) manager, U Thet Tun Oo. These securities companies include AYA Trust Securities, CB Securities, Myanmar Securities Exchange Centre, KBZ Sterling Coleman Securities, KTZ Ruby Hills Securities and Amara Investment Securities.
According to reports, as of January 2017, Myanmar had 33 million mobile users and 80% of these users were users of smartphones. Officials from YSX and the SECM say that the new online trading platform could persuade people to invest in the country’s capital markets.
In the nine months since the YSX opened, five companies have been listed on the YSX, two of which were listed this month. According to U Maung Maung Win, deputy minister for planning and finance and chair of the Myanmar Securities Exchange Supervisory Commission, market capitalisation at the exchange reached US$597m and trading value was US$3.4bn in nine months, higher than in Vietnam and Laos after a year of trading.
Outlook for real estate market and review of Yangon’s property tax system
Property investments by foreigners into Myanmar are expected to spike, according to U Aung Naing Oo, secretary of the Myanmar Investment Commission. This prediction comes in the wake of the new Condominium Rules, which were signed by the Union Minister of Construction on 7 December 2017, were published on the Ministry of Construction’s website on 15 December 2017. Notably, the new Condominium Rules will relax certain restrictions on foreign investment. The new Condominium Rules were covered in our December edition of 2017 Myanmar postcard. The new Condominium Rules, together with other recent legislative reforms facilitating foreign investment (such as the Myanmar Investment Law and the new Companies Law), are expected to contribute to increased demand for properties in Myanmar.
Mixed development projects are also expected to grow. One example is the Yoma Central project, which will feature luxury residences, office towers, a business hotel and serviced apartments, and connecting retail. BLP has been advising the sponsors on this project, which is targeted to be completed before the end of 2020.
In addition, the Yangon Regional Government intends to review and restructure the city’s property tax system, according to an announcement made by Chief Minister U Phyo Min Thein in December 2017. The official property tax rate in Yangon is currently 13% of the annual rental value. U Phyo Min Thein expressed the view that property tax rates in Yangon are relatively low, and tax reforms could potentially contribute to better infrastructure in the city.
Minimum wage update and reforms to labour market
Representatives of the Myanmar government, employers, civil society and international partners met this month to discuss the issues and progress being made in the efforts to implement labour market reforms. U Thein Swe, Minister of Labour Immigration and Population reaffirmed the government’s commitment to reforming Myanmar’s labour laws. The meeting was part of the International Labour Organisation’s (“ILO”) ‘Initiative to Promote Fundamental Labour Rights and Practices’ and follows the ILO’s guide to Myanmar labour law published in September last year. In their guide, amongst other things, the ILO recommended minimum-age requirements for workers, establishing maximum working hours and suggested guidelines for parental leave.
The meeting represents a continuing move by the government to reform labour markets in Myanmar including the introduction of a minimum wage in 2015. Most recently Myanmar’s National Minimum Wage Committee published a recommendation that the minimum wage be increased to 4,800 Kyats (approximately US$3.60) for a standard eight-hour work day with overtime paid in accordance with the relevant law specified for the overtime purposes. The rate proposed represent a 33% increase from the current rate of 3,600 Kyats and will apply to all businesses employing ten or more people.
Change of various ministers
The Myanmar Government has recently seen a number of significant changes in ministerial positions, including the following:
- U Thar Oo has been appointed as the Deputy Minister of Transport and Communication;
- U Aung Hla Tun has been appointed as the Deputy Minister of Information;
- U Win Khaing, the current Union Minister of Construction, has been designated as the Union Minister of Electricity and Energy; and
- U Han Zaw has been approved as the new Minister for Construction
A number of regional ministers have also been allowed to resign over the last month, as follows:
- U Ba Hein, the Minister of Ayeyarwady Region Agriculture, Livestock and Environmental Conservation;
- U Soe Myint, Minister for Agriculture and Irrigation of Magway Region;
- U Nay Myo Kyaw, Minister for Labour, Immigration and Population of Magway Region; and
- U Mann Jonny, Chief Minister of Ayeyarwady Region. He has been replaced by U Hla Moe Aung.
It has been speculated by the local press that the changes have been made in anticipation of the upcoming 2020 general elections, which are expected to be more contested than previous elections, after the National League for Democracy have been seen to have been slow in delivering campaign promises and the emergence of new political parties vying for election.