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Myanmar Postcard - Our top picks for September 2017

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Summary: Welcome to the ninth edition of BLP's monthly Myanmar update in 2017. We have distilled the top news items into this summary 'speed read'.

Singapore and China lead foreign investments in Myanmar 

Local investments amounting to K1.57 trillion and foreign investments amounting to US$7.44 billion were made in the 2016-17 fiscal year, according to Deputy Minister of Planning and Finance U Set Aung, at the Pyidaungsu Hluttaw on 31 August 2017.

U Set Aung attributed the piqued interest in foreign investment to the implementation of the new Myanmar Investment Law, which we have covered previously in our Myanmar Investment Law Insights. He also mentioned that in the 2016-17 fiscal period, investments had come from places including Lebanon, Ireland and Brazil which had never previously pushed capital into Myanmar and that investment from the likes of Australia, Bangladesh and Canada had returned after a break of over ten years. The communications and transportation sectors dominated, receiving a combined total of 46.3% of the investments from abroad.

According to the Myanmar Investment Commission, Singapore topped the list of foreign investors. Singapore has usually been used as a conduit by investors from countries where economic sanctions have been imposed on Myanmar.

China comes in second. According to the Myanmar Chinese Chamber of Commerce, Chinese investors have keen plans for further investment and development, including the construction of an international airport, a port and various housing projects. Just recently, from 15 September to 18 September 2017 in Yangon, Myanmar hosted the 14th World Chinese Entrepreneurs Convention for the first time. The event is focused on Chinese investors wanting to explore business opportunities in the region.

Loans for agricultural and construction sectors

A new plan has been drawn up to provide capital funds to businesses in the agricultural sector, the construction sector and SMEs nationwide, in order to encourage expansion. This plan was unveiled by the Union Minister for Planning and Finance, U Kyaw Win, at the 9th Private Sector Development Meeting at the Union of Myanmar Federation of Chambers of Commerce and Industry (“UMFCCI”), which took place on 28 August 2017.

As it currently stands, agricultural loans are provided by the Myanmar Agricultural Developmental Bank (“MADB”) and construction loans are provided by the Construction and Housing Development Bank (“CHDB”), the latter having itself received K30 billion in funds from the Myanma Economic Bank in addition to an ODA loan from the Japan International Cooperation Agency ("JICA"). Financial assistance is provided to SMEs by the Small and Medium Industrial Development Bank, as well as some other private banks.

The new plan is for businesses in the construction sector to be eligible to receive loans from both the MADB and CHDB, through the Myanmar Economic Bank (“MEB”). The aim is to encourage local developers to develop and build at a more efficient rate. An amendment to the condominium law is currently under legislative consideration which will give non-Myanmar citizens the legal right to buy property and which is anticipated to give a parallel boost to the real estate and banking sectors.

In the agricultural sector, only farmers are currently eligible to receive loans from the MADB but the new proposition will extend these loans to businesses further along the supply chain.

For the SME sector, financial assistance will be given to those involved in ethnic cultural and traditional work and household work. It is intended that priority will be given to SMEs involved in developing domestic products to replace those currently imported.

There are also plans to set up a development bank with the Central Bank of Myanmar to alleviate the ongoing liquidity problems faced by local banks.

New Tourism Bill published for consultation

A new Tourism Law Bill ("TLB") was published for consultation on 15 August 2017. The TLB has been drafted by the Ministry of Hotels and Tourism in order to modernise Myanmar’s tourism regulations by incorporating international standards, to promote sustainable development of tourism which respects the environment, cultural traditions and existing business and social laws, and to support effective marketing of Myanmar as a tourist destination both domestically and internationally. The TLB also aims to support the development of eco-tourism. If passed, the TLB will repeal the existing Myanmar Hotel and Tourism Law of (The State Law and Order Restoration Council Law No. 14/1993), which is not reflective of modern tourism standards and practices.

Myanmar has a growing tourism sector and as of May 2017 the government had approved operating licenses for 144 new hotels since the National League for Democracy Party took power. In 2016, 2.91 million tourists visited Myanmar and the government, recognising the potential for further growth, has set a target of raising this figure to 7.48 million by 2020.

Tourism is considered to be ahead of other sectors in Myanmar in having a number of policies and plans already in place to guide its development. These were installed under the stewardship of the previous Minister for Tourism, U Htay Aung and the TLB is intended to continue the positive theme in the tourism sector under the current Minister, U Ohn Maung, who himself spent his earlier career working in the tourism industry.

The TLB contains provisions for the creation of a number of public bodies, including:

  • Central Committee for the development of the national tourism sector;
  • Tourism Authorities operating at both state and regional levels; and
  • a new Inspectorate formed to inspect tourism industry businesses.

The TLB reflects the government’s intention to develop the tourism sector and the contributions that it makes to Mymanar’s economy. Myanmar’s rich cultural heritage is an asset that should be fully utilised in order to benefit the country. The new provisions proposed by the TLB should provide a welcome update to the law currently in force.

New Employment Contract Template issued

On 28 August 2017, Myanmar’s Ministry of Labour ("MOL") issued the new Employment Contract Template ("ECT"), which has now replaced the previous version. Notification 1/2015, issued by the MOL in August 2015, required all employees in Myanmar to be employed under a “prescribed employment contract template”, with effect from September 2015. The version that was launched in 2015 was drafted primarily for factory workers and as such was not suitable for use by other businesses. Petitions requesting the withdrawal or amendment of Notification 1/2015 were subsequently filed by labour unions, UMFCCI and other stakeholders. The new ECT has been launched following bipartite meetings between the UMFCCI and labour unions, who negotiated a draft and submitted it to the MOL for approval.

The revisions to the previous version of the ECT include the following:

  • less repetition of Myanmar labour law;
  • clarification of the calculation of the length of employment for the purpose of assessing severance payments;
  • the introduction of funeral leave; and
  • additional reasons for termination.

Although the new form of ECT improves upon the previous version, there are still a number of areas that are uncertain and which would benefit from further amendment or guidance issued by the MOL. For instance, the new ECT states that an employer and employee may cancel an employment contract by mutual agreement, but does not provide any further detail. Similarly, the ECT states that the signed contract must be submitted to the relevant Township Labour Office ("TLO"), but does not state what the TLO will subsequently do with it (the previous version of the ECT stated that the TLO was required to review, approve and register it).

Amendment of the Telecommunication Law

Minor amendments to Myanmar’s Telecommunication Law were published in the Daily Mirror on 30 August 2017 having come into force on 29 August 2017. The Telecommunication Law was originally enacted and came into effect on 8 October 2013.

The amendments have resulted in changes to the statute so as to reduce the maximum imprisonment penalty and identify a maximum financial penalty which can in some ways be considered welcome. However, some users of the telecommunications network such as social media users and journalists who are considered to be critical of the government or otherwise may still feel that the amendments do not go far enough as it leaves open the possibility of still being arrested if a complaint is made against them.

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