New Companies Law Submitted to Parliament
On 20 July 2017, the Myanmar government submitted a draft of the new Companies Law to the Upper House of Parliament.
Dr Myat Nyana Soe, secretary of the Upper House Bill Committee, emphasised that the current Companies Law imposes many restrictions on businesses, causing difficulties in attracting foreign investment to Myanmar. Conversely, it is envisaged that, under the new Companies Law, it will be easier to establish companies and possible to register them electronically. The new Companies Law is also expected to promote capital markets activities in Myanmar.
As mentioned in our April 2017 postcard, the director general of the Directorate of Investment and Company Administration, U Aung Naing Oo, has stated that the new Myanmar Companies Law is envisaged to be enacted into law before the end of this year.
Members of the BLP team were engaged to undertake the drafting of the Myanmar Companies Law and to lead the consultation process. See our review of the Myanmar Companies Law (in English and Burmese) explaining its effects on companies operating in Myanmar.
Updates to Employment Legislation
The Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry (“UMFCCI”) in cooperation with the International Labour Organisation is conducting workshops to reform various labour laws in Myanmar. One of the laws under review is the Labour Organisations Law which deals with the formation, operation and responsibilities of labour organisations and the rights and responsibilities of workers and employers in relation to their dealings with labour organisations.
The UMFCCI is also requesting that government officials remove imprisonment sentences from labour laws that could discourage foreign investment. The UMFCCI has suggested that increasing fines in labour laws instead of imprisonment sanctions should be more effective in combating non-compliant conduct.
Central Bank of Myanmar (“CBM”) Issues Regulations Governing Domestic Banking Sector
Following the enactment of Myanmar’s new Financial Institutions Law in 2016, the CBM has issued long-awaited regulations for the domestic banking sector, comprising the Capital Adequacy Regulations (“CAR”), Asset Classification and Provisioning Regulations, Large Exposures Regulation and Liquidity Ratio Requirement Regulation.
Under the new regulations, banks are required to maintain a liquidity ratio above 20%. Lending to a single party shall be limited to 20% of shareholder equity. In addition, banks must also maintain unsecured large exposure loan portfolios at a cumulative value below total shareholder equity.
All banks will have six months to comply with the new regulations. State-owned banks may be exempted from certain requirements, such as large exposure restrictions.
Tender Call to Upgrade Three Domestic Airports
The Department of Civil Aviation (“DCA”) is to issue a tender call for developers to upgrade three existing airports in Myanmar: Kawthaung airport in the Tanintharyi Region, Mawlamyine airport in Mon State and Heho airport in Shan State. The upgrades are planned to be conducted through a public private partnership ("PPP") arrangement and are envisaged to require a lot of investment.
The intention is for Mawlamyine and Heho airports to become major domestic airports and for Kawthaung airport to become an international airport. The biggest upgrade will be to Kawthaung airport as part of the long term plans to boost tourism in southern Myanmar. According to the Ministry of Hotels and Tourism, there were approximately 360,835 visitors to the Tanintharyi Region in 2016, with the majority of these visitors (approximately 346,586) landing in Kawthaung airport. This year, between January and April alone, there were over 140,847 visitors to the Region already, with approximately 130,000 arriving at Kawthaung airport. The intention is for this airport to be able to accommodate both overseas charters as well as scheduled flights in the Region. BLP has extensive experience in airport developments around the world and would welcome speaking to any interested investors or developers with respect to these projects.
Myanmar: swelling and unsound or slow and stable?
Between the years of 2014 and 2015, Myanmar’s fiscal deficit was 1.2 percent of gross domestic product ("GDP"); compare this to the current figure of 4.8 percent, teamed with the International Monetary Fund’s guidance that a country’s fiscal deficit should not go beyond 5 percent of GDP, and it’s easy to see why commentators may be concerned.
It has been reported that the account/trade deficit has ballooned due to the depreciation of the kyat and a decrease in export trade compared to imports, while foreign direct investments have also fallen from US$9 billion in 2015-2016 to US$7 billion between 2016-2017.
However, at the Myanmar Banking & Payments Conference in Yangon on 24 July, Sean Turnell, Senior Economic Advisor to the government was promoting the image of a more stable, albeit slower, growing Myanmar economy. He stated that the government’s objective is to move away from central bank fiscal deficit funding; instead establishing a bond market and proper bond auction to assist with funding. In addition, it will work on widening it’s taxation net – currently Myanmar collects the least amount of taxes in ASEAN – and aim to float the kyat, which has been under a managed float regime since 2013.
For now, according to Turnell ‘Myanmar’s story is one of stabilisation and slower growth’. Only time will tell whether Turnell’s predictions are correct but for now it appears that the government is attempting to take the right steps towards stabilising Myanmar’s economy.