Effective Date of New Myanmar Companies Law confirmed by DICA
Further to our November edition of Myanmar postcard, following the Myanmar Parliament’s approval of the new Myanmar Companies Law, President U Htin Kyaw gave his approval to the same on 6 December 2017. Subsequently on 15 December 2017, the Directorate of Investment and Company Administration ("DICA") announced that the new law will become effective on 1 August 2018.
After such a lengthy process to approve the new law, the delayed commencement date surprised and disappointed many in the business community. The new law has the potential to improve business confidence and drive new investment, particularly in sectors which the law will help liberalise, such as banking, real estate and wholesale and retail trading. It also provides a comprehensive corporate governance regime and a more transparent environment for business conduct. There will also be a streamlining of company administration arrangements at DICA, the corporate regulator, and an online corporate registry is being developed as a related initiative. Completion of this registry project was cited by the Government as the main reason for the delay, however few of the provisions of the new law will be affected by it, and commencement could easily have occurred in stages, with the key reforms coming online immediately to give the economy a much needed shot in the arm. Many are hoping that consideration may still be given to this.
We welcome inquiries on the impact of the law and will be running client and market briefings on the implications of the new law for business over the coming weeks.
Please refer to our Myanmar Companies Law guide.
Roland Berger business survey
The new Roland Berger Myanmar business survey has been published, 12 months after the first publication in December 2016. The survey obtained responses from nearly 500 business owners and senior executives, from a wide range of Myanmar companies. 61% of the respondents were local companies and 39% were international firms.
The survey found that short-term optimism has declined across all sectors, with only 49% of respondents expecting the business landscape to improve in the next 12 months, compared with 73% in 2016. The conflict in Rakhine state is likely to have further reduced investor confidence in Myanmar.
The reasons given for the fall in investor confidence include: lack of trained staff; unclear government economic policy; an unpredictable legislative environment; and selective and unpredictable enforcement of regulations. Respondents did, however, feel that some positive steps had been taken, which include the new Investment Law and a reduction in corruption.
The survey found that respondents are looking to the Myanmar government to boost economic growth, by delivering clear plans and policies across the key sectors. One of the most important of these is the provision of a stable electricity supply (companies in Myanmar currently face frequent blackouts).
93% of the survey respondents are either optimistic or very optimistic about Myanmar’s longer-term potential. That can be contrasted with a significant deterioration in business confidence in Myanmar (amongst both local and international firms) in the short term.
The survey notes that Myanmar is in competition for international investment with other markets in Southeast Asia, such as Vietnam. Multinationals currently face a number of challenges to doing business in Myanmar, including real difficulty in recruiting employees with sufficient experience. On a positive note, the lack of clear economic policy does offer multinationals an opportunity to influence the government and to provide investment proposals. Overall, the survey suggests that multinationals wishing to do invest in Myanmar should make the decision to do so on a long-term basis.
New Myanmar Condominium Rules
The Condominium Rules (the “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.
The Rules set out what documents are required to apply for an Operating License to develop a condominium and the screening procedures to be applied by the relevant authority in deciding whether to approve or refuse the issuance of the license.
Foreign investors will welcome that the Rules which apply to a foreigner or foreign entity state that a foreigner or foreign entity can be a joint developer of a condominium, but it will be necessary for the foreigner or foreign entity to obtain the approval of the relevant Management Committee, an MIC permit or endorsement and to put in place a formal agreement with the Developer.
It is also worth noting that Rule 34 declares that the Developer, Joint Developer and Collective Owner must not sell more than 40% of the apartments in a condominium to foreigners out of the total saleable floor area of the condominium. Rule 36 offers the ownership right of the foreigner who buys the apartment in the condominium and the ownership right will last as long as the condominium term is in validity.
Please see link to the Myanmar version of the Rules and please contact us if you would like an English translation.
Japan pledges Yangon infrastructure aid
Japanese investment in Myanmar infrastructure and other sectors seems to be increasing, alongside enhanced government to government initiatives. Myanmar media cited Japanese government officials saying that the countries are in talks for further projects to improve and develop further projects in Yangon. This is in line with Prime Minister Abe’s continued support for the reforms in Myanmar. The Japanese Prime Minister is also expected to announce further plans on improving bilateral ties between the two countries that would include more Japanese investments into Myanmar.
IMF issues revised growth forecast for Myanmar
The IMF reported Myanmar’s economy to be improving with macroeconomic imbalances being stabilised. They expect a respectable recovery of up to 6.7 percent in 2017/2018. The medium-term also remains favourable even with greater downside risk. For capacity development, a second wave of reforms are needed to speed up the progress as well as foster inclusion.
Yangon proposes K212 billion interim budget for Apr-Sep 2018
Following the change of the Myanmar fiscal year, a budget of K212 billion has been proposed by the regional Planning and Finance Minister, U Myint Thaung, to cover the interim period between the current 2017-2018 fiscal year and new 2018-2019 fiscal year.
The fiscal year in Myanmar had previously run from 1 April to 30 March but from next year it will run from 1 October to 30 September. This change was approved in Parliament in late October, in an effort to facilitate purchasing and infrastructure budgeting during the dry months from November to May.
The current fiscal year will therefore end on 1 April 2018, with the new fiscal year beginning on 1 October 2018. To cover the period between 1 April 2018 and 30 September 2018, an interim budget has been drawn up based on the 45 townships of the Yangon Region. U Myint Thaung has said that the budget will be used for “the construction of roads and bridges, extension of electricity and distribution of drinking water”.