Myanmar - Investment Legal Framework for Energy Sector

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Investment Legal Framework for Energy Sector
www.duanemorris.com
Oliver Massmann – Partner
DUANE MORRIS SELVAM
omassmann@duanemorris.com;

2. www.duanemorris.com2
Outlines
Today’s Myanmar
Economic Policy
Foreign investment legal Framework
Creation of Enabling Business Environment
Foreign Investment Opportunities
Facilitation of Business

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Today’s Myanmar
The Republic of the Union of Myanmar
The New Government has taken its duty of the state since 31st March 2011
Reforms
Focusing on Politics: National Reconsolidation, Peace and Stability , Freedom of Media
Focusing on Economic Development: Invite more FDI, Change Trade Policy,
Monetary & Finance Policy
Focusing on Administrative Measures: Good Governance, Clean Government and
Efficient Administration
Focusing on Private Sector Development: SMEs Development, To be a modernized
developed industrialize nation

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Myanmar’s Reform Efforts
April2012
Managed
Floating Rate
System Adopted
November2012Foreign
Investment Law
•Rules & Regulations
passed January 31,
2013
•Clarifies investor
rights & incentives
for investments
•Clarification on
types of investment
activities
•Classification of
Types of Business
Activities (MIC’s
Notification No.
49/2014 and
50/2014 issued on
14 August 2014; and
51/2014 issued on
19 August 2014.
July2013
Central Bank Law
passed
•More Autonomy for
Central Bank
October2014
Issued Operating
License to 9
Foreign banks
•3 Japanese Banks:
Bank of Tokyo-
Mitsubishi UFJ,
Sumitomo Mitsui
Banking Corp., Mizuho
Bank Ltd.
Launching of 1st
Myanmar Report
Issued OECD
Investment Policy
Review 2014
Included in WB
East of Doing
Business Report
April2015
SME
Development
Law passed by
Parliament
•SME
Development
Central
Committee was
formed in January
2013
•Aims to address
Market Access,
Finance Access &
Capacity needs of
SMEs
Minimum wage
has set at Kyat
3600 (around USD
2.80) and will be
implemented from
September 2015
(Notification No.
2/2015 of National
Committee for
Minimum Wage)
OngoingReforms
Reformation of
Myanmar
Company Act
Consolidation of
Foreign Investment
Law and Citizen
Investment Law
4

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Economic Policy Objectives
Sustainable development of agriculture towards industrialization and all round
development;
Equitable and balanced development among Regions and States;
Inclusive development of entire people;
Accuracy of Statistics and Statistical Systems

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Myanmar’s Priorities
Rural Development and Poverty Reduction
Agriculture development and industrialization
Energy sector development
Telecommunication development
Microfinance for rural people and SMEs
Education and health sector development
HRD

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Myanmar Data in 2013-14
FDI Inflow 4.1 Billion USD (2015-16 budget year - as of
July 2015 was 2.649 Billion USD)
Population(2014) 51.4 Million
GDP Growth 8.7% (GDP in 2014 USD 64.33 Billion)a
Export 11.2 Billion USD
Import 13.8 Billion USD
Trade Balance USD 2.6 Billion Deficit
Tele Density 14.8% (2014-15- 41.17% )
a) World Bank Database

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Foreign investment legal Framework
The Union of Myanmar Foreign Investment Law (State Law and Order
Restoration Council, Law No. 10/1988). Its Procedures.
8
Classification of Types of Business Activities (MIC’s Notification No.
49/2014 and 50/2014 issued on 14 August 2014; and 51/2014 issued
on 19 August 2014.
Foreign Investment Rules (MNPED’s Notification No. 11/2013), 31st
January 2013.
The Foreign Investment Law (Pyidaungsu Hluttaw Law No. 21/2012), 2nd
November 2012
The Special Economic Zone Law was enacted in 23rd January2014.
The State Owned Economic Enterprises Law Covered 12 Activities including
Exploration, extraction and sale of petroleum and natural gas.)
Classification of Types of Business Activities (MIC’s Notification No.
1/2013), 31st January 2013.

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List of Economic Activities under Prohibition
List of Economic Activities to be allowed only in the form of
Joint Venture with Myanmar Citizens
List of Economic Activities Permitted with the Specific
Condition
1. List of Economic Activities Permitted with the
recommendations of the Relevant Ministry and Required
Joint Venture with the Citizen
2. List of Economic Activities Permitted with Other Conditions
and required Joint Venture
Notification No. 49/2014

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Economic activities which required Environmental Impact
Assessment
Notification No. 50/2014

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Investment Activities that are not required to grant
exemption and relief from tax
Notification No. 51/2014

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 Legal framework : enactment of new FIL, SEZ & Rules for those laws
 Policy framework : more open, more transparent
 Institutional framework : new setup of the MIC
 Procedural framework : streamlining, simplifying, establishment of OSS
Creation of Enabling Business Environment

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Previous Investment Regime Current Investment Regime
Limitations
- To Lease the Land
(No option to lease the
land from private)
- Import Goods
(No option except MIC
permit)
- VISA
- Operating with
Foreign Currency
MFTB, MICB only
Relaxations
- Right to lease the land from
Private
Notification No. 39/2011
- Issued Import License (MOC)
Import goods concern
with business
- VISA
DICA will recommend
- Operating with Foreign
Currency
MFTB, MICB, + Private Banks
Notification No. 40/2011
(Foreign Banks are opened)
More Opportunities
Enjoy various incentives , among others include :5 year income tax holiday; 3 year customs duty
and internal taxes exemption /relief on importation of raw materials; exemption/relief from
customs duty and internal taxes on importation or machinery and equipments during
construction period; relief from income tax up to 50% on profits from export; exemption/relief
from customs duty and internal taxes on importation or machinery and equipments related to
increased investment approved by Commission.

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Laws related to incorporate as a company
- The Myanmar Companies Act 1914
- Special Companies Act 1950
- Myanmar Companies (Amendment) Act 1955
- Myanmar Companies Regulations 1957
Investment Laws
- Foreign Investment Law (2nd Nov 2012)
Foreign Investment Rules (31st Jan 2013)
- Special Economic Zone Law (Jan 2014)
SEZ Rules ( August 2015)
Legal Framework for Setting up of a Business in Myanmar
The State Owned Economic Enterprises Law (31st March 1989

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Three Alternative ways to start business in Myanmar
Company Incorporation
-Incorporation (or)
Registration
-Permit
-Start
-No Incentives
MIC permission
-Submit Proposal
-Permit
-Start
-Enjoy Incentives by FIL
SEZ Management
Committee
-Submit Proposal
-Permit
-Start
-Enjoy Incentives by SEZL
(More Advantages)

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3 SEZs
Thilawa SEZ
Dawei SEZ
Kyauk Phyu SEZ
SEZs Management
Committee which
regulate and grant
permit.
Existing Special Economic Zones and Economic Zones
Economic zones
established under
MIC

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Creation of Industrial Cluster in Myanmar
Existing Industrial Zones in Myanmar New Industrial Zones to be Established
Source: Myanmar Investment Guide
17
infrastructural facilities
land management plan for industrial cluster
town and city plan
Human resource development and employment plan

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- Supporting the main objectives of the economic development plan
- Development of employment opportunities
- Promotion and expansion of exports
- Production of import substitution
- Acquisition of high technology and development of manufacturing by high
technology
Investment Opportunities
Main Basic Principles of FIL

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 100 % Foreign owned
It is contributed 100% owned by the foreigner expect for the business
prescribed with the notification issued by the MIC
 A Citizen, a Citizen company or Concerned Government Organization
Joint Venture system with the local partner by the agreement between
the two parties
 Any System Included in the Mutually Agreed Contract
It will be cooperation system between government and private
including BOT system, BTO system
Forms of Investment

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Investor can apply the proposal by 3 ways
Foreign Investment which is connected natural resources based Industry
State owned Economic Enterprises
Investment or Industry not included in above 2 categories
How to Submit the Proposal

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Process to issue MIC Permit
From 1 by FIL
From 1
+ Draft of land lease
agreement
+ EIA or IEE or EMP
assessment
(depends on project)
Submit
Through
concerned
ministry or
department
+ If, SEE (PSC or MOU
or others)
+ If, Natural Resources
Based Industry
PAT
meeting
MIC
meeting
Permit for Investor
Recommendation
Regional Government
Concerned ministry
Public Opinion (if project is
sensitive on social and culture)
Within 15 Days PAT will reply to investor whether project is
acceptable or not.
Within 90 Days MIC will grant permit to investor.

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50 years
10 years
10 years
Investor could lease the land not only from Government but also form private
party for maximum 70 years.
Construction period is defined depends on business
Exemption or relief from custom duty or other internal taxes on machineries,
equipments, instruments, spare parts used in business
Starting commercial operation of business
Exemption or relief from custom duty or other internal taxes on raw
materials imported for production for the first three years.
Income tax exemption for a period of five consecutive years including the
year of commencement of commercial operation.
3 years
5 years
? Years/ months depends on business
Land Lease Period under MIC and enjoyment of Duty & Taxes relief / exemption

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 Appoint Citizens employees, technicians and service personnel for skilled
businesses as follows :
First 2 years 25%
Second 2 years 50%
Third 2 years 75%
 Unskilled labor must be Myanmar Citizen only
Obligation relating to employment

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Protection for Foreign Investment
Dispute settlement mechanism
State guarantee
No nationalization
No termination during the permitted period
Right to transfer & repatriation

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Particulars Free Zone( 75 %
must be exported)
Promotion
Zone(Tax rebates
on export)
Income Tax Relief
1st seven years 1st five years
2nd five years- 50 % 2nd five years-50%
Income Tax Relief if profits reinvestment 3rd five years-50 % 3rd five years-50%
Exemption from custom duties and other tax Raw materials,
Equipment
(Full)
Equipment
1st five years and 2nd
five years -50%
One Stop Service Centre Serves for company incorporation, immigration,
import/import license, taxes and duty
exemption/relief, labour certificate,
environmental conservation and prevention
plan, building permit, factory operation
Incentives under Special Economic Zone

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Relaxation of performance requirements
Liberalizations of operational conditions
One stop service
Coordinate with
related government agencies
Review
and update
regulations
Consultation with Int’l
Organization, stakeholders
Streamline & simplify procedures
for investment applications and approval
Facilitation of Business

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FDI flow in New Investment Regime
0
1000
2000
3000
4000
5000
6000
7000
8000
2011-2012 2012-2013 2013-2014 2014-2015
300.48
Chebwe Hydropower
USD Million
4343.98
1419.47
8010.53
4107.054
FDIinflowsfromtheperiod1stAprilto31stJuly2015–USD2649.143mi(64projects)
TotalPermittedInvestmentuptoJuly2015-USD56886.442mi(959projects)

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FDI Projection and Inflows
0
1
2
3
4
5
6
7
8
2012-2013 2013-2014 2014-2015
1
3
4
1.419
4.107
8.01
Projection
Approved
USD Billion

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1
3
No Sector
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
2015-2016
(as of July 2015)
No Amount No Amount No Amount No Amount No Amount No. Amount
1Manufacturing 4 66.32 5 32.25 78 400.72 94 1827.28 141 1502.01 48 383.126*
2Power 2 8218.52 1 4343.98 1 364.20 1 46.51 1 40.11 -
3Oil & Gas 9 10179.30 5 247.70 6 309.20 - 26 3220.31 10 2049.200
4Hotel &
Tourism
- 1 300.00 6 435.21 5 357.95 - 50.750*
5Mining 3 1396.08 2 19.90 1 15.33 2 32.73 1 6.26
6Agriculture 3 138.57 - 2 9.65 4 20.27 4 39.67
7Livestock &
Fisheries
- 1 5.60 3 96.02 5 26.86
8Transport &
Communicatio
n
- - 4 1190.23 8 1679.30 1 120.000
9Real Estate - - 4 440.57 6 780.75
10Other Services 0.63 4 14.77 5 18.23 14 357.32 5 46.067*
Total 21 19998.79 13 4644.46 94 1419.47 123 4107.06 211 8010.54 64 2649.143
U.S $ in million
Existing Direction of Foreign Investment

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Thank you!
omassmann@duanemorris.com;
Oliver Massmann – Partner
DUANE MORRIS SELVAM