Reforms aim to lure foreign investment
SINCE COMING TO power, the military government of Myanmar has sought to implement reforms through the Foreign Investment Law (FIL), effectively abandoning the 'Burmese Road To Socialism' that dominated the nation's post-war years until the 1990s and delivered only sluggish growth.
The government maintains that it has in recent years attempted to open the economy up to foreign investors, despite the United States and European Union embargoes, and legislative provisions under the FIL have been drawn up to be as straightforward as possible.
Foreign companies in the Union of Myanmar can be established under the Myanmar Companies Act, which is underpinned by a legal framework that has much in common with some other countries with market-orientated economies.
To oversee and administer the FIL, the Myanmar Investment Commission (MIC) was formed and acts as the initial approving authority for investment plans.
Foreign investors can set up their business in the form of a wholly foreign-owned or a joint venture with any partner (an individual, a private company, a co-operative society or a state-owned enterprise). In all joint ventures, the minimum share of the foreign party is required to be 35 per cent of the total equity capital. Moreover, the minimum amount of foreign capital required to be eligible under the Foreign Investment Law is US$500,000, (or US$300,000 for a service organisation).
Economic activities permitted under the FIL cover many sectors of the economy in a country that is famously rich in natural resources.
A flat tax rate of 30 per cent is applicable to any wholly or partly foreign enterprise operating under the law, but the first three years are tax-free. Further tax exemption or relief for an appropriate period can be considered if this will yield benefit for the state. The MIC may also grant exemption or relief from income tax on profit which is reinvested within one year, and relief from income tax of up to 50 per cent on the profit from exports.
Enterprises operating under the Foreign Investment Law enjoy a state guarantee against nationalisation and expropriation.
Operations in Myanmar can be carried out through one of the following business configurations: partnerships, companies limited by shares such as joint-venture companies, branch or representative offices of a foreign company, or not-for-profit associations.
A company limited by shares is required to register. For foreign enterprises the most standard method of doing business in Myanmar is through a limited company. Such a company could be a foreign company registered in Myanmar or a branch office or representative office of a company formed outside Myanmar. If one share is owned by a foreign partner, the company shall come under the definition of a foreign company, and will be required to apply and obtain a permit before registration.
Labour costs in Myanmar are low compared with neighbouring countries.