Country Profile Presentation: Myanmar

BackgroundVarious ethnic Burmese and ethnic minority city-states or kingdoms occupied the present borders through the 19th century. Over a period of 62 years (1824-1886), Britain conquered Burma and incorporated the country into its Indian Empire. Burma was administered as a province of India until 1937 when it became a separate, self-governing colony; in 1948, Burma attained independence from the Commonwealth. Gen. NE WIN dominated the government from 1962 to 1988, first as military ruler, then as self-appointed president, and later as political kingpin. In September 1988, the military deposed NE WIN and established a new ruling junta. Multiparty legislative elections in 1990 resulted in the main opposition party - the National League for Democracy (NLD) - winning a landslide victory. Instead of handing over power, the junta placed NLD leader (and Nobel Peace Prize recipient) AUNG SAN SUU KYI (ASSK) under house arrest from 1989 to 1995, 2000 to 2002, and from May 2003 to November 2010. In late September 2007, the ruling junta brutally suppressed protests over increased fuel prices led by prodemocracy activists and Buddhist monks, killing at least 13 people and arresting thousands for participating in the demonstrations. In early May 2008, Burma was struck by Cyclone Nargis, which left over 138,000 dead and tens of thousands injured and homeless. Despite this tragedy, the junta proceeded with its May constitutional referendum, the first vote in Burma since 1990. Parliamentary elections held in November 2010, considered flawed by many in the international community, saw the ruling Union Solidarity and Development Party garnering over 75% of the seats. Parliament convened in January 2011 and selected former Prime Minister THEIN SEIN as president. Although the vast majority of national-level appointees named by THEIN SEIN are former or current military officers, the government has initiated a series of political and economic reforms leading to a substantial opening of the long-isolated country. These reforms have included a senior-level dialogue with ASSK, re-registering the NLD as a political party, enabling party members, including ASSK, to contest parliamentary by-elections on 1 April 2012, the release of many (but not all) political prisoners, preliminary peace agreements with some armed ethnic groups, a reduction in media censorship, and an increasingly open debate in the Parliament.

Geographical LocationsSoutheastern Asia, bordering the Andaman Sea and the Bay of Bengal, between Bangladesh and Thailand

Total Area: 676,578 sq km where Land: 653,508 sq km Water: 23,070 sq km

Climate Tropical monsoon; Cloudy, rainy, hot, humid summers (southwest monsoon, June to September); Less cloudy, scant rainfall, mild temperatures, lower humidity during winter (northeast

monsoon, December to April)

Environmental Issues Deforestation; Industrial pollution of air, soil, and water; Inadequate sanitation and water treatment contribute to disease.

Demographic StatisticsNationality : BurmeseTotal Population : 54,584,650 (July 2012 est.)Language : Burmese (official)Religion : Buddhist 89%, Christian 4% (Baptist 3%, Roman Catholic 1%),

Muslim 4%, animist 1%, other 2%Age Structure : 0-14 years: 27.1% (male 7,534,762/ female 7,250,582)

15-64 years: 67.8% (male 18,385,523/ female 18,627,115)65 years and over: 5.1% (male 1,213,487/ female 1,573,181) (2012 est.)

Urbanization : urban population: 34% of total population (2010 est.)

Literacy : Definition: age 15 and over can read and writeTotal population: 89.9%Male: 93.9%Female: 86.4% (2006 est.)

Economic IndicatorsBurma, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, corruption, and rural poverty. Despite Burma's emergence as a natural gas exporter, socio-economic conditions have deteriorated under the mismanagement of the previous regime. Approximately 32% of the population lives in poverty and Burma is the poorest country in Southeast Asia. The business climate is widely perceived as opaque, corrupt, and highly inefficient. Wealth from country's ample natural resources is concentrated in the hands of an elite group of military leaders and business associates. In 2010-11, the transfer of state assets - especially real estate - to military families under the guise of a privatization policy further widened the gap between the economic elite and the public. The economy suffers from serious macroeconomic imbalances - including multiple official exchange rates that overvalue the Burmese kyat, fiscal deficits and lack of commercial credit further distorted by a non-market interest rate regime, unpredictable inflation, unreliable economic data, and an inability to reconcile national accounts. Burma's poor investment climate - including weak rule of law - hampers the inflow of foreign investment; in recent years, foreign investors have shied away from nearly every sector except for natural gas, power generation, timber, and mining. The exploitation of natural resources does not benefit the population at large. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter two causing significant environmental degradation. Other areas, such as manufacturing, tourism, and services, struggle in the face of poor infrastructure, unpredictable trade policies, undeveloped human resources (the result of neglected health and education systems), endemic corruption, and inadequate access to capital for investment. Private Banks still operate under tight domestic and international restrictions, limiting the private sector's access to credit. The United States, the European Union, and Canada have imposed financial and economic sanctions on Burma. US sanctions, prohibiting most financial transactions with Burmese entities, impose travel bans on senior Burmese military and civilian leaders and others connected to the ruling regime, and ban imports of Burmese products. These sanctions affect the country's fledgling garment industry, isolate the struggling banking sector, and raise the costs of

doing business with Burmese companies, particularly firms tied to Burmese regime leaders. Remittances from overseas Burmese workers - who had provided significant financial support for their families - have driven the Ministry of Finance to license domestic banks to carry out overseas operations. In 2011 the government took initial steps toward reforming and opening up the economy by lowering export taxes, easing restrictions on its financial sector, and reaching out to international organizations for assistance. Although the Burmese government has good economic relations with its neighbors, significant improvements in economic governance, the business climate, and the political situation are needed to promote serious foreign investment.

GDP (Purchasing power parity)BDT 6,800 billion (2011 est.)BDT 6,442 billion (2010 est.)BDT 6,116 billion (2009 est.)

GDP Per CapitaUS$880

GDP Growth6.0% (2012)5.5% (2011)

Inflation5.8% (2012 - 2013)4.2% (2011 - 2012)

FDIUS$20 billion (pledged, 2010 – 2011)US$329 million (2009 – 2010)US$984 million (2008 – 2009)

Imports

ExportsUS$9.5 billion (2011)US$8.1 billion (2010)

Largest export itemNatural Gas, US$2.94 billion

Unemployment5.5% (2011)

CurrencyMMK- Burmese Kyat

Business and Investment Opportunities

Up to 2012 China is the top investing country and then Thailand, Hong Kong and Korea are become top investing countries in the countries that investing in Myanmar.

In the total 31 of investing country, China is investing with 13.947 billion USD and got 34.4 % of total investment, Thailand got second with 9.568 billion USD, Hong Kong with 6.308 billion USD, South Korea with 2.938 billion USD, British with 2.659 billion USD and Singapore with 1.818 billion USD.

Up to March, 2012, the total foreign investment in Myanmar is 40.699 billion USD.

According to new law, the company which joint venture with foreign company will get 5 years free of tax and 70 years permission to do company business.

INTRODUCTION

Myanmar adopted the market oriented economic system in the year 1988 after adopting the centralized planning economic system for more than two decades. Substantial stabilization and reform measures had been undertaken to be in line with the new economic system. The initial step taken towards a more liberalized economy is to allow foreign direct investment and to encourage the private sector development. In the area of legal framework one of the first laws on investment promulgated by the State Law and Order Restoration Council is the Union of Myanmar Foreign Investment Law (FIL), promulgated on 30th November 1988 to induce foreign investment and to boost investment particularly in the private sector.

FOREIGN INVESTMENT ENVIRONMENT

1. Foreign Direct Investment Policy

Myanmar foreign direct investment policy is a component of the overall restructuring and development policy of the Government. The main components of the policy are:

(a) Adoption of market oriented system for the allocation of resources.

(b) Encouragement of private investment and entrepreneurial activity.

(c) Opening of the economy for foreign trade and investment.

The objectives of the Union of Myanmar Foreign Investment Law are:

(a) Promotion and expansion of exports,

(b) Exploitation of natural resources, which require heavy investment,

(c) Acquisition of high technology,

(d) Supporting and assisting production and services involving large capital,

(e) Opening up of more employment opportunities,

(f) Development of works which would save energy consumption and

(g) Regional development.

In order to oversee and administer the FIL, the Myanmar Investment Commission (MIC) was formed and it acts as initial approving authority for investment proposals. The Directorate of Investment and Company Administration (DICA) serves as the Secretariat of MIC.

2. Forms of Investment

Foreign investors can set up their business either in the form of a wholly foreign-owned or a joint venture with any partner (an individual, a private company, a cooperative society or a state- owned enterprise). In all joint ventures, the minimum share of the foreign party is 35 percent of the total equity capital.

3. Minimum Capital Requirement

The minimum amount of foreign capital required to be eligible under the Foreign Investment Law is:

For an industry US $500,000

For a services organization US $300,000

4. Eligible Economic Activities

Economic activities allowed under the Foreign Investment Law cover almost all sectors of the economy. It has been notified by the Myanmar Investment Commission (MIC).

Any economic activity not included in the notification can be considered individually.

5. Restricted Activities

The State-owned Economic Enterprises Law defines 12 economic activities in which private investment is restricted and are reserved to be carried out solely by the State. However, according to Section 4 of the said law, the Government may in the interest of the State, permit by notification to carry out such activities.

6. Tax Incentives under the Foreign Investment Law

i. Exemption from income tax for 3 consecutive years beginning with the year in which the operation commences and a further tax exemption or relief for considered beneficial for the State.

ii. The Commission may also grant:-

- exemptioa or relief from income tax on profit which is reinvested within one year.

- relief from income tax up to 50 percent on the profit from exports.

- right to pay income tax on behalf of the foreign employees and to deduct the same from the assessable income of the enterprise.

- right to pay income tax of the foreign employees at the rate applicable to the citizens of Myanmar.

- right to deduct the research and development expenditure.

- right to accelerate depreciation.

- right to carry forward and set off losses up to 3 consecutive years, from the year the loss is sustained.

- exemption orreliqf from customs duty and other taxes on:-

(a) imported machinery and equipment for use during the construction period.

(b) imported raw materials for the first 3 years commercial production following the completion of construction.

7. Application Procedures for Foreign Investment

A promoter for foreign investment must submit a proposal in prescribed form to the Myanmar Investment Commission for consideration of issuing a permit. With the Proposal the following must be attached.

i. Documents supporting financial credibility. (audited final accounts of a most recent year of the person or the firm that intends to make investment).

ii. Bank recommendation regarding the business standing.

iii. Detailed calculation relating to the economic justification of the proposed project indicating inter aila:-

- estimated annual net profit.

- estimated annual foreign exchange earnings or savings and foreign exchange requirement for the operation.

- recoupment period.

- prospects of creating employment.

- prospects of increase in national income.

- local and foreign market conditions and the requirement, if ariy, for local consumption.

iv. If it is a hundred percent foreign investment, a draft contract to be executed with an organization determined by the Ministry concerned.

v. If it is a joint venture, a draA contract to be entered into between the foreign investor and local counterpart.

vi. If it is a joint venture in the form of a limited company, draft Memorandum and Articles of Association and also a draft contract between the foreign and local investors.

vii. Other related draft contracts are also to be submitted together with the proposal.

viii. The promoter may apply for the exemptions and reliefs from taxes stated in Chapter 10 Section 21 of the Union of Myanmar Foreign Investment Law

8. Guarantee

Right to Transfer Foreign Currency

i. A persvn who has brought in foreign capital can transfer the following:-

- foreign currency entitlement of him.

- net profit after deducting all taxes and provisions.

- foreign currency permitted for withdrawal by the Commission which may include the value of assets on the winding up of business.

ii. A foreign employee can transfer his salary and lawful income after deducting taxes and other living expenses incurred domestically.

Guarantee

Enterprises operating under the Foreign Investment Law shall have the State guarantee against nationalization and expropriation.

9. Importing and Exporting

An enterprise permitted under the FIL has to be registered as exporter/importer upon business requirement with the Export Import Registration Office under the Directorate of Trade, Ministry of Commerce.

The following persons or enterprises can be registered as exporters/importers:-

(a) A citizen or an associate citizen or a nationalized citizen of the Union of Myanmar if the applicant is a sole proprietor.

(b) Partnership firms

(c) Limited companies, inclusive of foreign companies and branches or joint ventures formed under the Meaner Companies Act 1914 and Special Company Act 1950.

(d) Co-operative societies, registered under the Co-operative Society Law 1992.

Myanmar products can be exported with the exception of some selected items or restricted items under the export licencse. All goods which are not prohibited by the respective Gover�nment departments can be imported under the import licencse. Permitted foreign investment enterprises can import the following without import licencses.

(a) Capital investment items imported as foreign capital during the construction and initial investment period.

(b) Raw materials required for the first three years� commercial production

Investment Sectors

Since the time FIL has been enacted, MIC has permitted 400 projects from 29 countries up to the end of September 2006. The leading sectors are Power, Oil & Gas Manufacturing, Real Estate, Hotel and Tourism. Total amount of foreign direct investment in these projects is US$ 13.85billion.

Major investors are ASEAN countries with the amount of almost half of the total investment. Thailand ranks first with the amount of US$ 7375.623 million, UK ranks second with US$ 1587.974 million, Singapore ranks third with US$ 1341.223 million, Malaysia ranks fourth with US$ 660.747 million and Hong Kong ranks fifth with the amount of US$ 504.218 million.

Among the ASEAN countries, Singapore, Thailand, Malaysia, Indonesia, Philippine and Brunei Darussalam and +3 members, such as, Japan, China and Republic of Korea are doing investments in Myanmar. Among the BIMST-EC countries, Thailand, India, Bangladesh and Sri Lanka are doing investment in Myanmar.

III. EMPLOYMENT

1. Labour Force

Myanmar has an active labour force of 17.96 million. Fairly well trained manpower and skilled labour are available.

2. Labour Cost

The labour cost in Myanmar is quite low compared to other neighbouring countries. In the private sector it is usually fixed on mutual agreement between the employer and employee.

3. Working Hours

Companies, trading centres, factories 48 hrs a week

Oil field and mines 44 hrs a week

Underground mines 40 hrs a week

4. Social Security Benefit

Private enterprises employing at least 5 persons are covered by the Social Security Act 1954. The contribution to the scheme is approximately 4 percent of the insured wage and the ratio of contribution is employer 2.5: employee 1.5. The workers insured under the Act are entitled to free medical care, cash benefit for sickman, maternity and disability, funeral grants and survivors pension.

5. Recruitment

Required manpower can be recruited through Township Labour Offices.

6. Employment of Foreign National

Starting Business

1. Registration of Business Organizations

Operation in Myanmar can be carried out through one of the following business organizations.

1. Sole proprietorship

2. Partnerships

3. Companies limited by shares. i.e. joint venture companies; local companies; foreign companies.

4. Branch or Representative offices of a foreign company

5. Associations not for profit

2. Sole Proprietorship

A sole proprietorship is a business owned by an individual which usually operates under the name of the owner. Establishment and operation is simple. It is not required to register. Capital formation and withdrawal can be performed at one�s will. However, the proprietor�s liability is unlimited.

3. Partnerships

A group of individuals may enter into partnerships in order to carry on a business. The partnership�s rights and obligations are based on the agreements between the partners and the Partnership Act of 1932. In accordance with the Act, the number of partners is limited to twenty. A partnership firm may be registered, but registration is not compulsory. All partnerships formed in Myanmar are of unlimited type. When no provision is made for the period of time, the partnership will be dissolved when all partners are willing to do so.

4. Companies Limited by Shares

A company limited by shares is required to register. For foreign enterprises, the most normal method of doing business in Myanmar is through a limited company. Such a company could be a foreign company registered in Myanmar or by means of a branch office or representative office formed outside Myanmar. If one share is owned by a foreign partner, the company shall come under the definition of a foreign company, and shall apply and obtain a Permit before registration.

There are two main types of companies: a private limited liability company and a public limited liability company.

In a private limited company, the transfer of shares is restricted, the public cannot be called upon to subscribe for shares, and the number of members is limited to fifity. In a public limited liability company, the number of shareholders must be at least seven. The company, after registration, must apply for a Certificate of Commencement of Business to enable start the business operation.

The governing law for the limited companies is the Myanmar Companies Act 1914. A company with share contribution of the State shall be registered under the Special Company> Act 1950 and the Myanmar Companies Act 1914.

There are generally no minimum share capital requirements. However, minimum requirements do exist for banking and insurance companies and foreign companies and branches of all business. For foreign companies and branches, the minimum capital to be brought in are as follows:

- Industrial company - foreign currency equivalent to K. 1,000,000.

- Trading company - foreign currency equivalent to K. 500,000.

- Services company - foreign currency equivalent to K. 300,000.

5. Documents required for Registration

Under section 27A of the Myanmar Companies Act, a foreign company whether a hundred percent owned or a joint-venture and a branch/representative office is required to obtain a PERMIT before registration. However, a joint-venture with the State equity joined under Special Company Act 1950 is exempted from obtaining a PERMIT.

The application for PERMIT is to be accompanied by the following documents:

(1) Form A of the Myanmar Companies Regulation 1957

(2) Draft Memorandum and Articles of Association

(3) Duly completed questionnaire form

(4) Intended activities to be performed

(5) Estimated expenditures to be incurred in Meaner for the first year operations

(6) Financial credibility of the company / individual

(7) Board of Directors� resolution, if the subscriber is a company.

In the case of a foreign branch/representative office, the following shall be furnished in addition to the above mentioned documents.

(1) Instead of the companys draft Memorandum and Articles of Association, a copy of the Head Offifce�s Memorandum and Articles of Association or of the Charter, Statute or other instruments constituting or defining the constitution of the company, duly notarized and consularized by the Myanmar Embassy concern in the country where the company is incorporated.

(2) Copies of the Head Office Balance Sheet and Profit and Loss accounts for the last two financial years.

(3) Where the original Memorandum and Articles of Association and other relevant documents are not in English language, authentication of the translation into English.

The application for registration is to be accompanied by the following documents.

(I) Two sets of Memorandum and Articles of Association duly stamped and printed both in Myanmar and English

(2) Declaration of registration

(3) Declaration of legal and official version of the documents

(4) Declaration of the situation of registered office

(5) Translation certificate by a competent translator

(6) List of Directors

(7) List of person(s) authorized to accept services of process and notice in Myanmar on behalf of the company (i.e. for a branch office of a foreign company.)

For a Public company, the following additional documents shall be submitted before commencing the business

(I) List of person to act as directors

(2) List of Persons who have consented to act as director

(3) Agreement to take qualification shares.

6. Legislative requirements for Companies

The legal requirements for the companies to comply under the Myanmar Companies Act 1914 are as follows:-

Name:

The name of the company shall be painted or affixed on the outside of its registered office and every place of business. It must also be ingraved in legible characters on its seal and mentioned in all letterheads, notices, advertisements and other official publications, etc.

Registered Office:

Every company must have a registered office in Myanmar to which all communications and notices may be addressed. A notice of situation of the initial registered office must be furnished to the CRO when filing the incorporation documents. If the address is subsequently changed, notice must be given to the CRO within 28 days of the change.

Directors:

Every private company is required to have at least 2 directors. A public company must have a minimum of 3 directors. An undischarged insolvent is not eligible to be a director. A rectun of particulars of Directors, Managers and Managing Agents and of any changes therein must be lodged with the CRO within 14 days of the appointment or changes.

BANKING

1. Types of Bank

Central Bank of Myanmar (CBM) operates as a central bank and is the authority to oversee and regulate the financial institutions both State and private owned.

Four major specialized banks; the Myanma Economic Bank (provides countrywide domestic banking and saving services), the Myanma Investment and Commercial Bank (handles both domestic and foreign exchange transactions), the Myanma Foreign Trade Bank (deals in foreign exchange transactions) and the Myanma Agricultural and Rural Development Bank (provides seasonal and term loans for agriculture and livestock breeding) are the state owned financial institutions.

Twenty domestic private banks are now operating banking services and forty six foreign banks have opened representative o%offeces in Yangon.

Apart from the above institutions, Myanma Insurance is the sole insurance organization and underwrites various classes of insurance.

2. Exchange Arrangement

The currency Myanmar Kyats is pegged to the SDR at K. B.50847=SDR 1. Both exportation and importation of the Kyat is prohibited. All external payments are subject to authorization. The CBM has issued Foreign Exchange Certificates (FECs) which is equivalent in US dollar since February 1993 for the convenience of tourists and to enhance the foreign exchange earnings

TAXATION

1. General

There are 15 types of taxes and duties under four main heads, they are:

(1) Taxes levied on domestic production and public consumption - excise duty; licence fees on imported goods; state lottery; taxes on transport, commercial tax and sale proceeds of stamps.

(2) Taxes levied on income and ownership - income tax and profit tax.

(3) Customs duties.

(4) Taxes levied on utility of State-owned properties - taxes on land; water tax, embankment tax; taxes on extraction of forest products, minerals, rubber and fisheries.

Income of tax payer is computed on the basis of one fiscal year (April 1 to March 31 of the following year). The fiscal year in which income is received is expressed as "income year" and the year following as "assessment year"

A resident foreigner or a resident citizen is subject to tax on all income derived from sources within the Union of Myanmar and on income from sources outside the Union of Myanmar. In the case of an enterprise operating under the Union of Myanmar Foreign Investment Law, the tax is payable only on income derived from sources within the Union of Myanmar.

A non-resident foreigner is subject to tax on all income from sources in Myanmar.

A resident foreigner is

(a) a foreigner who lives in Myanmar for not less than 183 days during the income year,

(b) a company formed under the Myanmar Companies Act or any other existing Myanmar Law wholly or partly with foreign share holders.

(c) an Association of persons other than a company formed wholly or partly with foreigners and where control, management and decision making of its affairs are situated and exercised wholly in the Union of Myanmar.

A foreigner or a foreign organization who is not a resident in Myanmar is classified as a non resident. A branch company is treated as a non-resident. However, this classification is irrelevant to an enterprise operating under the Union of Myanmar Foreign Investment Law.

2. Tax Rates

A flat tax rate of 30'%o is applicable to enterprises operating under the Union of Myanmar Foreign Investment Law and those formed under the Myanmar Companies Act.

For a non-resident foreigner (including a branch company), income tax is a payable at 35% or at graduated rates from 3 % to 5(%/a whichever is greater.

The income from "salaries�* other than income of non-residentforeigner the tax is computed at progressive rates of 3% of 30%.

Customs Duties

With a few exceptions, all imported goods are liable to customs duties.

As for exports, tax is levied on export of a few commodities namely: rice and rice flour, rice bran, rice dust, oil cakes, pulses and cereals, bamboo and raw hides and skins.

6. Commercial Tax

Commercial Tax is turnover tax levied on goods either domestically produced or imported. It is also levied on services such as transport of passengers, entertainment, trading, operation of hotels, lodging and enterprises engaged in sale of foods and drinks.

For goods and services supplied in Myanmar, commercial tax is imposed at the time of supply. For the import of goods, commercial tax is collected by the Customs Department at the point of importation in the same manner that customs duties are collected.

The commercial tax rates for services are as follows:-

- 5 per cent on trading;

- 8 per cent on passenger transport fares,

- 10 per cent on hotel, lodging and reataurant services;

- 15 per cent on other forms of public entertainment; and

- 30 per cent on movie or cinema shows.

Ports

The Port of Yangon, which has long history, is the main port of Myanmar. In 1880, it was run by Commissioners for the Port of Rangoon. Then, in 19 54 - Board of Management for the Port of Rangoon took care the port operations. In 1972 Burma, Ports Corporation controlled the port until 1989. From then on Myanma Port Authority (MPA) governed the port operations.