investing and doing business in myanmar how to get it right!

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Agenda:

• An Introduction to Myanmar

• Investment in Myanmar

• A comparative snapshot with Vietnam

• Why choose Myanmar?

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Myanmar at Glance: • Official Name: Republic of the Union

of Myanmar • Location: South East Asia • Neighbors: Bangladesh, China, Laos,

India and Thailand • Area: 676,578 Km2 • Capital: Naypyidaw • Largest city: Yangon (Rangoon) • Currency: Kyat (MMK) (01 USD = 968

MMK) • Language: Burmese • Population: 61 million

MYANMAR IN 2012

GDP US$ 53.1 billion

GDP per capita US$ 835

GDP Growth 6.3 %

Inflation 6.1 %

Cumulative FDI as of Dec 2012

529 approved projects with a value at US$41.49 billion

Import turnover US$ 17,670 million

Export turnover US$ 9,203 million

Labor force 31.8 million

Minimum wage No general minimum wage Public sector: US$56.8 Laborer: About US$2.3/day

Presenter

Presentation Notes

Source: Wikipedia

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First impressions from Myanmar

Confucius never arrived!

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MYANMAR: New Asian Tiger?

Recent democratic reform with new Union Government headed by President Thein Sein in March 2011

International sanctions are lifted and foreign firms eye on Myanmar

GDP growth rate is projected to average around 6 per cent per year until 2020, with GDP doubling to $124 billion by 2020

Myanmar has all the elements required to create another Asian economic miracle

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• The challenges of Myanmar: US$1,500 : Average productivity of a worker in Myanmar

today, about 70% below that of benchmark Asian countries 4 years of average schooling in Myanmar 10 million additional people to absorb in Myanmar large

cities by 2030 US$650 billion: Total investment needed by 2030 to support

growth potential, US$320 billion in infrastructure alone

Source: McKinsey&Company

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• The Opportunities in Myanmar: Potential to achieve US$ 200 billion+ GDP in 2020, over four times

as high as today With spending potentially tripling from US$ 35 billion to US$ 100

billion, an estimated 10 million member of the consuming in 2030 from 2.5 million in 2010

Potential to create more than 10 million additional non-agricultural jobs by 2030

500 million people living in countries bordering Myanmar and the closest parts of China and India, a huge potential market

Source: McKinsey&Company

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INVESTMENT IN MYANMAR

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INVESTMENT IN MYANMAR - Introduction • With its natural and human resources and cultural and national heritage Myanmar

represents excellent potential for business investment.

• Myanmar welcomes foreign investments in all forms. The Government is intending to maintain good and strong economic relationship with all countries, all foreign organizations and individuals.

• An untapped market- rich in natural resources with a young population and a high number of English speakers.

• A fertile and resource-rich country strategically located in the heart of Asia, one of the world’s largest growing economic regions.

• Firms involved in precious stone, agricultural products or other industries may find Myanmar a fascinating place to begin developing longer term interests.

• Significant legal reforms aiming to improve investment climate:

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STRATEGIC INVESTMENTS: Most promising sectors • Construction and infrastructure: knowing that poor infrastructure may hold the country back,

Myanmar’s Government has accorded high priority to infrastructure development projects - such as roads, railways, bridges, ports facilities, airports, electric power, irrigation networks, communication systems, private schools construction, private hospitals, etc.

• ELECTRICITY/ENERGY: only about 15% to 20% of the total population are accessible to the electric power supply, and the rest have to rely on conventional natural resources… ELECTRICITY IS CRITICAL TO THE COUNTRY‘S DEVELOPMENT!

• Oil and gas: rich of oil and gas reserves, mostly unexploited, offering great opportunity for international bidders. World’s largest hydrocarbons companies such as Chevron, BP, Woodside, Shell, ConocoPhillips, ExxonMobil all expressed interest in entering Myanmar .

• Telecommunication: with population of over 60 million peoples, telecommunication is one of the most promising and lucrative industry.

• Mining: Myanmar is rich in mineral resources and minerals of potential importance are copper, gold, lead, zinc, silver, tin and tungsten, antimony, chromium and nickel. In terms of mineral potential, Myanmar ranks high among Asian countries, but mineral resources are very much under-utilized

• Other: forestry, agricultural, tourism.

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Form of Foreign Investment • Under the recent Foreign Investment Law 2012, foreigners are now

allowed to set up companies fully owned by them (whether this company was incorporated in Myanmar or abroad), or go into joint venture with any Myanmar citizen or the government of Myanmar!

• Any company with one or more foreign shareholders is classified as a Foreign Company, thus subject to Foreign Investment Law rather than Myanmar Companies Act (1914)

• Possibility of establishing a Special Company created under the Special Company Act of 1950 (where part of the equity belongs to the State)

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Form of Foreign Investment (cont.) • A foreign investor may incorporate in Myanmar a 100% foreign owned

company permitted by the Myanmar Investment Commission!

• A foreign company may establish a place of business or carry on business in Myanmar as a branch of a foreign incorporated company: by first apply for a Permit to Trade from the Ministry of National Planning and Economic Development.

• A foreign investor can join with any individual, firm, company, co-operative or state-owned enterprise from Myanmar to establish a joint venture either as a partnership firm or a limited company on the basis of a joint venture contract (ratio of foreign capital is now decided by the JV parties)

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Form of Foreign Investment (cont.) • Foreign companies with business relations or investment projects in

Myanmar may apply to set up representative offices in Myanmar (this being a common practice for banks).

• In contrast with a branch, a Representative Office of a company incorporated outside Myanmar is not allowed to perform direct commercial or revenue generating activities in Myanmar.

• However, it is permitted to liaise with its head office and collect data useful for the head office.

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General Types of Companies • Private Limited Liability Company

• Public Limited Liability Company

• Sole Proprietorship

• Company Limited by Guarantee with Share Capital

• Company Limited by Guarantee without Share Capital

• General Partnership

• Branch of a Foreign Company

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Capital requirement

• Minimum capital required to register for a Permit to Trade: Kyats 133,333,333 for an industrial company

Kyats 66,666,666 for a trading company

Kyats 40,000,000 for a service company

Note: Fifty percent (50%) of the prescribed capital must be brought in as foreign currency before the

Permit to Trade is issued and the balance 50% must be remitted within 30 days prior to the date of renewal of Permit to Trade

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Restriction • Activities prohibited by the Myanmar Foreign Investment Law:

Business which can affect the traditional culture and customs of the national races within Myanmar

Business which can affect public health Business which can affect the environment and eco-system Importation of hazardous or poisonous wastes into the country Business which produce or use hazardous chemicals under international agreements Production or manufacturing work or services which are activities reserved for citizens The importation of technologies, medicines or utensils/paraphernalia without relevant

permits, or not designated for use Agricultural investment and plantation and cultivation for long and short terms which can be

performed by citizens Livestock breeding which can be performed by citizens Marine fishing which can be performed by citizens Foreign investment activities within 10 miles from boundary/borders between neighboring

nations of Myanmar, except in State economic zones approved by the Myanmar Government

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Restriction (Cont.) • There are 21 economic activities which are prohibited.

• Notable ones include:

Manufacturing and related services of arms and ammunition for the national defense. Economic activities which is deemed to deteriorate the watershed or catchment protection forests,

religious places, traditional belief, pasture land, shifting cultivation farms and water resources Installation of factory in Myanmar utilizing of the imported wastes Management of natural forests Prospecting, exploration and production of jade/gem stones Production of minerals by medium scale and small scale Administration of Electric Power System Trading of Electric Power Inspection of Electrical Works Exploitation of minerals including gold in the revering and water way Air Navigation Services Pilotage Services Joint Printing and Broadcasting Service

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Restriction (Cont.) • 42 economic activities allowed only in the form of joint venture with Myanmar

citizens. • Notable ones include:

Production and Distribution of hybrid seeds, high-yield seeds and local seeds Manufacturing and marketing of grain products such as biscuits, wafers, noodles, macaroni,

vermicelli, spaghetti and other cereals related food products; of all kinds of confectionery including those of sweets, cocoa, and chocolate

Distilling, blending, rectifying, bottling and marketing of all kinds of spirits beverages and non-beverages

Prospecting, exploration and production of Industrial minerals and metallic mineral Large scale production of minerals Construction related to develop rail/road links such as bridges, highways, bypass, subways etc Establishment of international standard golf courses and resorts; Establishment , sales and lease of residential apartments /condominiums; office/commercial

buildings Domestic/International Air Transport Service Tourism business

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Investment Guarantee • Enterprises operating under the Foreign Investment Law have the State

guarantee against nationalization and expropriation.

• Guarantee is subject to an exception if the nationalization or expropriation is in the natural interest, in which case the investor is to be compensated for the market value of the investment.

• Government also guarantees that investment will not be terminated during the permitted term, and foreign capital will be transferred to investors upon the expiration of the term of the investment contract.

• Myanmar has investment protection agreements with China, India, Kuwait, Laos, the Philippines, Thailand and Vietnam.

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A COMPARATIVE SNAPSHOT WITH VIETNAM

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The respective workforce Minimum Wage (Monthly in USD)

Median Age Literacy Rates (age 15 + who can read & write)

Myanmar 17 26 89.9

Vietnam 49 28 94.1

Presenter

Presentation Notes

Source: http://www.pwc.com/th/en/publications/download/south-east-asia-web.pdf

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Level of Education Average of Schoolings (In Years)

Public Spending on Education (% of GDP)

College level Education (% of Population)

Myanmar 8 1.26% 11.5

Vietnam 10.4 1.8% 18.67

According to UNESCO

Presenter

Presentation Notes

Source: http://www.pwc.com/th/en/publications/download/south-east-asia-web.pdf

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Corruption Index 2008 score

2009 score

2010 score

2011 score

Rank

Myanmar 1.3 1.4 1.4 1.5 180

Vietnam 2.7

2.7

2.7

2.9

112

Information according to Transparency International

Presenter

Presentation Notes

Source: http://www.tradingeconomics.com/country-list/inflation-rate

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Infrastructure Port Train Airway Road General

Myanmar Poor Fair Poor Poor Poor

Vietnam Fair

Fair

Fair

Fair

Fair

Information according to CIA World Fact book

Presenter

Presentation Notes

Source: http://www.tradingeconomics.com/country-list/inflation-rate

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Cost of Incorporation

Country Starting a

business rank

Procedure(s) Time (Days) Cost (% of income per capita)

Paid-in Min. Cap (% of income per

capita)

Myanmar N/A N/A N/A N/A N/A

Vietnam 105 9 34 8.7 0.0

Information according to the report on Doing Business provided by World Bank dated June 2012

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WHY CHOOSE MYANMAR?

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WTO ANALYSIS OF LIBERALIZATION OF MARKET ACCESS: MYANMAR IS AT SAME

LEVEL WITH INDIA – NOT TOO BAD?

• *Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement

Country Limitation of market access*

Country Limitation of market access*

Malaysia medium Myanmar high Indonesia medium Cambodia medium

Philippines medium Laos medium Singapore low India high Thailand medium China medium Brunei high Vietnam low

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WHY CHOOSE MYANMAR?

• Myanmar: Last untapped market in Asia with full of potential to become new FDI hub

• BUT it depends on commitments on institutional reforms!!!! • OPEN OR ISOLATED?

• MODERN OR CONSERVATIVE? • Remember: Myanmar is the founding member of WTO that means

WTO service sector commitment : Unbound ⇒ Myanmar must move fast on concluding free trade

agreements

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Questions & Answers

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Thank you very much! OLIVER MASSMANN

Managing Partner – Duane Morris Vietnam LLC Member of the Supervisory Board of PetroVietnam Corporation

Duane Morris Vietnam Duane Morris Myanmar Pacific Place, Unit V1307/08, 13th Floor, No. 10 Phoyazar Street, 15 Ward, 83B Ly Thuong Kiet, Hoan Kiem Dist Baukhtaw Yankin Township Hanoi, Vietnam Yangon Suite, Myanmar

Contact email:

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