Guide to Doing Business in Myanmar

3 Introduction

Text 16/20 pt.

4 Forms of Doing Business Text 12/16 pt. 5 Business Activities Text 8/10 pt.

8

Government Approvals for Setting up a Legal Entity in Myanmar

10

Capital Structure and Incentives

10

Sale of Shares

11 Taxation 12

The Right to Purchase Foreign Currency and Remit Profits

13

Import and Export of Goods by a Foreign Invested Company

13

Real Estate Development

14

Litigation in Myanmar

14

Foreign Workers and Labour Law

16

Intellectual Property

17

Government of Myanmar and Major State Agencies

19

Sanctions Against Myanmar

List of Abbreviations FIL

Foreign Investment Law (2012)

RO

Representative Office

Permit to Trade

Permit to Trade Certificate issued by the DICA

DICA

Directorate of Investment and Company Administration

Registration

Registration at the Companies Registration Office

MIC Permit

Permit issued by the MIC

MIC

Myanmar Investment Commission

MOGE

Myanma Oil and Gas Enterprise

CIT

Corporate Income Tax

PIT

Personal Income Tax

NLD

National League for Democracy

NUP

National Unity Party

SDNs

Specially Designated Nationals

FinCEN

U.S. Financial Crimes Enforcement Network

SOEE Law

State-Owned Economic Enterprises Law

ESIA

Environmental and Social Impact Assessment

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Introduction Since the former Prime Minister U Thein Sein became President in March 2011, Myanmar has taken active steps to update its legal framework. Myanmar’s political and economic reforms, coupled with the release of Aung San Suu Kyi, have encouraged the United States and other countries to ease sanctions against Myanmar. Since then, the continued changes have been largely favourable to both foreign and local investors. Myanmar is currently undergoing critical economic and legal reforms, such as breaking up large monopolies, organizing a major privatization programme, and working with the International Monetary Fund on the unification and floatation of the exchange rate. Major challenges remain ahead, such as updating the banking system, improving infrastructure and communications, and establishing a stock exchange. Myanmar’s Foreign Investment Law (FIL) has been substantially revised, with the ultimate objective of attracting more foreign investors. The FIL promotes the expansion of exports, the exploitation of natural resources through large-scale investment, the acquisition of high-end technology, expansion of manufacturing and services, the creation of employment opportunities, and the development of the ethnic areas. The FIL provides both local and foreign enterprises with a more favourable and clarified legal framework for doing business in Myanmar. u

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Forms of Doing Business What Key Laws Govern Investments in Myanmar? Whether a foreign investor invests as a 100 percent foreign owned company or as a joint venture with a local entity, the applicable law is the FIL, originally enacted in 1988 and amended in 2012. The FIL provides a roadmap for the conditions and procedures for investment in Myanmar. Despite the recent reforms, however, a foreign investor must be aware that many day-to-day business transactions are still governed by an outdated legal framework. Myanmar has issued two pieces of legislation to guide the implementation of the FIL: Notification No. 1/2013 (31 January 2013), the “Stipulation of Types of Economic Activities” (the “Stipulation”), issued by the Myanmar Investment Commission (MIC), and Notification No. 11/2013 (31 January 2013), issued by the Ministry of National Planning and Economic Development (the “Foreign Investment Rules”). The Stipulation provides distinct categories for regulating foreign investment in different business activities. The Foreign Investment Rules describe the application process for foreign invested businesses and describe parameters for the transfer of shares, use of land, and use of foreign currency. In addition to registration under the FIL, the Myanmar Companies Act (1914) (the “Companies Act”) requires foreign companies to obtain a Permit to Trade. The Companies Act also offers an alternative formation procedure to the FIL, although without the incentives available under FIL incorporation. Finally, the State-Owned Economic Enterprises Law (1989) (the “SOEE Law”) governs certain business activities in which investment requires government participation. The MIC oversees the approval of foreign investments in Myanmar.

What are the Most Common Business Forms for Foreign Investment in Myanmar? Foreign investment may be made through one of these forms: • A public or private limited liability company • A branch or representative office of a foreign enterprise • Joint ventures, structured either as partnerships or as limited liability companies, with any individual, private enterprise, or state-owned enterprise of Myanmar, and • Production sharing contracts with a State-Owned Economic Enterprise for the exploration, extraction and sale of petroleum, natural gas or minerals For foreign enterprises, the most common method of doing business in Myanmar is through a private limited liability company, which carries out a project in Myanmar. The FIL may require the enterprise to take the form of a joint venture, depending on its business activities.

What are some Important Differences between a Private Limited Liability Company and a Public Limited Liability Company? The public cannot be offered shares in a private limited liability company. Also, the number of members is limited to 50. A public limited liability company must have at least seven shareholders. The company must also apply for a Certificate of Commencement of Business before its operations begin. As a practical matter, this form is not used for foreign investment.

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Guide to Doing Business in Myanmar

What is a Representative Office Permitted to Do? The Companies Act allows a foreign company to register a representative office (RO). An RO is often the first step in establishing a commercial presence in Myanmar. ROs are permitted to engage only in limited business activities, including business development, market research, and feasibility studies. ROs are not allowed to trade inside Myanmar and do not generate any income. Their offshore parent may provide regular remittances to cover marketing expenses, office lease, salaries, and other administrative costs. An RO allows a foreign company to assess Myanmar’s business environment before committing funds and resources to setting up a more permanent presence in the country. In order to apply to set up an RO, the foreign investor must provide board resolutions approving the establishment of the RO in Myanmar and copies of the passports of each of the company’s directors and shareholders. The directors must sign an undertaking that they will not trade in Myanmar and submit the document with the application dossier.

What Factors should a Foreign Investor Consider in Deciding between a Wholly Foreign-Owned Entity or a Joint Venture? The two main factors that a foreign investor must consider are whether the business sector in which it will operate requires a joint venture to establish a commercial presence in Myanmar, and whether the Myanmar party has a key asset or specialized local know-how essential to the proposed project. For example, in real estate development projects, the Myanmar party usually holds the land use rights, which by law cannot be directly transferred to a foreign investor, but may be contributed into a joint venture. The FIL provides that the parties to a joint venture may agree on the foreign and local equity contributions, although MIC has the power under the FIL to prescribe a minimum foreign ownership requirement on a case-by-case basis, depending on the nature of the proposed investment. Foreign ownership in a joint venture with a Myanmar citizen (other than the State) in a restricted business activity is limited to 80 percent of the total capital.

Is Investment through Local Companies or through Nominees Permitted? On 27 February 2012, the MIC passed an order regulating nominee investments carried out by Myanmar citizens. The order requires foreign investors to invest in accordance with the FIL, not through the use of a local nominee. Because the law does not recognize the nominee relationship, foreign entities or individuals will not be able to enforce their ownership rights in the shares or assets of the company in case of a dispute with their nominee. u

Business Activities The Stipulation categorizes foreign investment in specific business activities into three areas: i. Business activities in which foreign investment is prohibited; ii. Business activities in which foreign investment is permitted only in the form of a joint venture with a Myanmar company or individual; and iii. Business activities in which foreign investment depends on meeting certain qualifications or conditions, including a specific subset of activities which require an Environmental and Social Impact Assessment (ESIA).

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Prohibited Business Activities – Examples include: • Certain mining activities, including small-scale and medium-scale production of minerals; mining of metallic minerals, including river gold; prospecting and producing jade and gemstones • Oil refineries that produce certain toxic substances; administration of Myanmar’s electricity system, and trading in electricity • Other activities that are dangerous or damaging to the environment, such as the production of toxic or prohibited chemicals Even though foreign investment is not permitted in the prohibited business activities, the Foreign Investment Rules permit the MIC discretion to review proposals for foreign investment in these areas, if the investment would be in the interest of the State and its citizens. The MIC will take into consideration the opinion of the local population and the regional government. If permitted, the investment must be in the form of a joint venture, in which foreign capital is limited to 80 percent of the total capital. Business Activities in which a Joint Venture with a Myanmar Company or Individual is Required: As outlined above, where the Stipulation requires a joint venture for a particular business activity, foreign capital in the joint venture is limited to 80 percent of the total capital. The Stipulation requires a joint venture for activities such as: • Production and distribution of a variety of food and beverages • Manufacturing of some pharmaceuticals, textile threads, plastics, leather footwear, paper and certain chemical products • Prospecting and exploration of industrial mines, and large-scale mining operations • Construction and infrastructure projects, including bridges, highways, and golf courses, and development and sale of residential and office buildings, and • Domestic and international air transportation services The Stipulation does not provide guidance to identify what is meant by “large-scale” mining operations. Business Activities that are subject to Conditions: Foreign investment is permitted in certain areas if special conditions are satisfied. • Ministry Recommendations: Investment in some business activities requires the recommendation of the Ministry with oversight of that business area. For example, the Ministry of Mines must recommend a proposal for mineral exploration and production to the MIC. • Conditional Requirements: Certain business areas require the investment to satisfy special conditions. For example, a wholly foreign-owned hotel investment is permitted only for a three or more star hotel, while a joint venture is required for a hotel of less than three stars. Retail activities will be permitted only after 2015. They may not receive tax exemptions, and will require a capital contribution of at least US$3 million. • ESIA: Exploration and production of minerals, oil and natural gas, hydropower, and certain infrastructure projects will require an environmental and social impact assessment report. The report must be submitted with the application dossier.

Activities Reserved for the State According to the SOEE Law, certain activities may only be carried out by the government, unless the government grants an exception. These restrictions continue to apply in addition to the restricted activities set out in the FIL and its implementing legislation, and include:

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Guide to Doing Business in Myanmar

• Extraction and domestic and foreign sale of teak • Cultivation and conservation of forest plantations • Exploration, extraction and sale of petroleum and natural gas products • Exploration, extraction, and export of pearls, jade and precious stones • Aquaculture in designated fisheries which have been reserved for research by the government • Postal and telecommunications services • Air and railway transportation services • Banking and insurance services • Broadcasting and television services • Exploration, extraction, and export of metals • Electricity generation, and • Manufacture of products relating to security and defense The government reserves the authority to permit joint ventures with foreign investors in activities in which private investment would otherwise be prohibited.

Foreign Investment in Mining Three key laws govern the mining sector: the Myanmar Mines Law (1994), Myanmar Gemstone Law (1995), and the Myanmar Mines Rules (1996). The Ministry of Mines regulates foreign investment in this area. A foreign investor can apply to the Ministry of Mines in order to obtain a permit in one of the following categories: • Exploration, large-scale production or small-scale production of metallic minerals • Large-scale production of industrial minerals, or • Large-scale production of decorative stone According to the Ministry of Mines, foreign investment can be structured as profit sharing arrangements or as new investments. The Foreign Investment Rules provide that the initial permit issued for mineral exploration may not include survey exploration or production activities. After the investor has completed exploration, the investor may submit a supplemental application to the MIC for a permit to conduct survey exploration and production. The Stipulation sets out certain conditions for mineral exploration. The initial prospecting period is limited to two years, followed by an exploration period of no more than three years. Extensions are possible, but require an application. Large-scale mining operations are limited to a production period of 15 years, and approval is contingent on the projected mineral reserve and production capacity of the project. Exploration and exploitation of coal may only be conducted pursuant to a joint venture with the Myanmar Government.

Foreign Investment in Oil and Gas With respect to oil and gas resources, the SOEE Law reserves the government the right to carry out the exploration, extraction, production, and sale of petroleum and natural gas products. The government may permit such activities to be carried out jointly with other organizations, including foreign enterprises. Investors must enter into production sharing contracts with Myanma Oil and Gas Enterprise (MOGE), the state-owned enterprise that dominates oil and gas activities in Myanmar.

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Projects involving oil and gas exploration, as well as construction of oil and gas pipelines, are also required to complete an ESIA.

What are the Special Economic Zones and What are the Related Incentives? Myanmar created economic zones to encourage export-oriented investment. In these zones, goods produced by foreign-invested enterprises must be exported and sold on the international market, and may not be sold on the domestic market. The proceeds from those sales are taxexempt for the first eight years of operation, and eligible for tax relief for an additional two years thereafter. They will continue to be eligible for tax relief for five more years if the profits from exports are re-invested domestically. The Special Economic Zone Law also grants investors the ability to import machinery and raw materials duty free, as long as those materials and machinery are used for the production of goods for export. u

Government Approvals for Setting up a Legal Entity in Myanmar If a single share is owned by a foreign party, the company will still be considered a foreign company. Foreign invested companies may apply for a licence under either the Companies Act or the FIL. Only joint ventures with a State entity are exempt from obtaining this license. Only companies incorporated under the FIL have access to the tax incentives and other benefits set out in that Law. Investors who obtained licences under the earlier 1988 Foreign Investment Law (prior to amendment in 2012) are not required to obtain a new licence under the FIL, and the incentives and conditions set out in their licences will remain valid until the expiration of their term. In addition, the FIL provides that investors licenced under the earlier 1988 Foreign Investment Law will be governed by the provisions of the FIL from its effective date, 2 November 2012. Companies incorporated under the Companies Act must complete the following licensing requirements: a. The investor must obtain a Permit to Trade Certificate (“Permit to Trade”) from the Directorate of Investment and Company Administration (DICA) b. The investor must register at the Companies Registration Office (“Registration”) Companies incorporated under the FIL must complete the following licensing requirements: a. Obtain a Permit to Trade from DICA b. Complete the Registration process c. Obtain a permit issued by the MIC (“MIC Permit”) Permits to Trade are normally issued to different types of companies, including manufacturing companies, services companies, and trading companies. At present, however, Permits to Trade are not being issued to trading companies, as a matter of unwritten policy. The MIC oversees licensing of foreign investment activities in Myanmar. Its primary responsibility is to evaluate foreign investment proposals. It also has the authority to stipulate terms and conditions of investment permits and evaluate the status of foreign investment projects.

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Guide to Doing Business in Myanmar

Application Process for MIC Permit The Foreign Investment Rules set out the application process in detail. Dossier: The application dossier must include: • Commercial and financial information about the investor and the project, including information about capital commitments and foreign exchange requirements • The draft joint venture agreement and information about the proposed partnership, if applicable • Proposed use of technology, raw materials, energy, and human resources • Projections of the volume and value of production or service activities, and • Proposed land use plans, and drafts of land lease contracts If the business activity is designated as one that requires an ESIA, then that report must be enclosed with the application dossier. Submission: If the proposed investment is both related to the use of natural resources and governed by the SOEE Law, then the application dossier must be submitted to the MIC through the Ministry that handles the particular natural resource. In all other cases, the investor may submit the application dossier directly to the MIC. Preliminary Review Process: The application goes first to a Proposal Review Group, composed of officers from various Ministry departments. The Proposal Review Group meets once a week, and performs a preliminary review of the application. The investor is required to attend the meeting. If the application is approved, the Proposal Review Group submits the proposal to the MIC. Comment Period: The MIC will seek comments from the relevant state or regional government or Nay Pyi Taw Council (depending on the location of the investment), the Investment Assessment Group of the relevant ministry, and the Ministry of Environmental Protection and Forestry. The comments will be presented at the following MIC meeting. The MIC will meet at least twice per month. Issuance of Permit: The MIC will review the proposal based on several factors, including financial benefits, potential for new employment, use of technology, and environmental impact. If the MIC approves the proposal, it will issue an MIC Permit within 90 days of its decision. Post Licensing Requirements: After it receives its MIC Permit, the investor must report the final status of construction to the MIC within 30 days of completion of construction, and then submit a quarterly progress report to the MIC during operations. It must also submit to inspections, although the Foreign Investment Rules do not elaborate on the purpose or frequency of the inspections. The investor must also provide annual audit reports to the MIC.

Duration of MIC Permit and Permit to Trade MIC Permits are approved for a specified duration, and are usually issued on a long-term basis. There is no requirement for periodic renewal. Permits to Trade must be renewed every three years. u

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Capital Structure and Incentives What are the Requirements Regarding Capital Structure for Foreign Investment? The FIL does not require a minimum capital commitment for foreign investment in Myanmar. Nevertheless, the MIC will determine capital requirements on a case-by-case basis as it reviews proposals for foreign investment projects. The FIL does not incorporate any guidelines for how the MIC will determine capital requirements, other than to provide that the assessment will be made based on the proposed business activities of the investor. Foreign investors that opt to incorporate under the Companies Act must commit at least US$150,000, if they are a manufacturing company, or US$50,000, if they are a services company.

Are there Investment Guarantees? The FIL contains a State guarantee protecting enterprises against nationalization and expropriation, although this remains untested.

What are the Incentives for Obtaining an MIC Permit under the FIL? The FIL offers a large range of incentives and guarantees to foreign investors. The MIC grants a tax holiday period of five years to foreign invested companies approved under the FIL. In addition, the MIC may grant one or more of the following exemptions and incentives: • Exemption from or reduction of taxes on machinery or materials imported during the construction or development phase of the investment project • Exemption from or reduction of taxes on imported raw materials during the first three years of commercial production • Exemption from income tax on profits reinvested in the business • Relief from tax on a maximum of 50 percent of the profits derived from the export of goods manufactured in Myanmar • The right to pay income tax of foreign employees and deduct those payments from assessable income • The right to deduct the costs of research and development carried out within Myanmar, and • The right to carry forward and set off losses for up to three consecutive years u

Sale of Shares The FIL allows foreign investors to sell their ownership interest to either a foreign or local citizen or entity. If the foreign investors in a private limited liability company sell their entire ownership interest, the foreign investment permit will be revoked.

10 Guide to Doing Business in Myanmar

An investor must file an application with the MIC to transfer all or part of its shares in a company. The investor must provide proof of tax clearance from the Internal Revenue Department. The MIC will review the application based on the investor’s reason for the transfer and whether the transferee will be able to continue to operate the business. The MIC will also consider the impact of the transfer on the interests of the State. The transferee will be entitled to any tax exemptions or relief still applicable to the company at the time shares are transferred. u

Taxation What are the Corporate Income Tax Rates? Companies incorporated in Myanmar, under the Companies Act or under the FIL, are taxed on their global income. Non-resident companies (such as non-resident branches of foreign companies) are taxed only on their domestic income. The Corporate Income Tax (CIT) rate is 25 percent for companies incorporated under both the Companies Act and the FIL. Non-resident companies are taxed at a rate of 35 percent. Under the FIL, upon obtaining an MIC Permit, the foreign company enjoys a tax holiday period of five years, including the year the enterprise commences commercial operations. In addition, the MIC may grant any of the available exemptions and reliefs it deems appropriate. The exemptions and reliefs available to a company with an MIC Permit are set out in the section “Capital Structure and Incentives”.

What is the Tax on Goods and Services? Rather than a traditional value added tax, Myanmar has a Commercial Tax on goods and services. The tax varies depending on the proceeds of the sale, and ranges from 0 percent (for exempt items) to 100 percent for luxury goods, and 5 percent for services designated in the Commercial Tax Law.

Who is Subject to Personal Income Tax (PIT) and What are the Rates? Myanmar citizens and people who are considered “resident foreigners” are subject to Personal Income Tax (PIT). A foreigner staying in Myanmar for 183 days or more is considered a resident foreigner. Non-residents are taxed only on their domestic income, while residents are taxed on their global income. Both citizens and resident foreigners are taxed on salaries based on a progressive scale, starting at 1 percent and rising to a maximum rate of 20 percent. Income from sources other than salary is taxed on a progressive scale from 2 percent to 30 percent. Non-residents are also subject to PIT on income derived from sources in Myanmar, regardless of where the income is paid. Non-residents are taxed at a flat rate of 35 percent.

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Double Taxation Agreements Myanmar currently has double taxation agreements with the United Kingdom, Singapore, Malaysia, Vietnam, South Korea, India and Thailand. u

The Right to Purchase Foreign Currency and Remit Profits Opening an Account and Depositing Foreign Currency The foreign investor must disclose the amount of foreign capital required for the investment in the proposal submitted to the MIC. Once the investor receives its permit, it may open an account at a bank in Myanmar permitted to handle foreign currency, and deposit the amount of foreign currency designated in the proposal. The amount may be deposited in a lump sum, or if the investment is to be carried out over a specified term, it may be deposited in instalments. The investor must provide the MIC advance notice of the amount of foreign currency it intends to transfer into the country each year.

Use of Foreign Currency Investors may make transfers from their bank account only for expenditures related to their investment in Myanmar, including transfers within Myanmar to local companies or citizens. The investor may also reinvest profits to extend its business investments in Myanmar. The investor must engage an approved accounting company to conduct an annual audit of their business accounts. The audit reports must be sent to the MIC.

Is it Possible to Repatriate Investments from Myanmar? Yes. The FIL and the Foreign Investment Rules provide that a foreign investor who has brought in foreign capital can remit the following from Myanmar: • Foreign currency to which the investor is entitled on the expiry of the MIC Permit, subject to MIC approval • Proceeds from the sale of shares, subject to MIC approval • Distribution after liquidation of the business, subject to MIC approval • If the scale of the investment has been reduced, an amount of foreign currency equivalent to the reduction, subject to MIC approval • Net profit after deducting all taxes and debts, and • Indemnity amounts received under law A foreign employee can transfer his or her salary and lawful income after deducting taxes and other living expenses incurred domestically. Remittances of profit and capital repatriation are subject to Foreign Exchange Regulations, which are still being drafted by the Central Bank of Myanmar. Remittance must be made through a bank authorized to engage in international banking services. u

12 Guide to Doing Business in Myanmar

Import and Export of Goods by a Foreign Invested Company In principle, Myanmar generally allows the import of goods, subject to some restrictions. While a few types of goods are prohibited outright, others are restricted and require a special import licence issued by the Ministry of Commerce. Other ministries may have special regulations that govern the import of certain goods within their jurisdiction. Permits to Trade are not currently being issued to trading companies. The Foreign Investment Rules also provide that they do not apply to trading companies. Nevertheless, products manufactured in Myanmar can be exported with an export licence. Under the FIL, a business seeking to import or export goods must register with the Export Import Registration Office under the Directorate of Trade within the Ministry of Commerce. There are plans to eliminate the permit requirement for some types of goods. u

Real Estate Development Land in Myanmar is owned by the State and administered by various government departments. While a foreign investor may not own land, land use rights can be obtained by leasing land from the government or subleasing from a citizen who has a leasehold right, subject to the approval of the MIC. In addition, land can be contributed to a joint venture by a government agency. Foreign investors may also develop property using a build, operate, and transfer model, either as a wholly foreign-owned project, or on a joint venture basis. The Foreign Investment Rules permit projects to sub-lease or mortgage land and buildings, with the approval of the MIC. Land development projects must comply with the conditions set out in the Stipulation. The FIL and the Foreign Investment Rules permit foreign investors to lease State-owned or private land for up to 50 years, with the permission of the MIC. The lease is renewable twice, and each renewal may have a term of up to 10 years. The MIC may, in its discretion, approve a longer initial lease period for an investment in an undeveloped region. The Stipulation identifies the development and sale of residential and commercial property as a business activity in which a joint venture is required. u

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Litigation in Myanmar What is the Structure of the Court System in Myanmar? Myanmar’s legal framework is based on a combination of laws from different periods of its history, ranging from its colonial period through to current legislation. These laws exist alongside a common law-style judicial system. The Constitution describes a court system with three levels of hierarchy: (i) the Supreme Court of the Union, High Courts of the Region, High Courts of the State, Courts of the Self-Administered Divisions, Courts of the Self-Administered Zones, District Courts, and Township Courts, (ii) Courts-Martial, and (iii) Constitutional Tribunal of the Union. The Supreme Court is the highest court in the country, but does not have jurisdiction over the Constitutional Tribunal or the Courts-Martial. Cases are normally tried by a single judge. In special circumstances, the Chief Justice of the Supreme Court can order the formation of a panel of judges. All court proceedings are governed by the Civil Procedure Code, Criminal Procedure Code and the Courts Manual.

Is Arbitration Available in Myanmar? Arbitration within Myanmar is governed by the Arbitration Act (1944), which gives local courts broad authority to intervene in arbitral proceedings, including the right to remove arbitrators and modify the award. Because domestic arbitration processes are not efficient, foreign investors may prefer foreign arbitration. The FIL gives private parties the right to agree on a dispute resolution procedure in their contracts. Investors may therefore select foreign arbitration in their contracts. The Foreign Investment Rules provide that the investor must alert the MIC if a dispute arises, and must inform them of the type of resolution procedure that will be used. However, as a matter of policy, contracts between foreign companies and State-owned enterprises generally specify Myanmar law as the governing law, and provide for disputes arising from such contracts to be settled by arbitration in Myanmar under the Arbitration Act. In April 2013, Myanmar acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Myanmar is not a party to the ICSID Convention. u

Foreign Workers and Labour Law What Approvals do Expatriates need to Travel and Stay in Myanmar? Foreigners must have a visa in order to enter Myanmar. While a tourist visa is valid for 28 days, foreigners doing business in Myanmar can apply for a stay permit, which is valid for 3 months, 6 months or 9 months. In addition to the stay permit, if a foreigner intends to remain in Myanmar for more than 90 consecutive days, he or she must obtain a Foreigner’s Registration Certificate from the Immigration and National Registration Department of the Ministry of Immigration and Population. The certificate can be extended for up to one year with a recommendation letter from the employing company.

14 Guide to Doing Business in Myanmar

What Approvals do Expatriates need to Work in Myanmar? The MIC approves employment of foreigners in Myanmar. An investor must set out in the investment application dossier that it submits to the MIC the number of foreign experts or technicians it plans to employ. The MIC considers and approves employment of foreign personnel on a case-by-case basis, particularly if the role involves special expertise or skill, although it will give preference to the employment of citizens. After obtaining an MIC Permit, the foreign enterprise must apply for work permits from the Directorate of Labour under the Ministry of Labour and for stay permits and visas from the Immigration and National Registration Department.

Must a Company Employ a Minimum Number of Myanmar Citizens? The FIL sets out minimum requirements for employment of local staff in businesses that require special expertise. The FIL does not contain any guidelines to indicate when a business requires such special expertise. Such a business must have at least 25 percent citizens for the first two years after commencement of business activities, at least 50 percent for the second two-year period, and at least 75 percent for the third two-year period. In addition, the investor is responsible to ensure parity of salaries between citizens and foreigners employed at a similar level of expertise within the business. The investor must prepare an annual training program for its local employees, and submit the program to the MIC.

What Other Labour Laws Govern Employment in Myanmar? Myanmar labour regulations govern minimum wage requirements and severance, working hours and leave, child labour, worker’s compensation, trade unions, and other areas. The Agricultural Labourers’ Minimum Wages Act (1948) is the current regulation on the minimum wage. It is limited to agricultural or seasonal workers, and the minimum wage is set at 35 percent of the production from the land worked by the employee. In 2012, a new Minimum Wage Act was drafted, although it has not yet been approved. The draft Minimum Wage Act would cover individuals who work at any commercial, production or service business. A National Committee for Determining Minimum Wage would set guidelines for determining which kinds of business are subject to the minimum wage requirements. In addition, the National Committee would declare a minimum wage rate at least once every two years. The Social Security Act (1954) requires that companies with more than five employees contribute a portion of their wages to a fund administered by the Social Security Board. According to the Ministry of Labour, Employment and Social Security website, the current contribution is “approximately 4% of the insured wage and the ratio of contribution by employer and employees is 2 ½ : 1 ½ respectively.” 1 The Social Security Fund covers disability, maternity benefits, medical care, and pensions. In addition, for employees who are not covered by the fund, the Workmen’s Compensation Act (1932) makes the employer responsible for providing compensation for injuries or occupational diseases. According to the Foreign Investment Rules, all employees must be registered with the Social Security Board. In addition, the Social Security Board must submit a certification to the MIC every six months stating that the company’s social security obligations are fully paid up. u

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Ministry of Labour, Employment, and Social Security, http://www.mol.gov.mm/en/departments/social-security-board/ rates-of-contribution/ (last visited 26 March 2013). mayer brown jsm 15

Intellectual Property Trademarks Myanmar does not have a single, comprehensive trademark law. Several different pieces of legislation govern use of trademarks in Myanmar. The Penal Code defines a trademark as a “mark used for denoting that goods are the manufacture or merchandise of a particular person.” The Penal Code makes use of a false trademark a violation of the law. Trademarks can be registered under the Registration Act (1908) by making a declaration of ownership of the trademark and publishing a cautionary notice in the national newspaper warning against infringement of the trademark. Registration is not compulsory, and the fact that a trademark has been registered is not conclusive evidence of the ownership of the trademark. Rather, it establishes the use of the trademark for evidentiary purposes in case of prosecution or defense of any future action. Foreign trademark owners can apply for a declaration through a registered agent. Without a clear legal framework for protection of proprietary rights in a trademark, parties often were forced to rely on the general rule of “passing off ” to govern the acquisition of rights to a trademark, protection of that trademark, and available remedies. This rule prohibits a trader from representing his or her goods as the goods of another person or entity.

Copyrights Copyrights are governed by the Copyright Act (1914), which governs rights in published writing or music. The Copyright Act sets out penalties for violations of certain rights, including: selling or distributing an infringing copy of a work in which a copyright exists, importing an infringing copy into Myanmar, or exhibiting or performing an infringing work in public. The penalties range from small fines to imprisonment. The Copyright Act does provide for additional civil remedies that are more relevant in a modern context. For example, the owner of a copyrighted work may seek an injunction or file a claim for damages. In addition, the infringing works are deemed to be the property of the legal owner of the copyright. The Copyright Act, however, does not contemplate enforcement within Myanmar of copyrights arising in other countries. The Act only protects works first published in Myanmar, or unpublished works if the author was a citizen or resident of Myanmar at the time the work was created. The Television and Video Law (1996) is more modern, and provides for fines and imprisonment for copying, distributing, or commercial exhibition of a video without the consent of the licence holder.

Patents Myanmar does not have a system for registration of patents. As a practical measure, the owner of a patent may make a declaration of ownership under the Registration Act, as is sometimes done for trademarks.

Technology Transfer The Science and Technology Development Law (1994) requires that every contract that involves a transfer of technology must be registered with the Myanmar Scientific and Technological Research Department. If the contract is not registered, then a suit may not be instituted in case of misuse of the technology. u

16 Guide to Doing Business in Myanmar

Government of Myanmar and Major State Agencies The Republic of the Union of Myanmar is a multi-party system. The National League for Democracy (NLD) is the primary opposition party, and the National Unity Party (NUP) is the primary pro-regime party. There are also several smaller ethnic parties. Myanmar is a civilian parliamentary government, based on a Constitution reformed in 2011. The bicameral parliament is composed of 440 members in the House of Representatives, and 224 members in the House of Nationalities. A certain number of seats in each house are designated for military appointments, selected by the Chief of Defence Services. Parliament selects the president and two vice-presidents. The president serves a five-year term. GOVERNMENT STRUCTURE

Legislative Branch

Executive Branch

Judicial Branch

House of Nationalities

President U Thein Sein

Supreme Court

House of Representatives

Vice President U Nyan Tun

Vice President U Sai Mauk Kham

Attorney General Dr. Tun Shin

Courts - Martial

Constitutional Tribunal of the Union

Ministries

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MINISTRIES Myanmar has over 30 national ministries, including: • Ministry of Defence • Ministry of Home Affairs • Ministry for Progress of Border Areas, National Races and Development Affairs • Ministry of Foreign Affairs • Ministry of Social Welfare, Relief and Resettlement • Ministry of Information • Ministry of Culture • Ministry of Agriculture and Irrigation • Ministry of Forestry • Ministry of Finance and Revenue • Ministry of Construction • Ministry of National Planning and Economic Development • Ministry of Livestock and Fisheries • Ministry of Commerce • Ministry of Communications, Post and Telegraphs • Ministry of Labour • Ministry of Mines • Ministry of Cooperatives • Ministry of Transportation • Ministry of Hotels and Tourism • Ministry of Sports • Ministry of Industry • Ministry of Rail Transportation • Ministry of Energy • Ministry of Electric Power • Ministry of Education • Ministry of Health • Ministry of Religious Affairs • Ministry of Science and Technology • Ministry of Immigration and Population • Office of the Prime Minister u

18 Guide to Doing Business in Myanmar

Sanctions Against Myanmar What are the Sanctions Imposed by the European Union, United Kingdom, Australia, and Canada? Several countries have imposed sanctions on Myanmar, although restrictions have been progressively eased in recognition of the nation’s reform initiatives. In April 2013, the EU announced that all sanctions were to be permanently lifted, although the arms embargo remains in effect. Separately, the United Kingdom has also suspended its asset freeze on nearly 500 individuals and has eased other restrictions on key industries. Australia has maintained its prohibition on trade in weapons and arms, but has lifted travel bans on citizens of Myanmar. Canada has lifted prohibitions on trade, investment and financial transactions, and now permits the exchange of technical data. Asset freezes and prohibitions on transactions remain in place for certain designated individuals.

Are any US Sanctions against Myanmar still in Effect? Yes. The United States has had sanctions in place against Myanmar since 1997. In recognition of the progress on political reforms that the Myanmar government has made since 2011, the Obama administration implemented several measures in 2012 to ease sanctions. Certain US sanctions still remain.

Which US Sanctions have been Removed, and What about Reporting Requirements? In July 2012, the United States removed most restrictions on the export of financial services to Myanmar, so that US financial institutions are now able to engage in most transactions with Myanmar. In December 2012, the United States removed the prohibition against the import of Myanmar products, except for jadeite and rubies, opening the US market to goods originating in Myanmar. In February 2013, sanctions were eased on four Myanmar banks. Although they remain on the SDN list, US companies may now use these banks to transfer funds or facilitate their business in Myanmar. Also, on 2 May 2013, the State Department announced that the ban on visas for government officials from Myanmar had been lifted, but that it was extending targeted sanctions for another year. The United States also has eased restrictions on investment in Myanmar by US firms, subject to certain reporting requirements. There are two different reporting requirements that may apply to new US investments in Myanmar. First, there is the Annual Reporting Requirement, whereby any US individual or entity whose new investment in Myanmar exceeds an aggregate of US$500,000 is required to file annual reports with the U.S. Department of State, both in public and in proprietary versions. The public version must include such information as the name of the reporting person, an overview of the person’s operations in Myanmar, the person’s policies and procedures related to human rights, workers’ rights, anti-corruption, and environmental issues, arrangements with security service providers, details regarding significant property acquisitions, and any payments exceeding US$10,000 to a governmental entity in Myanmar. The proprietary version must disclose, among other things, information regarding communications with the Myanmar armed forces and risks identified in connection with the person’s due diligence on human rights, workers’ rights, and environmental policies and procedures.

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The second reporting requirement for new US investments in Myanmar is the MOGE Investment Notification, whereby US individuals or entities undertaking a new investment pursuant to an agreement with MOGE must notify the U.S. Department of State within 60 days of the new investment.

Other than these Reporting Requirements, are US Businesses Free to Do Business in Myanmar? US businesses (and any US citizens or US residents, wherever they are located, and any individuals located in the United States) must still take care not to do business, directly or indirectly, with Myanmar entities or individuals that have been designated by the United States as “Specially Designated Nationals” (SDNs), and not to facilitate business dealings with SDNs by non-US individuals or entities. A number of instrumentalities associated with the Myanmar Ministry of Defence, certain military officials, certain financial institutions, and certain individuals and entities deemed to be supportive of the military are specified on the SDN List maintained by the U.S. Office of Foreign Assets Control of the Department of the Treasury2. Any entity that is owned 50 percent or more by a listed SDN is also considered an SDN. The continued restrictions on dealings with Myanmar SDNs may hamper business relationships with Myanmar. For example, US financial institutions, though freed from the comprehensive prohibitions that had been in place before July 2012, are still barred from dealing directly with Myanmar banks that are SDNs. US financial institutions are permitted to transfer funds to or from an account of an SDN bank, on the condition that the account of the SDN bank must not be maintained on the books of any US financial institutions. The funds transfers must be routed through correspondent accounts of SDN banks at non-US financial institutions, and the funds transfers must not involve a debit to an account of an SDN bank. Also, associated restrictions promulgated by the U.S. Financial Crimes Enforcement Network (FinCEN) may require higher levels of due diligence when transacting through Myanmar banks. In conclusion, the opportunities for US businesses to invest in Myanmar and engage in other commercial ventures in Myanmar expanded considerably in 2012, but US businesses and their business partners must still attend to the remaining US sanctions. For the foreseeable future, sanctions compliance will remain an important feature of doing business in Myanmar. u

2

See www.treas.gov/ofac.

20 Guide to Doing Business in Myanmar

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