Myanmar Investment Seminar June 2013, Japan

The New Investment Regulations and Procedures

Cho Cho Wynn Deputy Director General Directorate of Investment and Company Administration Ministry of National Planning and Economic Development Myanmar

1

Outline 1

Policy Framework

2

Current Reforms for Investment Facilitation and Accountability

3

New Foreign Investment Law

4 5 5

Foreign Investments Flows into Myanmar

6

Doing Business in Myanmar

2

Investment Potential of Myanmar

7

SEZ in Myanmar

8

Conclusion

9

Policy Framework

3

National Economic Policy  Sustainable development of agriculture towards industrialization and all round development;  Equitable and proportionate development among Regions and States;

 Inclusive development of entire people;  Quality of statistics and statistical system;

Reforms

First Phase Focused on politic - National Reconsolidation - Peace and Stability - Freedom of Media

Second Phase Focusing on Economic Development - Invite more FDI - Change of Trade Policy - Monetary & Finance Policy - Conduct National Workshops in various economic sectors

Third Phase Focused on public Administrative - Good Governmance - Clean Government

Four Phase Private Sector Development

5

Current Reforms for Investment Facilitation and Accountability

6

Reforms in Investment Agenda  Issued notification no. 39/2011 relating to the right to use land. According to notification no. 39/2011, investors can lease the land not only from the State but also from private  The Special Economic Zone Law was also enacted in January 2011 and is now proceeding for amendment.  The Dawei Special Economic Zone Law was also enacted in January 2011.  Revised the exchange regime into a managed floating rate on 2nd April 2012.  Establish a Technical Coordination Team in July 2011. It is comprise of senior officials from Myanmar investment Commission, Ministry of Finance and Revenue, Ministry of Commerce and Ministry of Construction.  Myanmar Investment Commission reorganized on 23rd Sept. 2012 and consist of 11 members who are not only from Government Sector but also from private sector, academic field and researcher field and subsequently made some restructuring.  Enacted new FDI Law on 2nd Nov, 2012.  Issued notification no. 11/2013 by MNPED relating to Foreign Investment Rules.

Principles of MIC Not to violate the interest of State and people Not to have any impact on national dignity Not to breach of sovereignty Not to affect on environment

Criterions of Investment  Protection of investors  Safeguard of environment conservation  Deeply emphasize on social impact  Transparency and accountability in financial matters  Create job opportunities  Abide existing labour law  Support corporate social responsibilities consistent with regional and international standard and agreements  Transfer of Technology.

Myanmar Investment Commission H.E U Win Shein Union Minister for Ministry of Finance & Revenue

Chairman

H.E U Win Htun Union Minister for Ministry of Environmental Conservation & Forestry

Member

H.E U Zayar Aung Union Minister for Ministry of Rail Transporation

Member

Dr Htun Shin Union Attorney General Union Attorney General’s Office

Member

Dr. Aung Htun Thet Economist

Member

U Nyunt Tin Ambassador (Retired)

Member

Source: DICA

10

Formation of Myanmar Investment Commission (Cont.)

U Win Khaing Chairman of the Myanmar Engineering Association

Member

Daw Mya Thuza Advisor

Member

Daw Khine Khine Nwe Entrepreneur

Member

H. E Dr .Kan Zaw Union Minsiter for Ministry of National Planning & Economic Development

Secretary

H. E Thura U Thaung Lwin Deputy Minister for Rail Transportation

Joint Secretary

Source: DICA

11

Organization Chart of DICA/Secretariat Office of MIC PAT

Director General OSS

Administration Section

Deputy Director General

Foreign Investment Section

Citizens’ Investment Section

Investment Supervision Section

Special Economic Zone Section

Total Employee about 170

website : dica.gov.mm, mnped.gov.mm PAT : Project Assessment Team OSS : One Stop Service – Departmental Coordinating Team 12

Business Registration Section

Legal Section

Responsibilities related to Investment of DICA As Secretariat Office of the MIC

Business Administration and Registration

Scrutinizing the Investment Proposals Business Registration

Assisting To Solve The Difficulties On Investment Issues

Business Administration Provide information to Investors and coordinate with the relevant Ministries 13

New Foreign Investment Law

14

15

Relevant Economic Activities Economic activities stipulated by MIC with the prior approval of Union Government. Totally 11 restricted economic business/activities are designated as follow:Business be harmful to traditional culture and customs, public healthand environment and ecosystem Business brought the hazardous or poisonous wastes Factories or business produce or use hazardous chemicals under international agreements Manufacturing and Services allowed to carry out by only Citizens Business which are under experiment or unapproved technologies, medicines, apparatus equipment Agricultural business both short or long term, Livestock breeding & Marine Fishing be allowed to carry out by only Citizens Not allow to business within 10 miles around boundary line with neighboring countries , except industry zones approved by MIC  MIC may grant to allow economic activities with the prior approval of the Union Government for the interest of the State16and the People.

Foreign Investment Law Forms of Investment 1

2

A Citizen or Concerned Government Organization

100% Foreign Owned

Joint Venture 3

Any System Included in the Mutually Agreed Contract

17

Foreign Investment Law Tax Incentives 5 years tax holiday Further tax exemption/relief for an appropriate period in case if it is considered beneficial for the State Exemption or relief from income tax on profit which is reinvested within one year. Right to accelerate depreciation in respect of capital assets used in business, at the rate fixed by the State for the purpose of income-tax assessment. Relief from income tax up to 50 percent on the profit from exports. 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 carry forward and set off losses up to 3 consecutive years, from the year the loss is sustained. Exemption or relief form custom duty or other international taxes or both on machinery, equipment, instruments, machinery components, spare parts and materials used in the business, which are imported as they are actually required for use during the period of construction of business. Exemption or relief form custom duty or other international taxes or both on raw materials imported for production for the first 3 years after the 18 completion of construction of business.

Appointment of Personnel and Employees  appoint Citizens employees, technicians and service personnel for skilled businesses as follows :  (a) First 2 years 25%  (b) Second 2 years 50% 

(c)

Third 2 years

75%

 Arrange to provide necessary vocational training and practicing training to Citizen employees in order to upgrade their skills  Appoint only Citizens at the works in which expertise is not required;  Carry out labor recruitment through the Work and Labor Recruitment Office, local labor recruitment agents or by own arrangement;  Employ, in employing citizen skilled workers, technicians and staff, by signing the employment agreement mutually between the employer and employee in accord with the existing Labor Laws and Rules;

Appointment of Personnel and Employees (Cont.)  Grant equitable treatment both Local Citizen employee and Foreign employee in respect to salary and rights at technician rank.  The foreigners working in permit investment enterprise may apply work permit certificate , stay permit certificate issued by the State through MIC  Investor shall:-

 Make a employment agreement in accordance with the stipulations in appointing personnel and employees;  Carry out for enjoyable rights contained in the existing Labor Laws and rules including minimum wages and salary, leave, holiday, overtime fee, damages, workman’s compensation, social welfare and other insurance relating to employees in stipulating the rights and duties of employers  Settle the dispute arisen among employers, among employees, between employers and technician or service personnel in accord with the relevant existing laws.

Right to Use Land 50 Years (For Initial Period)

Depending on the business, type of business and investment amount

10 Years (First Renewal)

Land Lease

10 Years (Second Renewal)

21

Right to Transfer Foreign Currency

Foreign currency entitled to by the person

Net Profit

Foreign currency permitted for withdrawal by the MIC

Legitimate Balance

Through The Banks that can Operate the Foreign Banking 22

Guarantees

The Union Government guarantees as follow: against nationalization  against termination of investment during the permitted term  to transfer the entitled Foreign Capital to investor on the

expiry of the term of the contract

Application Procedure for Resource based Investment Proposal (e.g. Mining/Energy)

Agreement (Draft)

In vestment Proposal

Ministry of Mines/ Energy

MIC

Map of Contract Area

Recommendation Letters

Company ‘s Profiles/ Bank Statement

EIA/ HIA/ SIA/ Environment Management Plan

24

Application Procedures Fill up prescribed form(1) signed by promoter 100 % Draft contract or JV Contract Draft Lease agreement EIA/SIA report ( based on MECF/List of economic activities which required environmental impact assessment prescribed in notification 1/2013) For resource-based industry, submit through concerned Ministries

For non-resource based, submit directly to MIC

Application Procedures

25

Project Assessment Team (Rules 37)   

Supervised by DG DICA Meet every Thursday Comprised of Officials from o MNPED : DICA, PAPRD o Finance & revenue: Customs, Internal Revenue Dept o Labour o Electric Power o Construction: DHSHD o Industry o Commerce o Environmental Conservation and Forestry o If necessary, to be included experts from respective Ministries

26

Application for Permit (Section 20) The MIC;(a) May accept or refuse the proposal within 15 days (b) Shall allow or refuse the proposal within 90 days to the person who submit the proposal if the proposal is accepted.

27

Departmental Cooperation Team (Rules 157) Officials from – o MNPED : DICA, PAPRD o Finance & Revenue: Customs, Internal Revenue Dept o Labour: o Electric Power o Agriculture & Irrigation o Industry o Commerce o Conservation and Forest o Immigration o Livestock & Fisheries o Mining  Providing One Stop Services for the Investors  No. 1, Thitsar Road, Yankin Township, Yangon Region 

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Customs Duties on Import Sr. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Rate 0 0.1 0.5 1 1.5 2 3 4 5 7.5 10 15 20 30 40 Total

No. of Lines 380 2 123 2919 1219 219 813 101 877 625 626 1151 333 112 58 9558 29

Customs Duties on Export

• No Customs Duty on Export

Appraising Group

Foreign Investment Flows into Myanmar

32

Foreign Investments in Myanmar Foreign Investment Permitted Enterprises by Sector as of May2013 FDI Flows Total Investment- 42535.227 US$ Million 0.82 2.49

0.74

0.43 0.09

0.45 0.09

3.73 5.42 Power Oil and Gas

6.66

Mining Manufacturing 45.27

Hotel and Tourism Real Estate Livestock & Fisheries Transport & Communication Industrial Estate Agriculture Construction Other Services

33.82

Source: DICA

33

Foreign Investment Permitted Enterprises by Country as of May 2013 16000

FDI Flows

US$ in Million

14000

12000

10000

8000

6000

4000

2000

0

Source: DICA

34

Yearly Foreign Direct Investment Flow into Myanmar from 1988-89 to 2013 (May) FDI Flows US$ in Million 20000 18000 16000

14000 12000 10000

7394.78

8000

19998.97

6000

6066

4000 2000 0

4644.46 19.00

158.28

86.95 91.17

719.70 984.76 205.72

Source: DICA

329.58

1419.47 378.20

35

Yearly Trade with Japan from 2010-11 to 2012-2013 FDI Flows US$ in Million Trade with Japan (US$ in Million) No

Description

2010-2011

2011-2012

2012-2013

2013-2014 (Aprial-May)

1

Export

237.43

320.22

406.49

63.42

2

Import

256.35

502.17

1091.73

216.30

3

Total Trade

493.78

822.39

1498.22

279.72

4

Trade Balance

-18.92

-181.95

-685.24

-152.88

Source: DICA

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Investment Potential of Myanmar

Investment Potential of Myanmar Agriculture Food Processing

Resource

Fishery Mining

Mineral Processing

Forestry

Wood Processing

Oil & Gas

Petrochemical

Down Stream

Garment Labour (Quality, Quantity, Cost)

Electronic Parts Assembly Others Location Hotel & Tourism

Services

Logistics

Real Estate Other

Priority Investment

Which Area • Agriculture • Industry • Infrastructure

What type • Value Added • High Tech • Capital Intensive 39

Bilateral Investment Promotion & Protection Agreements

Concluded BITs

BITs Under negotiation

Philippines

Russia

Vietnam

Bangladesh

Lao PDR

Mongolia

China

Japan

India

Korea

Thailand

Iran

Kuwait

Israel

USA (IIA) 40

Doing Business in Myanmar

Doing Business in Myanmar

MIC

Permit

Start

enjoy incentives

Business

Company Incorporation

Registration/ Permit

Export/ Import License

Ministry of Commerce 42

Incorporation of Companies

 Laws related to incorporation of companies The Myanmar Companies Act 1914, Special Companies Act 1950, Myanmar Companies (Amendment) Act 1955 and Myanmar Companies regulations 1957.

 The Directorate of Investment and Company Administration is responsible for permission and registration of the incorporation of companies. 43

Business Permit According to the Section 27 (A) of the Myanmar Companies Act,  No foreign company shall carry on or continue its business in the Republic of the Union of Myanmar unless it has obtained a permit from the Ministry of National Planning and Economic Development.

 Therefore, the foreign companies must follow the laws, rules, regulations and procedures for applying permit, the basic principles of allowing permit and the formal requirements. 44

Doing Business in Myanmar (Resource-based Sector) Procedures and Documentary Requirements for Permit Application

Apply for Permit to Trade from Ministry of National Planning and Economic Development

Approval from the EC

Approval from the Cabinet

Application for Permit ( Affixed K.1000/- court fee stamp) Application Form A (2) copies (Duly filled up signed) List of intended business activities that will be carried out in the Republic of the Union of Myanmar (To mention only specific business) Statement of compliance for initial capital brought in. Original Bank statement for each shareholder or shareholder Company Passport copy or NRC copy of each shareholders and directors. Memorandum and Articles of Association. (Copy) Board of Director’s Resolution if shareholder is a company

45

Doing Business in Myanmar (Resource-based sector) Procedures and Documentary Requirements for Registration Application

Apply for Registration from Ministry of National Planning and Economic Development

Memorandum and Articles of Association Declaration of Registration Declaration of Registered Office

Approval from the EC

Approval from the Cabinet

Declaration of Legal Version List of intended business activities (To mention only specific business) Certificate of Translation List of Directors (Form 26) Passport copy or NRC copy of each shareholders and directors.

46

Special Economic Zone (SEZ) in Myanmar

47

Objectives  To base on the framework of the maintenance, protection and safeguarding the sovereignty of the State in allowing to operate foreign investment business;  To develop the momentum of the economy of the State by establishing and operating the Special Economic Zones;

 To develop the industry and high technologies in the State;  To improve the goods processing, trading and service business;  To enable the citizens to train, learn and transfer the high technologies;  To create more employment opportunities for the citizens;  To develop the infrastructures of the State .

Activities

Production based businesses Services business Infrastructure construction businesses Other businesses -

determined by the Central Body, with the approval of

the Government.

49

Institutional Arrangements

Central Body

Central Working Body Management Committee 50

The Myanmar Special Economic Zone Formation of Central Body According to the President Office’s Notification No(41/2011),in order to Form Central Body as follows:

• •

Vice -Chairman Vice -President

Chairman President

Vice -Chairman Vice -President

Members Union Ministers, Union Antony General, State and Division’s Chief ministers Secretary Union Ministers, Ministry of National Planning and Economic Development Joint-Secretary Director General , Foreign Economic Relation Department

51

The Myanmar Special Economic Zone Formation of Central Working Body According to the President Office’s Notification No(74/2012),in order to Formation of Central Working Body as follows:

Chairman Vice –President(2) Vice -Chairman Union Ministers, Ministry of National Planning and Economic Development Members Union Ministers, Deputy ministers Secretary Deputy minister, Ministry of Industry Joint-Secretary Director General , Directorate of Investment and Company Administration 52

Management Committee

Dawei Special Economic Zone Tanintharyi Region

• Chairman, • Deputy Minister Ministry of Transport

Thilawa Special Economic Zone Yangon Region

• Chairman, Deputy Minister Ministry of National Planning and Economic Development

Kyauk Phyu Special Economic Zone Yakhine State

• Chairman, • Deputy Minister Ministry of Labour, Employment and Social Security

53

Special Economic Zones in Myanmar

Kyauk Phyu

Yangon Thilawa

Dawei

7/3/2013

54

Opportunities • Opportunities for the people – Instant job opportunities – Long-term job opportunities – Technical transfers (both On Job Training and technical trainings) – Increased income and consumption – Labor rights and protections – Urban poverty reduction • Opportunities for the nation – High export growth – Import substitution to some extent • Opportunities for the private sector – Technical know-how – Opportunities for supporting industries (at a later stage) 55

The Myanmar Special Economic Zone Law Incentives

Income ax holiday

-

5 years

Second 5 years

-

50% relief on income tax –overseas sale products

Third 5 years

-

50% relief on income tax – reinvestment obtained from export sale

More applicable

56

The Myanmar Special Economic Zone Law Exemption from customs duty



Imported raw material



Machineries



Equipment



Machineries

Export Processing Zone

5 years



Vehicles



50% exemption for the next 5 consecutive years

57

Dawei Special Economic Zone •Dawei SEZ is situated in Dawei District, Tanintharyi Region which sits at the southern part of Mynmar. •The demarcated area of the Dawei SEZ is 44850 acre and will have the coastline in its western boundary and a lot of green area in its locality.

7/3/2013

58 58

Plan of Dawei SEZ The establishment of Dawei SEZ will be materialized into five phases. The first phase

(1 to 5 year)

The second phase

( 6 to 10 year)

The third phase

(11 to 20 year)

The fourth phase

(21 to 40 years)

The fifth phase

(41 to 75 years)

59

Plan of Dawei SEZ The first phase (5% of total area – about 2,500 acre) : Garment Industry, Leather Goods Industry, Food Processing Industry, Rubber Industry, Agro- based Industry, Furniture Industry, Electronics and Electrical Appliances Industry. The second phase ( additional 4000 acre ): Steel Mill (Billet, Slab and Down Stream Products), Fertilizer Plant, Oil Refinery, Auto Industry. The third phase ( additional 13,500 acre): Plastics Industry, Chemical Industry, Petrochemical Industry, General Industry. The fourth phase (additional 12,500 acre) The fifth phase : (additional 12,500 acre)

60

Dawei SEZ • It is the first SEZ in Myanmar and expected that Myanmar can attract more investments not only from home but also abroad, especially India, Thailand, Combodia and Viet Nam. • Additionally, Dawei SEZ will bridge between Viet Nam and Dawei Deep Seaport through road links of Cambodia and Thailand.Therefore, the Dawei SEZ will enhance connectivity in the region.

61

62

Map of Location Plan for Thilawa Special Economic Zone

Thilawa Special Economic Zone

7/3/2013

63

Thilawa SEZ (Yangon Region)

- Thilawa SEZ will be developed in Yangon Region which is only 38 kilometers from Yangon Airport and 23 Kilometers from downtown area. - It is located in Southern and Northern Parts of Kyauk Tan Township The area of Thilawa SEZ will be 23422148.442 square meter (5787.718 acre ) - The project will be realized by the closer cooperation between Japan and Myanmar. - From Japanese side, Mitsubishi , Sumitomo and Marubeni companies will make 49 percent of total investment while a Myanmar public company contributes 51 percent of investment amount. 64

The importance for Thilawa SEZ

- availability of large financial resources, - availability of advanced technology - availability of international experience and technical knowhow related to the management of Special Economic Zone in other countries and - the Government to Government cooperation and commitment

65

The importance for Thilawa SEZ

• In addition, the development of the outside infrastructure of the Special Economic Zone such as transportation, water resources, sufficient electricity and other related infrastructure development. • A large of capital and high-technologies for development of outside infrastructure is also important supporting factor for Special Economic Zone.

66

Cooperation Agreement for Thilawa SEZ

• Memorandum of Intent (MOI) - on 21st April, 2012 • Memorandum of Cooperation on Development of the Thilawa Special Economic Zone (MOC) on 21st December , 2012.

67

Organization Form • Myanmar-Japan Joint-Venture - Myanmar Consortium - Japan Consortium

68

Vision

www.dica.gov.mm www.facebook.com/pages/DICA/365149220225843

70