Myanmar Foreign Direct Investment Bill Seen as Anti-FDI


Myanmar Business Guide News

The initial euphoria surrounding the suspension of some international sanctions against Myanmar and the potential the country of 55 million people has for business development is starting to subside as details of the new Myanmar Foreign Direct Investment Bill becomes known.

While many people were hopeful the Pyidaungsu Hluttaw was set to enact a Foreign Direct Investment Bill that would pave the way for a rapid development of the country’s depressed business sector, more than 90 amendments to the much awaited Myanmar Foreign Direct Investment Bill is seeing it being labeled by some as the Myanmar Anti-Foreign Direct Investment Bill.

Amongst the raft of amendments made to the Myanmar Foreign Direct Investment Bill in its passage through the parliament are those that:

• limit foreign investment in certain businesses to between 35 and
49 per cent
• a requirement that initial foreign investment must be at least
$US5 million or the equivalent in another currency.
• Restrictions on the use of farming land and investment in
agricultural and livestock business being carried on by
local business people
• a ban on foreign investors in Myanmar investing in retail
business and small to medium service enterprises
• Regulating the sale of equity in a business by a foreign entity to
another foreign entity without the approval of the Foreign
Investment Commission
• A sliding scale requiring a minimum of 25 percent of skilled
employees be Myanmar nationals in the first two years of
investment increasing to 75 percent in the fifth and sixth year

Economist and Burma expert, Macquarie University Associate Professor Sean Turnell

Economist and Burma expert, Macquarie University Associate Professor Sean Turnell. Photo: Courtesy Macquarie University

In addition to scrapping a mooted five-year tax exemption period for new Myanmar Foreign Direct Investments, which was seen by many as placing existing Myanmar businesses at a disadvantage, reports on the new Myanmar Foreign Direct Investment Bill have failed to also mention a mooted 50 percent profits tax moratorium and changes to land rental periods. (For a list of items the Myanmar Foreign Direct Investment Bill was expected to contain see: Myanmar foreign investment law nears completion

 

Reaction to the new Myanmar Foreign Direct Investment Bill largely negative

Reaction to the public details of the new Myanmar Foreign Direct Investment Bill have largely been negative, with economist and Burma expert, Associate Professor Sean Turnell from Macquarie University telling the Democratic Voice of Burma:

“It is so important that, at this critical juncture, Myanmar [Burma] does not lock its economy up in the clutches of old vested interests. This is an example of the ‚Äòcreeping protectionism‚Äô many of us have feared.”

In the same article fellow Macquarie University collegue,¬†PhD candidate Jared Bissinger, said “the best medicine to kick-start the country‚Äôs economy, crippled from more than 50 years of economic mismanagement, is to adopt policies that create a fair, predictable and stable business environment from which everyone enjoys some benefits.

‚ÄúIf you keep restricting competition, what incentives will there be for these local companies to ever become strong enough to compete against foreign investors‚Äù said Bissinger.”

Robert Easson, Group CEO of management consulting firm Imagino Group Limited

Robert Easson, Group CEO of management consulting firm Imagino Group Limited. Photo via LinkedIn

On LinkedIn Robert Easson, a native of Myanmar and Group CEO of management consulting firm Imagino Group Limited, said he thought the Myanmar Government had “lost its marbles“.

“Am I reading this wrong or is the new FDI law actually more protectionist and anti FDI than the old law?”

“Myanmar business desperately needs FDI. Without it, they will never reach their potential. Sure give local business some level of protection, but this is completely counter productive.

“There is no nation (to my knowledge) in the Asian region that sets a minimum U$5 mill FDI. Thailand has the $500k / $300k manufacturing / services minimum which is reasonable. Australia has $750k, again, reasonable.

“If this law is passed with these amendments, I predict that Myanmar will continue to stagnate and perhaps even return to military isolationist rule because the only people that will seriously invest are companies in the extractive sectors.

“The US$5million minimum investment… will actually discourage the type of investment that needs to come to Myanmar to teach the grass roots businesses how to compete

“Myanmar needs the following to help the country and its economy join the 21st century:

  • 1. exponential improvement in infrastructure
  • 1. exponential improvement in banking & financial services sector
  • 1. exponential improvement in ICT sector

“Which of these sectors can Myanmar business (given the state of the sectors) improve independently without significant FDI? More importantly which of these sectors need the expertise of foreign investors who’s investment will fall well short of the US$5mill minimum investment. The short answer is ALL.”

According to Eleven Media Myanmar, the Myanmar Lower House (Pyithu Hluttaw) will now submit the Myanmar Foreign Direct Investment Bill to the 224-seat Upper House ( Amyotha Hluttaw) or debate and approval, after which it will be forwarded to Myanmar President Thein Sein for approval.

Prof. Turnell said while the approved¬†Myanmar Foreign Direct Investment Bill will no doubt affect some foreign investment decisions in the short-term, ‚Äúcountries are always ‚Äòtweaking‚Äô their investment laws, and we should not see this as the‚Äòbe all and end all”.

 

 

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John Le Fevre

Contributing author at Photo-journ.com

John Le Fevre is an Australian national with more than 30 years’ experience as a journalist, photographer, videographer and copy editor.

He has spent extensive periods of time working in Africa and throughout Southeast Asia and previously held senior editorial staff positions with various Southeast Asia English language publications and international news agencies.

He has covered major world events including the 1991 pillage riots in Zaire, the 1994 Rwanda genocide, the 1999 East Timor independence unrest, the 2004 Asian tsunami, the 2009 Songkran riots in Bangkok, and the 2010 ant-government Bangkok protests.

In 1995 he was a Walkley Award finalist, the highest awards in Australian journalism, for his coverage of the 1995 Zaire (now Democratic Republic of Congo) Ebola outbreak.

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