Legal reforms significant, but work remains

Strenghtened laws and regulations and continued government reform made Myanmar the world’s most improved country for doing business in, UK-based global risk analytics firm Maplecroft found in a report released on January 8.

Myanmar last year made progress in tackling corruption, weak rule of law, respect for property rights and controls on corporate governance, the firm said in its annual Legal and Regulatory Environment Risk Atlas for 2014.

Despite its growth, the report shows that Myanmar remained the fifth riskiest country in the world to do business out of 173, with a rating of “extreme” – a rank worse than civil-war ravaged Syria and the Central African Republic.

“While this appears a modest shift in ranking, it has already resulted in significant improvements for business, and Maplecroft forecasts that if Myanmar sustains its current trajectory it may move out of the ‘extreme risk’ category in the next 1-3 years,” Maplecroft wrote in a press release accompanying the report.

Myanmar was ranked the worst country in the world to do business in 2012, then moved up to third-worst in 2013.

“Myanmar’s efforts to strengthen the legal and regulatory environment are laudable,” Maplecroft senior analyst Chris Laws said in the release. “But, the country’s current lack of effective institutions of governance still raises serious concerns over regulatory enforcement, and it remains a challenging place to do business.”

The country climbed two positions in 2014 due to the “ongoing political and regulatory reforms process” that has largely ended international sanctions and boosted investor confidence, the report said.

In the past two years, Myanmar has passed 75 new laws, many notably affecting the business community, such as the Myanmar Citizens Investment Law, the Foreign Exchange Management Law and the Central Bank of Myanmar Law, said Kelvin Chia’s Yangon director Cheah Swee Gim.

“All of these have been promulgated or updated with the intention of facilitating business and investment in Myanmar,” she said.

The report evaluates countries across 21 indices in six key areas;:rule of law, corruption risk, corporate governance, regulatory framework, respect for property rights and supply chain labour risk.

“Grand corruption remains pervasive in Myanmar, while an absence of rule of law and interference in business matters from a wide range of powerful and vested interests, including the military, create a very uneven playing field for foreign investors,” the report says.

A new foreign investment law with revised foreign direct investment limits, improved land leasing rules and accession to the New York Convention on recognition and enforcement of arbitral awards also promoted a more predictable business landscape for international investors looking to Myanmar in 2014.

Jean Loi, managing partner at VDB-Loi, said that in terms of legal and regulatory framework, Myanmar did not present any higher risk for investors than its Southeast Asian neighbours.

“There is a raft of new laws being approved and implemented slowly. Investors can have an entity established in Myanmar within three days,” Ms Loi said. “It still takes around one to two years in Laos.”

While the legal and political framework remained the most significant risk to investors looking to Myanmar, Ms Loi said there were already changes in the pipeline for a rewrite of the income tax law, new value-added taxes and changes to stamp dutys rates.
A much-awaited Intellectual Property Law, passage of the Condominium Law, which schedules foreign ownership, and further amendments to the Financial Institutions of Myanmar Law are also in the works for 2014.

A continued path of ambitious and determined reform remains the key to reintegrating Myanmar into the global economy, lawyer Cheah Swee Gim said.

“Myanmar’s business ecosystem is still in the nascent stages,” she said “and like many emerging markets, is still experiencing some understandable difficulties.”

Source: Myanmar Times

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