Smaller foreign companies face restrictions on leases

Smaller-scale foreign businesspeople are having difficulty securing long-term leases, which is hampering foreign investment, businesspeople say.

Foreign businesspeople investing large amounts in sectors like manufacturing usually apply for permits through the Myanmar Investment Commission and can receive leases lasting up to 50 years, with the possibility of extensions. Investment that does not require MIC approval is limited to a one-year lease in most cases.

The requirement to renegotiate leases and possibly being forced to relocate each year adds to the difficulties of doing business in Myanmar, said one foreigner running a PR company.

“I could face difficulty if the land owner does not renew the lease for another year or if the price increases significant,” he said. “Many foreign businesspeople are challenged by this limit.”

Difficulties securing long-term leases could be somewhat of a barrier for foreign businesses looking to enter Myanmar, and was a complaint at a recent Myanmar investment summit in New York, said MIC secretary U Aung Naing Oo.

MIC is presently discussing the issue with the Ministry of Home Affairs, though a solution may be some time in coming. “Right now we know this could be a barrier for foreign businesspeople to some extent,” he said.

Foreigners and foreign companies are not allowed to own land in Myanmar and may only have leases lasting up to one year under the Transfer of Immoveable Property Restriction Act, said Kelvin Chia Yangon principal foreign consulting attorney Pedro Jose Bernardo.

The exception comes for firms with investment permits under the Myanmar Foreign Investment Law, which allows foreign firms to hold leases for up to 50 years, with two possible extensions of 10 years each.

Not all foreign investors, particularly those not in manufacturing or industrial activities, necessarily obtain an MIC permit. “Obviously, if you are one such non-MIC foreign company with a one year lease, you are generally at the mercy of your landlord, because you can be evicted at the end of one year – land security, in this sense, is difficult,” he said.

“Foreign investors would, of course, prefer predictability and continuity in operations – having short lease tenures [without an MIC Permit] would increase investor insecurity in this case.”

Economist and business observer U Hla Maung said securing leases is one of a number of legal limitations on foreign business in Myanmar that ought to be addressed.

Foreign businesses’ attempts to secure long-term leases is an ongoing issue, but some local landowners avoid it and simply rent to foreigners for longer periods than allowed by the law.

“However, there may be foreigners who don’t want to work illegally, so official liberalisation [of the restriction] would be better in the long term,” he said.

“The country really needs to attract more and more FDI, so we need liberalise any restriction if it is really a barrier,” U Hla Maung added.

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