Business leaders have welcomed the approval of a new investment law that they hope will cut red tape and bring an end to concerns that foreign and local businesses are being treated differently.
The Upper House approved the Myanmar Investment Law without amendments last week, and the legislation is due to come into effect in the “near future,” according to the Myanmar Investment Commission (MIC).
Foreign investment in Myanmar has been lacklustre since Daw Aung San Suu Kyi’s National League for Democracy (NLD) took power in April; many potential investors appear to be waiting for clear policies from the new government before entering the country.
Last year, foreign direct investment (FDI) plunged to $3.9 billion from a peak of $8 billion in 2014. In the five months since the NLD took power just over $383 million has flowed into the country.
The new bill will allow the government to apply tax breaks more prudently, the commission said. Under the current rules firms investing through the MIC automatically receive a 5-year tax break.
After the new law takes effect exemptions will be granted to sectors that the government considers important for growth and the duration of the tax break will be flexible.
“International organizations such as the World Bank and IMF have told us that Myanmar doesn’t need to offer special incentives to attract foreign investment,” said Dr Maung Maung Lay, Vice President of UMFCCI, Myanmar’s Chamber of Commerce. “We just need to have good infrastructure.”
He added: “If we have that, I think those investments will come on their own.”
“The investment law is essential for the country’s development,” said U Aung Thura, CEO of the Thura Swiss research and consulting firm. “We need this legal framework. But nothing is perfect and the law is just part of a process.”
It is not certain that the new rules on tax exemptions would spur growth in regions that most needed it, he added.
“Companies will get tax exemptions depending on the levels of development of states and regions where they invest. If they invest in a less developed region, they will get a higher tax exemption. But, I don’t think international investors will be interested in places that lack infrastructure, even with the exemption. So, I can’t tell right now how much impact that will have.”
Investors can also expect less red tape as the number of projects that require permission from the MIC will be cut. The bill also promises avenues to settle disputes before going to arbitration and guidance on transferring foreign currency, both of which the previous laws lacked.
The bill will replace the Foreign Investment Law and the Citizens’ Investment Law. The commission has said that having two bills has created the perception that foreign and local companies were not being treated equally.
“In any other ASEAN country there is only one investment law, but Myanmar has two right now.” said U Than Soe, an NLD Amyotha Hluttaw MP for one of the Yangon constituencies and a former economic analyst.
He added: “There are so many local and foreign investments waiting for this law. That’s why the Amyotha Hluttaw approved it without any amendments.”
The bill will now needs to be approved by the Union Parliament and signed off by the President, but it is hard to know an exact timeline for when it will be enacted, said Daw Khin Ohnmar Aung, the deputy director of the Directorate of Investment and Company Administration.
Source: Myanmar Business Today
