Amid political challenges, Myanmar prizes UK investment for economic renewal

With Myanmar’s new Investment Law coming into force over a year ago, along with a soon-to-be implemented Companies Law, the government hopes its liberalisation and decentralisation efforts will help secure new British investment and support to move the economy forward. UK expertise is seen as particularly vital for Myanmar to develop a strong financial services sector and to build a competitive education system which can prepare the country’s young population for the challenges ahead.

The UK’s Department of International Trade organised an outward mission to the UK in March, led by U Kyaw Myo, deputy transport and communications minister. The delegation included a dozen officials and 27 business representatives, who met with over 150 British businesses to explore potential commercial opportunities.

In a wide-ranging interview, U Aung Naing Oo, director general of the Directorate of Investment and Company Administration (DICA), spoke to The Myanmar Times about bilateral trade and investment opportunities between the two countries and the government’s latest priorities. He also responded to criticisms and concerns among the private sector regarding the slow pace of reforms.

British expertise supporting PPP and people

British trade and investment interest mainly focuses on education, energy, financial services and infrastructure in Myanmar. U Aung Naing Oo was convinced that the reforms delivered will attract more inward investments in those sectors. Regarding infrastructure, the Myanmar government has already devised and drafted the Public-Private Partnership (PPP) framework in order to attract more investment. British investors interested in the infrastructure sector are now able to explore opportunities to invest via a PPP.

“Infrastructure is one of the key areas for British investors to come and invest,” he said. The delegation met policymakers and consultants in London and visited one of the UK’s airports to look at how domestic airports can be upgraded to cater for further demand.

PPPs have been used as a mechanism to build and upgrade infrastructure across ASEAN for decades. While they are relatively new to Myanmar, the government has embraced the arrangements with enthusiasm, including the vastly ambitious government-owned New Yangon Development Company (NYDC), which covers a landmass twice that of Singapore.

Education is another sector which presents immediate opportunities for British businesses. On April 20, the Myanmar Investment Commission (MIC) announced it will permit foreigners to make full capital investments in private schools across the country. Foreigners can hence fully own and operate private schools teaching a curriculum prescribed by the education ministry or an international curriculum. British service providers as well as those from other countries are allowed to invest in basic education schools, technical, vocational and training schools, higher education schools, subject-based schools and private schools.

U Aung Naing Oo said that the administration had hoped to roll out that MIC announcement before the visit to the UK, but administrative procedures “took longer than expected”.

Nonetheless, “the idea is to open up education sector for investments, to attract more foreign investment in the education sector in order for Myanmar citizens and Myanmar young people to have more opportunities to learn locally”, while benefiting from an education which matches international standard. This is an area where British investors in particular will be keen to take part given the UK’s internationally reputed education institutions.

Energy is a sector where UK investments, or those businesses incorporated in Virgin Islands and Cayman Islands have been involved, the official went on.

In fact, the Secretary of State for Scotland David Mundell visited Yangon in April last year to promote projects in the offshore oil and gas sector. The projects were initiated in September 2015 when U Pe Zin Tun, as permanent secretary of the Ministry of Energy, led a delegation to Aberdeen. Two companies, Aberdeen International Associates (AIA) and AGR, are working with Myanmar businesses, including the state-owned Myanmar Oil and Gas Enterprise (MOGE), to identify and develop their capacity. Meanwhile, UK firm James Fisher and Sons last year signed an MoU to supply ships and equipments and technical support to domestic Royal Marine Technology to develop offshore services.

In addition, UK businesses are interested in the automotive industry. However progress is limited due to the lack of clear policy from Nay Pyi Taw.

“We don’t have a proper policy for foreign investments in the automotive sector.”

“We need a clear automotive policy, which is actually in the pipeline to be approved and implemented. If we have a proper automotive policy, that’d be really good for investors. They can then understand what they can do and what they cannot do,” he explained. The industry and transport ministries are working closely on the adoption of the policy in consultation with the private sector. But no timeline was given.

While Myanmar has not fully liberalised the banking and non-banking financial services market, the DICA chief said that those areas “will be opened up sooner or later”.

Legislative breakthroughs

U Aung Naing Oo noted that the Investment Law enacted and promulgated last year “is going really well”. The legislation decentralised decision-making process and delegated power to regional authorities. Regional and state investment commissions, chaired by regional chief ministers, have the authority to approve investment proposals of up to US$5 millon without having to seek permission from the MIC.

The new Companies Law, enacted in December 2017, will be enforced in August 2018 seeking to further cut red tape.

“The Companies Law will be enforced on August 1. The Companies Law paves the way for all foreign investors to come and work together with Myanmar local companies.

“A lot of barriers and restrictions will be removed for foreigners in doing business in Myanmar by using our new Companies Law,” he remarked. It will allow foreign entities to take up to a 35-percent stake in domestic companies and open up the Yangon Stock Exchange for non-Myanmar investors.

“So there are a lot of expectations, especially on the Companies Law, from British investors, because our Companies Law is actually based on the British common law system and based on the 1914 Companies Act [formerly the Burma Companies Act].

“Definitely, once the Companies Law is enforced, there will be more investments from the UK, particularly in the financial services sector, and probably in the education sector.”

The unanticipated decision to delay implementing the law until August led to widespread disappointment among businesses last December. U Aung Naing Oo disagreed with the criticisms and responded with an analogy: “If we want a baby, we need to wait for nine months. If we only wait for three months, we will get a puppy, we cannot get a baby.”

The director general argued that the timeframe for Myanmar to move from enactment to enforcement is only eight months, which is shorter than many regions: it took Hong Kong 14 months, 13 months for Singapore and 12 months for Malaysia to achieve the same result.

“In Myanmar, it only takes us eight months. So you can see whether that [criticism] is fair enough or not,” he responded.

DICA is now in preparing to revise and modernise the Partnership Act and is indirectly involved in the drafting of the new Insolvency Bill, which is led by the country’s Supreme Court. The new insolvency legislation will streamline and replace three older laws to address corporate and personal insolvency in one law, and will carve out a separate corporate rescue and insolvency regime for smaller businesses. DICA will be responsible for corporate insolvency.

Criticisms and challenges

The Myanmar Times asked U Aung Naing Oo to respond to the fact that political conflicts in Myanmar have damaged the country’s reputation as an investment destination while the slow pace of economic reforms have stalled investor confidence. Lawyer Eric Rose earlier argued that the lack of a coherent and transparent government response to the Rakhine crisis “guarantees that this situation will mar the country’s and, by implication, the NLD’s reputation for the remaining three years of its term”.

“I don’t have any objection to those points but, from my personal point of view, the government is working so hard in getting more reforms [delivered] and moving forward,” he replied, adding that some changes in regulations are easier to implement while others, such as the Companies Law, require more time because of the scale and complexity.

“But one thing which is still very clear is the [lack of] cooperation among the ministries. We do need better cooperation from my personal point of view. We must have better coordination among the ministries to make the reforms more effective and more efficient … this is one of the weaknesses in the reforms here.

“One important thing is that the government is preparing to speed up the reform programmes in the country,” he noted. Such efforts would definitely create positive outcomes and momentum in the next few years.

Upon completing its second year in office in March, the political leadership was accused by business leaders of being “bogged down in protectionist doctrine espoused by ‘business and government’ elders”. U Aung Naing Oo refuted this criticism by citing the liberalisation efforts spearheaded by the government. “If you look at our investment policy, we have opened up to attract more FDI into this country. This is a good example to show that the government doesn’t really have protectionist policy.”

Another complaint heard across the business community is that the NLD-led administration places too much emphasis on legislation, and overlooks the executive aspect as well as communications.

The government is fully well-aware of those concerns, he insisted: there have been a lot of new laws enacted, but those laws need to be supported by relevant bylaws and regulations. In addition, all these rely on sound and effective enforcement by agencies and regulators.

The challenge is that the bureaucrats responsible may not be familiar with the new practices, systems and regulations, he explained. For example, DICA is providing training and capacity-building programmes to its employees to prepare for the implementation of the Companies Law. “But I don’t think all the government agencies in other ministries are preparing for the enforcement [of the new regulations].”

The official conceded that communications between the bureaucracy and the private sector or other stakeholders has not been effective.

Some ministries release new notifications or changes regulations suddenly without consultation with stakeholders or without prior notice. In turn, DICA receives complaints from investors. “This is one of the signals that some of the government agencies are not properly consulting the stakeholders,” the director general observed.

Source : Myanmar Times

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