Investing in Myanmar: Balancing risk and reward (Part 2)

By Eric C. Rose, Nina Dunn -

Although quite involved and not inexpensive, the process of investment in Myanmar can be very rewarding

In Part 1 of this article, we reviewed the Myanmar investment considerations of a U.S. investor as they are impacted by U.S. legislation and practice. This article continues the analysis by examining the “on-the-ground” investment considerations in Myanmar, including its Foreign Direct Investment Law of 2012 (FDI) and Foreign Direct Investment Rules of January 2013 (FIR), banking issues, and other aspects of investment.

Investment security

The FDI has specific provisions that protect foreign investment from nationalization and guarantees repatriation of profits and security of invested capital. These protections are in addition to the guarantees an investor may find in the seven bilateral treaties Myanmar has with other countries (Thailand, Laos, Vietnam, Philippines, China, Kuwait and India). Similar investor protection provisions can be found in the newly enacted Myanmar Special Economic Zones Law, which is applicable in the three Special Economic Zones (Dawei, Thilawa and Kyauk Phyu).

Additionally, Myanmar recently became a full member of World Bank’s MIGA, which makes direct foreign investment into Myanmar eligible for the agency’s investment guarantees (e.g. covered risks include expropriation, breach of contract, transfer restriction, failure to honor financial obligations, or war/civil disturbance). Furthermore, American businesses which desire to make investments in Myanmar sourced with U.S. manufactured goods or services can also avail themselves of limited facilities extended by the U.S. ExIm Bank, including limited short and medium term lending and investment insurance. Additionally, it is expected that OPIC will soon start a program for Myanmar-bound U.S. investors.

Form and function

Once the issue of security of its investment is resolved, a U.S. investor must choose the right corporate form for its investment vehicle. A number of questions need to be asked: How will the Myanmar entity (public or private limited liability company, or a branch) relate to the investor’s other investments? Is 100 percent foreign ownership the only means of investment, or is seeking a suitable local partner an option?

Legal barriers contained in the FDI and the FIR will require that the foreign investor petition the Myanmar Investment Commission (MIC) for a permit and for an exemption from the FIR limitations that prohibit, for example, the operation of foreign-controlled businesses in certain business activities reserved to either state-owned enterprises, or to Myanmar citizens. The MIC Permit will allow the newly formed Myanmar subsidiary to import duty-free foreign raw and finished materials for its project, will exempt it for up to five years of income taxes, and allow it to lease land for at least 50 years (as of today, foreign entities, or their Myanmar subsidiaries, are otherwise prohibited from owning or leasing long-term land or buildings, a very distinctive disadvantage to foreign investment). Foreign-controlled Myanmar businesses have to project what areas of business they intend to operate in at the outset, thus a clear outline of their intended activities has to be provided to the MIC as well as to the Ministry of Planning’s Department of Investments and Corporations Administration (DICA) in seeking exceptions from the FIR prohibitions, as well as petitioning for the grant of an MIC Permit and a Permit to Trade, respectively.

A local partner and a capable bank

Assuming that a Myanmar partner is required, the U.S. investor has to do three things before starting any registration process: conduct a thorough due diligence investigation into the background of the potential Myanmar partner; submit a prospective name of the Myanmar business for preliminary approval by the Companies Registration Office (CRO); and discuss with its U.S. bank the prospective investment in Myanmar.

Doing the preliminary investigation of the Myanmar partner is a critical step in order to reduce any chance that the partner has OFAC SDN connections (see Part 1 of this article for a more in-depth discussion of this aspect). Choosing the name is an important factor, as registrations of trademarks and trade-names in Myanmar are essential to protect oneself from copycats. Although the country does not yet have a comprehensive IPR legal system, it does have a procedure for registering trademarks. Talking with your banker is a prudent initial stepbecause  very few U.S. bankers will conduct business with Myanmar or its banks or companies. The ability to repatriate profits would be of limited value without a banking relationship capable of undertaking such transactions … or without knowledge of available offshore solutions. It goes without saying that due diligence should also be performed on any local Myanmar bank to be used. The local banks may or not be on the SDN list, and/or have the sophistication and capital to be able to assist the U.S. investor.

Pushing papers

If the (generally tax-based) decision is made to incorporate a Myanmar limited liability company with 100 percent or majority foreign capital, the process of applying for the MIC Permit, as well as for the DICA Permit to Trade can take weeks… if not months… and involve extensive documentation. The DICA permit is a separate, parallel procedure from that required to obtain a Certificate of Incorporation or a Certificate of Registration of a Branch Office, as the case may be, from the CRO. Further, DICA requires that some documents be consularized and notarized at the Myanmar Consulate in the investor’s home country.

In order to insure a favorable outcome, meetings with the relevant government “stakeholders” (e.g. MIC members, the ministries which have jurisdiction over the proposed business, as well as with the state/regional authorities) are highly advisable in advance of the filing of permit applications. Use of competent legal counsel and accountants, familiar with the relevant requirements, will dramatically speed up the process.

Once the permit documents are filed, an application for a six-month Temporary Permit to Trade and Temporary Certificate (TPT) should also be filed with the CRO, which, if granted (at CRO’s discretion) will allow the new entity to start operating before the Permit to Trade and the MIC Permit are granted. With this TPT, the new entity can lease a facility for a period no longer than one year, open a bank account, hire personnel, lease telephone and internet lines, etc. Finally, and as described in Part 1 of this article, a U.S. person investing more than $500,000 in Myanmar, or one dealing with the state-owned oil and gas company (MOGE), or one making more than $10,000 payments to the Myanmar government, will have U.S. State Department reporting requirements. These reporting requirements are in addition to those required by OFAC.

Although quite involved and not inexpensive, the process of investment in Myanmar can be very rewarding, as the country’s transformation offers rarely seen opportunities. The Myanmar government issues a large number of tenders, seemingly on a daily basis, relating to a variety of investment areas including energy exploration and generation. Myanmar has extensive agricultural areas, which, despite the fact that currently this is the most important segment of the country’s economy, remain largely untouched. The large labor pool of literate, willing and able workers, as well as the rising tide of consumerism for the country’s 60+ million population, make Myanmar a magnet for foreign investment with annual GDP growth exceeding 7.5 percent. Despite its challenges, Myanmar is an exciting opportunity not to be missed.

Eric Rose is the Lead Director of Herzfeld Rubin Meyer and Rose Law Firm Limited, Yangon, Myanmar. He can be contacted at

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