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A brief look at the laws of Myanmar
8.1.1 The Law
Much of the law that serves as a foundation for the legal system of present day Myanmar can be traced back to English origins. The British, following the annexation of Burma to Britain on January 1, 1886, administered Burma as a province of British India. Consequently, the English common law, that had been codified in India, was introduced to Burma in the form of The Myanmar Code. Likewise, the Burma Companies Act has similar origins as the Myanmar Code. The parliamentary government that administered Burma between 1948 and 1962 introduced the Burma Acts while the socialist government, between 1962 and 1988, introduced further law including a new constitution. Finally, many new commercial laws have been introduced under SLORC and SPDC in their attempt to open up the economy to foreign participation and introduce market principles.
8.1.2 The Courts
There are presently two types of courts operating in Myanmar i.e. criminal and civil courts. The structure of the courts are as set out below:
|Criminal Courts||Civil Courts|
|Chief Court||Chief Court|
|Divisional/State Court||Divisional/State Court|
|District Court||Deputy Divisional Court|
|Township Court||Additional Divisional Court|
Jurisdiction, within the hierarchy of courts, is determined by the nature of the claim. Within the criminal system, each court has original jurisdiction based on the severity of crime and corresponding punishment. In the civil system, the Divisional/State Court, Deputy Divisional Court and the Additional Court have original jurisdiction in all civil disputes with the exception of admiralty jurisdiction which is the domain of the Chief Court. The principal factor that determines the court of original jurisdiction in the civil system lies in the size of the claim.
There is only one level of review in both the criminal and the civil systems which is conducted by the Chief Court that reviews both issues of law and fact. The composition of the trial procedures, apart from the absence of a jury, mirrors that of other common law countries. A trial proceeding can require between three to ten years to process a claim in both the original jurisdiction as well as review by the Chief Court. In addition, as in other common law systems, specific relief, injunctions and damages are available remedies.
Foreign investors are permitted to participate in a wide range of economic activities. The following is a list of activities in which foreigners are permitted to participate:
Cultivating, producing, processing and marketing of seasonal crops (including tapioca and tobacco).
Establishing of plantations (including medicinal plants, coffee, tea, palm oil, horticulture, etc.) and producing, processing and marketing of their produce.
Livestock breeding, processing, canning and marketing of livestock and its products (including pig breeding and pork processing etc.).
Production and marketing of animal feeds, additives, supplements and veterinary medicines.
Breeding, fishing, processing, and marketing of fresh water and marine fish, prawns and other aquatic organisms including fish fry, fingerlings, post larvae of shrimp, but not including breeding and production of fish and prawns in fisheries which have been reserved for research by the Government.
Production, processing, marketing of all kinds of fish feeds.
Production and marketing of basic construction materials, furniture, parquet etc., using teak extracted and sold by SOEs (to be carried out jointly with SOEs).
Production and marketing of carvings and handicrafts made of teak that have been extracted and sold by SOEs engaged in the extraction and marketing of the same.
Production, processing and marketing of hardwoods (other than teak), bamboo, cane/rattan and other forest products.
Production and marketing of construction material, furniture and other products using hardwoods (other than teak), bamboo, cane/rattan and other forest products.
Exploration, exploitation, production and marketing of non-metallic industrial minerals, such as coal, limestone, gypsum, etc.
Marble quarrying and production and marketing of marble blocks and slabs.
Carrying out other quarrying industries and marketing of products thereof.
Manufacturing and marketing of bakery products including biscuits, wafers, noodles, macaroni, spaghetti, etc.
Manufacturing and marketing of all kinds of confectionery including those of sweets, cocoa and chocolate.
Preserving, manufacturing, canning and marketing of other food products.
Processing, manufacturing and marketing of oil and fats from vegetables, animals and other substances.
Manufacturing and marketing of soft beverages, aerated and non-aerated products.
Manufacturing and marketing of malt and malt liquors and other brewery products.
Distilling, blending, rectifying, bottling and marketing of all kinds of spirits, beverages and non-beverages.
Combing, spinning, weaving, finishing and marketing of textile materials of cotton, jute, silk, wool, synthetic fibers, and other fibers of all kinds.
Manufacturing and marketing of made up apparel of all kinds including knitwear.
Manufacturing and marketing of made up apparel materials of all kinds including towels, linens of all kinds, rugs and carpets.
Manufacturing and marketing of cordage, rope and twine of all kinds.
Manufacturing and marketing of soaps of all kinds, dentifrices, cosmetics, perfume and toilet preparations. Manufacturing and marketing of jewelry. Manufacturing and marketing of all kinds of personal goods not elsewhere specified, including umbrellas, safety matches, etc.
Manufacturing and marketing of household goods such as textiles, glass, plastic, melamine, metal products, ceramic and earthen-ware.
Manufacturing and marketing of non-electrical household goods such as enamel-ware, cutlery, crockery of all kinds.
Manufacturing and marketing of electrical household goods and appliances, such as refrigerators, air conditioners, hot plates, irons, cookers, fans and other home use appliances.
Manufacturing and marketing of radios, transistors, television receivers, videos, etc.
Manufacturing and marketing of electrical fittings and fixtures, electrical lamps, bulbs and tubes, etc.
Leather Products and the Likes
Processing of hides, skins and leathers of all kinds, excluding synthetic leather, and manufacturing and marketing thereof, including footwear, handbags, etc.
Processing of synthetic and artificial leather and manufacturing and marketing thereof, including foot-wear, handbags, etc.
Processing and marketing of furs and skins not elsewhere specified.
Manufacturing and marketing of bicycles, tricycles, and other cycles of all kinds, component parts and accessories.
Manufacturing and marketing of scooters, motorcycles, mopeds, etc., component parts and accessories.
Manufacturing and marketing of motor cars, buses, trucks, vans, wagons, component parts and accessories.
Manufacturing and marketing of tractors of all kinds, ambulances, fire engines, dump trucks, bowsers and other occupational motor vehicles, component parts and accessories.
Manufacturing and marketing of tires, tubes and flaps for all kinds of vehicles and other purposes.
Manufacturing and marketing of bricks, tiles, floor tiles and wall tiles, refractory bricks, etc.
Manufacturing and marketing of asbestos building materials of all kinds.
Manufacturing and marketing of cement of all kinds, cement products, lime, plaster and related manufactures.
Manufacturing and marketing of pre-stressed concrete pipes, plant and other concrete products.
Manufacturing and marketing of all kinds of glass and glass products.
Pulp and Paper
Manufacturing and marketing of pulp of all kinds, paper and paper boards of all kinds including newsprint.
Manufacturing and marketing of paper, paper boards including carbon paper, waxed paper, toilet paper, etc.
Chemicals, Chemical Products and Pharmaceuticals
Manufacturing and marketing of all kinds of basic chemicals, organic and in-organic including caustic soda, chlorine, stearic acid, etc.
Manufacturing and marketing of all kinds of light chemicals, not elsewhere specified.
Manufacturing and marketing of all kinds of plastic wares.
Manufacturing and marketing of chemical products, such as paints, varnishes, dyes, thinner and lacquers, etc.
Manufacturing and marketing of industrial chemical gases including compressed, liquefied and solid forms.
Manufacturing and marketing of ice in all forms.
Manufacturing and marketing of medicine, pharmaceutical and drugs, etc.
Manufacturing and marketing of insecticides, pesticides, etc.
Manufacturing and marketing of rubber products.
Recycling of chemicals, plastic wastes and others, and marketing.
Iron and Steel
Manufacturing and marketing of iron and steel products, using iron and steel purchased from SOEs or from abroad.
Manufacturing and marketing of basic iron and steel products using iron and steel purchased from SOEs or from abroad.
Manufacturing and marketing of basic non-ferrous metal products of all kinds using metals purchased from SOEs or from abroad.
Manufacturing and marketing of pre-fabricated and structural products of all kinds including construction and building parts.
Machinery and Plant
Manufacturing and marketing of all kinds of agricultural machinery and agricultural equipment.
Manufacturing and marketing of all kinds of machinery and equipment used for extraction of timber.
Manufacturing and marketing of all kinds of mining machinery and equipment.
Manufacturing and marketing of all kinds of machinery and equipment for other industrial purposes including wood-based industries.
Manufacturing and marketing of scientific, medical, surgical, optical and all other professional machinery, equipment and accessories.
Manufacturing and marketing of machinery, equipment and accessories required for the production and distribution of electricity including cable, switches, transformers, generators, batteries, etc.
Manufacturing of machinery, equipment and accessories required for all kinds of telecommunication including wireless sets, telephones, etc. and marketing under the permission of the Government.
Manufacturing and marketing of pumps of all kinds.
Manufacturing and marketing of all kinds of machinery and equipment not elsewhere specified, including piston, piston rings, injection pumps and nozzles, casting parts, forging parts, pressure vessels, etc.
Manufacturing of small plants.
Manufacturing and marketing of all kinds of machine tools.
Manufacturing and marketing of all kinds of cables, ropes, twine, chain and similar products.
Manufacturing and marketing of cinematographic and photographic films, cassette and video tapes and related electronic and electrical products.
Manufacturing and marketing of clocks and watches of all kinds.
Manufacturing and marketing of fountain pens, ball pens, pencils, and similar writing gear.
Manufacturing and marketing of all kinds of toys, mechanical and non-mechanical.
Manufacturing and marketing of machinery and equipment not elsewhere specified.
Construction enterprises undertaking domestic and overseas construction works.
Installation of machinery plant and equipment and provision of trial and test run service.
Transport and Communications
Road transport and vehicle repair services.
Inland water transport services.
Shipping agency services.
Hotel and Tourist Industries.
Economic Activities to which the State-Owned Economic Enterprises Law applies
Economic activities mentioned in Section 3 of the State-Owned Economic Enterprises Law, provided permission has been obtained under Section 4 of the said Law.
The Government has reserved certain activities for SOEs (as listed below), however, there is a possibility that the Government will approve foreign participation for those economic activities that are reserved for SOEs. Any citizen or foreign investor that wishes to participate in a restricted activity must first submit an application to the relevant SOE which in turn submits a proposal to the Ministry under which it operates. A proposal is then submitted by the SOE to the Government for final approval. The following activities are reserved for SOEs:
a. extraction of teak and sale of the same in the country and abroad;
b. cultivation and conservation of forest plantation with the exception of village owned fire-wood plantations cultivated by the villagers for their personal use;
c. exploration, extraction and sale of petroleum and natural gas and production of derivative products;
d. exploration and extraction of pearls, jade and precious stones and export of the same;
e. breeding and production of fish and prawns in fisheries which have been reserved for research by the Government;
f. postal and telecommunications service;
g. air transport service and railway transport service;
h. banking service and insurance service;
i. broadcasting service and television service;
j. exploration and extraction of metals and export of the same;
k. electricity generating services other than those permitted by law to private and co-operative electricity generating services; and
l. manufacturing of products relating to security and defense which the Government has, from time to time, prescribed by notification.
8.3.1 Forms of Business Organizations
There are several different types of business organizations through which a foreign investor can conduct economic activity in Myanmar: sole proprietorship, partnership, company, branch office, local representative and joint venture.
8.3.1 (a) Sole Proprietor/Partnership
Both of these forms of organizations can be 100% foreign owned and also qualify for privileges provided for by the Union of Myanmar Foreign Investment Law that was issued on November 30, 1988 (FIL).
8.3.1 (b) Company
A foreign investor that chooses to open a company must incorporate under the Myanmar Companies Act unless the enterprise involves an SOE in which case it is necessary to incorporate pursuant to the Special Companies Act. Under the Myanmar Companies Act, a Myanmar company is defined as one having its share capital fully owned and controlled by Myanmar Citizens. Accordingly, if a foreign investor owns or controls any shares in a company established in Myanmar it would be treated as a foreign company unless the Government or an SOE is a shareholder. It is possible for the foreign shareholder to hold up to 100% of a company that is incorporated in Myanmar. However, a foreign company will be required to obtain a Permit to Trade, as discussed below in Section 8.3.2, from the Ministry of National Planning and Economic Development by way of application to the Companies Registration Office in order to transact business in Myanmar. In addition, companies involved in specific sectors such as banking and finance, hotel and tourism, etc. will need to seek approval from the relevant ministry. The application for incorporation of a foreign company is to be submitted to the Companies Registration Office. There are now several specific categories of companies that are permitted:
Essentially there is a prescribed form of memorandum of association for each of the above mentioned types of companies which is rather narrow in scope. This, means that an investor may have to incorporate more than one company should it desire to carry out several different types of activities.
If the promoters of the company anticipate a fairly substantial level of investment it may be feasible to apply for a permit under the Myanmar Foreign Investment Law (FIL), as discussed below in Section 8.3.3, that would entitle the company to enjoy the privileges provided thereunder. An application for a permit under the FIL (FIL Permit) is to be submitted prior to the application to incorporate the company.
8.3.1 (c) Branch Office
A branch office is not commonly used as a vehicle to conduct business and is generally reserved for such industries as oil, gas and banking. In some ways a branch possesses similar characteristics as that of a locally incorporated company in that a branch can apply for FIL incentives, the capital requirements applicable to companies are likewise applicable to branch offices and a branch office is required to obtain a Permit to Trade. However, unlike a company there is no separate juristic entity that is created and therefore the head office will be subject to unlimited liability.
8.3.1 (d) Local Representative
A foreign company may appoint an individual or enterprise in Myanmar as its business representative. The appointment letter from the foreign principal will need to be certified and authenticated by the relevant Myanmar Embassy in the country of the principal.
If the business representative is to be appointed on a commission basis the foreign principal is required to pay, as a registration fee, the foreign equivalent of Kyat 10,000 (currently approximately US$ 1,700, at the present official rate).
If the business representative is to be appointed on a salary basis, such salary must be at least US$ 100 per month. Where the local salary to be paid is above US$ 1,000 per month, the registration fee is Kyat 10,000 payable in the local currency. Where the salary to be paid is between US$ 500 and US$ 1,000 per month, the registration fee is Kyat 5,000 payable in local currency. Where the salary is between US$ 100 and US$ 500 per month, the registration fee is Kyat 2,500 payable in local currency. Such registration fees are payable to the Ministry of Trade.
8.3.1 (e) Joint Venture
Although it is possible to incorporate a 100% foreign owned company many foreign investors have chosen, particularly in instances involving substantial investment or where the foreign investor desires to participate in an activity generally reserved for SOEs, to engage a local partner: a list of foreign joint ventures as of December 30, 1996 is attached as Annex (1). In the case of the latter, the Government has included, in the enabling legislation of SOEs, a provision providing for participation of foreign investors in activities that are reserved for SOEs. The underlying principle behind this provision is to attract foreign investment and technology to develop the resources of Myanmar.
A joint venture can be structured either through a contractual relationship or a company. In the case of the former, the Partnership Act of 1932, applies to the general framework of the relationship between parties. The joint venture contract should fill the gaps and provide a more detailed guideline as to issues relating to capital contribution, management, the apportionment of liability between partners and in instances involving a government enterprise, a waiver over that enterprise’s right to claim immunity in their capacity as a government entity.
In the instance where the joint venture decides to incorporate a company for purposes of the joint venture, the comments above, under Section 8.3.1(b), are applicable. In addition, if the local partner is a company that is receiving incentives pursuant to the Myanmar Citizens Investment Law 1994 (this law provides non-foreign companies with similar benefits as the FIL), the joint venture company will be required to obtain an FIL Permit.
8.3.2 Permit to Trade
8.3.2 (a) General
The obtaining of a Permit to Trade from the Registrar of Companies is crucial to carrying on business in Myanmar. Formerly such permits were issued by the Ministry of Trade but in late 1993 this was switched to the Registrar of Companies which is part of the Directorate of Investment and Company Administration in the Ministry of National Planning and Economic Development.
Every foreign enterprise in Myanmar is required to apply for a Permit to Trade from the Companies Registration Office in order to transact business in Myanmar. However, a joint venture consisting of a foreign partner and an SOE, formed under the Special Company Act 1950, is not required to obtain a Permit to Trade in order to conduct business in Myanmar.
8.3.2 (b) Application Procedure
A copy of the relevant application form must be filled out, with the requisite stamp duty affixed thereto, and submitted to the Registrar of the Companies Registration Office together with the documents mentioned below:
a. a copy of the foreign company’s memorandum and articles of association and, in the case of a branch, a copy of the Head Office’s memorandum and articles of association duly notarized and endorsed by the Embassy of the Union of Myanmar in the country where the foreign investor’s company is incorporated;
b. copies of the company’s balance sheet and profit and loss accounts for the previous two years and, in the case of a branch, a copy of the Head Office’s balance sheet and profit and loss accounts for the previous two years duly notarized and endorsed as mentioned in the previous paragraph;
c. a duly completed questionnaire form;
d. a list of the intended economic or business activities to be carried out in Myanmar;
e. a list of the expected expenditure of the foreign branch or foreign company to be newly set up for the first year of operations; and
f. if a foreign company or branch has the intention of operating a public utility or exploiting, developing or utilizing any of Myanmar’s natural resources, then the foreign company will need to also obtain a certificate from the relevant ministry.
8.3.2 (c) Policy Considerations
The application for a Permit to Trade shall conform with the following policy considerations:
a. compatibility with the economic policies and objectives of the Government;
b. exploitation of natural resources and promotion of exports;
c. compatibility with existing laws in force, in particular, the FIL;
d. support and assistance given to exports and imports;
e. development of production and commercial technology;
f. increasing employment; and
g. earning foreign exchange.
8.3.2 (d) Capital Prerequisites
In order to obtain a Permit to Trade there are certain minimum capital requirements. In the case of a foreign company incorporated in Myanmar this specifically relates to the “Issued and Paid Up Capital” whereas in relation to the branch of a foreign company incorporated outside Myanmar, it relates to what is known as the “Head Office Fixed Capital Account”.
The minimum capital requirements will be affected if the enterprise chooses to apply for a permit under the FIL. If the promoters seek to incorporate a company without an FIL Permit the minimum capital requirements are:
Kyat 1,000,000 for an industrial company;
Kyat 1,000,000 for a company involved in the hotel sector (as an investment);
Kyat 500,000 for a trading company;
Kyat 300,000 for a services company;
Kyat 300,000 for a company involved in the hotel sector (as service);
Kyat 300,000 for a company involved in tourism; and
the capital requirement for a company involved in the banking, insurance and finance sectors is currently not available.
The capital requirement for a company seeking to obtain an FIL Permit is generally as listed below, however the MIC may require a higher level of registered capital:
US$ 500,000 for an industrial company; and
US$ 300,000 for a services company.
A minimum of 50% of the capital must be brought into the country within 60 days after the approval has been received and the remaining 50% must be brought into the country no later than one year following the issuance of the Permit to Trade. The definition of foreign capital is fairly liberal and can consist of any of the following:
a. foreign currency that is acceptable to the Myanma Foreign Trade Bank;
b. machinery, equipment, machinery components, spare parts, instruments, etc. that is required by the enterprise but not available in Myanmar;
c. license, trade marks, patent rights and technical know how; and
d. profits that have accrued to the enterprise and are re-invested or re-investments out of the share profit.
The foreign currency brought in as share capital can be deposited in a foreign currency account at the Myanma Foreign Trade Bank, the Myanma Investment and Commercial Bank or other permitted banks. It can than be used to acquire assets and pay for other expenses in the relevant foreign currency; effectively meaning one gets the real market value for the foreign currency brought in. The foreign capital can be used for such expenses as the cost of incorporation, up to 75% of the required equipment and goods required to be imported by the enterprise and the company’s expenses within Myanmar.
It is important to note that, whilst the Issued and Paid Up Capital of the Head Office Fixed Capital Account may be used for the operations of the foreign company or branch respectively, in the case of a branch it may not charge head office expenses against such Head Office Fixed Capital Account.
There are certain limitations on the indebtedness of foreign companies or branches. Domestic debt and other liabilities should not exceed the Head Office Fixed Capital Account in the case of branches, or the Issued and Paid Up Capital in the case of foreign companies. In addition, the debt to equity ratio should not exceed 1:2.
8.3.2 (e) Validity
Formally Permits to Trade were only issued for one year subject to renewal but this has been extended to two years.
8.3.2 (f) Renewal of Permit to Trade
An application for the renewal of a Permit to Trade should be made thirty days prior to the expiry of the Permit to Trade. To renew a Permit to Trade the foreign company needs to follow all of the above procedures necessary to obtain a Permit to Trade in the first instance and, in addition, is also required to provide:
a. in the case of a foreign branch, a detailed statement of total sales into Myanmar whether by the head office or by the branch, a total statement of worldwide sales, a copy of the annual report and financial statements of the head office;
b. documentary evidence regarding taxes paid and any alterations to the memorandum and articles of association;
c. a certified statement of the conditions under which the last Permit to Trade was granted;
d. a certificate by the company’s auditor and a director or secretary of the foreign company certifying that the relevant capital has been paid in; and
e. a balance sheet and profit and loss account for the last two years duly audited by a registered accountant or certified public accountant.
8.3.3 Incentives Permitted Under the Myanmar Foreign Investment Law
8.3.3 (a) Application
A foreign investor needs to complete and submit a proposal in the prescribed form to the office of the MIC. The legal and economic sections of the office of MIC will conduct an initial screening and forward the application, together with its comments, on to MIC. The MIC shall render a decision on the application and if that decision is favorable then it will seek formal approval from the Cabinet. The entire application process generally takes between one to three months. An application generally consists of the following:
a. documents in support of the foreign investor’s financial credibility (e.g., audited financial accounts of the most recent year);
b. a bank recommendation regarding the business standing of the foreign investor;
c. a detailed calculation relating to the economic justification of the proposed project indicating inter alia, the estimated annual net profit, estimated annual foreign exchange earnings or savings as well as foreign exchange requirements for the project, proposed recoupment of capital period, prospects of new employment, prospects of increased national income, as well as the local and foreign market conditions in distribution;
d. if the foreign investment is to result in a 100% foreign owned company a draft contract needs to be executed with a relevant ministry specified by the MIC;
e. if the foreign investment is to result in a joint venture of some kind with a local Myanmar citizen or company, then a draft of such contract to be entered into needs to be submitted; and
f. if a wholly owned or joint venture company is to be established, then a draft of the proposed memorandum and articles of association needs to be submitted.
The MIC will then scrutinize the proposal from a technical, financial, commercial, economic and social viewpoint within the framework of the Government’s policy objectives. Upon approval by the MIC, an FIL Permit is issued granting to that enterprise specified privileges pursuant to the FIL. Once the foreign investor has obtained approval from the MIC it must then obtain a Permit to Trade from the Ministry of National Planning and Economic Development by way of the Registrar of Companies.
8.3.3 (b) Tax Incentives
Upon receipt of an FIL Permit, an enterprise will be permitted an exemption from income tax for a period extending up to three consecutive years (possibility of extension if it is decided that it is in the interest of the State), inclusive of the year of commencement of production of goods and services. In addition, the following incentives are available at the discretion of the MIC:
a. exemption or relief from income tax on profits of the business if they are maintained in a reserve fund and re-invested within one year after the reserve is made;
b. right to accelerate depreciation with respect to machinery, equipment, building or other capital assets used in the business, at a rate fixed by the MIC, to the extent of the original value, for the purpose of income tax assessment;
c. if goods are produced for export, relief from income tax up to 50% on the profits accrued from the said export;
d. right of an investor to pay income tax payable to the State on behalf of foreigners who have come from abroad and are employed in the enterprise and the right to deduct such payment from assessable income;
e. right to pay income tax on the income mentioned above for foreigners at the rates applicable to the citizens residing within the country;
f. right to deduct from the assessable income, such expenses incurred in respect of research and development relating to the enterprise which are actually required and are carried out within the State;
g. right to carry forward and set-off up to three consecutive years from the year in which loss is sustained in respect of such loss sustained within two years immediately following the enjoyment of exemption or relief from income-tax for each individual enterprise;
h. exemption or relief from customs duty or other internal taxes or both on machinery, equipment, instruments, machinery components, spare parts and materials used in the business, which are imported as they are actually required for use during the period of construction; and
i. exemption or relief from customs duty or other internal taxes or both on such raw materials imported for the first three years of commercial production following the completion of construction.
8.3.3 (c) Guarantees/Right to Transfer Foreign Currency
a. Foreign investors operating under an FIL Permit will receive a guarantee against nationalization for the enterprise during the term of contract or extended term;
b. foreign investors operating under an FIL Permit will receive the right to repatriate profits of the enterprise;
c. foreign investors operating under an FIL Permit will receive the right for foreign employees of the enterprise to repatriate their savings; and
d. foreign investors operating under an FIL Permit will receive the right to repatriate the rightful entitlement of the foreign investor in foreign currency after the termination of the business.
8.3.3 (d) Additional Rights
a. Right to lease land for up to 30 years;
b. exempted from obtaining an import license for import of capital goods and raw materials.
8.3.3 (e) Duration of Investment
The duration of the permitted investment is relative to the amount of the investment.
Table 13: DURATION OF INVESTMENT
|Amount of Foreign Investment in US$||Duration||Possible Extension Period|
|Less than 1,000,000||10 years||5 years|
|Between 1,000,000 to 3,000,000||15 years||5 years|
|Between 3,000,000 to 5,000,000||20 years||Two 5-year terms|
|Between 5,000,000 to 10,000,000||25 years||Two 5-year terms|
|More than 10,000,000||30 years||Three 5-year terms|
The governmental body responsible for the administration of taxes is the Internal Revenue Department which falls under the Ministry of Finance and Revenue.
8.4.2 Income Tax
A resident status will be permitted to a natural or juristic person in the following instances. First, an individual is considered to be a resident, for tax purposes, if that individual resides in Myanmar, in the respective income year, for not less than 183 days. In addition, a foreign employee of any enterprise operating under the FIL for income tax purposes will usually be treated as a resident citizen. Second, a company that is incorporated in Myanmar is considered to be a resident even though the shares may be held by a foreign investor. Finally, an association of persons other than a company will be deemed to be a resident in instances where the control, management and decision making are located and exercised entirely within Myanmar. Other individuals or juristic entities not covered above will be deemed to be a non-resident for tax purposes.
8.4.3 Assessable Income
The scope of an individual/juristic entity’s liability will be affected by its tax status. A resident foreigner/citizen is subject to tax on all worldwide income while a non-resident is subject to income generated from sources within Myanmar. In assessing the taxable income the following are permitted deductions:
dividends and share profits are not deemed to be part of the assessable tax;
expenses incurred in earning the income, as well as depreciation allowances in respect of capital assets are deductible from the gross income for tax purposes. However such expenses do not include expenses which are of a capital, personal or domestic nature, or which are not commensurate with the volume of business; and
c. 25% of donations made to approved institutions.
8.4.4 Tax Liability
Tax rates applicable to individuals will vary according to the organization which that individual is attached to as well as the individual’s status as a resident or non-resident. The tax rate applicable to a foreigner engaged under special permission in a State sponsored project, enterprise or undertaking is 20% of the total income before any deduction or relief is allowed. A foreign employee may be deemed to be a resident foreigner if that person is engaged in an enterprise operating under the FIL, in which case a 10% levy will be applied against that individual’s gross salary. Resident foreigners not falling under these two categories will be assessed a flat rate of 15%. In the case of a non-resident foreigner, a non-resident foreigner will receive a flat rate of 35% on the income that is generated from within Myanmar.
Concerning corporate tax rates, a flat rate of 30% is applicable to an enterprise of any nature and any form operating under the Foreign Investment Law and those operating under the Myanmar Companies Act. Otherwise, a flat rate of 35% or progressive tax rates starting from 3% to a maximum ceiling of 50%, the greater of the two being applicable.
Where the branch income of a foreign company cannot be precisely assessed, the assessment may be made on the basis of income accruing and arising in Myanmar by any one of the following methods:
a reasonable percentage of the foreign company’s total turnover arising out of sales with, and within, Myanmar; or
a proportion of worldwide profits adjusted in accordance with the Myanmar Income Tax Act using the following method:
assessable Myanmar income = Myanmar turnover/world turnover x adjusted worldwide or global profit; or
any other method deemed fit and proper by the Myanmar Revenue Authorities.
The following rates are applicable to resident and non-resident individual/juristic entities:
Table 14: TAX RATE APPLICABLE TO A RESIDENT
|Level of Income (Kyat)||Tax Rate|
|1 to 5,000||3%|
|5,001 – 10,000||7%|
|10,001 – 20,000||10%|
|20,001 – 35,000||15%|
|35,001 – 50,000||20%|
|50,001 – 75,000||25%|
|75,001 and above||30%|
Table 15: TAX RATE APPLICABLE TO A NON-RESIDENT
|Level of Income (Kyat)||Tax Rate|
|1 to 5,000||3%|
|5,001 – 10,000||10%|
|10,001 – 15,000||15%|
|15,001 – 20,000||20%|
|20,001 – 30,000||25%|
|30,001 – 40,000||30%|
|40,001 – 50,000||35%|
|50,001 – 70,000||40%|
|70,001 – 100,000||45%|
|100,001 – 150,000||48%|
|150,001 and above||50%|
8.4.5 Withholding Tax
Withholding taxes are to be deducted at the rates mentioned below for the following sources:
resident - 15%;
non-resident - 20%;
b. Royalties for the use of license, trade marks, patent rights etc.:
resident - 15%;
non-resident - 20%;
c. Payment on contracts undertaken by State organizations, development committees and co-operative societies:
resident - 3%;
non-resident - 3.5%;
d. Payment for work done by a foreign contractor:
resident - 2.5%;
non-resident - 3%.
8.4.6 Filing of Taxes
Income is computed on the basis of a fiscal year which starts on April 1 and ends March 31 of the following year. The fiscal year in which income is received is expressed as “income year” and the year following as “assessment year”. Tax liability is estimated and is pre-paid on a quarterly basis i.e. at the end of June, September, December and March. Note a penalty ranging from between 5% to 10% is imposed in the event that the tax liability exceeds the aggregate quarterly payments. Income tax returns are required to be filed with the office of the Internal Revenue in the relevant city or town on or before June 30 covering the previous income year ending March 31.
An enterprise has further responsibilities which include, amongst others, its commitments with respect to the payment of salary, capital gains and winding up of activities. Employers are required to submit two returns with respect to the payment of salaries. A Monthly Statement of Salaries and Income Tax Deductions must be filed together with the relevant income tax payments within one week of the tax deductions. In addition, an Annual Statement of Salaries and Income Tax Deductions must be filed at year’s end. Tax is also payable on capital gains in which event a return should be lodged within one month of the disposal of the relevant capital assets. An enterprise which ceases to carry on business is required to lodge a return within one month from the date of discontinuation.
8.4.7 Commercial Tax
The Commercial Tax Law was promulgated on March 31, 1990 and became effective from the financial year 1990/91. This tax is imposed on goods and services produced or rendered within the State and goods imported from abroad. The commercial tax payable on imported goods is collected by the Customs Department in the same manner as customs duty is collected.
The commercial tax is levied in accordance with the schedules set out in the Commercial Tax Law (please refer to Annex 7 for sample rates). The tax will be charged on the landed cost of the imported goods and on the sale proceeds of the goods produced within the State. The tax rates for services are 8% on passenger transport fares, 30% on movie shows, 15% on other entertainment, 5% on trade and 10% on hotel, lodging and restaurant services.
There are provisions for the exemption of commercial tax wherever such exemption is considered appropriate particularly as incentives for newly established business and exports.
8.4.8 Customs Duties and Fees
With a few exceptions, all imported goods are liable to customs duties and would accordingly have to be declared to the Customs Department. Customs duties levied on the import of machinery, spare parts and inputs, generally range from 5% to 30%. In addition, a license fee on imported goods is charged at 5% of the value of such imported goods. No license fee is charged on exports. An export duty is levied on the export of a few commodities. For example, Kyat 10 per ton is charged for rice, Kyat 5 for rice barn and rice dust, 10% ad valorem for bamboo and 5% ad valorem for raw hides and skins, oil cakes, pulses and cereals (other than rice and rice products).
8.4.9 Double Tax Treatise
Whilst Myanmar is presently in the process of negotiating tax treatise with various countries the only tax treaty that remains in effect is that which is in place between Myanmar and the United Kingdom.
8.5.1 Statement of Accounts
8.5.1 (a) Company
The Myanmar Companies Act requires a company to maintain proper books of account, such as ledgers and cash books, at the registered office of the company, in respect of:
all monies received and expended by the company and the nature of those transactions;
all sales and purchases of goods by the company; and
c. the assets and liabilities of the company.
The directors of a company shall, no later than eighteen months from the date of incorporation and subsequently on a yearly basis not to exceed intervals of fifteen months, lay before the company at a general meeting a balance sheet and profit and loss statement. The balance sheet shall, in addition to a summary of the property, assets, capital and liabilities of the company, provide details as to the nature of the assets and liabilities and the method by which the value of the fixed assets have been determined. The profit and loss statement shall be in a form prescribed by the Myanmar Companies Act and shall include the details of remuneration paid to the directors and managing agent if any.
The Companies Registration Office will require a copy of the financial statement as a document to support the extension of the Permit to Trade i.e. every two years. If the general meeting adopts the financial statement than a copy of the balance sheet will need to be signed by the manager or secretary and submitted to the Companies Registration Office. However, if the financial statement is not adopted a statement of that fact and the reasons therefore shall be annexed to the balance sheet that is submitted to the Companies Registration Office.
8.5.1 (b) Branch Office
A branch of a foreign company must file annually:
a. a copy of the balance sheet of the parent company together with a statement showing the holding of its shares classified according to the nationality of the holders and, if its balance sheet does not contain all of the information required in Form H of the Third Schedule of the Companies Act, such additional information needs to be provided; or
b. if the law of the country of the foreign company does not require the filing of the balance sheet, a statement in the form of a balance sheet containing such details also has to be provided by the foreign company. Regulation 9 also requires that, in addition to any other documents required under the Act, a copy of each of the balance sheet and profit and loss account in Form B set out in Regulation 9 should also be submitted.
Note, a copy of every document filed with the Registrar shall be duly certified as a true copy by an official of the government in whose custody the original is held, the signature or seal of such official being authenticated in accordance with the law of the country of incorporation and duly legalized by the relevant Embassy or Consulate concerned or a notary public of such a country, his/her certificate being duly legalized by the relevant Embassy or Consulate.
A company is required to have their accounts audited annually by an auditor who is qualified under the Myanmar Accountancy Council. The auditor is required by Section 145 of the Myanmar Companies Act to express a “true and correct view” on:
a. whether or not they have obtained all the required information and explanations;
b. whether or not the balance sheet and the profit and loss account are drawn up in conformity with the provisions of the Myanmar Companies Act;
c. whether or not the balance sheet and the profit and loss account exhibit a true and correct view of the company’s affairs; and
d. whether the books of accounts have been properly kept by the company.
In practice, a “true and correct view” i.e. a 100% check on accounts is applied to local accounts because of the relatively small amount of activity. However, a “true and fair view” is generally rendered with respect to the accounts of joint ventures and foreign companies in which an auditor verifies a random sampling of activities within a prescribed range of criteria.
The Ministry of Labor is responsible for the general administration of the various governmental bodies involved in labor that includes but is not limited to the Department of Labor, the Social Security Board, the Central Inland Freight Handling Committee, the Factories and General Labor Laws Inspection Department, the Central Trade Disputes Committee and the Overseas Employment Division.
Generally employers wishing to employ more than five employees may notify the Township Labor Office, in a prescribed form, prior to the recruitment of employees. The Township Labor Office then proceeds to prepare a list of candidates from which an employer may select those who are most suitable. However, an employer can choose the conventional route of advertising in the New Light of Myanmar (the daily newspaper in Myanmar) and screening those applicants who return a response.
Wage levels have not managed to keep pace with either the rates of inflation or the weakening of the Kyat relative to the US dollar. As a result, wage levels remain competitive with the levels of other countries located in the Indochina region. Employee wages in the private sector are generally negotiated between the employer and employees. However, there are minimum wage councils in both the rice milling industry and the cheroot and cigar rolling industries that set the minimum wage levels for their respective industries. Below follows estimates of current wage levels:
Table 16: APPLICABLE WAGE RATES
|Occupation||Wage Rates per Month (US$ at Present Exchange Rates)|
|Unskilled||0.40 (per day)|
|Domestic Staff||15 to 200|
|Junior Secretary (bi-lingual)||50 to 100|
|Senior Secretary (bi-lingual)||300|
|Executive||500 to 100|
|Accountant||200 to 500|
|Chief Accountant||500 to 1,000|
|Entry Level Civil Servant||5 to 6|
8.6.4 Stipulated Work Hours
The normal work day usually consists of an eight hour day with a one hour lunch break becoming common place amongst foreign employers. Hours in the private sector generally run from 8:00 a.m. until 5:00 p.m. while the public sector runs from 9:30 a.m. until 4:30 p.m.
8.6.5 Employee Benefits
The Social Security Act applies to those enterprises employing more than five employees. Pursuant to the Social Security Act, employers are required to insure their employees with the Social Security Board by contributing a portion of the employee’s salary into a fund and the employer is obligated to contribute three times the amount of the employee’s contribution.
Employees in the private sector are entitled to the following number of paid days leave of absence:
6 days casual leave;
30 days medical leave;
10 days earned leave; and
the standard public holidays in each calendar year (approximately 21 days).
8.6.6 Termination of Employment
Conciliation is the preferred means of resolving disputes between employers and employees. The initial step in the process requires an employer to submit the dispute to the local Township Workers Supervisory Committee. If the parties are not able to reach an agreement the dispute is then forwarded to the Township Trade Disputes Committee for arbitration. Arbitration proceedings can then be forwarded to two additional levels of review at the state/divisional level and finally onto the Central Trade Disputes Committee should the parties disagree with the award. Ultimately employers may dismiss employees who are in violation of the terms of the employment agreement. Generally two to three months notice is given with a severance pay of three to four months as compensation.
8.7.1 Immovable Property
Myanmar, as in most other countries, permits a freehold interest in “immovable property”. The Government has come to define “immovable property” by statute as land, buildings, hereditary allowances, rights of ways, lights, fisheries or any other benefit to arise out of land and things attached to the earth or permanently fastened to anything that is attached to the earth. The Transfer of Property Act permits the transfer of an interest in “immovable property” by way of sale, mortgage, lease and exchange or gift. However the Registration Act requires that the transaction be registered in order to be enforceable. Registration is effected at the Land Records Department located in the area in which the property is situated. The registry at the Land Records Office provides a history of the “immovable property” and any interests that have been registered thereto. However, there may be claims on the “immovable property” that are not registered but may constitute defects in a transfer of interest i.e. acquisition of interest by way of adverse possession or squatters rights, leases of less than one year and any easements that may run with the “immovable property”.
There are two main restrictions to the transfer of interest in “immovable property” that relate to foreign investors. First, the Transfer of Immovable Property (Restriction) Act prohibits the purchase of land or the grant of a lease in land for more than one year to a company owned by a foreigner or a foreign individual. Second, land that was appropriated by the Government and designated as “agricultural land” may only be transferred or leased to individuals who intend to continue to utilize the land for agricultural purposes.
8.7.2 Lease Hold Interest
As mentioned above, generally the tenor of lease which foreign investors are permitted to enter into is less than one year. However, the Government may grant a foreign investor with a long term “right to use” government owned land most typically in instances where there is a BOT project or a joint venture involving a governmental body. The maximum lease period is for thirty years with an additional fifteen year extension contingent on approval by the Government.
Table 17: MAXIMUM DURATIUON OF LEASE PERIOD
|Investment Amount in US$||Permitted Duration|
|1,000,000 and below||10 years|
|1,000,000 to 3,000,000||15 years|
|3,000,000 to 5,000,000||20 years|
|5,000,000 to 10,000,000||25 years|
|10,000,000 to 30,000,000||30 years|
|30,000,000 and above||30 years + 5 + 5 + 5|
To date there has been little foreign investment in the agricultural sector despite the Government’s attempt to promote growth in this sector. The Central Committee for the Management of Culturable Land, Fallow Land and Waste Land has been created in order to manage the use of land and has set out the following criteria with respect to the use of land for agricultural purposes:
Table 18: MAXIMUM ACREAGE PERMITTED UNDER VARIOUS ACTIVITIES
|Plantation Crops||5,000 acres|
|Seasonal Crops||1,000 acres|
|Livestock, Poultry and Aqua-culture|
|Livestock and Poultry Farming|
|Buffalo, Cattle and Horses||5,000 acres|
|Sheep and Goat||1,000 acres|
|Poultry and Pigs||500 acres|
Source: Speech given by Dr. Mya Maung, Director General of the Department of Agricultural Planning on October 28 – 29, 1997 at the Myanmar in ASEAN Conference.
8.7.3 Intellectual Property
8.7.3 (a) Overview
Many of the laws that are in place with respect to intellectual property were introduced to Burma whilst Burma was administered by the British from India. Many of these laws went into hibernation under the socialist government while Burma remained, to a large extent, a closed country. The collapse of socialism and the opening of the economy has given rise to local products or services that are attempting to ride the coat tails of long established foreign companies by utilizing names or trademarks that are similar to that belonging to long established multi-national companies. At this point in time there have been no real test cases that have determined the level of protection foreign investors will be able to enjoy with respect to intellectual property. Many of the disputes have thus far been resolved through negotiations. However, ASEAN is now attempting to develop an intellectual property regime that will eventually pressure Myanmar to conform to international practices.
8.7.3 (b) Copyright
The introduction of the Burma Copyright Act in 1914 was intended to provide protection for literary, dramatic, musical and artistic works produced in Burma, or, if unpublished, produced by an individual who was either a citizen or resident in Myanmar at the date of creation. The term of protection is the life of the author plus fifty years after his/her death. Whilst the Burma Copyright Act has not been repealed by the Government, enforcement of rights granted by the Burma Copyright Act has not occurred in the recent past.
8.7.3 (c) Patent
The India Patents and Design Act 1911 introduced in Burma as the Patents and Design Act of Myanmar and India Act V (1945) was originally promulgated in order to provide protection for registered patents. However, similar to the Burma Copyright Act in 1914 there have been no attempts to exercise the rights provided therein in recent years.
8.7.3 (d) Trademark
There is presently no trademark act per se which creates a proprietary right in a trademark. In practice, a declaration of ownership of trademark is registered, pursuant to the Registration Act, which is followed by the publication of a cautionary notice in the New Light of Myanmar. The registration and subsequent publication do not create any proprietary rights in the trademark however it serves as evidence in any actions taken in criminal or civil proceedings.
The English common law that has been adopted by Myanmar as well as the various volumes of the Burma Code do offer some measure of assurances. Both the civil and criminal laws define a trademark in rather liberal terms and requires that the constitution of the trademark be distinctive in nature thereby enabling the proprietor to distinguish his/her goods from that of others. Acquisition of a right in a trademark is not acquired through statute but rather through the use of the trademark. The common law principle of “passing off” provides an action against another party who uses the trademark, belonging to another, with the intention of misleading the public and thereby causing damages to the proprietor. Common law remedies include injunctions, damages and other ancillary reliefs. Under criminal law, a party that knowingly uses the trademark of another may be subject to one year imprisonment or fine or both.
8.8.1 (a) The Kyat
The Kyat is a non-convertible currency and cannot be imported or exported out of the country. The official exchange rate has remained at 6 Kyat to the US Dollar although the unofficial or black market rate hovers as of early 1998 at around 275 Kyat. The black market rate of exchange fluctuates according to the demand for US dollars by either the Government or the private sector. However the trend has been toward an increasing devaluation in the Kyat. The decline in value of the Kyat can be attributed to the fact that much of the Government’s deficit has been financed out of significant increases in the money supply. Additional pressure has been placed on the currency as a result of declining foreign currency reserves. The Government has established a monetary stabilization committee that is led by Lt. General Khin Nyunt in order to cope with the fluctuation of the currency.
The disparity between the official rate and black market rate has fueled the growth of a burgeoning black market. The Government has introduced measures to reign in control of currency exchanges. An amendment to the Central Bank Law creates a seven year jail term and maximum fine of Kyat 200,000 fine for those who are convicted of dealing in currency in the black market. Enforcement of this provision has been sporadic at best. Another means by which the Government has attempted to control the exchange of currency is by the licensing of official exchange centers. On December 8, 1995 ten exchange centers were opened and were permitted to:
exchange the US Dollar and Foreign Exchange Certificates (“FEC") into Kyat at the black market rate;
exchange the US Dollar into FEC;
exchange travelers checks into FEC or Kyat (5% commission); and
d. exchange the Kyat into FEC at the black market rate.
The official exchange centers provide foreign investors without a local source of Kyat income, an official route toward the exchange of currency at the prevailing black market rate. The Kyat can then be used to pay for local expenses. In addition, the opening of the exchange centers provide an official route for the exchange of Kyat into FEC which can in turn be deposited into a foreign currency account.
8.8.1 (b) Foreign Exchange Certificates
For many years there were tight exchange controls but despite this the black market grew almost unabated. Many believe this finally led to a government press release in late January 1993 announcing that with effect from February 4, 1993 the Central Bank of Myanmar would start issuing FEC with the objective of enhancing foreign exchange earnings and for the convenience of tourists and business people visiting Myanmar. Three denominations of the FEC, namely those equivalent to US$ 10, US$ 5 and US$ 1 were introduced. These certificates are good for use only within the Union of Myanmar and are convertible. The exchange rate of the FEC is primarily based on the United States Dollar but is also exchangeable with the following foreign currencies and traveler’s checks:
Bank of Tokyo Traveler’s Check;
Citicorp Traveler’s Check;
Visa Traveler’s Check;
Bank of America Traveler’s Check;
First National Citibank Traveler’s Check;
Swiss Bankers Traveler’s Check; and
Commonwealth Bank of Australia Traveler’s Check.
One United States Dollar will generally be equivalent to one unit of FEC but the Pound Sterling is to be exchanged at the daily cross rate notified by the banks. Any fractions of an FEC calculated at the daily cross rate will not be exchanged.
Apparently FEC may be issued using Visa Credit Card facilities. However, if you want to use credit cards to obtain FEC we suggest that you check, before you go, with the relevant card company.
Payment by FEC is deemed to have been made in foreign currency and is acceptable by any person or organization in Myanmar. Recipients of FEC may, upon payment of 10% of the value of the FEC as a bank charge, deposit the FEC into their foreign currency accounts. Those who do not possess foreign currency accounts as yet may also establish one with the Myanma Foreign Trade Bank. No questions will be asked as to how and why one received the FEC. The Central Bank of Myanmar has issued a clarification which states that the 10% bank service charge will not be imposed on deposits made by government organizations or government related joint venture business organizations.
Initially, the FEC were permitted to be purchased only by tourist or business people who had the compulsory obligation to change at least US$ 300 upon arrival at the Yangon Airport or by non-resident foreigners. This regulation has been revised and now, anyone in Myanmar (foreigners and citizens alike) who has access to legally earned foreign exchange may purchase FEC officially. However, the Government has specified that FEC are not to be utilized for normal payment of house rents, and rentals for motor cars and machineries.
Most observers are of the opinion that the introduction of the FEC is basically the introduction of a dual currency system - following similar steps in the People’s Republic of China. It is a huge step forward in a positive direction. Some feel that this initiative taken by the Government is a clever move in putting a halt to the illegal flow of foreign currency bank notes out of the country, and that it indirectly and unofficially devalues the local Kyat currency without any official devaluation process being necessary.
Depending on its availability and the specific needs of the business community the exchange rate of the FEC will fluctuate. However, it is anticipated that, in the long run, the exchange rate of FEC will be slightly lower than the black market rate for US Dollars. The present rate of exchange is approximately FEC 1 to Kyat 265 whereas the exchange rate for the US Dollar is Kyat 275.
8.8.2 Foreign Exchange Controls
Myanmar’s dwindling foreign exchange reserves has placed a great deal of pressure to regulate the flow of foreign currency out of the country. The management of exchange is administered by the Controller of Foreign Exchange of the Exchange Department of the Central Bank of Myanmar and the Exchange Management Board pursuant to directives that are issued by the Ministry of Finance and Revenue. The Central Bank has issued four types of licenses that permit exchange activities:
licenses to commercial banks that are permitted to purchase and sell foreign currencies;
licenses that permit the licensee to exchange US Dollars into FEC;
licenses that permit the licensee to purchase and sell FEC in Kyat; and
d. licenses permitting shops to receive foreign currency for the exchange of goods.
The remittance of foreign currency into the country is unlimited however the physical import of amounts in excess of US$ 2,000 will trigger a reporting requirement. Foreign currency that enters Myanmar must either be converted into Kyat or deposited into a foreign currency account. Foreign currency accounts may be opened with a minimum of US$ 100. Note, there will be a 10% service charge for the deposit of funds into a foreign currency account. However, there is an exception for foreign currency that is brought in as part of the capital requirements of an enterprise formed in Myanmar.
Outward remittances of foreign currency face a more difficult scenario. The low levels of foreign currency reserves creates an incentive for the Government to retain as much foreign currency in the country as possible. Authorization is required for the payment of external foreign currency accounts, however, authorization, for aggregate monthly remittances below US$ 50,000 per month, should be forthcoming provided that there is ample documentation to support legitimate expenditures. Note in July of 1997 the Government implemented a new regulation that restricts the amount of foreign currency that may be remitted abroad to US$ 50,000 per month. However, enterprises operating under an FIL Permit are permitted to remit profit abroad.
8.8.3 Financial Institutions
Under the socialist government the banking sector was eventually consolidated into one bank, The People Bank of the Union of Myanmar, which remained under the control of the government. In the mid 1970’s the government overhauled the banking sector and created a Central Bank and four other State owned banks: the Myanmar Foreign Trade Bank; the Myanmar Economic Bank; the Myanmar Agricultural & Rural Development Bank; and the Myanmar Investment & Commercial Bank. The Central Bank retains control of the sector as the scope of its responsibilities include the regulation of both State owned and private banks, establishing the reserve requirements, asset to liability ratios, minimum cash requirements and maximum discount and interest rates amongst other activities. The move toward a market economy beginning in 1988 was accompanied by further reforms intended to liberalize the banking sector by means of a gradual process.
There are several phases of the plans to liberalize the banking sector. The first set of measures have been implemented and allowed the formation of local banks as well as representative offices of foreign banks. The second phase permits the formation of joint venture banks to be formed by local banks in association with foreign banks. The final phase intends to introduce full foreign branches.
At the present time the participants in the banking sector are as follows:
a. Government bank:
The Central Bank of Myanmar;
b. State-owned banks:
The Myanmar Economic Bank;
The Myanmar Foreign Trade Bank;
The Myanmar Investment and Commercial Bank; and
Myanmar Agricultural and Rural Development Bank.
c. Local banks:
First Private Bank Limited;
Myanmar Citizens Bank Limited;
Co-operative Bank Limited;
Myawaddy Bank Limited;
Yadanabon Bank Limited;
Yangon City Bank Limited;
Yoma Bank Limited;
Myanmar Oriental Bank Limited;
Myanmar May Flower Bank Limited;
Tun Foundation Bank Limited;
Kanbawza Bank Limited;
Asian Yangon International Bank Limited;
The Myanmar Universal Bank Limited;
Asia Wealth Bank Limited;
Myanma Industrial Development Bank Limited;
Myanma Livestock and Fisheries Development Bank Limited;
Co-operative Promoters Bank Limited;
Co-operative Farmers Bank Limited;
Sibin Tharyar Yay Bank Limited; and
Inwa Bank Limited.
d. Joint venture banks:
Myanmar May Flower Bank Limited and the Siam City Bank Public Company Limited (Thai);
Tun Foundation Bank Limited and the May Bank (Malaysia);
Asia Wealth Bank Limited and the Thai Farmers Bank Public Company Limited (Thai); and
Yoma Bank Limited and the Fuji Bank (Japan).
e. Foreign representative banks:
Bangkok Bank Public Company Limited;
Krung Thai Bank Public Company Limited;
Siam City Bank Public Company Limited;
The Thai Military Bank Public Company Limited;
Thai Farmers Bank Public Company Limited;
Bank of Ayudhya Public Company Limited;
The Development Bank of Singapore Limited;
Keppel Bank of Singapore Limited;
Overseas Union Bank Limited;
Oversea-Chinese Banking Corporation Limited;
United Overseas Bank Limited;
Bank of Commerce (M) Berhad;
Malayan Banking Berhad (Maybank);
The Pacific Bank Berhad;
Public Bank Berhad;
Korea Exchange Bank;
Korea First Bank;
Korea Long Term Credit Bank;
Bank Dagang Nasional Indonesia;
Panin Bank International Inc., Nauru;
Bank Francaise du Commerce Exterieur;
Banque National de Paris;
The Sumitomo Bank Limited;
The Tokai Bank Limited;
The Sanwa Bank Limited;
The Asahi Bank Limited;
The Dai-Ichi Kangyo Bank Limited;
The Sakura Bank Limited;
Bank of Tokyo-Mitsubishi Limited (new license for merger);
The Fuji Bank Limited;
Hong Kong and Shanghai Banking Corporation Limited;
Standard Chartered Bank;
ABN AMRO Bank NV;
Arab Bangladesh Bank Limited;
National Bank Limited;
Global Commercial Bank;
First Overseas Bank Limited;
Deutsche Bank Aktiengesellschaft;
MBf Bank Limited;
Daewoo Bank (Hungary) Limited;
BII Bank Limited;
First Commercial Bank;
RHB Bank Berhard (new license for merger); and
Credit Agricole Indosuez (new license for transfer).
The only goods that are restricted from trade are those goods that are reserved for SOEs i.e. teak, oil and natural gas, pearls, jade, gems, minerals and metals. Concerning imports, goods are classified into three different categories: “priority”, “luxury” and “other”. Myanmar is presently a net importer of goods and the trend has been towards an increase in the imbalance of the trade gap. In order to remedy the situation, the Government has placed temporary restrictions on the import of “luxury” goods. In addition, certain border trade points have been temporarily closed. Consequently, many of the different forms of trade listed below have been restricted in some form or another. In addition, the Government has also made a concerted effort to increase exports primarily in the area of agriculture and light manufacturing.
Although the Government has adopted a policy favoring the export of goods there are certain agricultural products that attract taxes upon export. For example, 5% of FOB value is levied as export tariff for vegetables and herbs, pulses and beans, maize, animal feed, animal horns and leather, 10% export tariff is levied for bamboo and Kyat 10 per metric tone is levied for the export of rice and rice products. An export license fee for timber log exports is levied ranging from Kyat 25,000 for up to US$ 5,000 of export value, up to Kyat 100,000 for more than US$ 150,001 export value. Other than the above items, export duty is free.
8.9.2 Registration and Licensing Requirements
The Government generally requires that import/export activities be undertaken by an enterprise that is duly registered and possessing the requisite import/export license. The following natural/juristic persons are allowed to register as an importer/exporter at the Ministry of Trade:
a. a citizen of Myanmar if the enterprise is a sole proprietorship;
b. a partnership;
c. limited companies inclusive of joint ventures;
d. branch offices; and
e. co-operative societies.
The registration is good for a period ranging between one year and three years and an application to extend is permitted and should be commenced prior to the expiration of the existing registration term.
In addition to the registration of the enterprise, it will be necessary to apply for an import or export license (note, import and export licenses must be applied for separately) in relation to the movement of goods across the border. Licenses are good for a period of six months and can be extended for a three month duration. In addition, the terms may be amended upon application and payment of additional fees. Note that the following imported goods are exempt from the licensing requirements:
a. goods imported pursuant to FIL incentives:
capital equipment as specified under the FIL guidelines; and
raw materials and packing materials imported within the first three years of production and used for purposes of manufacture and export;
b. goods imported by SOEs:
goods used for business or departmental use; and
capital goods imported for government projects;
c. specified medicines and raw materials used in the manufacture of pharmaceutical products;
fertilizers, farm implements and insecticides;
e. new motor vehicles imported by oil companies, diplomatic organizations and enterprises with an approved FIL Permit, and
f. goods entering the country through the transit trade scheme as described below.
Note, the import of certain products require further governmental approvals which must accompany the application for license:
b. foreign movies;
c. reconditioned machinery;
d. communications equipment including fax and telex machines and telephones; and
e. livestock and certain livestock products.
Also note, FIL incentives include the use of an Open General License that permits an enterprise to import approved goods especially when the enterprise requires large amounts of capital goods or the import of goods on a frequent basis due to the nature of the enterprise.
8.9.3 Methods of Import/Export
There are several different procedures of import and export which are high-lighted below:
8.9.3 (a) Normal Trade (Conventional Trade) System
This is also known as the “export first/import later” system whereby 100% retention of foreign exchange earned from export is permitted. This is a conventional trade method which requires the opening of a Letter of Credit as in many export/import transactions. Under this system, exporters are required to utilize 100% of their foreign exchange earnings to import the priority items listed by the Government.
The export of goods is permitted only under three INCOTERMS, i.e. FOB (Free on Board), CFR (Cost and Freight) and CIF (Cost, Insurance and Freight). If exported under CFR or CIF, the exporter is required to pay freight charges and insurance premiums in hard currency to the Myanmar Five Star Shipping Line and to Myanmar Insurance which are SOEs.
8.9.3 (b) Counter Trade System
Counter trade procedure under which an exporter has to import the same value of goods can be done with private enterprises by opening a Letter of Credit.
This can also be done with an SOE without opening a Letter of Credit but with the approval of the Foreign Exchange Management Department of the Central Bank of Myanmar.
8.9.3 (c) Consignment Sales System
Under this system, a foreign company can send goods on a consignment basis to a private enterprise or an SOE which has been properly appointed on a commission basis as its Business Representative by the foreign company.
Under this system, the opening of a Letter of Credit is not required. Goods may be sold in foreign currency which can be repatriated after deduction of commission and income tax as prescribed. Goods can also be sold in Kyat and the Kyat accumulated may be utilized for purchase of Myanmar products to be exported or converted into FEC at an official exchange center and then deposited into a foreign currency account. Accumulated money can be utilized for service charges inside Myanmar. While in Myanmar, the goods are still owned by the foreign company that sent the goods. At present, the minimum commission permissible is 5% of the CIF value and 3.5% will also be levied as a profit tax.
Under this procedure, for every US$ 100 CIF value of imported goods, the export of up to US$ 120 FOB value of Myanmar products will be permitted.
In the same manner that foreign goods can be imported into Myanmar under the consignment sales system, some Myanmar export items i.e. handicrafts, vegetables, fruit, timber, rattan canes, furniture made with lacquer wares and other home appliances can also be exported under consignment sales system to a foreign country. Payment of commissions and other expenses by the Myanmar company are permitted.
8.9.3 (d) Import First /Export Later System
A foreign company can sell goods to a company in Myanmar on an import first/export later basis whereby, for every US$ 100 CIF value of goods sent into Myanmar, up to US$ 110 FOB value of Myanmar products will be approved for export. Under this system, the opening of a Letter of Credit is not required.
Due to the risks involved i.e. goods will have to be exported before money has been received, only a handful of companies do business under this procedure. Most of these tend to be entrepreneurs in Myanmar with relatives living in foreign countries. The problem with this system is that although the Myanmar side permits the import without opening a Letter of Credit, some countries do not permit goods from their countries to be exported without receiving a Letter of Credit.
8.9.3 (e) Transit Trade System
Under this system, goods can be imported into Myanmar for final delivery to a third country. The foreign buyer or seller can appoint a Myanmar citizen or enterprise as a carrier of these goods with a minimum commission of 5% payable in hard currency to the carrier and a 2.5% customs duty and 5% service charge are also payable to the Customs Department in hard currency.
This system is frequently used in the export of automobiles to Yunnan Province, in the People’s Republic of China. The same procedure can be used for re-export trading activities to other countries. Goods are required to be transported through the prescribed approved routes.
8.9.3 (f) Border Trade System
A border trade system under which customs tariff rates are differently levied in comparison with conventional sea borne trade is permitted in order to develop bi-lateral trade relations particularly with Myanmar’s neighboring countries of the People’s Republic of China, India, Bangladesh and Thailand.
Under this procedure, trading can be done only with the currency used by the relevant neighboring country or in hard currency. However, the export of twenty-eight items is restricted under border trade procedure. These are:
|1. Teak||15. Silver|
|2. Petroleum||16. Tin (Wolfram)|
|3. Precious Stones, Gems and Jewelry||17. Tungsten (Scheelite)|
|4. Rice||18. Gold|
|5. Arms and Ammunitions||19. Diamond|
|6. Antiquities||20. Jade|
|7. Raw Cotton||21. Pearl|
|8. Animal Hides and Skins||22. Wolframite/Scheelite Admixture|
|9. Peanuts/Groundnuts||23. Coal|
|10. Fresh Water Fish and Prawns (Fresh and Dried)||24. Other Metals 25. Rubber (Latex)|
|11. Chicken, Duck, Pigs, Goats, Lamb (Live and Prepared)||26. Ivory 27. Sea Water Prawns (Fresh)|
|12. Lead 13. Copper||28. Buffaloes, Cows, Elephants, Horses and other rare animals|
8.9.4 Procedures for Export and Import
8.9.4 (a) Import Procedure
The following general procedures are applicable to the import of goods:
a. the enterprise must register as an importer/exporter under the Ministry of Trade;
b. the registered importer is required to open a foreign exchange account at the Myanmar Investment and Commercial Bank, or an appropriate commercial bank, in order to apply for an import license from the Directorate of Trade;
c. in applying for an import license, the application should include the sale contract and/or pro-forma invoice mentioning detailed specifications, mode of packing and delivery phasing;
d. an import license fee needs to be paid to the Directorate of Trade within twenty-one days following the issuance of the license;
e. an irrevocable Letter of Credit should be opened by the importer at the Myanmar Investment and Commercial Bank;
f. if the purchase is made on an FOB basis, the importer has to secure insurance from Myanmar Insurance and a freight booking from Myanmar Five Star Line; and
g. finally, after receiving shipment advice from the sellers, the importer has to arrange for the clearance of goods and payment of duty.
Under the existing rules and regulations all incoming consignments of the goods must be cleared through the Customs Department under the Bill of Entry. The Bill of Entry is to be accompanied by the following documents:
a. original invoice;
b. freight bill;
c. insurance bill;
d. original bill of lading or airway consignment note;
e. packing list; and
f. import license.
Customs duty is payable according to the tariff schedule based on assessed value. Together with the customs duty, commercial tax is levied on the imported goods based on the landed cost which is the sum of CIF value, port dues calculated at 0.5% of CIF value and customs duty. These taxes are collected at the point of entry and at the time of clearance.
Seven-eighths of the customs duty paid on goods that could be easily identified will be refunded when such goods are withdrawn from the country again under the drawback facility. Goods on which drawback is claimed must be re-exported within two years from the date of importation. Such time may be extended up to three years if there is sufficient reason for such extension.
8.9.4 (b) Export Procedure
Similarly, there are a number of general procedures which have to be complied with for the export of goods:
a. the enterprise must register as an importer/exporter under the Ministry of Trade;
b. the registered exporter must obtain an export license, in conformity with the rules and regulations laid down by the Directorate of Trade;
c. an irrevocable Letter of Credit has to be opened by the buyer through a correspondent or acceptable bank to the Myanmar Investment and Commercial Bank;
d. the method of transport has to be nominated by the buyer;
e. when the product is to be shipped the Myanmar Port Authority has to be contacted if it is to be done on an FOB basis;
f. a pre-shipment inspection, if required, will be conducted by the Government's Inspection and Agency Services with respect to specification, weight, quality and packing; and
g. details of the cargo, such as export license, shipping bills, other shipping documents and customs pass, etc., must be presented to the Myanmar Investment and Commercial Bank for processing of the Letter of Credit and also to the Customs Department together with the above information as well as Form E (Declaration For Export of Goods).
Similar to other areas of law, laws are in place to provide for arbitration in Myanmar however there has been little in the way of recent court precedent that provides any degree of certainty with respect to the outcome. The primary body of law which sets out the guidelines for arbitration proceedings is contained in the Myanmar Act IV (1944). Contained in the first schedule of the Myanmar Act IV (1944) are implied conditions that are intended to guide arbitration proceedings unless the parties agree to contract different terms. An award, that is the product of arbitration proceedings in accordance with the Myanmar Act IV (1944) and any contractual terms, must be submitted to the courts for confirmation in order to be rendered enforceable. Awards are generally confirmed in summary proceedings. However, the Myanmar Act IV (1944) does give discretion to the court to either amend or set aside an award. The Government is presently exploring the possibility of adopting the use of foreign standards for arbitration proceedings though no concrete steps have yet been taken.