After months of parliamentary debate, Nay Pyi
Taw has finally done it: Myanmar’s new Foreign Investment Law was
enacted on Nov 2 with a number of protectionist measures struck from the
final draft.
While the law clarifies some issues for investors and create new
incentives for investment, it also extends the powers and remit of the
Myanmar Investment Commission (MIC), whose task is to approve and
oversee foreign investment.
Investors will need to closely scrutinise the government’s practical
interpretation of multiple provisions of the law and remember that MIC
approval will be needed to effect an exit or increase in any investment.
Most significantly, the law creates new broad-based categories of
restricted investment, which could apply to many businesses and extends
investor duties. Additionally, it requires the Ministry of National
Planning and Economic Development (NPED), which oversees the MIC, to
issue implementing rules and procedures by the end of January.
The content and application of these rules, together with
interpretation of the law’s new categories of restricted investment,
will be crucial in determining the extent to which the FIL truly
facilitates foreign investment in Myanmar. Investors planning to make an
application to the MIC before these new rules and procedures are issued
will need to consider their investment strategy carefully.
The FIL imposes significant requirements on investors in the area of
employment and labour, for the first time requiring that an employment
contract be executed with all employees, prohibiting wage discrimination
between similarly qualified Myanmar citizens and foreign citizens, and
requiring investors to employ an increasing proportion of Myanmar
citizens over a six-year period, moving from 25% to 75% in two-year
intervals.
Under the law, investors are also required to run employee training
programmes to improve the skills of their workforce. In addition, for
the first time, the FIL requires foreign employees to obtain a work
permit in addition to a stay permit.
On the plus side, the FIL provides flexibility regarding the level of
participation by a foreign investor in joint ventures, is significantly
more liberal than the 1988 Foreign Investment Law with respect to the
lease of land, provides for the ability to transfer invested capital and
net profits at prevailing exchange rates, and allows the investor to
hold foreign currency accounts at designated Myanmar banks.
It also provides improved tax benefits, such as a five-year income
tax holiday and an exemption or relief from commercial tax on exported
goods.
The legal protection of an investment and legal recourse in the case
of a dispute is naturally of concern to investors in any market. The FIL
addresses this concern two principal ways. It provides a guarantee
against nationalisation of an FIL investment and allows the freedom to
negotiate the application of foreign law and foreign arbitration to
investments.
However, even if an investor can successfully negotiate this, Myanmar
is not yet a party to the New York Convention on Foreign Arbitral
Awards (1958), which requires contracting states to recognise and
enforce arbitration awards made in other contracting states. As such,
investors may encounter difficulty enforcing a foreign award in Myanmar
courts.
The FIL lays down a helpful time scale for MIC response to an
investment proposal. Within 15 days after “necessary scrutiny”, the MIC
may make a response to the investor, either accepting or rejecting their
proposal. In practice, this may not result in shorter deliberations by
the MIC. The law requires the MIC to issue a permit within 90 days of
acceptance of a proposal.
There were high expectations of the new Foreign Investment Law.
Whether those expectations can be met will depends on its practical
implementation over the next few months and years, as well as the
provision of detailed rules yet to be issued. Investors will need to
move cautiously to manage risk and secure their investment.
source: Bangkok Post
No comments:
Post a Comment