Background
Since Myanmar (formerly Burma) gained independence in 1948,
the nation went through turbulences mainly of ethnic uprisings. Once
widely-known “Asian’s Rice-Bowl”, for its richness of vital resources, was
dragged into the status called least developed country (LDC); that was enlisted
by World Bank. Ethnic instability right aftermath of independence of the nation
was transformed into military-led government for many decades. The
self-prescribed “Burmese Way to Socialism” gained upper-hand and the entire
economy was nationalized into the hands of small group of military leadership
in 1962. The era was ended by “people power” in 1988 and the power vacuum was
quickly seized by military dictatorship in 1988. For over (20) years, the
military personals, both at national and regional levels, gained not only the
military might but also the exclusive power to monopolize the entire economy.
Dozens of economy-driven laws and regulations were stipulated by the top-most
leadership but the incentives to boost the economy, stipulated in the laws,
were never materialized. In fact, in many business developments, leading
generals ignored or bypassed the laws to make their ways for their own and
cronies’ wealth. In 2010 heavily rigged election, the generals and their
subordinates were elected to lead the country.
Beginning 2010, existing elected military-turned civilian
government made sweeping changes in politics and economy. But Myanmar is still
in the verge of transition into fully democratic state. President Thein Sein
led newly elected government made stunning transition by inviting the once
banned political opposition National League for Democracy (NLD) and its leader
Aung San Su Kyi, releasing political prisoners, suspension of controversial Dam
construction project by siding with public, allowing many opposition and
minority ethnic group to the legislative, relaxing regulations of highly
restricted media and news and establishing genuine dialogue with minority
ethnic armed groups. Many, including United States and European countries,
praise the drastic development as ‘flicker of democracy’. By 2014, Myanmar will
hold the chairmanship of a powerful regional bloc called ASEAN for the very
first time.
Recently, the Office of the President declared September 19,
2013 is the date that Anti-Corruption Law comes into full force and becomes the
law of the land.
Governing Laws
1.
The Foreign Investment Law (Nov. 2, 2012)
2.
The Foreign Investment Rules (Jan 31, 2013)
3.
Law of Myanmar Central Bank (Jul 11, 2013)
4.
Law Amending the Commercial Tax Law (Sep 29,
2011)
5.
Environment Conservation Law (Mar 30, 2012)
6.
Farmland Act (Mar 30, 2012)
7.
Anti-corruption Law (Sep 13, 2013)
8.
Myanmar Citizens Investment Law (Jul 29, 2013)
9.
Burma Companies Act (1914) & Myanmar
Companies Rule (1957)
Corporate Social Responsibility & Business Culture in Myanmar
Doing business in Myanmar is
challenging! It is true for those who
prepare to start their business solely based on their own interest. In fact all
governing laws now attract and respect the mutual interest for both parties:
investor and Myanmar. Let’s take a look how the Burmese business culture
influences foreign investors:
·
“Beware of brokers” is an old saying in public
and still shadowing the lives of Burmese. During early 1990s, the military-run
government opened the free-market economic system. Flood of foreign investors
and traders arrived in Myanmar, mainly from neighboring countries. Due to lack
of experience and volatile business law, the economic boom was shot-lived. The
country ended up with foreign investment which have least or no business
credibility from their principles. For example, a Singapore-based financial company
arrived in Myanmar with impractical promises both to government and public that
they will insure the businesses at low premiums. It turned out the financial company
had no official credential awarded by Europe-based principle headquarters. The
several insured (companies) loss their premium and ended up no recovery for the
loss occurred to businesses. Myanmar seeks principle direct investors now.
·
Although Anti-corruption law has been in force,
many high and mid-level government officials are not following them accordingly.
They are still considered corrupted. Generations of plague has been deeply
rooted in all government offices. The widespread addiction has something to do
with those businesses who want to make sure all their transactions move fast with
no obstacles. Only handful of inner circle of Government has discharged the
directives to those around them. “Good governance” and “Transparency” become
working guidelines to all departments. Few years ago, any foreign business has
to have connection from inside the country called cronies who are very close to
administration. A business or contract
will not be granted without their blessings. Foreign businesses had to spend
upfront amount of money, in dollars (not local currency ‘kyat’), to appease the officials first with no indication or hope
to get a license. The contract will be awarded based on bidding amount if you
encounter competitors. The current laws and procedures are now encouraging to
process bidding in public with full transparency. Don’t jump on to the idea
of “under-table treatment”!
·
Layers of bureaucracy: Government admitted its
‘paper-pushing red-tape’ bureaucratic style in business related offices. Both
company administrative and trading directorates have installed the ‘one-stop’
centers in nation capital Naypyidaw and business capital Yangon. The concept is
to eliminate time consumption and establish transparency for prospective
investors and businesses. Be patient with delay but keep in touch with
principle officials.
·
Banking, financial stability and insurable
interest: Myanmar is in the process of transforming existing banking system to
assimilate into international main stream. Current position of governor of
Central Bank has been recently elevated to full cabinet position; giving a broad
power to reform entire banking system. Official foreign currency exchange rates
(U.S. Dollar/Euro) have been adjusted to meet market rate in order to make
monetary transaction smoother and stable. It is learned that public stock
exchange system is on the horizon. Private banks are being granted to handle
foreign currency transactions. Credit/debit cards and automated machines are
widely introduced for general public in major metro-cities. Many
foreign-trained technocrats are appointed at sub-cabinet positions. With
rapidly growing opportunity, businesses need liability protection. Likewise,
previously defunct insurance industry for general public has been back in
public eyes: life, health, auto, home, business, etc. Foreign and domestic
financial and business consultants are invited to meet with both government and
private parties and perform workshop discussions. Well-known economists are
being appointed at the president’s office.
·
Perception of well-established businesses toward
the prospective investors/traders: During socialist era, very few businesses
are allowed to run under highly restricted “state-owned” economic system.
Market economy has been monopolized by handful of cronies close to generals for
decades. Cronies’ business empires ultimately grow and expand. With change of
business practice laws, those cronies worry their wealth will be challenged by
foreign investors. It is important foreign investors respect the laws that
protect the interest of domestic businesses.
·
Basic infra-structure: Previous governments have
made effort to build infra-structure in industrial and special economic zones.
Due to lack of expertise and corruption, most business zones are not operable
to the fullest. Electricity, land improvement, water and drainage system, accessibility
are under-developed. Series of contract are brokered from hands to hands
without being materialized. Due to under-developed manufacturing industry, the
new government has taken serious steps by bringing in high-tech based
industrial development consulting companies from Korea and Japan for surveying.
It is projected future industrial land development will get leverage with at
least neighboring well-developed countries.
·
Promise made to those investors: Previous
investment laws prohibit from nationalization once it goes into full contract.
However many foreign-owned businesses are being flipped into their cronies
hands when there are signs of potential growth. Current foreign investment law
specifically stipulates that there will be no nationalization during or even in
the period of extended contracted term. It also allows repatriating the entire
vested amount in foreign currency. Union government takes the full
responsibility of these clauses stated in the laws.
·
Statistical and demographic data: Due to lack of
proper reporting system by departmental and regional administration and data
processing weakness, Myanmar’s vital, economic and social indicators are widely
known as unreliable. It is partly because of the ongoing habit of ‘inflating
and deflating’ of the data by personal/organizations responsible to submit to
high-ranking government officials. Officials at all levels are addicted to this
practice of appeasing their ‘boss’. Beside there is no census taken for more
than 3 decades. Central Statistical Organization, a sole department responsible
for compiling and producing sets of indicators, has now been reformed with
knowledgeable statisticians/economists. A census will take place by next year
with assistance from United Nations and well-known professionals from abroad.
·
Political and regional stability: It is vital to
have a peaceful environment to create a productive business. With that in mind,
the Union and regional government are working tirelessly with once opposition
parties and underground armed ethnic groups. Countless trips have been made by
high level Union cabinet members to meet and discuss with those leaders. There
is an encouraging signs of nationwide ceasefire in the near future. Government
has met with almost all opposition groups and invited to participate actively
in nation-building process. It is important that both sides have to establish a
mutual lifetime trust. The trust is happening!
