Invest Responsibly in Myanmar

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!