Foreign Investment Environment and important Myanmar Issues

Dr. Nimnual Piewthongngam

By Dr. Nimnual Piewthongngam

Table of Content
1. Foreign Investment Environment
Foreign Investment under Burma Companies Act Foreign Investment under Myanmar Foreign Investment Law

2. Key Issues on Employment and Labor Law 3. Banking System and Foreign Exchange Control 4. Taxation

Myanmar

Foreign Investment Environment: Foreign Investment under Burma Companies Act

Law: Myanmar Companies Act ( April 1914)

Administrator: Directorate of Investment and Company Administrative (DICA) Type of business organizations for foreign investor 100% foreign owned (limited liability company or branch) Joint venture with a citizen, private company or state-owned economic enterprise

Note Can you buy shares in Myanmar Company (local company)? 5

Foreign Investment Environment: Foreign Investment under Burma Companies Act

Required permit: Permit to Trade

Minimum Capital requirements

Industrial company: Trading company: Services company: 1,000,000 Kyat 500,000 Kyat 300,000 Kyat

Time to incorporate: Approximately 6 months and now applications are backing up Directors: at least 2 and a foreigner can take this role

Foreign Investment Environment: Foreign Investment under Burma Companies Act

Flow chart for setting up of a foreign company
Step 1
Propose three names to CRO

Step 2
*Apply for a Permit to Trade with DICA

Step 3
*Apply for company registration with CRO

Receive the approved name from CRO

**Bring 50% of minimum capital requirements into Myanmar before the issue of the initial permit to trade

CRO approves the company registration application

DICA issues the Permit to Trade

CRO issues a certificate of incorporation of the company

*In the case of a foreign branch/ representative office, additional documents shall be submitted as required while applying for permit to trade and company registration CRO: Companies Registration Office DICA: Directorate of Investment and Companies Administration ** second half may be remitted to Myanmar one year from the date of issue of the permit A joint-venture private limited company with a government entity formed under the Special Company Act is exempt from obtaining a permit to trade

Foreign Investment Environment: Foreign Investment under Myanmar Foreign Investment Law
Law: Myanmar Foreign Investment Law Administrator: Myanmar Investment Commission (MIC)

Type of business organizations

100% foreign owned or Joint venture with any partner (a citizen, a private company, a cooperative society or a stated-owned enterprise)*

Permit required: MIC Permit + Permit to Trade Capital requirement:

Manufacturing company: Services company: USD 500,000 USD 300,000

*The minimum share of the foreign investor must be 35% of the total equity capital.

Foreign Direct Investment policy

Promotion and expansion of exports; Exploitation of natural resources requiring substantial amounts of capital;

Technology transfer activities;

Development of energy conservation activities; Regional development; Creation of more employment opportunities
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Promoted Business Sectors

Construction Power Manufacturing Real Estate Development Transport Livestock & Fisheries Mining Hotel and Tourism Industrial Estate Agriculture
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Restriction on Foreign investment

1. 2. 3. 4. 5. Sale or removal of teak from the country Cultivation and conservation of forest plantation Exploration, extraction , production and sale of petroleum and natural gas Exploration, extraction and exportation of pearl, jade and precious stones Breeding and production of fish and prawns in fisheries which have been reserved for research by government 6. Postal and telecommunication service 7. Air transport service and railway transport service 8. Banking service and insurance service 9. Broadcasting service and television service 10. Exploration, extraction and exportation of metal 11. Electricity generating service other than those permitted by law to private and cooperative firms 12. Manufacture of products relating to security and defense except when granted permission by the government. *** Can do JV with Government***

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Foreign Investment Incentive under MFIL

Tax incentives First 3 years corporate income tax exempted *** Changes under consideration If the profits are maintained in a reserve fund and are reinvested within one year after the reserve fund is made, exemption on such profits is granted 50% tax reduction on profits earned from exports Same personal income tax rate for foreigners as local people Able to include personal income tax of foreign staff as companys expense Tax reduction on research and development expense Accelerated depreciation granted Granted 3 year continual loss account from actual loss date Exempt or relief from import duties for imported machines and equipment during the period of construction of the company Exempt or relief from import duties for imported materials in the first 3 years of the business 30 years (or more) of land rental contract, depending on MIC consideration 12

Myanmar Foreign Investment Law Flow chart for setting up of a foreign company
Step 1
Submit an investment proposal to MIC

Step 2
*Apply for a Permit to Trade with DICA

Step 3
Apply for company registration with CRO

MIC scrutinizes the proposal

**Bring 50% of minimum capital requirements into Myanmar before the issue of the initial permit to trade

CRO approves the company registration application

MIC issues the MIC permit DICA issues the Permit to Trade

CRO issues a certificate of incorporation of the company

CRO: Companies Registration Office DICA: Directorate of Investment and Companies Administration *In the case of a foreign branch/ representative office, additional documents shall be submitted as required while applying for permit to trade and company registration ** second half may be remitted to Myanmar after one year from the companys incorporation

Investors with projects that do not qualify under the MFIL will skip step 1 and will directly apply for a Permit to Trade and will register the company with the CRO

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Key Issues on Employment

Important Laws: Myanmar Labor Law, Social Security Act, Trade Union Act, Workmens Compensation Act, Factory Act and Leave and Holiday Act. No minimum wage requirement except some specific industries (rice milling, cheroot and cigar rolling etc.) Hiring can be done through permission from Department of Immigration No work permit system. A company can sponsor a stay permit for its foreign employee of 3 or 12 months A company must request to hire foreign employees at the MIC at the time of applying for the MIC permit No requirement on number of Burmese to expatriates but in practice, foreigner can be hired in some positions that Burmese cannot perform.

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Other Important Matters

Repatriation of Income and Capital
MFIL companies

Require approval from MIC and the Foreign Exchange Management Board
Require approval of the Foreign Exchange Management Board

CA companies

Exchange Controls
Dealings with foreign exchange requires permission from Central Bank of Myanmar the rates of exchange are authorized by the Central Bank of Myanmar

Foreign ownership of land and immovable property

Prohibited Lease land from private sector for only 1 year at a time Long term land lease (30 years) from government or private sector for a company set up under Myanmar Foreign Investment Law Problems-prices are too high, not enough hotels, apartments and office buildings

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Intellectual Property Protection

Taxation
Taxable income
Charged on total income, after deductions for allowable expenditures and depreciation.
Heads of income are profession, business, property, income from other sources and undisclosed sources.

Dividends and the repatriation of profits

All dividends are exempt from income tax or withholding tax No withholding tax on dividends or the repatriation of profits
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Taxation

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Source

Taxation

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Source

Banking and Exchange Control

All banking matters are controlled by Central Bank of Myanmar (CBM) under Central Bank of Myanmar Law Transactions relate to foreign investment and trade must be done through Myanmar Foreign Trade Bank, Myanmar Investment and Commercial Bank and Myanmar Economic Bank Foreign Exchange Regulation Act governs foreign exchange control issue. Central Bank of Myanmar controls all foreign exchange matters Note Problem regarding the foreign exchange rate is being fixed by the Government
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Main Points on Draft Amendments to Foreign Investment Law

Tax exemption for income tax for a period extending to 3 consecutive years is extended to 5 consecutive years. According to Notification 39/2011 private land owned by citizen can be leased to foreigners with the approval of Myanmar Investment Commission. Profit on the sale or transfer of assets is subject to not more than 50% capital gains tax. May request for commercial tax exemption or relief. Adopting non-nationalization policy but may be compensated at market price if foreigners business is taken over.
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Road or Runway ?

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New Parliament House

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Thank you for your attention

Dr.Nimnual Piewthongngam
Executive Director
AEC Strategy Center- University of the Thai Chamber of Commerce email: nimnual_pie@utcc.ac.th

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Investment opportunities in Indonesia

Dr. Nimnual Piewthongngam

Indonesia

Source: Lonely Planet

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Introduction
Official name: Republic of Indonesia

Population: 240 Million

Religious: Muslim Capital : Jakarta Language : Indonesian Currency : Rupiah International Airports: 27 Domestic Airports: more than 100 Main Ports: 25 Largest Archepelago Country: more than 17,000 islands
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Investment legistration
Investment Act: Law of Republic of Indonesia Number 25 of 2007 Concerning Investment Clear explanation of investment Cover domestic and foreign investment Provide Investment protection from naturalization Allow to use arbitration or aternative dispute resolution to settle investment disputes Free to Repatrte Investment and Profit

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Forms of Investment
Establishment of a Foreign Investment Companies Foreign Investment Company licensed by Ministry of Finance Foreign Investment Company licensed by Investment Coordination Board (BKPM)

Establishment of Foreign Company Representative Office

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Investment registration
Foreign investment must be in the form of limited liability company and subject to Indonesian Compnies Law No.40 of 2007

Requires at least 2 shareholders

Minimum capital: IDR 50 million Application to obtain legal status can be submitted by the founders electronically

Application must at least contain name and domicile of the company; term of the company; aim and purposes of the company; amount of authorised; subscribed and paid-up capital; and complete address of the company Obtain approval of the legal entity from the Ministry of Law and Human Rights (MLHR) within 60 day after the deed of establishment has been signed

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Investment application
Invetment Appplication Investment Coordination Board ( BKPM) take application grant licence and incentives

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investment incentives
Reduction of net income of up to 30% of the capital invest amount (equal to 5% per annum). Accelerated depreciation and amortization to fixed assets obtained and used and in the qualified investment up to 10 years Lower withholding tax rate on dividend distribution to nonresident taxpayers a lower rate might be applicable under the relevant Double Taxation Agreement. Extended loss compensation period between five to ten years.

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Bangking/Foreign Exchange control

Ministry of Finance and Bank Indonesia (BI) are responsible for banking system and foreign exchange control Foreign investors may freely transfer funds from or to abroad Goverment Banks: 5 Private Bank: 69

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Intellectual property protection

Intellectual Properties are protected Warning!!!! Need to consider registering your trademark in Indonesia and other ASEAN Countires

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land use
Right to Cultivate (RGU) of 60 years which can be extended for another 35 years Right to Build (HGB) of 50 years which can be extended for another 30 years Right to Use (KP) up to 45 years with possibility to be extended for another 25 years

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taxation
Individual Income Tax Rates: Progressive rates 5% - 30% Corporate Income Tax (CIT) Rates: Fixed rate of 25% Permanent Establishment Income Tax Rates: CIT at rate of 25% + Branch Profit Tax at rate of 20% (*) Withholding Tax on Service Fee, Dividend, Interest and Royalty paid to non-Indonesian resident at rate of 10-25% (*) Note: (*) = subject to the applicable DTA

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Taxation
VAT

Domestic delivery: 10% Import VAT (taxable goods and services): 10% Export VAT (taxable goods and certain services): 0%

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immigration
Expatriate may obtain stay permit up to 2 years

Permanaent stay permit shall be granted to expatriate who has been staying in Indonesia for 2 consecutive years
Mulitple entry permit for a limited stay permit holder for 12-24 months

Miltiple entry permit for a permanent stay permit holder for 24 months

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Dispute settlement
Arbiration

Alternative dispute resolution

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Opportunities
Huge market Cheap labor Abundant of natural resources 10% of Population has very high purchasing power Need goods and services Government has clear policy for foreign investment Thai good quality products are wanted such as fruits and rice

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Weakness
Corruption Many cheap goods from India and China Most of population is poor Laws and Regulations are not quite transparent

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