Doing Business in Myanmar

Govt has monopoly on 12 industries, including the following

Extraction of teak and sale of the same in the country and abroad;
ultivation and conservation of forest plantation with the exception of village!owned
fire!wood plantations cultivated by the villagers for their personal use;
Exploration, extraction and sale of petroleum and natural gas and production of products
of the same;
Exploration and extraction of pearls, "ade and precious stones and export of the
#reeding and production of fish and prawns in fisheries which have been reserved
forresearch by the Government;
$ostal and %elecommunications &ervice;
'ir %ransport &ervice and (ailway %ransport &ervice;
#anking &ervice and )nsurance &ervice;
#roadcasting &ervice and %elevision &ervice;
Exploration and extraction of metals and export of the same;
Electricity Generating &ervices other than those permitted by law to private and
cooperative
electricity generating services;
*anufacture of products relating to security and defense which the Government has from
time to time, prescribed by notification+
,oreign companies cannot buy shares in #urmese companies, thus any business interests must be
accomplished through "oint!ventures+ 'ny company wishing to invest in #urma re-uires the
approval of the government to do so
Foreign Direct Investment
*ost trade with *yanmar appears to be regional
in nature+ %he top . countries are %hailand,
hina, &ingapore, )ndia and *alaysia+
hina/ #ilateral trade between #urma
and hina, for example, is said to have
reached the 0&1 1 billion mark in 2223
4of which #urmas exports to hina
amounted to about 152 million and
imports from hina to 622 million7+
)ndia/ urrently at 0&1 .22 million, and
expected to grow fast+
Total Imports to Myanmar/ 'ccording to
figures given below, stood at 0&1 2+8 billion in
2223, of which hina accounts for 622m
9verall trade with #urma appears to have
decreased since 2221, but it seems as if trade with
regional neighbors has increased
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Relations with the US/ %he 0+&+ does not offer E:)* bank or 9$) insurance coverage for
#urma+ )n 1665, the $resident prohibited new 0+&+ investment+ onsumer boycotts combined
with a plethora of state and local sanctions in the 0+&+ create additional risk for companies
involved in the #urma market+ %rade (egulation
Export-Import olicies 4source/ http/;;www+asiatradehub+com;burma;exportpolicy+asp 7
Barriers to Tra!e an! Investment
9verview
o $er capita income is only 182<+
o =ack #urma also lacks a significant private banking sector, modern banking
practices and an independent entral #ank+
o $oor infrastructure is a ma"or impediment to distribution of goods and services+
o >ue to its poor human rights record and the inade-uacy of its narcotics suppression
efforts, #urma is unable to obtain multilateral financial assistance and bilateral aid
has been suspended+
&tate foreign currency regulations /
o 9ver the 1665;6? fiscal year, the G9# imposed a series of trade restrictions which
in sum have made it tremendously difficult for traders to turn a profit+ 'mong these
restrictions, a 1.2,222 per month remittance cap appears to have been most onerous+
%he G9#@s motivation for this spate of restrictions appears to be an effort to capture
scarce foreign exchange+ Aowever, the result has been to further dampen legitimate
trade+
o 9n *arch 6, 166?, the G9# revoked the foreign exchange privileges of the nine
private banks which had previously been authoriBed to handle foreign currency+
&ubse-uently, only state banks could deal in foreign exchange+
Con!onvertible and 9vervalued urrency
o ' main obstacle to doing business in #urma is an official exchange rate that
overvalues the domestic currency 4kyat7 by some <2 times+ %he official exchange
rate is so out!of!line with the market rate, that virtually all business transactions,
except those involving state industry, are now conducted at the parallel rate+
o Conetheless, foreign firms are re-uired to record transactions at the official rate
when submitting forms to the government+ Dhen foreign firms bring in foreign
exchange to be used for purchases on the local economy, they must deposit it in a
state bank+
o ,oreign firms sometimes avoid the official exchange rate by paying for services in
dollars+ ,oreign firms sometimes also withdraw funds from their state bank
accounts in ,oreign Exchange ertificates 4,Es7, which they then exchange for
kyat at the market rate+
o %he government is now demanding payment in hard currency for an increasing
number of local expenses, including the salaries of locally hired management level
staff+
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o %he kyat is not freely convertible+ Eyat and ,Es cannot be taken out of #urma+
o %he government strictly limits outflows and inflows of funds for any purpose,
including debt service, imported inputs, capital, returns on intellectual property and
profit remittance+
umbersome Export!)mport $olicies /
o )mport permits re-uired/ >espite laws to encourage foreign trade and investment
promulgated in the 1662@s, cumbersome restrictions from the socialist period
remain, including permits re-uired for imports, exports and most other business
activities+ )mporters and exporters say it is extremely difficult to work in trade
without paying officials for permits+
o $rocedures for issuing import and other business permits are not transparent, which
provides opportunities for graft+
o )n Fuly 1665 the government imposed an Gexport firstG policy, re-uiring companies
to use export earnings to obtain import permits+ )mports could only be brought into
the country in a ratio of <2H essential goods, 82H non!essentials+
o 9n *arch 22, 166?, the *inistry of ommerce announced 9rder Co+ 8;6?, under
the ontrol of )mports and Exports 'ct of 1685, two priority lists, 4'7 and 4#7, from
which items may be imported in a ratio of at least 4'7 ?2H to 4#7 22H+ %his order
strengthened the Fuly 1665 <2H;82H regulation, and specified even allowable
Gnon!essentialG items+
o (estrictions on imports/ %he Export )mport ontrol ommittee, an interagency
committee chaired by the >eputy *inister for %rade, makes ad hoc amendments to
the list of prohibited imports+ %he list is published in trade bulletins and
publications, but changes with little notice+
9n *arch 22, 166?, under 9rder Co+ .;6?, the *inistry of ommerce
announced a list of prohibited commodities for import+
*&G, soft drinks, biscuits, canned food, dried noodles, li-uor and
alcohol, beer, cigarettes, fresh fruits, and other items prohibited by
existing laws
o (estrictions on exports/ %he Export )mport ontrol ommittee has made fre-uent
amendments to the list of prohibited exports, issuing temporary bans with little or
no advance notice+
9n *arch 22, 166?, the *inistry of ommerce expanded to border trade
posts the prohibition on export of certain restricted items, including/ (ice,
sugar, groundnut and sesame oils, petroleum, gems, gold, "ade, pearl,
diamonds, lead, tin tungsten, wolfram, silver, copper, Binc, coal and other
metals, ivory rare animals, skin and hide, shrimp skin powder, arms and
ammunitions, anti-ues, rubber and cotton+
%he state has a monopoly on exports of rice, teak, petroleum, natural gas,
gems, "ade, pearls and other items+ Exports of such items are controlled by
the relevant government ministry+
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'n export service fee of 12H was imposed on all border trade exports in
*arch 166?; that fee was reduced to ?H in &eptember 166?+ )t must be paid
in foreign exchange+
)nade-uate dispute settlement mechanisms
o #urmese law stipulates that commercial disputes are to be handled solely under
#urmese arbitration+
o #urma is C9% a member of the )nternational enter for the &ettlement of
)nvestment >isputes nor is it a party to the Cew Iork onvention+
o *ost businesses involved in disputes seek to settle the matter informally, rather than
rely on the cumbersome legal system+
$oor Dorkers (ights/
o )n 16?6, the 0nited &tates withdrew #urma@s eligibility for benefits under the
GeneraliBed &ystem of $references 4G&$7 due to the absence of internationally
recogniBed worker rights+
o =abor unions are illegal in #urma+ Dorkers are unable to organiBe, negotiate or in
any other way exercise control over their working conditions+
o 'lthough regulations set a minimum employment age and wage, and maximum
work hours, these are not uniformly observed, especially in private factories and
other establishments+
o %he government uses forced adult labor in infrastructure construction and porterage
for the military in active combat Bones+
o %hese labor practices are not consistent with #urma@s obligations under )=9
onventions 26 and ?5+
apital 9utflow $olicy
o ,oreign exchange transactions can be handled only by the state!owned *yanmar
,oreign %rade #ank 4*,%#7, *yanmar ommercial and )nvestment #ank 4*)#7,
and the *yanmar Economic #ank 4*E#7+
o itiBens who earn foreign currency must deposit their earnings in these banks+
o #urmese citiBens cannot export foreign exchange, but, after paying 12 percent of
the amount in taxes, can withdraw the rest in ,E@s+
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roce!ures "or Export an! Import an! #ustoms #learance
$% roce!ures "or Export an! Import
'n enterprise permitted under the ,oreign )nvestment =aw has to be registered as exporter
importer upon business re-uirement+ with the Export )mport (egistration 9ffice, >irectorate of
%rade+
The Registration o" Exporters&Importers
%he following persons or enterprises can be registered at the *inistry of %rade as
exporters;importers/
' citiBen or an associate citiBen or a naturaliBed citiBen of the 0nion of *yanmar
$artnership firms
=imited companies or "oint venture corporations, formed under the *yanmar
ompanies 'ct 16.? or &pecial ompany 'ct 16.2
o!operative societies, registered under the 0nion of *yanmar o!operative =aw,
1652
Registration Fee
%he fee for registration as exporter;importer is Es .,222 for one year and Es 12,222 for three
years+ %he same fees are payable on renewal+
'oo!s which may (e Exporte!
*yanmar products can be exported with the exception of some selected items like teak, rice,
etc+ under the export licence issued by *inistry of %rade+
)ali!ity erio! o" Export *icence
%he validity period of export licence is normally < months+ )f necessary, the period may be
extended by the *inistry of %rade+
'oo!s which may (e Importe!
'll goods which are not prohibited by the respective government department, can be imported
under the import licence issued by the *inistry of %rade+ J&ee discussion aboveK
Import *icence Fee J&ee table belowK
)mport licence fees are payable on all imports from abroad, it includes those imports for which
import permits are not re-uired, those imported by means of a permit, an import licence or
open general licence; imports through the border and those imported for general trading
purposes by the &tate Economic Enterprises 4&EEs7, government departments, co!operatives
and private enterprises+
.
)mport permits issued by the *inistry of %rade are re-uired for all items+ )n the past year
422237 such permits have been increasingly difficult to obtain+
=icence fees must be paid according to the specified rate for import of goods on consignment
basis either by &EEs or private enterprises and entrepreneurs+ %he import licence fees payable
on the +)+, 4Iangon7 value of goods imported from abroad ranges from a minimum fee of E
2.2 to a maximum of E .2,222 as follows/
#%I%F value Import *icence Fees
E 12,222 E 2.2
E 12,221 ! E 2.,222 E <2.
E 2.,221 ! E .2,222 E 1,2.2
E .2,221 ! E 122,222 E 2,.22
E 122,221 ! E 222,222 E .,222
E 222,221 ! E 822,222 E 12,222
E 822,221 ! E 1,222,222 E 22,222
E 1,222,221 ! and above E .2,222
+!!itional Service Fees "or Imports& Exports
)mports / 'lso on *arch 22, 166?, the *inistry of ommerce also announced a service
charge of 2H payable in foreign currency on the +)+,+ value for issuance of an import
license on items used for garment assembly 4cutting, making and packaging7+
Exports / )n the spring of 166?, the *inistry of ommerce announced imposition of a
12H service fee on all border trade exports+ Dhile that service fee was reduced in
&eptember 166? to ?H, it still cuts significantly into export profits+
Tari""s an! Import Taxes
#urma follows the AarmoniBed &ystem of )nternational Comenclature+ %hree types of taxes
can be levied on imports/ import duties, commercial taxes and license fees+
%ariffs/
&ince #urma "oined '&E'C in Fuly 1665 and adopted a reformed tariff rate
schedule, tariffs now range from Bero to a maximum of 82H, with cars, luxury
items, "ewelry and items produced in #urma facing the highest tariffs+
%ariffs on most other items including consumer goods are moderate+ %ariffs on
most industrial inputs, machinery and spare parts are around 1. percent+
ustoms Laluation
%he ustoms >epartment bases its valuation on ), value, after adding landing
charges e-ual to ,%- percent o" #IF value+
,or some commodities, ustoms uses its own reference guide to determine the
value of imports+ %he guide lists prices in kyat based on the price goods are sold for
<
in #urma, and sometimes lists values substantially lower or higher than the value
outside #urma+
&ince 166< the G9# has evaluated imports, for customs duty purposes, at 122 kyat
per 0+&+ dollar+
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