Construction Practices in Myanmar

Karina Peng
Partner
1
Construction Practices in Myanmar
Contents
Permitted construction related activities
Procurement of land leases
Tenders
Contract terms
Q&A
2
Construction Practices in Myanmar
Permitted construction related activities
Consultancy services activities (including architectural design and
engineering services)
- Recommendation to be issued by the Myanmar Engineering Council in
favour of proposed company to be incorporated.
- Architectural/engineering design submissions to be signed off by a
Myanmar citizen civil/structural engineer, licensed by YCDC and/or a
Myanmar citizen architect, licensed by YCDC.
3
Construction Practices in Myanmar
Permitted construction related activities
Infrastructure development and construction
- Notification No. 1/2013 (on classification of economic activities) dated
31
st
January 2013 issued by the Myanmar Investment Commission
i. Prohibited activities
e.g. Manufacturing and marketing of construction materials whose
composition includes asbestos.
ii. Activities to be conducted in joint venture with Myanmar citizens
e.g. construction of rail/road links such as bridges and highways.
iii. Activities to be conducted with recommendations from relevant
Ministries
e.g. airport construction (approval from the Government
and Ministry of Transport required).
4
Construction Practices in Myanmar
Procurement of land leases
Foreigners cannot own immovable property in Myanmar (s. 37, Constitution
and the Transfer of Immoveable Property Restriction Act 1987).
Section 37 of the Constitution
The Union:
(a) is the ultimate owner of all lands and all natural resources above and
below the ground, above and beneath the water and in the atmosphere
in the Union;
(b)
(c) shall permit citizens the right of private property, right of inheritance
5
Construction Practices in Myanmar
Procurement of land leases
Transfer of Immoveable Property Restriction Act 1987
Section 3:
No person shall sell, buy, give away, pawn, exchange or transfer by any means
immoveable property to a foreigner or foreign owned company.
Section 4:
No foreigner or foreign owned company shall acquire immoveable property by
way of purchase, gift , pawn, exchange or transfer.
Section 11:
Whoever contravenes the provisions of sections 3 and 4 shall be sentenced to
a minimum of three years and a maximum of five years imprisonment and the
relevant property shall be confiscated as public property.
6
Construction Practices in Myanmar
Procurement of land leases
As foreigners are not permitted to own land, they can secure the right to
develop land by entering into land leases.
Foreigners are not allowed to enter into a lease for a term exceeding one
year section 5, Transfer of Immoveable Property Restriction Act.
However, the Myanmar Investment Commission, may allow foreign
investors to lease land up to an initial term of 50 years plus two 10 year
term extensions (depending on the nature of business, industry and volume
of investment).
Longer term may be permitted by MIC, with Government approval where
the land to be developed is located in less developed and difficult to
access regions.
7
Construction Practices in Myanmar
Procurement of land leases
According to section 128 of the Foreign Investment Law, investors do not
have the right to lease and to operate any business on the following lands:
a) religious lands;
b) cultural heritage regions as designated by the relevant Union
Ministries;
c) lands restricted for State defence and security;
d) lands under litigation;
e) lands restricted by the State from time time;
f) lands which may be impacted by noise or pollution caused by
investors business.
8
Construction Practices in Myanmar
Procurement of land leases
Manner by which long term land leases may be procured:
(a) For land owned or administered by Government departments/
Government organizations:
- through submission of tender bids
- through direct negotiations
(b) For land owned by private citizens:
- through direct negotiations
Regardless of the identity of the land owner, the procurement
of long term land lease rights shall be subject to MIC approval.
9
Construction Practices in Myanmar
Common features of Myanmar public tenders
In view of the Governments efforts to enhance transparency in dealings
across all sectors, foreigners can now participate in the submission of
tender bids to lease land for infrastructure development.
Directive No. 1/2013 dated 5 April 2013 issued by the Presidents Office:
- Formation of tender selection committee (to include Region or State
government representatives, where necessary).
- Tenders to be opened in the presence of selection committee and
bidders.
High level of flexibility afforded to investors (design, concept, etc).
Documentary requirements:
constitutional documents of the investors;
financial background; and
past track record.
10
Construction Practices in Myanmar
Common features of Myanmar public tenders
Tender clarifications.
Development of project infrastructure on a BOT basis.
Economic proposal
Land lease premium;
Annual rent; and
Investment amount.
Technical proposal
Development plan e.g. for hotels: number of rooms, type of facilities, etc.;
Region Government will want to ascertain if the development plan fits within
the city development plan;
Plans and drawings;
Environmental and social impact assessment report; and
Commitment to the proposed time-frame.
11
Construction Practices in Myanmar
Profile of a successful applicant
Attractive technical proposal; Government is not only focused on
maximizing economic returns but is keen to ensure:
- generation of employment opportunities (during/post-construction);
- development of much needed infrastructure; and
- transfer of technology and technical skills to local sub-contractors.
Credibility of joint-venture partners, particularly the international partner
when it relates to technical proposal.
12
Construction Practices in Myanmar
Direct negotiations with the Government
Although the new policy of transparency of the Government accords priority
to land development through tender bids, it seems that the Government is
also willing to be approached directly by investors so as to expedite much
needed infrastructure development in certain industries, in particular, energy
and hospitality.
In such a case, once the investor has a clear idea of the location, nature
(design, concept, etc.) and scope of infrastructure to be developed, it may
be useful to arrange a meeting with the relevant Union Minister to
understand (among others) whether:
the proposed project has already been ear-marked for public tenders;
how the Government can be of assistance in procuring the land;
the expectations of the Government in relation to rent, investment scale,
etc.
13
Construction Practices in Myanmar
Land due diligence
Land grants can be issued by any of the following authorities:
Within Yangon Region : Either of Yangon City Development Committee or
Department of Human Settlement and Housing Development (under the
Ministry of Construction) or the Administration Department.
Outside Yangon Region: Either of Mandalay City Development Committee
or Nay Pyi Taw City Development Committee or the Administration
Department (under the relevant State or Region Government).
14
Construction Practices in Myanmar
Land due diligence
Certified land map (Form 105) and land history (Form 106) can be issued by
any of the following authorities:
Within Yangon Region : Either of Yangon City Development Committee or
Department of Human Settlement and Housing Development (under the
Ministry of Construction) or the Township Land Records Department (for
grants issued by the Administration Department).
Outside of Yangon Region : Either of Mandalay City Development
Committee or Nay Pyi Taw City Development Committee or the Township
Land Records Department (for grants issued by the Administration
Department).
15
Construction Practices in Myanmar
Land due diligence
Due diligence should be conducted before entering into a lease agreement:
(a) Title checks:
Conducted with either of YCDC / MCDC / NCDC / DHSHD / Admin Dept. / Land
Records Dept (the Relevant Government Departments):
- Copies of all documents relating to the plot of land proposed to be leased and
authorization letter from the land owner for submission to the Relevant
Government Departments to apply to have sight of the land records; and
- Copy of recently certified land map to be issued before entering into the lease
agreement.
(b) Site investigation
- Lessor to hand over vacant possession of the land;
without encumbrance.
16
Construction Practices in Myanmar
Contract terms
Mandatory provisions/standard practices
- For contracts governed by laws other than Myanmar laws, please consider that
there may be mandatory provisions of Myanmar law/standard practices which
apply.
- For example, section 73, Contract Act 1872, provides that a contracting party
who suffers as a result of breach of contract by the defaulting contracting party
is entitled to receive compensation from the defaulting contracting party for any
loss or damage caused to him thereby, "which naturally arose in the usual
course of things from such breach, or which the parties knew, when they made
the contract, to be likely to result from the breach of it."
- In light of the above provision, total exclusion of liability clauses may not be
enforceable.
17
Thank You!
18
karina@pwplegal.com
+95 (09) 420019777
www.pwplegal.com
19