Myanmar: Time to Invest

This article is the first in a 3-part series called 'Myanmar: Time to Invest or Investigate'
Click here to read Part II - Time to Investigate I
Click here to read Part III - Time to Investigate II

WHY YOU CAN AND SHOULD MOVE INTO MYANMAR NOW?
1. Leverage on the uncertainty surrounding new foreign investment law
2. First mover opportunity
3. Organizational investments will continue to increase

1. Leverage on the uncertainty surrounding new foreign investment law
Since the introduction of the new Foreign Investment Law (FIL) 2012, critical discussion regarding the legislative framework ambiguity has never ceased; emphasizing on the lack of clarity in the foreign investment regulations. Many has the perception that the FIL as a set of rules cast in stone and restricted activities to foreigners will continue to be constrained permanently. 

​However on the contrary, many legislative changes have been seen made over the past 3 years and we are seeing a new economic landscape under new FIL.
 
The earliest major change came whereby foreigners no longer required a local partner to start a business in the country, and were able to legally lease property with the enactment of the new FIL in 2012. Following which, there has been expansion of the list of economic activities (under Notification 49/2014) that have been allowed for foreign investors as joint ventures with Myanmar citizens and  types of activities that are subject to specifically prescribed conditions.
 
As of recent, we even seeing fewer economic activates types that are prohibited for foreign investors under Notification 96/2015 issued on 11 November 2015 by Ministry of Commerce, we are seeing an increasing ease in the trading restrictions on foreigners whereby joint ventures companies are now allowed to trade on selected agriculture products and hospital equipment.
 
Laws are constantly proposed and legislated, procedures are also simplified and enhanced i.e. the new Investment Law Of [2015] currently drafted to replace ‘The Myanmar Citizens Investment Law, Pyidaungsu Htluttaw Law No. 18 of 29 July 2013’ and ‘The Foreign Investment Law, Pyidaungsu Htluttaw Law No. 21, 2012, 2 November 2012’. This encourages foreigners to have a greater foothold in terms of inbound investment along with increased flexibility to thes investment structure.
 
For a copy of the new Investment Law Of [2015], please download it here.
 
We are looking at the FIL like an unfinished book that was published. Ideas are still flowing in, work is still in progress and new chapters are still unfolding. Various aspects are ‘fluid’ and subject to negotiation, especially the major foreign projects regulated under the Myanmar Investment Commission (MIC) which in a way, can be discussed on a case by case basis, depending on the economic benefits the investment can bring for the economy.
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2. First mover opportunity
Several multinational companies have already taken their first step, gaining an early mover advantage. This allows them to take advantage of the popular industries which are still in their early development stage. They get their name familiarized with the locals, giving them a longer lead time to establish networks before the real race starts with the remaining players – an operating model which other foreign companies should look at and emulate for their entry into the country.

Some of the major deals that were seen between 2013 -2015 in some of the sectors are:
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INFRASTRUCTURE

1. Telenor (NW) and Ooredoo (Qatar) entered Myanmar in 2014 following the victorious bid of telecommunications licenses.
2. Japanese mobile operator, KDDI and conglomerate, Sumitomo Corporation (JP) have established a joint venture in 2014. They were selected as partners by Myanma Posts and Telecommunications (MPT) to assist in contesting with newcomers Ooredoo Myanmar and Telenor Myanmar.
3. To date, Myanmar's Telenor has just ended its first year of operations in 2015 with 14 million subscribers.

OIL & GAS

1. Royal Dutch Shell (NL) partners with Japan-based Mitsui Oil Exploration Co Ltd (MOECO)  in 2015 to start oil exploration in Rakhine and Tanintharyi.
2. Tap Oil Limited (AU) together with its local joint venture partner, Smart E&P International Company Ltd., signed the Production Sharing Contract with Myanmar Oil and Gas Enterprise (MOGE) in 2015.
3. Chevron’s (US) Myanmar subsidiary, Unocal Myanmar Offshore, started exploration activities in 2015.

CONSTRUCTION

1. Surbana Jurong has set up a branch office in Myanmar (Surbana International Consultants) its township planning services in Myanmar along with big projects i.e. low cost 220 acres residential development in the Dagon Seikkan Township with the Ministry of Construction and i-Land Industrial Park is a 160 hectare development in Bago.
2. Soilbuild Construction Group has been awarded its first US$50.4 million ‘The Rosehill Residences project’ contract to build and design a 24-storey residential project in Myanmar.

RETAIL & CONSUMER PRODUCTS

1. Coca Cola Company (US) – the opening of their bottling plant in 2013.
2. Colgate Palmolive’s (US) acquisition of Shwe Ayar Nadi Co. Ltd’s toothpaste in 2014. 
3. Swiss food manufacturer, Nestlé’s (SA) partnership with Myanmar Distribution Group (MDG) to distribute its made-in-Myanmar products.
4. General Motors (US) distributes its Chevrolets in 2013 through a joint venture between Singapore’s Alpine Group and Myanmar’s AA Medical Group.

FOOD & BEVERAGES

1. KFC becomes the first US fast food chain that opened in Myanmar in 2015, established by Yum! Brands and Singapore-listed company investment firm Yoma Strategic.
2. Pizza Hut (US) established a joint venture with local retail City Mart Holding Co Ltd and Jardine Restaurant Group in 2015 as well.

3. Organizational investments will continue to increase
Despite many challenging aspects i.e. regulatory uncertainty, human resources issues are expected to persist in the next couple of years. Myanmar has been consistently experiencing a growth rate of around eight percent. Foreign investments in Myanmar will not cease to increase, presuming that the government does not backtrack on its economic reforms. 
 
Many sees the influx of foreign investment in recent years a catalyst for positive change, as the government is subject to international public and media’s careful scrutiny which certainly promotes greater accountability and transparency in the investment framework.

Source: Directorate of Investment & Company Administration (DICA); Myanmar

Click on the links below to continue reading with the next part of the series:
Click here to read Part II - Time to Investigate I
Click here to read Part III - Time to Investigate II

Editor's Note: This post is Part I of a 3-part series. Part II will be published on 23 Mar 2016. Stay tuned.