Htet Tayza discusses a new policy from Myanmar's government.

Myanmar’s government has long-strived is to increase foreign investment, so the country’s economy receives the capital, expertise and support needed to grow. Htet Tayza comments on new reports, suggesting that Myanmar will implement a new policy to incentivise international investors.

Attracting foreign investment 

Myanmar is increasingly attracting foreign investment. Government figures indicate that Myanmar’s foreign direct investment (FDI) volumes hit US$9.4bn during the 2015/2016 fiscal year. Meanwhile, the country’s government recently announced an ambitious new FDI goal, estimating in its new 20 year development that volumes will increase to US$140bn by 2030.

In order to encourage new FDI flows, Myanmar’s government will combine the existing Foreign Investment Law and Myanmar Citizen’s Law. The new legislation, titled “The Investment Law of the Republic of the Union of Myanmar,” is currently in draft phase. The primary aim of this law is to remove obstacles to investment, thereby creating jobs and boosting Myanmar’s consumer spending power, which is currently lower than in most other nations.

Tax exemption policy 

Myanmar has now announced that it will provide tax exemption status to firms who export 100% of their output. Thai news source Nation Multimedia reports that this announcement was made by Aung Naing Oo, the Director-General of Myanmar’s Directorate of Investment and Company Administration (DICA). He noted that if the Myanmar Investment Commission offers this waiver to a firm, it will enjoy multiple permanent tax exemptions, regardless of the nature of their business.

Explaining, Naing Oo noted: “The new regulations look to support the current national objectives, which means refining those privileges to better suit exporters… It is not going to be three years. If they want 10 years, 20 years or 50 years, they will get full tax exemptions as long as all of their products are for export. For example, other businesses that import raw materials will need to pay customs duties. But exporters that have found a place in the international market will get refunds equivalent to the amount they paid [in taxes] while importing raw materials.”

A DICA official added that these exemptions will be offered to both domestic and foreign-owned firms operating within Myanmar. Expanding, the official said: “Regardless of the location of factories and ownership, whether locally- or foreign-owned, the factories are entitled to enjoy tax exemptions for an unlimited period, as long as they export all the products from their factories.”

Tackling the deficit 

This move, Nation Multimedia writes, is designed to tackle Myanmar’s widening current-account deficit. It is crucial that the South-East Asian nation expands export-orientated investment, at a time when growing imports are only increasing Myanmar’s current account deficit. During the 2015/2016 fiscal year, Myanmar’s imports increased by 10%, but its exports only grew by a small margin, meaning that its current account deficit climbed to 8.3% of gross domestic product (GDP).

Estimates from the Asian Development Bank suggest that even with a rise in FDI, Myanmar’s current account deficit will still measure around 7.7% in the 2016/2017 fiscal year. It is vital that this deficit is closed, as during April to December 2015, it contributed to a 26% depreciation of the Kyat, the national currency, against the US dollar, making it more expensive to do business in Myanmar. During the opening seven months of 2016, the Kyat depreciated by a further 11% against the US dollar.

It is easy to see why Myanmar’s government is planning to offer permanent tax exemptions to export-orientated firms. By pursuing this strategy, they have made it more cost effective for these companies to conduct business in Myanmar, giving them more incentive to invest in the South-East Asian country. With this move, it is entirely possible that Myanmar’s government could both start closing the nation’s current account deficit and boost FDI volumes, kick-starting fresh economic growth going forward.

Htet Tayza.

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Join the conversation! 2 Comments

  1. […] recently announced that both domestic and foreign-owned firms who export 100% of output will be supplied tax exempt status, showing that it will continue to liberalise trading regulations going […]

    Reply
  2. […] and Myanmar Citizen Law. When enacted, the Law is expected to provide a raft of benefits, such as raising foreign investment in Myanmar, through the provision of tax exempt status to some exporters in the […]

    Reply

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About Htet Tay Za

My name is Htet Tay Za and I’m a young banking professional from Myanmar. I was born in Yangon, Myanmar twenty-four years ago. I have a keen interest in business, cuisine, lifestyle and philanthropy.

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Economy, Htet Tayza, htoo htet tayza, Myanmar

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