Image of Yangon, Myanmar

Myanmar is currently pushing to reform its investment landscape, to attract the foreign direct investment (FDI) needed to promote economic growth. As part of these efforts, Myanmar’s government recently gave its regional counterparts the power of approve most investments.

Investment law

FDI could bring a range of benefits to Myanmar’s businesses. This includes the provision of capital, as well as access to global industry expertise and sector technologies, making Myanmar’s businesses more competitive. We have recently seen the transformative effect of FDI in Myanmar’s crucial agricultural industry. Private investment in agriculture is rising, and this is facilitating the development of profitable projects such as the Kyaiklat rice mill. This will strengthen Myanmar’s place in the global rice sector, by using innovative parboiling tech to improve the quality of the rice it exports.

But investment in Myanmar has long-been hampered by red tape. For example, investments currently have to be approved by the Myanmar Investment Commission (MIC), a government body. The country is now focusing on liberalising its investment rules to encourage greater capital inflows, by implementing the Myanmar Investment Law. It is hoped that the MIL, which combines local and foreign investment regulations, will give Myanmar the ability to rack up sustained FDI rates of US$48 billion per year, helping the government achieve its target of increasing FDI to US$140 billion by 2030.

Handing over power

The MIL is designed to promote greater economic progress nationwide. It is hoped that with this law, regions across the nation will see rising investment activity. The MIL specifically states that with some exceptions, regions and states can now give the go ahead to business investment proposals without MIC approval and a recent report from the Myanmar Times illustrates how this will work in practise.

The newspaper notes that regional and state investment commissions in Myanmar will now be able to solely greenlight investments for any proposal worth under the US$5 million. However investments which could impact the environment, capital intensive investments, strategic investments, will remain within the sole remit of the MIC. The national government will also retain the right to ask the MIC to scrutinise investments, while investments over US$5 million will still require MIC approval.

Spreading the wealth

Commenting, MIC Secretary U Aung Naing Oo said: “Some authorities are delegated to regions and states to facilitate investment processes. For restricted businesses, they will still need to seek [MIC] approval.”  The regions will be required to report investments details to MIC. Explaining why, he said: “To report to the MIC on facts and figures about permitted businesses is meant for more accurate and comprehensive statistics. Afterwards, data on investment will be managed in a better way.”

The government also announced that it will develop three “zones,” to govern how regions fit within the MIL’s new income tax exemption framework. This plan prioritises townships ahead of regions and states, providing greater tax breaks for businesses in less-developed states. Investors in developed zones such as Yangon will get these tax breaks for three years. This will rise to five years for investors in moderately developed townships, and up to seven years for those in the least developed areas.

Balancing prioritises

This news will be welcomed by many. It could assure regional leaders that they can expedite the investment approval process in most cases for small businesses, as these firms are the least likely to see investment of over US$5 million, to the small scale of their operations. Small to medium-sized enterprises (SMEs) comprise 99.4% of all Myanmar’s businesses, so the success of Myanmar’s economy depends on their success. The streamlined investment approval process will reduce red tape, making Myanmar more attractive to investors, and potentially boosting capital inflows for SMEs.

The government’s decision to extend extra privileges to investors in lesser developed areas, could also prove beneficial. There is a strong rural/urban divide in Myanmar, with living conditions being significantly higher in the urban areas. For example, 89% of Myanmar’s urban population has access to electricity, but only 16% to 18% of its rural population can say the same. The government’s policy should make it more attractive for investors to participate in lesser developed regions, supplying their businesses with the funding needed to build vital infrastructure and increase rural quality of life. If they can access improved facilities, such as more robust power grids, rural businesses will be able to compete more easily with their urban counterparts, further lifting Myanmar’s economy in the process.

Htet Tayza.

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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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