FDI regulation and setting up a subsidiary company in Myanmar
Foreign Direct Investment RegulationsAlthough investments are coming in, most companies are still hesitant due to the political situation. Since the elections in 2015 and the new government will be installed soon, more companies are expected to enter. Myanmar is currently processing its new Investment Law which will replace the Foreign Investment Rules (2013). It is now expected to come in place in 2016 after the installation of the new government. The new law should clarify many areas of uncertainty and doubt among specialists and investors including rules and regulations with regard to Joint Venture companies. In 2016 the government published a law notification (26/2016) which, in the meanwhile, should clarify some doubts in existing regulations. Although the notification does not impact fisheries and aquaculture directly, it does stipulate that if an investment proposal relates to a sector which needs ministerial approval (such as aquaculture, see below), the Myanmar Investment Committee (MIC) can decide to disallow 100% foreign ownership. Currently, according to CBI (2014), FDI is allowed in the following activities in the seafood industry:
According to Section 4 of the Foreign Investment Rules (2013), the Fishing Business in Myanmar’s Territorial Waters with the following conditions, can be carried out by Myanmar citizens or companies only: I. Far distance fishing of marine fish, prawn and other aquatic creatures in Myanmar’s territorial waters; II. Fishing at ponds, lakes and other close distance/onshore fishing. Under certain circumstances, with backing of the Department of Fisheries (DoF), investments in fisheries may be approved.
There is no maximum foreign investment ratio in aquaculture. However, aquaculture investment projects need the recommendation from the Ministry of Livestock, Fisheries and Rural Development. Aquaculture production of freshwater and marine fish that affects local biodiversity is not allowed. An environmental and social impact assessment is required for foreign investments in large scale freshwater, marine fish and prawns breeding activities.
- Local processing:
A foreign company can set up a local food processing business in Myanmar, according to Section 20 of Foreign Investment Rules (2013). However preserving, manufacturing, canning and marketing of fish products is only allowed in the form of a Joint Venture with Myanmar citizens. The MIC formally allows foreign shareholding up to a share of 85% of the total equity of the to-be-established company. However, this ratio is judged on a case-to-case basis. In practice the MIC allows foreign ownership between 50-70%.The current minimum of foreign capital to be brought in, has been stipulated at US$ 500,000. Subject to consideration of the MIC, this company may obtain some privileges under Foreign Investment Law such as a tax holiday of five years, permissible long term lease up to fifty years with two extensible terms of ten years and exemption of commercial tax for export products.
Applying for approval from the Myanmar Investment Committee (MIC)DICA clearly describes the process of applying for MIC approval on its website. Foreign investors always require a permit from the Myanmar Investment Committee. Myanmar citizens are only required to apply for a MIC permit for specific types of investment. Foreign companies only providing services within Myanmar do not require a MIC permit and can start operating their business after incorporating a company, according to the Myanmar Companies Act. Registration with MIC his has several advantages, including:
- permission to lease land on a long term basis
- access to tax incentives (such as relief of income tax and custom duties)
- access to stay permits, foreign experts and technicians can be appointed
- no nationalisation of businesses during the term of investment
- no business suspension before the expiration of the permitted duration