Cheah Swee Gim, Director, Kelvin Chia Yangon: Viewpoint

Viewpoint: Cheah Swee Gim

After taking office in 2016, the National League for Democracy continues to work to improve the legal framework for facilitating business development in Myanmar. Now that the dust has settled from a series of changes, Myanmar has begun to try to effectively execute the reforms promulgated in past years. However, that is not to say that there were not significant changes made in Myanmar’s legal landscape in 2018.

The long-awaited Myanmar Companies Law (MCL) came into effect on August 1, 2018, establishing standards on corporate governance and company management structures that are more up-to-date and better aligned with international best practices. Although the MCL and the electronic registry for company registration have encountered delays since their initial implementation, these are steadily being overcome. Company registration is easier and swifter than ever, and provides a great opportunity for starting new businesses.

In May 2018, as part of its commitment to progressively liberalise trade, the Ministry of Commerce issued Notification 25/2018, which allowed 100% foreign-owned companies and joint ventures between local and foreign investors to conduct both wholesale and retail trading of specified commodities – such as consumer products, medicines, hospital equipment and furniture – subject to specific conditions, such as minimum capitalisation and registration requirements.

In the latest effort to allow international participation in domestic banking, in November 2018 the central bank allowed licensed branches of foreign banks to provide services to local firms. The move is a much-welcomed step towards improving access to finance for investments and promoting business activities.

The 2018 Union Tax Law adjusted the fiscal year for state-owned enterprises from April-March to October-September, while the fiscal year remains unchanged for non-state-owned enterprises.

Despite these promising developments, improvements are yet to be made in certain areas. For example, the opening of the insurance sector to foreign companies faces delays, and both existing industry players and prospective investors continue to wait on progress from regulators. In addition, new laws on intellectual property protection remain in the draft stages, with no clear indication of when they will be enacted. Furthermore, the absences of both a clear and well-balanced public-private partnership model and a procurement system has placed a ceiling on the speedy conclusion of large-scale infrastructure and public services deals and transactions. The pursuit of such projects is protracted and costly, and investors may face difficulty in securing terms to build a viable investment and financial model that strikes a balance with the risks that they incur.

Furthermore, while the Directorate of Investment and Company Administration (DICA) has consistently tried to modernise the legal framework for businesses and facilitate investment development, the implementation of the relevant laws by the various line ministries for different sectors remains inconsistent, creating obstacles and confusion for investors.

Building an accountable, reliable and effective legal framework is an ongoing process, and Myanmar’s progress has been slow, yet steady. While the implementation of new laws slowed down in 2018, Myanmar successfully reformed the old regime, with the implementation of the MCL as a prime example. Moreover, the Ministry of Investment and Foreign Economic Relations, composed of the DICA and the Foreign Economic Relations Department, was created in November 2018 to streamline investment promotion and facilitation.

Looking forward to 2019, the administration is expected to channel all its efforts to further strengthen the legal framework for facilitating investment. While rapid changes to legislation are not expected, we may yet hope for incremental changes among the ministries that deal directly with investors, as a result of their increasing familiarity with the reforms and their earnestness to encourage investment in Myanmar.