Cheah Swee Gim, Director, Kelvin Chia Yangon, on the role of foreign investment in modernising the existing legal framework

Nearly three years have passed since Myanmar embarked an exciting era of political democratisation and market liberalisation. During this time of transition, the economy has undergone rapid development through the liberalisation of formerly state-controlled industries, the re-establishment of trade and diplomatic relations with other developing and developed nations, and the approval of more than $43bn worth of investments from both local and foreign sources.

In these nascent years of the transition, the government of Myanmar has clearly recognised the importance of the rule of law in sustaining this political and economic renewal. Within the last two years alone, 75 laws have been passed, covering crucial areas such as employment, foreign investment, foreign exchange, and management of the central bank. The pace at which such laws have been passed has been unprecedented for any developing country, and the formation of the Assessment of Legal Affairs and Special Issues Commission by the Pyithu Hluttaw (House of Representatives) is only expected to further accelerate the development of Myanmar’s legal infrastructure.

Legislative Challenges

Overhauling a legal regime that has been stagnant for over half a century is not easy. The process involves reevaluation, refining, updating and improving upon ingrained and outdated systems. In order to shift to an effective system of law, decision makers responsible for developing the rule of law require a thorough understanding not only of applicable legal jurisprudence but also of the prevailing needs of businesses and industries. The Myanmar government and the local business community are only just beginning to catch up with their regional counterparts in ensuring that the country’s legal system and business practices are on par with international standards. Progress has been phenomenal, but international pressure and investor expectations remain high.

What many have failed to understand, however, is that Myanmar has a legal system based on sound common law principles and it has also developed an adequate investment framework. Despite their apparent lack of sophistication, laws and regulations relating to investment contain fundamental features that address the concerns of investors for implementing and safeguarding their business ventures. Details of the system and its various investor protections are outlined in the preceding article (see overview).

Foreign Investors

The increasing involvement of foreign businesses in Myanmar’s economy has been one of the critical drivers pushing the legislative process forward. Foreign businesses serve as an effective catalyst in advancing and strengthening Myanmar’s legal structures, as the government has shown a genuine interest in ensuring that its laws and procedures are investor-friendly. To this end, it has taken into account feedback received from businesses. The results of this inclination can be witnessed in a variety of actions taken both legislatively and administratively.

The Myanmar Investment Commission notification detailing such restrictions and permissions were published in January 2013. However, less than one year later, the Commission is reviewing this very notification in light of investors’ requests for greater clarity, with a view to reducing obstacles to foreign investment in Myanmar. Likewise, the Myanmar Companies Act, originally promulgated in 1914 as the foundation of corporate governance in Myanmar, is now being redrafted to allow for an improved company law structure for foreign business vehicles operating in Myanmar.

Agents Of Change

Ambiguity remains to be found in various aspects of the new legislation that is currently under discussion, in addition to uncertainty regarding certain administrative procedures. Having said that, organisations possessing entrepreneurial spirit, fortitude and perseverance have entered this highly promising market and are succeeding admirably.

Therefore, foreign businesses can make numerous gains by investing in Myanmar, not only for its own commercial benefits, but rather by acting as agents of change and modernisation in this ever-evolving nation.