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2012-06-25-DoingBusinessinMyanmar08Jun12636383v3

2012-06-25-DoingBusinessinMyanmar08Jun12636383v3

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Published by Ko Nge
Myanmar
Myanmar

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Categories:Types, Business/Law
Published by: Ko Nge on Feb 28, 2013
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© Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.
 
Doing Business
in Myanmar 08Jun12 636383v3.docx
1
8 June 2012
DOING BUSINESS IN MYANMARby
 
MYANMAR LEGAL SERVICES LTD
A foreign investor looking at a project or transaction in Myanmar for the first time will find an outdatedlegal framework and administrative practices governing most business transactions. The role of the law,lawyers and the judiciary in Myanmar was established during the British colonial period, and continued
after Myanmar gained independence in 1948 until 1962. In 1962 the government changed the country’s
economic policy to socialism. When the State Law and Order Restoration Council took power inSeptember 1988, this marked a shift from a socialist to a more liberal and market oriented economicpolicy. The first Constitution of Myanmar was enacted in 1947; the second in 1974 and the current onein 2008 effective from 31 January, 2011 (first convening of the Parliament). A general election took place in 2010. By-elections in 44 districts were held on 1 April 2012.During the second session of Parliament in fall 2011, 15 new laws/amendments were enacted andduring the third session February
 – 
March 2012, 11 new laws/amendments were enacted. See listing inSchedule 1.
The laws and practices governing investing in Myanmar are undergoing rapid changes. TheMyanmar government is obtaining technical assistance and training in a number of key areas,including foreign exchange controls, finance and investment law reform and trade facilitation.A new Foreign Investment Law (2012) was expected to be passed by the Parliament in its thirdsession. However, although the Bill has been published in the Myanmar Gazette, it has not beensigned into law by the President.Foreigners Investing in Myanmar
A foreign investor may incorporate in Myanmar a 100% foreign owned company, establish and operateas a registered branch of a company incorporated outside Myanmar; establish and operate as a soleproprietor; and establish and operate as a 100% foreign owned partnership.The incorporation of a foreign Myanmar company and registration of a Myanmar branch of a foreigncompany in Myanmar is subject to the procedures and requirements set out in the Myanmar CompaniesAct and by the Directorate of Investment and Company Administration
(“DICA”)
.The Foreign Investment Law (1988 as amended) defines two types of foreign investment: 1) a soleproprietorship wholly owned by a foreign investor supplying 100% foreign capital, and 2) a jointventure in the form of either a partnership or limited company, in which the foreign capital investedmust be a minimum of 35% of the total equity capital.
Foreigners who invest in “local” companies or through nominees have no legal standing to enforce
their rights. Foreigners considering investment in Myanmar should only invest through aMyanmar incorporated company in which they are controlling shareholders and directors dulyregistered at the Companies Registration Office in accordance with the Myanmar Companies Act(1914) (or Special Companies Act (1950) if a joint venture with a government enterprise).
 
 
© Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.
 
Doing Business
in Myanmar 08Jun12 636383v3.docx
2
On 27 February 2012, the Myanmar Investment Commission (
MIC
) passed an Order relating tonominee investments carried out by Myanmar Citizens. The order requires foreign investors to invest inaccordance with the Foreign Investment Law, not through the use of a local nominee (Act no. 10/88 of the State Law and Restoration Council), upon failing to do so, the concerned company will beblacklisted.
Foreigners may not purchase land or condominiums in Myanmar.Myanmar Legislation
Myanmar legislation includes 13 volumes of codified laws from the period 1841
 – 
 
1954 (known as the
“Burma Code”), and numerous special laws, notifications, rules and regulations enacted from time to
time. The Government also publishes a weekly Gazette detailing notifications, changes to existing lawsand new laws. Myanmar Laws enacted after 1988 are usually published both in Myanmar and English.
The Attorney General’s Office published a compilation of Myanmar 
laws up to 2010. English versionsare published up to 2009.
The Court System
According to the Constitution, Courts of the Union include (i) Supreme Court of the Union, HighCourts of the Region, High Courts of the State, Courts of the Self-Administered Division, Courts of theself-Administered Zone, District Courts, Township courts and the other Courts constituted by law, (ii)Courts-Martial, and (iii) Constitutional Tribunal of the Union.The Supreme Court is the highest Court in the country without jurisdiction over the powers of theConstitutional Tribunal and the Courts-Martial. There is no jury system in Myanmar. Cases arenormally tried by a single judge; however, in special cases the Chief Justice of the Supreme Court caninstruct to form a panel of judges. The language of the Court is Myanmar, and procedures of all courtsare governed by the Civil Procedure Code, Criminal Procedure Code and the Courts manual, all of which are available in Myanmar and English language versions.
Sources of Local Advice
1
 
Myanmar Investment Commission:
The MIC is the agency responsible for reviewing most types of foreign investment, and for coordination with other government agencies. MIC is a good source of information for foreign investors. Before September 2011, in practice, in some commercial matters, theMIC submitted to the Trade Council (TC and afterwards named TISC) for final approval.Commencing from 1
st
September 2011, the Government issued Notification No 82/2011 and formed anew MIC with the Minister of No (2) Ministry of Industry as Chairman, four members, one Secretary,
and one Joint Secretary. MIC’s objectives include to develop the State’s economy by promoting
investment projects; to promote more opportunities for investment, technical knowhow and jobprospects; to prepare in advance to incorporate and cope up with ASEAN countries, and to be moreefficient on investment under the market oriented system. Notification relating to the formation of TISC replacing TC, was repealed by this Notification No 82/2011. Currently, there is no TISC or TCabove MIC.
1
See website of DICA (Directorate of Investment and Company Administration, Ministry of National Planning and Economic Development)www.dica.gov.mm,This
website includes a “Myanmar Investment Guide.”
 
 
 
© Copyright - MYANMAR LEGAL SERVICES LIMITED 2012.
 
Doing Business
in Myanmar 08Jun12 636383v3.docx
3
Legal Advice
: Legal advice on business law in Myanmar can be obtained from local Myanmarlawyers. There are several local law firms that are affiliated with international law firms.
International Accounting Firms
: Currently, there are no international accounting firms in Myanmar.
Currencies and Exchange Rates
There are three main currencies in use in Myanmar.1.
Kyat
: is the national currency for daily transactions among citizens and visitors in Myanmar.2.
Foreign Exchange Certificates (FEC)
: are purchased (as required) with
 
foreign currency byforeigners visiting Myanmar. One FEC technically is equal to one US dollar. FECs areaccepted by government agencies and certain vendors established to use by the Central Bank of Myanmar since 4 February, 1993.
2
 3.
US Dollars
: which is the preferred foreign exchange currency, but cash dollars can be usedlegally by locals only at establishments licensed to accept US dollars. While banks will alsobuy Euros and Singapore dollars, for every day transactions US dollars may be used intransactions, if they accept foreign currency at all.Before 1
st
April 2012, t
he “official exchange rate”
was approximately 6.00 kyat per one US dollar, thisofficial exchange rate regime was abandoned on 1
st
April 2012 in favor of a managed market exchangerate. The free market rate as of May 2012 was approximately 830 kyat per one US dollar. Thegovernment sometimes issues an internal notification of the market exchange rate for tax purpose onlyto calculate the exchange rate loss and profit for tax payers. In October 2011, the government licensedexchange rate centers where legal foreign exchange currency earners can change US$, Euros,Singapore Dollars and FECs with kyat. Currently, the government is taking steps in consultation with
IMF on reforming the country’s exchange rate system.
When the Foreign Investment Law was enacted, only two banks, the MFTB and MICB were permittedto operate foreign bank and foreign exchange transactions. Recently, the authorities have grantedpermission to Co operative Bank, Kanbawza Bank, Asia Green Development Bank and Aye-yarwaddyBank to operate as foreign banks in ASEAN countries, notably Thailand, Singapore and Malaysia.These banks require official authorization from the Central Bank of Myanmar to actually carry outtransactions.Foreign investors doing business in Myanmar should know that some types of investment will require
 part of the capital to be “imported” in amounts determined at the “official exchange rate” (but usuallynot “exchanged” at the official rate). This initial investment capital may be held in a foreign currency
account at one of two government operated foreign currency banks, namely Myanmar Foreign Trade
Bank (“MFTB”) and Myanmar Investment and Commercial Bank (“MICB”) in US$, Euro, Singapore
Dollars, or in FECs.
GENERAL LAWS GOVERNING DOING BUSINESS
2
 
“Information Minister Kyaw Hsan announced in August 2011 that the Myanmar Government would begin phasing out FEC.”
[http://www.dvb.no/news/govt-to-phase-out-fecs-cut-export-taxes/17047] This will likely come as part of the overhaul the government isplanning, in consultation with the IMF, expected to be tabled some time during 2012.

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