December 7, 2017 11:38 pm JST

Myanmar eases investment rules amid Rohingya headwinds

Property and retail among targeted sectors

YUICHI NITTA, Nikkei staff writer

A view of the Myanmar industrial port terminal at the banks of the Hlaing river in Yangon. © Reuters

YANGON -- A new company law has come into effect in Myanmar to encourage investment by foreign companies in the Southeast Asian nation.

The new law, which has drastically revised the old company law put into force in 1914 when the country was under British rule, permits companies whose ownership by foreigners does not exceed 35% to own land as well as export and import end products. Previously, the ownership of land was permitted only for companies 100% owned by local capital.

An investment boom in Myanmar, which began after the launch of democratic reforms in 2011, has run its course for now. With international criticism against Myanmar for the oppression of the Rohingya Muslim minority growing stronger, concerns about investment in the country are spreading among foreign companies.

Myanmar hopes to maintain its high economic growth by attracting foreign businesses through a set of new deregulations which they call 'the second wave of reforms'.

Under the old law, a company was treated as foreign if even one share was foreign-owned, and was subjected to restrictions. The new law, which will take effect next summer,designates a company as foreign if more than 35% of its shares are held by foreigners.

Companies whose ownership by foreigners does not exceed 35% are therefore designated as domestic and freed from restrictions on corporate activities. Foreign companies used to be banned for owning land and only permitted to lease for less than a year.

The new directive helps foreign companies work out long-term business strategies, as they can own land through firms in which their stake is below 35%.

Through such units, the measure also enables foreign companies to export and import end products and enter the retail and wholesale businesses. Under the previous regulation, the government of Myanmar banned overseas companies from obtaining licenses for exports and imports of finished products, as well as investing in retailers and wholesalers.

Direct investment in Myanmar from abroad increased sharply after the country in 2011 began its shift to civilian administration from long-lasting military rule. But the boom appears to be taking a breather these days.

Since August 2017, Myanmar's governing National League for Democracy party, led by the country's de facto leader Aung San Suu Kyi, has been criticized internationally for the massive influx of Rohingya refugees to neighboring Bangladesh. The U.S. Department of State revealed in October that it was considering sanctions against senior officials of Myanmar's national military and others responsible for the oppression of Rohingya people.

According to a macroeconomic analysis released by the International Monetary Fund in mid-November, Myanmar's economy is expected to grow 6.7% in fiscal 2017, up 0.8 percentage point from the previous year.

While the economy is likely to maintain solid growth on a medium- to long-term basis, downturn risks, including the Rohingya problem, may adversely affect support for the country's development as well as the sentiment of foreign investors, the IMF said. 

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