Myanmar Embassy - Korea : Trade & Business

Trade & Business

Myanmar Foreign Trade Policy

As Myanmar was a founder member of the old organization GATT, and a member of the new organization WTO, foreign trade policies of Myanmar are generally governed by the rule-based multilateral trading system. Myanmar’s foreign trade is mainly with Asian countries; People’s Republic of China, Singapore, Japan, Thailand, Malaysia and India are its main trading partners. More than 70% of total export goes to the Asian region and round about 90% of total import comes from this region. Like most developing countries, Myanmar is still an exporter of agricultural and other primary products. The country’s imports consist largely of manufactured goods, particularly the capital goods and raw materials which constitute about 65 % of total imports. Myanmar has bilateral trade agreements with the Republic of Korea, People’s Republic of China, Thailand, Bangladesh, India, Pakistan, Viet Nam, Laos, Philippines, Malaysia in the Asian region, and with six countries in Easter Europe, on the principle of equality of rights and mutual benefits. Myanmar has signed four Border Trade Agreements with its neighbours. With China in August 1988, with India in January 1994, with Bangladesh in May 1994 and with Thailand in March 1996, with a view to legalize and normalize the increasing border trade, which is an integral part of the Myanmar foreign trade. The value of total border trade has increased from US$ 357.13 million in 1996/97 to US$ 460.57 million in 2002/2003, an increase of 28.96% during the last seven years. Myanmar-China border trade is the most developed, accounting for 72.04% of the total. Thailand comes next with 16.08%, India 2.56%, Bangladesh 5.8% and others 3.52%.

Salient Points of the Foreign Investment Law

Foreign Investment Law

Since the Union of Myanmar Foreign Investment Law (FIL) was promulgated on 30 November 1998 and its procedures prescribed on 7 December 1988. Myanmar has opened the doors to foreign investors to participate actively in exploiting natural resources thereby enhancing long-term mutually beneficial economic cooperation.

The basic principles of Foreign Investment are as follows:-

(a) promotion and expansion of exports;
(b) exploration of natural resources which require heavy investment;
(c) acquisition of high technology;
(d) supporting and assisting production and services involving large capital;
(e) creation of new employment;
(f) development of works that would save energy consumption; and
(g) regional development.

Function of Myanmar Investment Commission

Myanmar Investment Commission (MIC) was formed in order to oversee and administer the FIL. MIC is an initial approving authority for investment proposals under Foreign Investment Law. MIC scrutinizes the foreign investment proposal put up by the investors from technical, financial, commercial, economic, social and environment aspect, within the framework of the policy objectives of the Foreign Investment Law. If the proposal meets the requirements set out in the Laws, MIC puts up the proposal to Trade Council and Cabinet for final approval. It will take about six weeks to issue MIC permits. The Government is now encouraging resources based labour intensive and export oriented manufacturing industries for the benefit of the State. Existing of fairly trained and literate labour force attracts labour intensive and export oriented industries.

Form of Organization

Foreign investors are allowed to establish the enterprises in the form of wholly-foreign owned or a joint-venture with any Myanmar counterpart. In the form of a joint venture, the foreign capital shall not be less then 35 percent. The minimum foreign capital to be brought into Myanmar has been notified by the Myanmar Investment Commission, US$ 500,000 for manufacturing, Kyats 500,000 (approx US$ 50,000) for services company/branch.

Benefits Enjoyable under the Foreign Investment Law

Myanmar offers investment incentives and guarantee to foreign investor. Regarding tax incentives an enterprise covered by the Foreign Investment Law is entitled to an income tax holiday period of three years including the year in which its commercial operations are first launched and also to a further reasonable period provided by the Commission on application. In addition, the enterprise may enjoy any or all of the following exemptions and relief:-

(a) exemption or relief from income tax on reinvested profits within one year;
(b) accelerated depreciation rates approved by the Commission;
(c) fifty percent relief from income tax on profits acquired from exports;
(d) right to pay income tax on behalf of foreign experts and technicians employed in the business and the
right to deduct such payment from the assessable income;
(e) right to pay income tax on the income of foreign employees at the rates applicable to Myanmar nationals;
(f) right to deduct Research and Development expenditures from the assessable income;
(g) right to carry forward and set off losses up to three consecutive years from the year the loss is sustained;
(h) exemption or relief from customs duty or other internal taxes or both on;
(1) imported machinery, equipment, instrument, machinery components, spare parts and materials used in the business during the period of construction; and
(2) imported raw materials for the first three years of commercial operation after completion of construction.

The FIL provides an irrevocable State guarantee that an enterprise permitted by the MIC under the FIL shall not be nationalized during the permitted period or the extended period (if any). It also provides repatriation of profit. In the case of termination or dissolution of the business, repatriation of foreign capital can also be transferable. In appointment of personnel, through preference should be given to citizens there is no restriction for the appointment of experts and technicians from abroad.

Salient Points for Business Opportunities in Myanmar

The main attraction in Myanmar for foreign investment is its abundant natural resources of agricultural products, timber, minerals, marine products. Most of the natural resources are still untapped.

In addition, Myanmar has favourable human resources. The work forces are relatively skilled and quickly adaptive towards new working environments. Again the cost of labour is among the lowest in the ASEAN region with English being commonly spoken. Myanmar also has a long history that dates to more than a thousand years. It has cultural heritage which has so much to offer to the world. Commercial and tax laws are based on the English legal system and therefore, should not present under difficulties for foreign investors. Most of the laws and rules are in English language, which is widely used in documentation, correspondence and accounting.

Prospective Investment in the Promising Sectors

Promising sectors which could be expanded the production frontier in a shortest possible time with much efficiency, grater comparative advantages and attractive returns, are agriculture, livestock and fisheries (including off-shore and deep sea), forestry, mining, energy, and manufacturing sectors.

Agriculture

The agricultural sector as a dominant force in Myanmar’s National Economy Development, plays significant role in providing overall domestic agro-based industries. Agriculture, livestock and fisheries and forestry at present contribute to 53% of Myanmar’s GDP, and to 35% of export earnings and remain as the principal pillars in the national economy. Myanmar has 18.21 million hectares of cultivable land of which only 10.12 million hectares are under cultivation at present. It is expected to reach 14.16 million hectares in next 30 years period. Available in addition 8.9 million hectares for cultivation are for agricultural investment and agricultural labour is relatively cheap. Myanmar is leading producer as well as exporter of pulses and sesame among ASEAN countries and second largest exporter in global market. The strategies measures has bee made to improve agricultural productivity in the area expansion, yield expansion, crop diversification, use of advanced agricultural technology such as post harvest technology and to apply better storage and milling and packaging system.

The Ministry of Agricultural and Irrigation (MOAI) in line with the market-oriented economy and with the national economic development objectives, is undertaking necessary measures to maximize private sector participation, attract foreign investment and accelerating growth and development of agricultural sector. Endeavours are being made to attract local and foreign entrepreneurs to invest and establish mutually beneficial trade and business in form of JV or 100% investment in the following areas:

(1) Land utilization
(2) Establishment of Agro-based industries
(3) Assembling and manufacturing of light agricultural machinery and small farm implements
(4) Manufacturing of agricultural commodities, input supplies and machineries
(5) Trading of agricultural commodities, input, supplies and machineries

Land Utilization

With a view to develop agriculture, livestock and other affiliated enterprises, the State Economic Enterprises, Joint Ventures, Co-operatives societies and other organizations and private individuals are being granted the right to cultivate fallow and waste cultivable land upon application. Central Committee for the Management of Cultivable Land, Fallow Land and Waste Land (CCMCL) has been formed and duties and rights of the Committee have been prescribed. The Committee has prescribed the procedures for the right to cultivable or utilize land for agriculture and livestock production purposes. Foreign investor or local organizations consisting of foreign investors may also apply for the utilization of land to the Myanmar Investment Commission (MIC) through MOAI.

CCMCL has authority to grant the right to cultivate or utilize cultivable land, fallow land and waste land up the maximum area as stated in the table below. Larger land areas of up to 50,000 acres (or more depending on type of investment) can be allotted with the approval of the Cabinet through MIC.

(a) Agriculture

	(i) Plantation Crops	5,000 acres
	(ii) Orchard		3,000 acres
	(iii) Seasonal Crops	1,000 acres

(b) Livestock, Poultry Farming and Aquaculture

	(i) Aquaculture		2,000 acres
	(ii) Livestock & Poultry Farming
	    (aa) Buffalo, cattle & horse	5,000 acres
	    (bb) Sheep, goat		1,000 acres
	    (cc) Poultry, pig		500 acres

Duration has been fixed for a maximum period of thirty years for cultivation and utilization of land for plantation crops and orchard, livestock and poultry farming and aquaculture purposes. The period may be extended upon negotiation, depending on type of project or nature of activities.

Exemption from payment of land revenue shall be granted for a period of 2 to 8 years from the granting of the lease depending upon the type of project i.e. agriculture, livestock and aquaculture. Moreover, other incentives such as three years of income tax exemption may be granted from the year of commencement of commercial run of the business carried out on land developed and invested. An order permitting the right to cultivate/right to utilize land shall be granted after a deposit of 10% of the investment as guarantee fee has paid.

Indicative rate of annual land rent are described in following table:-

Type of cultivation	Annual rent per acre
Perennial crop cultivation on fallow land	US$ 8-15
Crop cultivation on deep water area	US$ 8-20
Crop cultivation on fallow land in dry zone	US$ 15-40

The rent mentioned above is just the indicative rates. It may be vary from one location to another and may differ based on type of investment project.

Livestock and Fishery Resources

Myanmar has vast pasture land with suitable climate for animal husbandry and poultry. Myanmar with a coastal line of 2,832 km is also rich in marine resources. It has been estimated that one million metric tons of fishery resources could be exploitation is less than 60% of the sustainable yield. The continental shelf covers 228,781 sq.km and Myanmar’s exclusive economic zone is 486,000 sq. km wide. The fishery together with the livestock breeding is the important sector of the economy and it contributes 9.3% to GDP in 1988-99. Sectoral policies and principle objectives of the livestock and fishery sector are:-

- to promote all round development in the livestock and fishery sector;
- to increase meat and fish production for domestic consumption and share the surplus with other countries;
- to encourage the expansion of aquaculture; and
- to upgrade the socio-economic status of livestock and fisheries communities.

The fisheries sector is considerably important in Myanmar’s economy, as fish constitutes a major source for animal protein in the diet of the people. the staple food in Myanmar is rice and pulses, beans, nuts and vegetables are also consumed in large quantities. Per capita consumption of fish was 18 kg and per capita consumption of meat was 6.2 kg last year.

The country is endowed with rich and varied marine and inland fishery resources, with a production potential (sustainable yield) of 1.05 million metric tons per annum from marine source alone. Inland water bodies such as natural lakes, reservoirs, river systems, ponds, etc. cover an area of about 8.2 million hectares. There are 3,474 flood fisheries (leasable fisheries) producing about sixty eight thousand tons of fish and prawns annually.

Production, processing and marketing of all fishery/fishery related activities are carried out by the private sector. All state owned fishing vessels, carried vessels, ice plants, processing plants, clod stores, fishmeal plants, and dehydration plants et. are sold or leased to the private sector and the government and the Ministry of Livestock and Fisheries encourages and support the expansion, and the role of the private sector.

Manufacturing

With abundant natural resources, high labour quality available at low cost, existing manufacturing facilitates and favourabl geographic location, Myanmar has high potentials for industrial development. The employment in this sector is relatively low, less than 10% of total labour force, which is about 1.7 million. The agro-based industries in terms of number as well as value are predominantly agricultural products processing industries such as rice milling, edible oil milling, beans and pulses processing, sugar milling, food and beverage, et. Within the ASEAN, labour intensive and low tech industries are relocated to less developed countries. Myanmar has more rooms for such kind of opportunities. The priority industries in which investment is trongly encouraged:

Export Oriented Industries

Resource based industries
- agro-based industries (canned fruits/vegetables)
- wood-based industries
- leather, rubber-based industries
- copper fabrication
- seafood industries

Non-Resource based industries
- garment/textile
- light manufacturing /electrical appliances
- electronic industry
- footwear industry
- other export oriented industry

Domestic Market Oriented Industries

Resource based industries
- food/beverages (rice, oil, sugar mills, etc)
- agro supportive industry (farming tools, fertilizers, pesticides)

Non-Resource based industries
- cement
- simple electronic and machinery components
- plastic ware
- iron and steel
- agro supportive industry (tractor, water pump)
- packaging industry

Forestry

Myanmar is indeed very rich in forest resources, as the forest covers about 50.81% of the total land area. According to its climatic zones from temperate to arid and tropical several variant forests types exist. They are the temperate forests in the north, the deciduous forests and dry forests in the central parts and semitropical rain forests in the south. There are over 5,000 different plant species, including 2,100 tree species, 840 kinds of orchid, 96 varieties of bamboo and 32 different types of cane. In 1998/99 reserved forest and protected public forest area totaled 105,672 sq. km.

The forest policy of Myanmar has been formulated according to the forestry principles adopted by the United Nations Conference on Environment and Development. The Government gives priority to protect the soils, water catchments eco-systems, bio-diversity, plant/animal resources, scenic reserves and national heritage sites. At the same time sustainable management of the forests is practiced simultaneously so as to ensure perpetuity the level of benefit both tangible and intangible for future generations. It also employs the maintenance and rational use and enhancement of the forest resources base, to ensure ecological resilience and its contribution to socio-economic growth on a continuous basis.

Mining

Myanmar is rich in mineral resources and minerals of potential importance are copper, gold, lead, zinc, silver, tin and tungsten, antimony, chromium and nickel. In terms of mineral potential, Myanmar ranks high among Asian Countries, but mineral resources are very much under-utilized. There still exist a large mineral potential and it is the policy objective of the Ministry of Mines to immediately boost up the present production thus fulfilling the growing domestic needs of mineral and metal products and at the same time promoting exports.

The Myanmar Mines Law was promulgated in mid 1994, with this new law, all mining activities are administered by the Ministry of Mines. The Myanmar Mines Rules was promulgated in 1996.

Mineral-wise the government emphasis is more on the production of copper, gold, lead, zinc, iron and steel and is collaborating with foreign companies for the exploration and exploitation of these resources.

Types of possible investments can be through production sharing or profit sharing arrangements. It is the intention of the Ministry of Mines not to make new investments by itself, rather, it would encourage foreign investors to make them. The Ministry of Mines is prepared to offer new areas or deposits for new projects or to provide raw materials and existing facilities as its participation in the joint ventures. These participations would be valued on fair and equitable basis so that the foreign investor may receive reasonable return and the Ministry may enjoy mutual benefits.

Production sharing type of investment could either be straight split on total production or with consideration of recovering production cost. In the cost recovery type of production sharing, it is usually done in such a way that a certain percentage of total revenue is reserved before consideration of recovering the production costs.

Straight production split type is preferred by the Ministry of Mines in large volume, low price and low cost of production types of minerals such as dimension stones, coal and other industrial minerals. In the case of other more valuable metallic minerals such as gold and copper, production sharing with cost recovery type of cooperation may be possible.

The Ministry of Mines is also welcoming investment from sources inside the country and privatization of the state run mines is being done at the same time. Some of the state owned tin tungsten mines have been transferred recently to local entrepreneurs to work in joint venture with the government. Gem and Jade mining which is also given priority, is now solely done by local entrepreneurs without government participation. It will take some time for all the state owned mines to be fully privatized and during the Five Year Development Plan period the government would continue to participate in the projects and joint venture operation requiring large investment and modern technical know-how. However as the private sector develops, the eventual goal of the Ministry would be full privatization of most of the state-owned operations and to emphasize more on the role of regulatory authority to properly supervise and control the mining activities to ensure the beneficial use of the mineral resources over a long term and the sustainable development of the mining sector.

Energy

Much emphasis and priority is placed on the development of the electric power sector because of its vital importance to the nation’s social and economic development. At present, only about 15% to 20% of the total population is accessible to the electric power supply, and the rest had to rely on conventional natural resources. The Government’s economic growth target requires a substantial expansion of the national power supply. Commercialization and privatization of the electric power sector will be required to fulfill the power needs.

Myanmar has an abundance of hydropower potential of more than 100,000 MW and huge reserve of offshore natural gas. Developments of hydropower involve high capital costs and long lead time for construction in contrast to gas turbines and combined cycle power plant. In order to meet future demand hydropower has to be developed on long term basis and gas turbines will have to be built as a stop-gap measure. The abundance of hydropower potential enables Myanmar to consider development of hydropower projects not only for domestic power supply but also for export to the neighbouring countries.

Myanmar has very high potential in the development of oil and gas and hydro-energy sector. Oil and gas exploration under the energy sector is contributed highest on the foreign investment in Myanmar. New discovery of off-shore gas fields developed by foreign investors are operating under the production sharing contracts. There is, therefore, a lot of potential can be seen in the establishment of downstream and related industries in this particular sector.

Hotels and Tourism

Another prospective booming sector is tourism sector. Myanmar is a cultural destination with its rich cultural heritage and is also blessed with natural environment like snow-capped mountains, beautiful lakes, long rivers lush tropical forests, unspoiled beaches and archipelagoes. There is a growing need for international class hotels in major tourist sites. There are also many newly opened areas where there are no hotels of international standard. Many opportunities for the investment in developing gold courses, beach resorts, tourist village, amusement parks, recreational centres are also available.

Myanmar offers considerable economic opportunities and potentials for FDI. Myanmar is situated on the dynamic crossroad, linking Southeast Asia. southwest China (Yunnan) and the India subcontinent which could be interpreted as potential vast market of around 2 billion consumers. Labour in Myanmar, with English being commonly spoken in among those who are most competitively priced in the world market. Myanmar will be incorporated into AFTA under CEPT scheme and also into the ASEAN Investment Area. More room is widely opened for foreign investment in their prevailing competitiveness of the resources and geo-strategies positions.

The Role of Private Sector

The Government adopted policies which promoted the private sector as the main engine of growth and also created an environment conducive to foreign investment. Economic reforms were introduced which allow the private sector a role in all area of the economy particularly external trade. The private sector involvement in agriculture, manufacturing and processing, trading, services, banking, construction etc, have gained momentum over the years.

Furthermore, 60% to 70% of exports as well as 60% or more of investment are generated by private businessmen. The private sector constitutes 95% of all registered manufacturing factories and establishments, producing 70% of their total production.

The largest and most influential non-government agency responsible for the private sector in Myanmar is the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). Among the objectives of the UMFCCI are (i) to cooperate and coordinate with the State in economic and social activities (ii) to lead Myanmar business community integrated into international trade and globalized economy.

UMFCCI have at present over 12 thousand members of which 6% are foreign companies. Under its umbrella are 16 Chambers from various states and divisions, 9 border trade associations and 24 trade associations such as Myanma Industry Association, Myanma Rice Millers Association and Myanma Forest Products and Timber Merchant Association, etc. UMFCCI is a member of the Paris-based International Chamber of Commerce (ICC) and the ASEAN Chamber of Commerce and Industry (ASEAN-CCI) and follows the policies of ICC which supports competition, reduction of trade barriers, facilitation of international trade and the conduct of settlement of international trade disputes.

Myanmar Tax Structure

Comprises fifteen different taxes and duties under 4 headings:-

(a) Taxes on domestic production and public consumption;
(b) Taxes on income and ownership;
(c) Customs duties; and
(d) Tax on the utilization of state owned properties.

Laws apply to individuals, companies and joint ventures;

(1) The Myanmar Income Tax Law;
(2) The Commercial Tax Law; and
(3) The Union of Myanmar Foreign Investment Law (MFIL)

Income Tax on Companies

Type of Taxpayer or Income	Tax Rate
Companies incorporated in Myanmar under Myanmar Companies Act	30%
Enterprises operating under MFIL Foreign organizations engaged under special permission in State-sponsored projects, enterprise or any undertaking	30%
Non-resident foreign organizations such as a branch of a foreign company	Greater of 35% or 5% to 40%
Capital gains Resident Companies Non-Resident Companies	10% 40%

Type of Taxpayer or Income	Tax Rate
Salaries Foreigners engaged under special permission in a State-sponsored project, enterprise, undertaking Foreigners working for MFIL companies Foreigners working for non-MFIL companies Nationals earning foreign exchange	20% 10% 15% 10%
Other Income Foreigners	>35 or 5-40%
Capital gains tax Resident Non-Resident	10% 40%

Commercial Tax Rates on Revenue

Activities	Tax Rate
Activities	US$	Kyats
Trading (purchase & sales of goods) Transport Entertainment Hotel, restaurants, lodgings Sale of food and drinks Tourism business Cleaning & Oiling of motor vehicles Insurance business except life assurance business Beautifying and physical exercise business, hair dressing etc. Printing	8 8 15-30 10 10 5 10 5 5 5	5 8 15-30 10 10 5 10 5 5 5

Withholding Tax

	Resident (N/F)(%)	Non-Resident F(%)
Interest Royalties for the use of licences, trademarks, patent rights, etc. Payment for work done by foreign contractors Payment for work done under contracts for State	0 15 2.5 3	15 20 3 3.5

Note: -Above deductions shall be set off against tax due on final assessment. -Dividends, branch profit and share of profit of an association of persons which has been taxed are exempt, and therefore no withholding tax.

Double Taxation Agreement

Main Relief	Countries
Main Relief	United Kingdom	Malaysia	Singapore
Dividends	Exempt	10%	5% to 10%
Interest	No specific provisions	10%	8%-10% for bank and financial institution
Royalties	Taxable in recipient’s country and exempt in source country	10%	10% to 15% (depend on the types of royalties concerned)
Shipping	Normal rate*	50% of normal rate	50% of normal rate
Air Transport	Normal rate*	Normal rate*	Normal rate*
Technical Fees	No specific provisions	10%	No specific provisions
Date	1948-49	1-4-1998	1-4-2000