Chapter 7. Myanmar

The regulatory environment for Myanmar is relatively less burdensome compared to its Association of Southeast Asian Nations (ASEAN) neighbours, in part due to fewer laws and regulations in place overall. Yet a rapid enactment of new laws in the past decade risks creating an increasingly fragmented regulatory environment if ministries do not make concerted efforts to assess regulatory needs and impacts together. The government has nevertheless developed a clear and formal policy to support small- and medium-sized enterprise (SME) development, which has been accompanied by an SME law to support its implementation. National standards for products and services have not yet been developed in Myanmar, so businesses deciding to export must comply with foreign standards negotiated on a case-by-case basis. This risks limiting the scale of trade opportunities for SMEs by imposing excessive administrative and financial burdens on SMEs striving to meet multiple standards for different buyers.

    

Regulatory context

The lifting of international sanctions in 2012 saw Myanmar open up its economy to the world with the introduction of the Foreign Investment Law, which set out the rules and regulations applicable to foreign investors separately from those applicable to local investors, which otherwise followed the Citizens Investment Law of 1994.

In 2016, the Foreign Investment Law and the Citizens Investment Law were replaced by a single Myanmar Investments Law, effectively streamlining investment legislation for both domestic and foreign businesses as well as opening up a number of previously-restricted sectors to foreign investment. It also aimed to increase investment protection and channel investments into diverse economic sectors beyond natural resources and telecommunications, which had been the primary recipients of foreign direct investment (FDI) to date. The new Investment Law also established the Myanmar Investment Commission, which was assigned to process and approve investments.

Myanmar’s efforts to transition to an open, market-based economy with supporting reforms have been successful in improving the country’s investment climate and attracting a large wave of FDI in a relatively short period of time. Between 2013 and 2016, approved FDI in Myanmar increased markedly from USD 1.4 billion to USD 9.48 billion (DICA, 2017[1]).

Around 69% of FDI in Myanmar goes to a limited number of sectors that are dominated by a handful of large national or multinational enterprises (MNEs) – namely, oil and gas (31%), electricity (24%), transport and telecommunication (14%) (DICA, 2018[2]). Domestic investments are target primarily to real estate development (26%), transport and communication (16%) and other (16%) (DICA, 2018[3]).

Yet the vast majority of businesses in Myanmar are small and medium-sized enterprises (SMEs) operating in sectors outside the aforementioned sectors. SMEs account for 99% of all businesses and 70% of total employment in Myanmar and the bulk of them are concentrated in the food and beverage industry (67%), followed some ways behind by construction (8%) and garments (4%) (Sanyal and Eisinger, 2016[4]).

All in all, this means that there is relatively little FDI going towards SMEs in general, and even less towards diversifying SMEs. On the positive side, this also means that there is a significant opportunity for SMEs in Myanmar to grow in just about any sector.

The government has recognised SMEs as the main engine for job creation and economic prosperity for the broader population, and has introduced a dedicated SME Development Policy in 2015 (hereafter the “SME Policy”) to support the “creation of regionally innovative and competitive SMEs across all sectors that enhance income generation and contribute to the social-economic development mission” of Myanmar (Government of Myanmar, 2015, p. 2[5]).

For the first time, the SME Policy underscored the importance of SMEs in the country and laid out a number of important supporting policies including increased access to government funding support, training and capacity building, and some tax-related exemptions. The SME Policy also set out the government’s commitment to helping SMEs improve trade and export and to reduce the administrative burden for SMEs.

The SME development agenda is supported by a broader 12-point economic policy issued in July 2016, which gears towards transitioning Myanmar to a market-oriented economy in all sectors. Point 11 further emphasises the government’s commitment to supporting SMEs by improving the ease of doing business, increasing access to financial services, and developing a higher skilled labour force (Myanmar Times, 2016[6]).

Overall, the regulatory context for Myanmar has been changing rapidly. Between 2011 and 2016, 232 pieces of legislation were passed, 105 (45%) of which were amendments or re-amendments and 17 repeals of previous laws (Egreteau, 2017[7]). The influx of new laws or amendments and the speed with which they have been introduced have prompted concerns about regulatory overlap or inconsistency, not to mention added considerable complexity to Myanmar’s regulatory framework as well as its processes. The government is aware that, if these processes are not sufficiently co-ordinated or streamlined, they may risk creating regulatory bottlenecks for attracting or approving investments, advancing project developments, and ultimately impact the achievement of policy goals.

Regulatory governance

Business laws and regulations in Myanmar

In Myanmar, all business-related laws, notifications, regulations and directives apply to enterprises of all sizes, including SMEs. As SMEs account almost all domestic private sector businesses in Myanmar, it can be said that the general business regulatory framework is de facto sufficient for capturing local SMEs. Business-related laws which have been enacted by the State Law and Order Restoration Council and are still in place include:

  • Union Tax Law (2017)

  • Specific Goods Tax Law (2016) (amended 26 July 2017)

  • Income Tax Law (1974) (amended 31 August 2016)

  • Private Industrial Enterprise Law (1990)

  • Commercial Tax Law (1990) (amended 2015)

  • Myanmar Investments Law (2016)

  • Myanmar Companies Law (enacted December 2017).

A draft SME law is also being prepared by the Department of SMEs as of November 2017. The draft law focuses on the following four areas: production set up; service; trading; and other. It is intended to support the implementation of the SME Policy.

In the meanwhile, in order for an SME to qualify for the benefits and exemptions outlined in the SME Policy, it must fall under the definitions of small- and medium-sized enterprises listed in Table 7.1 and not be a public company or subsidiary of a public company.

Micro-enterprises are defined separately by the Promotion of Cottage Industries Law 1991 and overseen by a different ministry – the Ministry for Agriculture, Fisheries and Livelihood – which has maintained its historical mandate to develop cottage industries.

In December 2017, a new Myanmar Companies Law (hereafter Companies Law) was enacted to comply with the Investment Law passed in October the previous year. The Companies Law combined and updated elements from the Myanmar Companies Act (1914) and the Special Companies Act (1950) to reduce restrictions on setting up companies, facilitate online business registration, and develop Myanmar’s capital market. The Companies Law aimed to attract more foreign investment, which the government considers one of the best development channels for the country and includes provisions such as allowing foreigners to legally own unmovable properties including condominium apartments for the first time. The Companies Law was developed with technical assistance from the Asian Development Bank.

Table 7.1. Definition of MSMEs in Myanmar

Category

Micro

Small

Medium

Power (horse power) used

Between 0.25 and 5

3 to 25

26 to 50

Number of workers

Up to 9*

up to 30*

51 to 100

Capital investment (Kyat)

Up to 1 million

Between 1 and 5 million

Production value per year

Up to 2.5 million

Between 2.5 to 10 million

Annual revenue

Up to 50 million*

* The Companies Law of 2017 also updated certain definitions of small companies. Micro-enterprises are defined differently by the Cottage Industries Law (amended 2011).

MSME: micro, small, and medium enterprise.

Note: SMEs in the industry sector are defined by the Private Industry Enterprises Law of 1999.

Source: Provided to the OECD by the Ministry of Industry, 2017.

The Companies Law 2017 also updated the definition of small companies as a (non-public) company which employs less than 30 workers and has an annual revenue of less than MMK 50 million in the previous financial year (DICA, 2017[8]). However, it is unclear whether pre-existing definitions of SMEs under other categories have been overwritten by this Companies Law.

Micro, small, and medium enterprises (MSMEs) must register with the government to be eligible for SME development schemes. SMEs may register with the government via three different channels: 1) the Department of SMEs under the Ministry of Industry; 2) the City Development Committees; 3) Directorate of Investment and Company Administration (DICA) under the Ministry of Planning and Finance. Micro-enterprises may register with the Ministry of Agriculture, Livestock and Fisheries.

The various definitions and registration channels for SMEs have led to governance challenges in data collection, monitoring and evaluation. Presently, SME data collection duties in Myanmar are dispersed among the following agencies: Directorate of Industrial Supervision and Inspection (DISI); SME Development Centre (SDC); city and township development committees; and the Central Statistical Organisation (CSO) – some or all of which may compile statistics using different definitions of SMEs.

Data on MSMEs in Myanmar is generally limited, in part because MSMEs do not always register with the government. The current data on SMEs is tracked by the Ministry of Industry and only focuses on the industry sector. There is no official data collected on the service sector. There is a draft regulation on collecting SME data, although progress is unclear.

As a result of poor registration rates, few MSMEs are captured by tax collection. The Ministry of Agriculture, Livestock and Fisheries acknowledges that micro-enterprises are generally too small to pay tax. The Ministry of Industry, which registers SMEs, likewise notes that many SMEs do not register or do not want to register, and the ministry has limited capacity to enforce registration. Many MSMEs in Myanmar operate informally, particularly if they prefer to keep operations at a local scale.

There is no policy document on regulating the informal economy or government initiative to improve data collection on the informal economy.

Institutional and regulatory setup

Table 7.2. Institutional and regulatory setup in Myanmar

Government

State structure

Parliamentary Republic

Head of state

President

Executive

The executive power of the Union of Myanmar is vested in the President.

Within the executive branch, several institutions intervene at different stages of the regulatory cycle:

Office of the President supports the President in the exercise of his functions, and monitors and periodically evaluates public policies, with the aim of contributing to decision-making by the Executive. The President may make changes or additions to ministries as necessary and is responsible for appointing ministers and the Attorney General, with the approval of the Pyidaungsu Hluttaw (Assembly of the Union).

● The Presidential College elects the President. It comprises three groups: the two houses of the Pyidaungsu Hluttaw and the third from Hluttaw representatives of the Defence Services as nominated by the Commander-in-Chief.

● The Vice President ranks directly after the President and serves the functions of the deputy head of state. There are two Vice Presidents in Myanmar, who each serve five-year terms.

State Council was created in April 2016 to work across all areas of government and serve as the link between the executive and legislative branches, comparable to the Prime Minister’s Office in other countries.

National Defence and Security Council (NDSC) comprises 11 individuals, six of whom – including the Commander-in-Chief - are appointed directly from the Defence Services. The NDSC has a prominent role in executive decision-making relating to foreign and military affairs in Myanmar.

Financial Commission consists of seven groups of individuals, including the President as the Chairman. It submits the Union budget to the Pyidaungsu Hluttaw and advises the executive on financial affairs.

Line Ministries are responsible for putting forth national public policies in their area of competence. There are currently 23 ministries in Myanmar.

Since November 2017, a new Ministry of the Office of the Union Government is responsible for co-ordinating all agencies and ministries under the office of the President. Its tasks include performing administrative, planning and finance matters. It is also responsible for the submission of bills to the Pyidaungsu Hluttaw.

Ministry for International Co-operation, also established in November 2017, is responsible for managing international co-operation in political and economic issues. This new ministry takes over some of the international co-operation duties previously tasked to the Ministry of Foreign Affairs and the Ministry of Planning and Finance.

Legislative

Assembly of the Union (Pyidaungsu Hluttaw; officially the Republic of the Union of Myanmar) is the national bicameral legislature of Myanmar. The Pyidaungsu Hluttaw passes, amends or appeals the majority of the laws in Myanmar. Each member serves for a term of five years, after which they are replaced via by-elections by the Union Election Commission. Between 2011 and 2016, the Union Parliament rarely initiated the policymaking process; rather, most of the 232 laws enacted by the legislature were prepared by the executive branch or a non-legislative union-level body like the Union Election Commission or the Office of the Attorney General. (Egreteau, 2017[7]).

House of Nationalities (Amyotha Hluttaw) is the upper house of the Pyidaungsu Hluttaw, founded in January 2011. It comprises 224 members, 168 of whom are directly elected with equal representation (12 representatives) from each state or region, and the remaining 56 representatives appointed by the Myanmar Armed Forces.

House of Representatives (Pyithu Hluttaw) is the lower house of the Pyidaungsu Hluttaw. It comprises 440 members, 330 of whom are directly elected and the remainder appointed from the army by the Commander-in-Chief of the Defence Services.

● Each state or region also has its own Hluttaw or unicameral legislative assembly. Lawmaking powers of the state or region Hluttaw are limited to localised issues such as land revenue, municipal taxes, land and property leasing, or off-grid power generation within the region or state. Laws passed by the Hluttaw may be overwritten by laws passed by the Pyidaungsu Hluttaw. Compared to the Pyidaungsu Hluttaw, the region/state Hluttaws have passed very few laws.

Legal system

The federal judiciary power is vested in the Supreme Court. A Judiciary review or Constitutional Tribunal may be triggered only by ministers and other executive representatives of the union, states, regions and self-administrative areas to determine whether the measures taken by ministers and executive representatives are in conformity with the Constitution.

Administrative-territorial structure

14 state and regions

Ministry or agency responsible for SMEs or SME-related issues

Department for SMEs, Directorate of Industrial Supervision and Inspection (DISI), Ministry of Industry. The Ministry of Industry also runs the SME Development Centre.

Other support structures within government on regulatory policy

Directorate of Investment and Company Administration (DICA) is responsible for business registration, investment application processing and approval, data monitoring on businesses including SMEs.

According to Myanmar’s 2008 Constitution, the executive branch and the Union President has a leading role in law making. Most draft laws between 2011 and 2016 originated in the executive branch, before being discussed in the Union legislature (Egreteau, 2017[7]).

Regulatory process for SMEs

Established in 2012, the Department for SMEs in the Ministry of Industry is responsible for developing the country’s SME Policy as well as the new SME Law. It also oversees an affiliated SME Development Centre in Yangon. The Department of SMEs has a budget approved by the State Council to carry out its activities. The Department of SMEs is based in Nay Pyi Taw, where it co-ordinates with more than 50 regional offices across the country. SMEs may register with various branches of the Department of SMEs located throughout the country, after which they can benefit from a number of support services provided by the department, including access to government loans, training and capacity building. The cost of registering a business with the Department of SMEs is MMK 30 000 as of September 2017.

SMEs in Nay Pyi Taw, Yangon or Mandalay may also obtain licences to operate from the appropriate City Development Committee (CDC). In Yangon and Mandalay, a simple licence issued by the CDC suffices to enable an SME to operate within the city. The functions and duties of the CDCs may differ from each other according to their founding legislation and differ yet again from the functions and duties of state or regional governments. The Yangon CDC offers an online service for business registration and other information (Yangon City Development Committee, 2018[9]).

The third option for business registration is with the Directorate of Investment and Company Administration (DICA) under the Ministry of Planning and Finance, which is the statutory authority for investment promotion, streamlining business regulation and investment procedures. It is responsible for registering and monitoring local and foreign businesses under the Myanmar Companies Act 1914. The cost of registering a private business at DICA is much higher (MMK 500 000) compared to registering with the CDC or the Department of SMEs. However, it is obligatory to register with DICA if a company, joint venture, association or non-profit wishes to export, and of the three business registration channels, only DICA is authorised to incorporate businesses and to provide tax incentives such as the three-, five- and seven-year tax exemptions according to the Myanmar Investments Law 2016 and the Myanmar Companies Law 2017.

Figure 7.1. Registration process for SMEs in Myanmar
picture

*The initial application should include the following: Form (A) SME registration application form; Form (B) SME member application form; Form (C) SME member renewal/extension application form.

Source: Myanmar SME Development Department, Ministry of Industry, 2017.

There is a plan to establish an SME Agency which, if established, may take over the SME Development Centre.

Micro-enterprises are regulated by the Department of Cottage Industries within the Ministry of Agriculture, Fisheries and Livestock. Previously, the department had been under the Ministry of Co-operatives and Cottages, but the latter has been absorbed into the Ministry of Agriculture, Fisheries and Livestock. This causes some confusion as not all micro-enterprises as in the agricultural sector, and presently micro-enterprises are regulated separately from SMEs, which fall under the mandate of the Ministry of Industry.

Director Generals have authority to implement the basic principles of relevant laws, to consult and carry out tax relief measures in consultation with the Ministry of Planning and Finance, to organise sale of local products at foreign trade exhibitions, to negotiate to obtain local and foreign loans and grants, to carry out public consultation or media promotion of companies, call for accounts or inspection of any company under its jurisdiction (whether registered or not) in the relevant law, revoke or cancel the registration of entrepreneurs that have not abided by the orders or directives under the relevant law, issue orders and directives related to the category of businesses under its jurisdiction, delegating duties and powers to any officer in the department or to any working body.

Ministers are responsible for presenting draft laws in the executive branch. Ministers also have authority to grant, suspend or cancel business registration, formulate programmes or bodies to promote, assist or supervise businesses, and take the final decision in the case that an entrepreneur appeals against the decision of a DG.

Highlights of regulatory opportunities and challenges to support SMEs

Regulatory clarity

The SME Policy of 2015 articulated the importance of SME growth and diversification, establishing a clear purpose and political commitment to increase support to SMEs. The policy outlined a number of regulatory improvement goals including reducing difficulties and constraints faced by business start-ups, encouraging the free flow of capital, building capacity for entrepreneurship, enhancing information networks and flow, and facilitating business operation. The policy also recognised the importance of developing value-added products for export and trading with regional partners, as well as converging Myanmar social and economic standards with ASEAN development.

An accompanying SME Law (development in progress) will support the implementation of the SME Policy. Proposed provisions included in the SME Law include a reduced corporate tax rate for SMEs and other incentives, which have not yet been revealed as of the end of 2017.

Government support for SMEs is further emphasised in the Myanmar Investment Law 2016, which stipulates that “the Government may undertake subsidies, funding, capacity building and training to Myanmar citizen investors and citizen-owned small and medium-sized enterprises. The Government may also allow exemptions and reliefs for the locations where Myanmar citizen-owned businesses are operated or other economic activities” (Pyidaungsu Hluttaw, 2016[10]).

Regulatory quality management

Compliance with business registration

One of the biggest regulatory challenges for policymakers is that MSMEs may lack understanding of formal business practices, or even prefer to operate informally in order to avoid administrative burden and taxation. This extends into regulatory challenges for authorities when MSMEs are unwilling to engage in the first stage of the regulatory process: registering their businesses. The government has introduced various policies and programmes to encourage SMEs to register including capacity building, access to loans, lower tax rates, tax holidays and business matching. While both the Cottage Industries Law and draft SME Law indicate financial penalties for failure to register, these penalties are rarely enforced in practice.

The government has taken some initiative to streamline registration procedures. For example, DICA offers a one-stop service for registration and is also in the process of establishing an online registration portal. DICA also serves as the Secretariat for the Myanmar Investment Commission (MIC), which is responsible for processing and approving investment applications. DICA receives online investment applications on MIC’s behalf.

Compliance with product or service standards

There is no national standards body in Myanmar and, at present, product standards are agreed upon between seller and buyer on a deal-by-deal basis. This results in a reliance on the importer to designate the desired standards and may burden local producers to comply with multiple standards for the same product.

More efforts to align national to international standards are in progress. For example, Myanmar’s hotel star rating system is matched to international norms. A memorandum of understanding (MOU) has also been signed between the Myanmar Department of Research and Innovation and SPRING Singapore to share expertise in the accreditation of conformity assessment bodies based on international standards and requirements (DICA, 2017[11]).

Compliance with intellectual property laws

There is no statutory law specifically dedicated to intellectual property (IP) protection in Myanmar, which may result in higher risk or perceived risk for businesses intending to set up in Myanmar or work with local companies. Some forms of IP protection are offered for certain patents and designs but these are considered outdated and offer limited protection for intellectual property (WIPO, 2016[12]).1

Enforcement and inspection

In the context of investments, an Investment Monitoring Division (IMD) overseen by DICA is responsible for inspection and oversight functions relating to permits, endorsements, import licences for raw materials and machinery, tax incentives and payments, business visas, land rights authorisations and business monitoring. The IMD can recommend to the Commission Office an administrative penalty be imposed on an Investor under Section 85 of the Law.

Regulating the informal economy

Most micro-enterprises and many SMEs do not register their businesses, preferring to operate in the informal economy. Similarly, much of the labour force in MSMEs is informal and difficult to track. There are no policies, regulations or sanctions pertaining to informal labour.

Administrative simplification

In November 2015, the government adopted priorities to improve the efficiency of the Myanmar administration and the ease of doing business across all sectors. One of the first major reforms implemented by the government was a reduction in the number of ministries in the Union Government from 36 to 21. Notably, the six ministries that comprised the previous President’s office were merged into one.

In the years following, many regulatory reforms have aimed at creating incentives for both local and foreign investors and reducing barriers to business operations, for example by introducing multiple exchange rates, reducing import restrictions and export tax, and liberalising import/export procedures.

The Union Government is establishing one-stop shops around the country as part of its ongoing public sector reforms. Myanmar has set up more than 70 one-stop shops across the country to deliver transparent and efficient government administrative services to citizens. These one-stop shops include counters from various government agencies delivering public services ranging from electricity, internal revenue, public health, social welfare, police, immigration, complaints and queries (UNDP, 2018[13]).

Customs facilitation

The Customs Department has an explicit policy to simplify or remove outdated regulations, in line with international best practice and standards.2 Some examples of customs-related regulatory simplification achieved to date include:

  • Reduction of a number of unnecessary requirements for trade and customs procedures, including the use of the e-customs system (Myanmar Automated Cargo Clearance System, MACCS) for import and export of goods since 2017.

  • Removal of double taxation on firms by calculating commercial tax before adding customs duty.

  • Removal of requirement for exporters to produce a bank certificate as proof that they have been paid for goods before exportation is permitted.

The Customs Department also has a plan to develop an umbrella of various trade facilitation measures in line with the ASEAN Economic Co-operation (AEC) Master Plan including customs valuation, post-clearance audits, and an authorised economic operator. Procedures for customs valuations, post-clearance audits, advance ruling of classification (i.e. H.S. code) and valuation have been issued and applied in 2017. Procedures for an authorised economic operator have also been submitted to the Union Minister for approval. Public awareness campaigns are underway.

E-government

Myanmar’s Customs Department has been developing its e-Customs system since 2013, with support from the Government of Japan. The system includes the MACCS and the Myanmar Customs Intelligence System (MCIS). As of November 2017, MACCS is operational in Yangon and will be extended to the Myawadi border areas in June 2018. A large number of government departments are already participating in MACCS, including the Trade Department, Myanmar Port Authority, Food and Drug Administration, Plant and Animal Quarantines, Fisheries department, Myanmar Economic Bank and various other imports, exporters and customs brokers.3 The MACCS and MCIS form the basis for Myanmar’s National Single Window.

The Ministry of Communications is in the process of building up Myanmar’s e-Government with support from the Government of Korea. The Ministry of Commerce has already started to use some e-Government systems, for example in customs. The Ministry of Labour, Immigration and Population has also implemented an e-visa system for both tourist and business travellers since 2016.

Stakeholder engagement

Since 2012, there is a legal requirement to conduct Public-Private Consultations. Ministries are free to conduct these consultations as they see fit, as there is currently no existing guideline on how this should be carried out. Nonetheless, these consultations are often carried out on an ad hoc basis with concerned associations, companies, chambers, and other representatives from the private sector. Prior notification is provided to these stakeholders before the consultation. During these consultations, the private sector provides comments to specific draft SME regulations, which are then considered in the final draft.

Consultations are recorded by the respective ministry; however, these are not made public.

Regulatory assessments

The government has started to explore regulatory impact assessments (RIA) on a pilot basis and has provided some training on its applications with the support of international partners. The government occasionally conducts a review of existing legislation with the goal of identifying those that are obsolete. A Legislative Review Committee meets every week to review legislation under the Union Legislative List. It may prepare a report on resolving or simplifying legislation, which is presented to the Attorney General’s Office.

Currently, there are no ex ante or ex post regulatory impact assessments in place in Myanmar’s regulatory process.

Appeals

An appeals process is in place, although seldom triggered by businesses in practice. If there is a dispute or conflict over a regulation, “any person conducting a private industrial enterprise or any entrepreneur who is dissatisfied with an order or decision of the DG (of the Directorate of Regional Industrial Co-ordination and Industrial Inspection) may file an appeal to the minister within 30 days of the receipt of such order or decision” and the minister makes the final decision (Private Industrial Enterprise Law 1990). Enforcement decisions relating to customs laws (such as the Sea Customs Act) may be appealed at the administrative level at the Revenue Tribunal Office in Nay Pyi Taw.

SME linkage policies

Myanmar relies heavily on foreign donor support to develop the necessary framework for integrating SMEs into global value chains (GVCs). Efforts to date are primarily confined to special economic zones.

Special economic zones

Myanmar has been developing special economic zones (SEZs) to attract foreign investment. It currently has three SEZs in Dawei, Kyaukphyu and Thilawa,. All three SEZs are located along the western coast of Myanmar and are intended to serve as windows for international export for goods from China, Japan, Thailand and other border trading partners, as well as products from Myanmar itself. More SEZs and industrial zones are in the government planning pipeline. There is no preferential treatment for SMEs in SEZs; SMEs can join SEZs as long as they follow SEZ laws and regulations.

The first SEZ in Thilawa was developed in co-operation with the Government of Japan. It began operations in late 2015 with a legal framework - including preferential laws and regulations – developed by the Japan International Co-operation Agency (JICA). Japanese businesses account for more than half the companies active in the SEZ. The other companies come from China, Thailand, the United States and other countries. Sectors represented in the SEZ include garment and toy manufacturing, steel products, radiators, aluminium cans, packaging and waste management.

Myanmar also has nine industrial zones. The industrial zones are inland and primarily target local manufacturers serving the domestic market (OECD, 2014[14]).

Table 7.3. Good practices in SEZ policies in Myanmar

Foreign/local ownership

No limitations/Equal treatment

Catering to domestic market

● Liberalised

● Criteria-based

● Subject to regular, non-zone, import regulations

Purchases from domestic market

● Companies eligible for exporter benefits since these should be treated as exports from domestic markets

Eligibility for benefits

● No minimum export requirements

● Foreign and domestic companies

● Private zone developers

● Manufacturers and service providers

Labour policies

● Full consistency with international norms, including International Labour Organization (ILO) labour standards and OECD Guidelines for Multinational Enterprises

Private zone development

● Competition with government-managed zones on a level playing field

● Developers eligible for full benefits

● Criteria are clearly defined in legislation

Source: OECD (2014), OECD Investment Policy Reviews: Myanmar 2014https://doi.org/10.1787/9789264206441-en.

The fiscal incentives for companies operating in Myanmar’s SEZs are more generous under the Special Economic Zone Law 2011 compared to the general Foreign Investment Law. For example, all businesses - large or small - in the SEZ may benefit from a tax exemption for three consecutive years starting from the year of operation, plus a further tax holiday or relief for companies that are considered beneficial to the state. The benefits may include:

  • Exemption or relief from income tax on profit which is reinvested within one year.

  • Relief from income tax up to 50% on the profit from exports.

  • Right to deduct research and development expenditure.

  • Exemption or relief from customs duty and other taxes on.

  • Imported machinery and equipment for use during the construction period.

  • Imported raw materials for the first three years of commercial production following the completion of construction.

Responsible business conduct

Responsible Business Conduct (RBC) has been referenced in a number of legal documents in Myanmar. In the 2016 Investment Law, Myanmar included an explicit reference to responsible investment as a top objective. RBC is likewise included in the assessment criteria (Rule 64.d and 64.g) in the 2017 implementing rules for the Investment Law. The Myanmar Investment Commission (MIC), which is tasked with developing responsible and accountable businesses, may consider whether the investors or their associates have contravened the law, including in other jurisdictions on issues relating to the environment, labour, tax, corruption and human rights (Rule 66). A set of accompanying rules also asked investors to report on any applicable environmental, social, economic and land-use impacts from their businesses and how they will carry out their investments in a sustainable way (OECD, forthcoming[15]).

Recommendations

  • A formal arrangement to consolidate inputs from different ministries before new legislation is put in place could help reduce occurrences and risks of overlapping or contradictory regulations. At present, there remains limited consultation between ministries and no formalised arrangement to consult between ministries in the creation of new legislation.

  • Systematically review and evaluate present regulations to ensure that they are necessary, and if so, that they meet their intended objectives efficiently and effectively. There is currently no mandatory ex ante or ex post impact assessments to assess regulatory needs ahead of introducing new legislation, nor are existing legislation regularly reviewed for their performance. The Government of Myanmar does not measure individual or aggregate regulatory burdens as an explicit objective to lessen administrative costs for citizens or businesses.

  • Establish a centralised administrative business registry where information can be shared and accessed by all relevant government agencies. This would simplify the registration process as well as reduce administrative and cost burdens for government and SMEs alike. A centralised business registry would also allow the government to conduct centralised data collection about SMEs, which would improve access to better quality SME statistics for data and policy analyses going forward.

  • Share findings from stakeholder consultations between ministries in a designated portal, which could further disseminate stakeholder feedback for better and more co-ordinated policymaking and policy delivery.

  • Develop a clear policy to align and adapt national product and services standards with regional (ASEAN) or international product or service standards.

References

[16] ASEAN Single Window (2018), Myanmar General Information, http://asw.asean.org/nsw/myanmar/myanmar-general-information (accessed on 21 August 2018).

[2] DICA (2018), Foreign Investment of Existing Enterprises as of 28/2/2018 by Sector, http://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/fdi_sector_6.pdf.

[3] DICA (2018), Myanmar Citizen Investment of Existing Enterprises as of 28/2/2018 by Sector, http://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/mcil_4.pdf.

[8] DICA (2017), Draft Myanmar Companies Bill, http://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/mcl_english_version_june_2017_abc_comments_clean.pdf.

[11] DICA (2017), Myanmar and Singapore Reaffirm Bilateral Ties at 6th Singapore-Myanmar Joint Ministerial Working Committee Meeting, http://www.dica.gov.mm/en/news/myanmar-and-singapore-reaffirm-bilateral-ties-6th-singapore-myanmar-joint-ministerial-working.

[1] DICA (2017), Yearly Approved Amount of Foreign Investment by Country, http://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/yearly_by_country.pdf.

[7] Egreteau, R. (2017), Parliamentary Development in Myanmar: An Overview of the Union Parliament, https://asiafoundation.org/wp-content/uploads/2017/05/Parliamentary-Development-in-Myanmar.pdf.

[5] Government of Myanmar (2015), Small and Medium Enterprise Development Policy, http://www.industry.gov.mm/en/download/file/fid/338.

[6] Myanmar Times (2016), Government Reveals 12-point Economic Policy, http://www.mmtimes.com/business/21664-nld-12-point-economic-policy-announcement.html.

[14] OECD (2014), OECD Investment Policy Reviews: Myanmar 2014, OECD Publishing, Paris, https://doi.org/10.1787/9789264206441-en.

[15] OECD (forthcoming), Inclusive Investments in GVCs: Opportunities for ASEAN SMEs, OECD Publishing, Paris.

[10] Pyidaungsu Hluttaw (2016), Myanmar Investments Law No. 40/2016, http://www.dica.gov.mm/sites/dica.gov.mm/files/document-files/myanmar_investment_law_official_translation_3-1-2017.pdf.

[4] Sanyal, S. and F. Eisinger (2016), Enabling SME Access to Finance for Sustainable Consumption and Production in Asia, http://www.switch-asia.eu/fileadmin/user_upload/Publications/2016/Green_Finance_Study_-_2016_-_Myanmar.pdf.

[13] UNDP (2018), One Stop Shops across Myanmar, http://www.mm.undp.org/content/myanmar/en/home/ourwork/povertyreduction/successstories/One_Stop_Shops_in_Myanmar_A_Step_Towards_Bringing_Service_Closer_to_Peoples.html.

[12] WIPO (2016), Development of Intellectual Property System in Myanmar, http://www.wipo.int/edocs/mdocs/aspac/en/wipo_tm_tyo_2_16/wipo_tm_tyo_2_16_3_4.pdf.

[9] Yangon City Development Committee (2018), Online Business License, https://app.ycdc.gov.mm/business_license/index.php (accessed on 10 August 2018).

Notes

← 1. Limited forms of intellectual property protection are provided for in the following laws: Registration Act (1908); Penal Code (1860); Merchandise Marks Act (1889); Sea Customs Act (1878); Specific Relief Act (1877); Patents and Design (Emergency Provisions) Act (1946); Private Industry Enterprise Law (1990); Science and Technology Development Law (1994); Electronic Transactions Law (2004).

← 2. The Sea Customs Act (1878) and Land Customs Act (1924) have been amended in March 2015 in line with international practices, such as the Revised Kyoto Convention.

← 3.  ASEAN Single Window (2018), Myanmar General Information, http://asw.asean.org/nsw/myanmar/myanmar-general-information (accessed on 21 August 2018).