Market participants in Myanmar are querying the validity of an alleged new draft of Myanmar’s foreign investment law, obtained and leaked by Reuters last week, and have branded the significance of the proposed changes as over-hyped.
Among a series of changes proposed in the draft investment bill are provisions allowing foreigners to set up businesses in Myanmar without local partners. Reforms also include a five-year tax exemption for foreign companies, government guarantees against nationalisation, easing of restrictions on private land use and repatriation of profits.
The draft would now need to be approved by parliament and signed into law by the president Thein Sein - a process which is expected to be finalised by mid-April.
One Yangon-based law firm partner said the validity of the news was uncertain given the leak related to confidential inter-parliamentary discussions. He also questioned the international reaction to the news.
“Many are saying this is a huge change, but to me it is not game-changing at all,” he said. “The changes proposed are not drastically different to Myanmar’s Foreign Investment Law of 1988.”
“With so much else changing in Myanmar it is hard to say if these changes will make much difference,” he said.
Thura Soe-Paing, managing director of All Myanmar Investment & Development Partners, an affiliate of Singapore-based investment company Frontier Investment and Development Partners, agreed the reported changes were only cosmetic.
“The common perception is that reforms in Myanmar are happening very fast, but people here are complaining it is going too slowly,” he said. “Economically things haven’t changed that much. Banking laws are still antiquated and there is still little transparency as to what the reform agenda or timeframe is.”
DFDL Mekong’s James Finch said the draft foreign investment law were consistent with earlier laws, but by and large just represented a liberalisation of the provisions in the Myanmar Foreign Investment Law of 1988.
Foreign investment development organisation Network Myanmar's chairman Derek Tonkin warned the fine print and follow-on reforms would prove important, however.
“This will mushroom in the coming months and years as it did in Vietnam from a single document to literally volumes of decrees, notifications, instructions on all sorts of matters related directly or indirectly to foreign investment,” said Tonkin, who is also the former British Ambassador to Thailand, Vietnam and Laos.
Soe-Paing said the proposed foreign investment law revisions were likely to have a positive effect on foreign investment in the country. Nothing unworkable had been suggested and some changes, such as allowing foreign shareholders and directors, would make direct investment in Myanmar companies easier, he said.
But he said other reforms were much more significant. The dual exchange rate for the local kyat currency currently in operation in the country was a bigger concern to would-be investors than foreign investment legislation, for example.
To that end, Myanmar's central bank, unifying up to seven different rates used by business, government and consumers on April 1. These reforms will set the country's new exchange rate at around 820 kyat per US dollar, close to its black market level. The official rate is currently at about 6.4 kyat to the US dollar, based on a 35-year peg to International Monetary Fund special drawing rights.
Finch added that debates within the Myanmar government as whether or not it should adhere to the New York Convention on Arbitration of 1958 were also significant. “Such adherence would open the country to numerous investors, particularly those who would help it achieve sustainable growth,” he said.