Thu 1 Nov 2012
Filed under: Business / Trade,Inside Burma,News
Myanmar’s parliament passed a more business-friendly foreign-investment law Thursday that removes some previous restrictions on foreign ownership of joint-venture companies.
The move was guardedly welcomed by the investment community seeking to do business in the long-isolated country as it opens up its economy.
The new law is part of a raft of sweeping reforms implemented by President Thein Sein aimed at modernizing an economy that had stagnated through mismanagement during nearly a half-century of military rule. But attempts to revamp the existing foreign-investment laws, drafted in 1988, had been stalled by debate between pro-business reformers including the president and groups concerned that local businesses could be trampled by larger foreign corporations entering the country.
The bill approved Thursday replaced an earlier version that Mr. Thein Sein had sent back to the nation’s parliament in September following criticism from investors and reforms that it was too protectionist. This time, said Zaw Htay, an official with the president’s office, the new bill could be signed into law as early as Friday.
“At this time, the president will surely sign the bill and promulgate it as law,” Mr. Zaw Htay told The Wall Street Journal.
Not all details of the new law are known, but Mr. Zaw Htay said the new bill crucially does away with a previous requirement for foreign investors to hold at least a 35% share in joint ventures with local partners in unrestricted sectors. Instead, the shareholdings will now be split according to the desires of the respective partners.
For some restricted sectors, such as agriculture, the bill defers restrictions about foreign-ownership caps—set at 50% under the initial draft—to new ratios that will be set out by Myanmar Investment Commission at a later date, Mr. Zaw Htay said.
Investors that have been following the tussle over the law closely were guarded in their praise but were reserving judgment.
“As ever, the devil is in the details,” said Kevin Murphy, a managing director at Andaman Capital Partners, a Yangon- and Hong Kong-based advisory group. “If the law truly allows the market to decide the right ratios of partnership in a deal, it’s an eminently sensible step in the right direction.”
The new law would be of most benefit to Western companies seeking clarity on the investment landscape, many of whom are only now starting to consider Myanmar as an investment destination after nearly all global sanctions against the country were lifted. Other foreign companies from countries that maintained trade ties in recent years, chiefly from Asian nations such as China and South Korea, have been present in the country for a long time.
“Investors providing [foreign direct investment] into frontier economies want consistency and those Western investors who were perhaps holding back from investment into Myanmar will now have the clarity required to press forward with investments,” said Brian Gordon, a partner at international advisory firm Holman Fenwick Willan.
Maung Maung Lay, vice president of the Union of Myanmar Chamber of Commerce and Industry, said the details have yet to fully articulated by the government but said that he expected a “considerable number of investors” would come in after its passage.
—Patrick Barta and Celine Fernandez contributed to this article.