Sherpa Hossainy's Blog

HRW Blasts Myanmar’s Draft Association Law

Posted in Business, Myanmar, Yangon by Sherpa Hossainy on August 23, 2014

Asks the government to revise or reject the legislation

Published in Myanmar Business Today (Vol 1, Issue 31) on Sep 5, 2013

A lady receives NGO aid in the delta region in Myanmar. Human Rights Watch said the draft Law Relating to the Forming of Organisations bill, if enacted, would require NGOs to obtain official registration to operate; provide overbroad and vaguely defined regulatory authority to a body under effective military control; and subject groups to arbitrary decisions without appeal. IFRC

Myanmar’s draft associations law fails to meet international human rights standards and should be significantly revised or discarded, Human Rights Watch said last week. If passed in its current form, the law would permit excessive government control over civil society groups, hindering freedom of speech and association at the expense of Myanmar’s reform and development, the US-based advocacy group said in a statement.

The draft Law Relating to the Forming of Organisations, made public on July 27, is slated for early debate in Myanmar’s national assembly. HRW said the bill, if enacted, would require nongovernmental organisations (NGOs) to obtain official registration to operate; provide overbroad and vaguely defined regulatory authority to a body under effective military control; and subject groups to arbitrary decisions without appeal. Members of unregistered groups could face criminal penalties.

“This draft law would give the Burmese government broad authority to refuse to let a group operate and send association leaders and members to prison if the group functions without permission,” said Phil Robertson, HRW deputy director, Asia.

“It seems the government wants to keep its stranglehold over civil society, effectively muzzling watchdog groups during this critical reform period.”

The draft associations law contains a number of provisions contrary to the right to freedom of association as set out in the Universal Declaration of Human Rights and international human rights treaties, HRW said.

The draft law would require all NGOs to register before functioning, essentially conditioning the right to freedom of association on gaining government approval. Chapter VIII states that organisations and members without a “formation certificate” may “not form or function as an organisation.” Individuals who fail to comply face criminal penalties, including up to three years in prison and fines.

The draft law in chapter III creates a “Central Committee” that has authority to reject NGO registrations and terminate existing groups. There are no provisions to ensure the committee’s independence or competence, HRW said.

“It is chaired by the minister of home affairs, who is designated under Myanmar’s 2008 Constitution to be a senior serving military officer. The Myanmar military’s longtime hostility toward domestic and international groups raises serious concerns about this committee’s impartiality on matters of NGO registration,” the HRW statement said.

Central Committee decisions under the proposed law are final and not subject to appeal. Moreover, there is no provision for appealing a suspension or termination of registration status. The committee has broad authority to cancel the registration of those organisations that “are found to be acting in ways or for an objective that are different from those at the time of formation or registration.”

HRW said the law also lacks procedural safeguards such as advance notice of regulatory action, opportunities to resolve problems prior to termination or suspension, or limiting termination to a sanction of last resort. The human rights group termed the proposed waiting period of 90 days for a committee decision on an application as “unnecessarily long.”

The draft law sets out that registration of any domestic or international NGO is only for a period of five years, and that organisations must re-register before the expiration of this period. Such re-registration requirements provide an opportunity for the Central Committee to retaliate against a group that has advocated against or criticised government policies, HRW said.

The draft law should be revised to comply with international standards, the rights group said. It said the law should make registration voluntary, and eliminate criminal and other penalties for organisations that do not register. HRW demanded clarification of the vague and unspecified provisionsso that the government“cannot use the law to target critics by denying them registration.”
While governments have a legitimate regulatory interestin providing benefits to civil society organisations that register as legal entities and preventing criminal activity, such regulations should not provide a cover to undermine rights to freedom of association, expression, and assembly, HRW said.

“The proposed associations law could be easily misused to deregister groups that criticise government policies and practices,” Robertson said.
“The government should be treating civil society groups as key to national reform and development, not as an obstacle.”
The draft law also places restraints on international groups that could severely hamper their legitimate activities, HRW said.

The Central Committee could require international NGOs to sign memoranda of understanding with government ministries in order to function, something some but not all international organisations do. Those who do not register or are denied registration “shall not function or exist.” The law does not clarify if this would prohibit all forms of engagement with the country, such as short-term visits.

The number of domestic organisations and community groups in Myanmar rose considerably following the devastation wreaked by Cyclone Nargis in May 2008. They now play a critical role in promoting women’s rights, environmental protection, poverty reduction, economic development, health, education, and human rights, among other areas.

Many of these organisations have already expressed strong opposition to the draft law, rejecting many of its provisions and decrying the lack of consultation with civil society during its formulation.

In an August 21 statement, the United Nations special envoy on Myanmar, Tomas Ojea Quintana, said that passage of the law in its current form “would be a serious setback for the development of a strong and vibrant civil society” in Myanmar and that “the government has to change its mindset on registration procedures if it is to create an environment in which civil society can thrive.”

“Burma is slowly emerging from decades of harsh authoritarian rule where many groups faced either control by the government or being forced into exile,” Robertson said.

“The draft associations law threatens the recent gains made by Burmese civil society groups and will undercut efforts to hold the government to account in the reform process.”

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Foreign investment rules in practice in Myanmar – Part 3

Posted in Business, Investment, Legal, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Part 3: Mining; distribution, wholesale and trading; retail, supermarkets and hypermarkets; hospitality and foreign currency remittances

Published in Myanmar Business Today (Vol 1, Issue 21) on June 27, 2013

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Recently, international law firm Clifford Chance and VDB Loi have jointly released a briefing note on the practical implementation of the Foreign Investment Law in Myanmar. This is the third part of Myanmar Business Today’s series of sector-wise analysis based on the briefing. This week’s topic is mining; distribution, wholesale and trading; retail, supermarkets and hypermarkets; hospitality and foreign currency remittances.

The Myanmar government implemented the country’s Foreign Investment Law (FIL) 2012 with two notifications or FIL Rules, creating a practical framework to match the government’s policy of welcoming foreign investment. Both notifications, 11/2013 of the Ministry of National Planning and Economic Development and 1/2013 of the Myanmar Investment Commission (MIC), were released on January 31.

Mining

“Most large-scale mining projects are subject to the requirement of having a local partner, although there have been exceptions to this in the past,” Edwin Vanderbruggen, co-author of the report and a partner at VDB Loi, a specialised law and tax advisory firm with offices across Southeast Asia, told Myanmar Business Today.

Mining concessions take the form of a Production Sharing Contract (PSC), where the government’s take comprises royalties, production sharing and income taxes, he said. According to the report, under the current rules, foreign investors may hold up to 80 percent of the capital in a large scale mining enterprise.

However, mining of minerals from riverbeds or near rivers, the surveying and production of jade and other gems, and all small- and medium-sized mineral production enterprises are prohibited for foreign participants, the report said.

“A joint venture (JV) is required for small- and medium-scale mining extraction, the exploration and testing of industrial raw materials related to mining, and the large-scale mining of minerals,” Edwin said. A JV with the government is required for the production and sale of rare earths, strategic minerals, radioactive minerals and gems and investors involved in exporting raw minerals such as granite, stone or coal must first obtain approval from the government.

For investors involved in large-scale mining, the production period may not exceed 15 years, but it is extendable four times for periods of five years each with six months’ advance notice, and for investors involved in the production of pearls, the limit is 15 years, but it may be extended twice for up to five years each, with one year’s advance notice, according to the new rules.

The time limit for investors involved in carrying out mining feasibility studies is two years, while for prospecting and exploration the limits are two and three years respectively.

Distribution, wholesale and trading

The distribution of goods manufactured by investors themselves in Myanmar was already allowed under the previous regulation. “There are no limitations on who investors can sell to. A foreign invested manufacturing company can sell its products directly to retailers, for example,” Edwin said.

Previously, “trading” was considered a prohibited activity for all foreign-invested companies, even JV companies. In the wake of the new FIL, this policy is evolving, according to the report.

“The limit on what the government is prepared to allow in terms of distributing goods without manufacturing is not yet entirely clear,” Edwin said.

Wholesaling is also allowed for foreign investment, but is subject to the receipt of an opinion by the Ministry of Commerce beforehand. In addition, a JV is required for all “packaging enterprises.”

Retail, supermarkets and hypermarkets

“The government’s policy is aimed at facilitating foreign investment for large modern trade,” Edwin said regarding foreign investments in the retail sector. Foreign investors are permitted to own and operate “supermarkets” so long as the store surface is between 12,000 and 20,000 square feet, and they may own and operate “hypermarkets” so long as the store is at least 50,000 square feet. For smaller surface areas, retail shops are not allowed to be located in close proximity to local businesses and they must sell mainly local products, according to the new rules. If a retail shop is operated through a JV agreement, the local partner must have at least a 40 percent shareholding.

Retail enterprises other than those mentioned above are expected to be permitted as of late 2015 (except car and motorbike retailers), but will require a minimum capital investment of $3 million. Such enterprises will be given no tax exemptions, and special rules apply for the retail of alcohol or tobacco products.

Hospitality

For hotels classified as three-star or above, 100 percent foreign ownership is permissible, while lower ratings will require a JV. Hotels constructed on government land are usually organised through a build-operate-transfer structure. “In this structure, the investor has the ownership and management of the hotel for a period of 15 to 30 years, after which the buildings are transferred to the government,” Edwin explained.

The government, often through the Ministry of Hotels and Tourism, receives an annual lease fee which is either a certain amount per square metre, or a percentage of the hotel’s revenue. A substantial payment to the government may also be due at the outset of the agreement for obtaining the land right.

Myanmar is also preparing for the licensing casino enterprises. Casinos will require government permission, must follow the rules and regulations of the Ministry of Hotel and Tourism and the Ministry of the Interior and must be located in restricted areas of hotels. They can only be accessed by foreign nationals. Wellness or spa enterprises must be located in 3-star or above hotels or boutique hotels, the new rules say.

Foreign currency remittances

The new FIL allows for the remittance of foreign currency through banks authorised to make such transactions at prescribed rates of exchange. According to the Foreign Exchange Management Law foreign-invested companies have the right to hold foreign currency and a foreign currency bank account and there are no limitations on inward/outward remittances from a current account.

The rules also say foreign currency may be retransferred overseas after examination and approval from the MIC or from the Central Bank.

“In practice, a foreign-invested enterprise is required to open a capital remittance account in Myanmar for the inward remittance of the capital and monies raised through loans. In terms of outward remittances, the company is allowed to open any bank account with a licensed Myanmar bank in a foreign currency and in kyat,” Edwin said.

Payment of dividend, interest and repayment of capital on loans by a foreign invested enterprise with an MIC Permit must be approved by the MIC before the bank is allowed to execute the outward remittance, according to the rules.

A shift of power within MIC

Posted in Business, Investment, Legal, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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The balance of power within Myanmar Investment Commission has noticeably shifted towards the Ministry of Finance and Revenue in a bid to pick projects that are financially and socially favourable for Myanmar, experts said.

The structure of Myanmar Investment Commission (MIC) saw a massive shakeup last month as new chair and members were appointed, according to a notification from the President’s Office.

The position of MIC chair changed from Minister for the President’s Office and former Minister for Industry U Soe Thein to U Win Shein, minister for finance and revenue.

More importantly, a bulk of evaluation and verification of investment proposals are now assigned to the departments of the finance ministry such as the Internal Revenue Department (IRD) and the Customs Department (CD).

The number of representatives of other ministries on the MIC has also dropped as the government increased the private sector representatives from two to five, out of a total of 11.

These three trends have combined in a remarkable power shift in MIC, investment experts say, as the finance ministry is now set to play an increasingly central role in getting an investment licence.

“We have only seen a few meetings under the new chair, however, from now on we expect proposals to be more carefully scrutinised. The MIC seems more careful and better equipped to assess whether the explanation of the applicant holds water or whether the proposal is properly substantiated. The government does not want to give away tax holidays for projects that are not sustainable or correctly represented,” Edwin Vanderbruggen, partner at VDB Loi, a leading law and tax advisory firm, told Myanmar Business Today.

Edwin, whose company’s investment licensing team in Myanmar helps foreign investors obtain MIC permits for investment projects, said the financials of the investment proposal have also become crucial.

“With the IRD and the CD taking care of more of the evaluation effort, more emphasis is put on the financial planning of an investment. The capitalisation, funding, capital expenditure, revenue, labour and other key points of the MIC’s investment proposal template now seem to receive even more attention.”

Social issues are now playing a bigger role too, Edwin said. “There has been some turbulence in local media about the MIC supporting projects that had adverse social consequences. With five private sector members out of 11 MIC members, it is likely that social issues will be given more weight,” he added.

BASF plans to ramp up investment in Asia Pacific; targets Myanmar

Posted in ASEAN, Business, Industries, Investment, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013
Ethylene Unit at BASF-YPC Company Limited / Ethylen-Anlage in der BASF-YPC Company Limited

A steam cracker operator carries out a routine inspection at a BASF plant in China. BASF

Aims to invest $13b in the region

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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German chemical giant BASF announced it will invest over $13 billion (€10 billion) and create around 9,000 new jobs in the Asia Pacific region as part of its new growth strategy.

While about half of the money set aside for expansion will be spent in China, BASF is also planning to explore “untapped markets” in Myanmar, Laos, Cambodia and Mongolia, it said.

According to the firm’s new global strategy, BASF aims to scale up its sales to $32.6 billion (€25 billion) in the Asia Pacific region by 2020.

“BASF is implementing its global ‘We create chemistry’ strategy in Asia Pacific with a set of ambitious targets and a focus on sustainability. By being involved in those emerging markets, we not only open up new growth opportunities beyond 2020, but we become part of an emerging industry structure in these countries,” Dean Draper, Managing Director, ASEAN sub-region, BASF Southeast Asia, told Myanmar Business Today in an email response.

“BASF will set up task forces to explore the potential in Asia Pacific’s untapped markets. We target annual sales of €110 million in these markets by 2020,” Draper said.

Draper said: “In Myanmar, BASF is present and working with partners in the construction, agriculture and rubber industries. For example, end of May this year in Yangon we launched “Master Builders Solutions,” our global BASF brand of advanced chemical solutions for the construction industry.

“The untapped markets are a new area and we are at a relatively early stage. You will see other announcements of our more specific plans in the future.”

The world’s largest chemical company saw its margins slide in the region to 10 percent in 2012, which prompted it to shift its research and procurement to the world’s fastest growing chemical market to help double profitability.

BASF has a “good chance” to reach the average profitability of the group, Martin Brudermüller, vice chairman, board of executive directors, said at a press conference in Hong Kong.

On a group level, BASF aims to lift margins to 20 percent by the end of 2020 from a current 14 percent.

“In the next decade, Asia Pacific will face huge challenges while remaining the fastest growing market for the chemical industry. With our Asia Pacific strategy, we are positioning BASF as the leading provider of sustainable solutions for the Asia Pacific region. Based on our strong global R&D network, we will considerably strengthen our innovation capabilities in Asia Pacific, enabling us to better serve our customers in all industries in the region,” Brudermüller said in a statement.

BASF estimates the cumulative annual growth rate (CAGR) for real chemical production through 2020 for Asia Pacific at 6.2 percent, well above the world average of four percent.

BASF will conduct around one quarter of its global research activities from Asia Pacific. By 2020, BASF plans to reach a total of around 3,500 R&D personnel in the region, up from around 800 in 2012.

BASF is also going to establish research facilities in the areas of electronic materials, battery materials, agriculture, catalysis, mining, water treatment, polymers and minerals.

The company is currently considering establishing a second Innovation Campus Asia Pacific following inauguration of the BASF Innovation Campus Asia Pacific in Shanghai, China.

More than $ 2.62 billion in regional sales will be achieved through new business and acquisitions by 2020, BASF said.

By 2020, BASF aims for local production of approximately 75 percent of the products it sells in the Asia Pacific region in order to intensify its collaboration with and strengthen its supply position to customers in Asia Pacific.

BASF, which currently operates more than 100 production sites in the Asia Pacific, including two highly-integrated Verbund sites, located in Kuantan, Malaysia, and Nanjing, China, will invest in a range of efficiency measures that will save approximately $1.31 billion annually by 2020, it said.

Intel Capital Invests $16m in ecommerce across Asia

Posted in ASEAN, Business, Investment by Sherpa Hossainy on July 10, 2013

Global investor provides funding, business development support and technology expertise

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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Intel Capital, Intel Corp’s global investment organisation, announced three investments in e-commerce firms seeking to scale up and extend their businesses in Asia.

The investments, totalling approximately $16 million, are: India’s Bright Lifecare, a distributor of nutrition, health and wellness products; Snapdeal.com, a consumer goods marketplace in India; and portfolio company Singapore’s Reebonz.com.

“Intel Capital focuses on adding unique and differentiated value beyond just financial investments by providing entrepreneurs strategic expertise, a global network and business development programmes to help them reach new customers and successfully scale businesses for a global economy,” said Arvind Sodhani, president of Intel Capital and Intel executive vice president, in a statement.

“These three exciting and innovative companies are delivering new ecommerce experiences to an ever-increasing customer base throughout Asia. We look forward to helping them grow and succeed through our resources and their passion.”

These investments will help drive innovation in the fast-growing ecommerce and distribution industries, Intel said. Growth in Asia’s middle-class, overall expansion of its economy and ever improving internet connectivity in the region has given rise to a considerable online retail market opportunity for these firms.

“We see start-up companies across Asia-Pacific taking advantage of new business opportunities created by the spread of personal computing and broadband Internet access. These technologies allow entrepreneurs to reach new markets and customers, and offer innovative new services that will help to enrich the lives of people across Asia,” said Gregory Bryant, vice president and general manager, Intel Asia Pacific.

However, Myanmar’s IT industry will have to wait longer to attract such investments from Intel, Sodhani said. “Myanmar does not yet have a venture capital ecosystem,” he said at the World Economic Forum on East Asia in Nay Pyi Taw. Myanmar’s lack of legal framework, poor internet connectivity and dearth of skilled IT professionals are barring Intel to invest in the recently opened Southeast Asian country, he added.

Bright Lifecare Private Ltd is India’s premier consumer health company. It is India’s leading distributor for nutrition and health products. It also operates India’s leading e-pharmacy network, HealthKartPlus, and develops innovative digital technology products for the consumer healthcare industry.

Snapdeal.com is one of the largest online marketplaces in India. The site features the widest assortment of products across all categories including fashion, electronics, home goods, among others. Thousands of small businesses, brands and retailers are leveraging Snapdeal’s reach of 20 million registered users to deliver their products across 4000 towns and cities of India.

Reebonz.com is one of the largest private sales ecommerce groups in Asia. It sells luxury goods, including fashion items such as handbags and accessories, to customers across Southeast Asia, North Asia and Australia. Intel Capital first invested in the company in 2012. Following the investment, the company launched Reebonz Vintage, a marketplace for pre-owned luxury goods, and Kwerkee.com, which sources and sells unique products from the best designers in the world.

In 2012, Intel Capital invested $352 million in 150 investments globally, with approximately 57 percent of funds invested outside North America.

Intel Capital started investing in Asia Pacific in 1998 and to date it has invested over $2 billion in more than 320 technology companies in a variety of industries including: mobile computing, consumer internet, cloud computing, software and services and semiconductor design and manufacturing. Over 60 of these companies have gone public or have been acquired.

Microsoft appoints market development partner in Myanmar

Posted in Business, Computer, Investment, IT, Myanmar, Software, Technology, Yangon by Sherpa Hossainy on July 10, 2013

Cites close collaboration with local experts as key to ensure sustainable economic growth

Published in Myanmar Business Today (Vol 1, Issue 20) on June 20, 2013

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American IT giant Microsoft announced that it has appointed local IT company Myanmar Information Technology (MIT) as its first market development partner to grow its presence in Myanmar.

MIT will be responsible for expanding the Microsoft ecosystem in the country and work with local businesses and government to provide ICT solutions that will drive greater economic growth.

Jamie Harper, Microsoft’s general manager of Southeast Asia, said on the sidelines of the World Economic Forum on East Asia in Nay Pyi Taw, “Microsoft is delighted to be forming this partnership in Myanmar. I am excited by what the future holds for Myanmar, a future we believe technology will be a vital part of.”

Describing Microsoft’s entry into Myanmar and other emerging markets, Harper said that there is no ‘one-size-fits-all’ formula for ensuring success, but the company is committed for the long haul in Myanmar.

“Microsoft’s business is built on partners. Understanding the nuances of conducting business in each and every market we invest in is critical. That’s why we focus on building sustainable partnerships with local experts. A strong local ICT industry and robust partner network can create a positive impact in any country.”

Currently the largest software company in Myanmar, MIT was founded in 1997 and is a co-founder of the MICT Park with the Myanmar ICT Development Corporation. The company has more than 300 employees.

Dr Tun Thura Thet, chief executive of MIT, said, “We are very proud that Microsoft chose MIT to be its market development partner in Myanmar and we are very excited to build upon a long and fruitful relationship that will benefit our country. I believe Microsoft’s global experience and solutions will be invaluable in building the Myanmar ICT industry.”

Market intelligence firm IDC expects IT spending in Myanmar to reach $233.56 million by 2016, representing a compound annual growth rate of 16 percent between 2011 and 2016.

Harper said, “We believe that only through working closely with the public and private sector, can technology be part of the national agenda and play its role in ensuring competitiveness and capacity building.”

Microsoft has more than 28,000 partners in Asia Pacific. These companies generated nearly $125 billion in revenues, according to an IDC study. The study concluded that for every $1 that Microsoft generated in Asia Pacific, its partners generated more than $10.

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GE pledges $7-m project in Myanmar

Posted in Business, Finance, Investment, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 19) on June 13, 2013

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US-based technology giant GE last week announced a $7-million programme in Myanmar that will support training and capacity-building efforts throughout the country.

The new commitment, announced on the sidelines of the World Economic Forum on East Asia in Nay Pyi Taw, will focus on strengthening the health care system, improving the energy architecture and promoting the development of Myanmar’s human capacity.

John Rice, GE Vice Chairman and President and CEO of Global Growth Operations, said, “While Myanmar has made enormous strides to integrate into the global community and promote economic development, there are key areas where GE and others can partner to build capacity and support Myanmar’s future growth.”

The initiatives will include healthcare programming, power and water programming and corporate programming.

Under the healthcare programme, GE Foundation, the philanthropic arm of GE, announced it will expand its “Developing Health Globally” (DHG) programme to include Myanmar. This represents an initial $3 million commitment and as the programme evolves, the investment could get doubled, GE said.

The initial work will focus on decreasing the rate of maternal and new-born infection at government operated, district-level hospitals and clinics, as well as strengthening other aspects of maternal care. The GE Foundation will partner with the Ministry of Health (MoH) and Jhpiego, an affiliate of Johns Hopkins University for this project.

Also, under a rural healthcare pilot project, in partnership with the MoH, GE will supply training, technology and equipment to help reduce maternal and infant mortality rates. The programme is scheduled to launch in August. The biomedical engineer training programme will see GE providing training for 40 MoH participants on the usage of medical devices and on the delivery of healthcare.

GE’s power and water programming includes plans for developing a master electricity plan for Myanmar, which will evaluate how to best address its needs with the resources available. The plan will identify what types of power solutions will be most effective and where facilities should be located to maximise efficiency and system stability, GE said.

The GE corporate programming will launch a leadership training programme for public and private sector leaders in Myanmar. Under this programme, 50 individuals will be selected for an intensive two-week programme in the US focusing on the development of leadership skills in business, government and civil society. An additional 50 local leaders will be given the opportunity to participate in a GE-sponsored ASEAN regional leadership training programme at the Lee Kuan Yew School of Public Policy in Singapore.

The GE Foundation will also support the provision of legal services by international lawyers (the Senior International Lawyers Programme) to the Myanmar Resource Development Institute (MRDI) and other legal institutions in Myanmar. It will also sponsor the participation of Myanmar government officials in international training on public procurement best practices, and establish the Myanmar chapter of Transparency International.

Myanmar needs investment in agriculture for a “Quick Win” for Poverty Reduction

Posted in Agriculture, Business, Myanmar, Yangon by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 19) on June 13, 2013

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To promote inclusive growth in Myanmar at this crucial stage in its development, investment in rural areas and finding ways to improve the livelihood of farmers should be a priority, business and government leaders said in a session on the long-term outlook for the economy at the 22nd World Economic Forum on East Asia.

“Putting a big focus on agriculture right now is key,” said meeting Co-Chair Helen E Clark, administrator of the United Nations Development Programme (UNDP) in New York. “You can get a quick win for poverty eradication now.” But, warned Clark, this will require investing in the infrastructure to drive agricultural growth and productivity. About 70 percent of the Myanmar labour force is employed in agriculture.

“We encourage investment in the agriculture sector,” said Serge Pun, chairman of Serge Pun and Associates, Myanmar, noting that the nation’s foreign investment laws provide some protection for small farmers. “While we are endowed with a lot of good things, we are not an agricultural force,” he said. The reasons: low productivity and a lack of investment, technology, and research and development.

“The only way to get discretionary income to the people of Myanmar is to give those people [a way to earn] money,” reckoned Indra Nooyi, chairman and chief executive officer of PepsiCo, USA. She said Pepsi is helping farmers grow high-yield potatoes and then buying up the crop for use in making food products.

The participants said promoting the agriculture sector can help ensure balanced growth in Myanmar over the long term, which will allow it to avoid the middle-income trap.

“You can have a very balanced economy here if you get the frameworks right,” said Michael Andrew, the Hong Kong-based Global Chairman of KPMG International. “Myanmar should proceed carefully with setting out the regulatory frameworks for its emerging industries and sectors. The government, for example, is soon to award crucial telecom licences. It is really important that these processes be seen as transparent and on a level playing field,” Andrew said.

Another key to creating a balanced, sustainable economy is education and skills training, the discussants said. India is focusing a number of its investments in neighbouring Myanmar in this area, including a technology institute in Mandalay. “Myanmar will need skilled people and that is where we are seeking to help,” said Anand Sharma, minister for commerce and industry and textiles of India.

Myanmar introduces 2pc advance tax on all imports and exports

Posted in Business, Export and Import, Finance, Myanmar, Tax, Yangon by Sherpa Hossainy on July 10, 2013

Published in Myanmar Business Today (Vol 1, Issue 19) on June 13, 2013

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In a move to improve tax compliance the Internal Revenue Department will start collecting a 2 percent income tax on the value of nearly all imported and exported goods, according to a new government notification.

The newly imposed tax will be implemented from June 14.

According to the notification, importers must pay an advance income tax assessment of 2 percent on the customs value of the goods for import and exporters must pay an advance income tax assessment of 2 percent on the value of all exported goods.

However, there are a few exceptions, including import of materials and equipment during the construction period of projects with an investment permit from the Myanmar Investment Commission (MIC).

The tax collected is counted as an advance payment of the income tax payable by the importer or exporter, and can also be reimbursed.

“A two percent cash leakage for all imports is likely to impact every businesses and consumers in Myanmar, but in most cases rather slightly,” Edwin Vanderbruggen, a partner at VDB Loi, a specialised law and tax advisory with offices all across Southeast Asia, said.

“Trading companies working on high volumes with very tight margins might be affected if their contractual framework doesn’t allow to pass on any unforeseen costs to their customers, and if they have difficulty in financing the sudden missing 2 percent,” he added.

“In theory exporters should not be adversely affected, and foreign investors should not be impacted if they have MIC permit,” Edwin said.

Myanmar unveils $500-m tourism master plan

Posted in Business, Economy, Investment, Myanmar, Tourism, Yangon by Sherpa Hossainy on July 9, 2013

Published in Myanmar Business Today (Vol 1, Issue 19) on June 13, 2013

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Myanmar launched an almost half a billion dollar master plan in a bid to boost its tourism industry and promote sustainable tourism.

The Myanmar government, alongside the Asian Development Bank (ADB) and the Government of Norway, unveiled the “Tourism Master Plan” on June 6 on the sidelines of the World Economic Forum on East Asia.

The master plan outlines 38 development projects valued at about $500 million aimed at increasing Myanmar’s tourism competitiveness, protecting environmentally important areas and safeguarding ethnic communities.

“This master plan outlines a path to welcoming more visitors to Myanmar without threatening our unique cultural heritage or endangering pristine environments,” said U Htay Aung, union minister for hotels and tourism.

International visitor arrivals in Myanmar are forecast to rise to 7.5 million in 2020 – a seven-fold increase from current numbers – with corresponding tourism receipts worth $10.1 billion, according to ADB. Under a high growth scenario, the tourism industry could provide up to 1.4 million jobs by 2020, the lender said.

“Tourism will be a pillar of Myanmar’s economy, and it has the potential to create meaningful job opportunities for the country’s people, including those living in poor communities,” said ADB Vice President Stephen Groff. “This plan is a long-term vision, and a solid start to ensuring tourism contributes to equitable social and economic development in Myanmar.”

The master plan, funded by Norway, recommends building tourism-related human resources by strengthening the tourism education and training system, and identifies $44.5 million in new opportunities and partnerships aimed at training tourism workers.

“The master plan provides a leading tool for Myanmar to develop the sector in an environmentally and socially sustainable manner. The implementation will demand strong government leadership and coordination among a wide range of government agencies and state and regional governments,” said Katja Nordgaard, Norwegian ambassador to Myanmar.

The projects focus on expanding international air arrivals in Mandalay and Nay Pyi Taw, undertaking improvements to the Bagan river pier to support more cruises, and building feeder roads in destinations like Ngapali beach and Inle Lake.

According to the plan, Myanmar’s 1993 Tourism Law will be reviewed and updated to streamline licensing formalities for hotels, restaurants, tour operators, and tour guides, as well as to amend sections governing regulations around the gaming subsector, labour and the establishment of outbound tour operations for Myanmar citizens. The plan suggests establishing a Tourism Executive Coordination Board, chaired at the vice-president level, to draw the various tourism-related ministries, agencies, and federations together under a single umbrella.

The plan also outlines the need for new tourist police divisions to be set up not only to safeguard tourists, but to prevent child trafficking and sex tourism. It suggests new tourism initiatives be introduced to ethnic communities using pilot community-based tourism projects that ensure local people are prepared to handle an influx of visitors, and maintain control over tourism in their communities.

Nearly half a million visitors arrived by air in Myanmar last year, with Thailand, China, Japan, the US, and South Korea making up the bulk of visitors. France, Germany, Malaysia, Singapore, and the UK each accounted for about 4-5 percent of overall arrivals. Another 465,614 visitors – mostly on day trips from Thailand – arrived via land borders.

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