Aug 2, 2016

The Guide to Corporate Establishment in Myanmar

The IMF projects Myanmar to be the world’s fastest growing economy in 2016, with GDP forecast to advance by 8.6 percent. Still considered a frontier economy, Myanmar is at a young but developing stage for foreign direct investment (FDI) within ASEAN. Not only does the nation offer fertile land, bountiful resources, and a strategic geographic location, but the Government is increasingly committed to encouraging foreign investment through major economic and political reforms. The reform process began in 2011 and has successfully increased trade and FDI, contributing to 8.3 percent real GDP growth in the 2013/14 fiscal year, which topped the preceding year’s 7.3 percent growth.

Although reforms have been successful in augmenting Myanmar’s economic growth and attracting foreign investment, the regulatory environment remains complex. In 2012, Myanmar released the Myanmar Foreign Investment Law to address the rights and duties of foreign investors. More recently, Myanmar has seen the passage of the Special Economic Zone Law which was passed in 2014, offering numerous FDI incentives. Further, the 102 year old Companies Act, which serves as the country’s foundation for investment, is currently under revision in parliament.

In the midst of an evolving economic and regulatory climate, it is crucial for prospective investors to understand their responsibilities in Myanmar. Government agencies, namely the Directorate of Investment and Company Registration (DICA), as well as private advisors can play a key role in

Options for Investment

Below, the steps for registering a private limited foreign company and a foreign company branch office are outlined. These are the two best vehicles for foreign investors to establish profit generating operations in Myanmar. Deciding between a private limited foreign company and a branch office is largely influenced by the desired business function of the company.

Private limited foreign companies can be 100 percent foreign owned and engage in nearly all service provision and manufacturing activities. The industries that allow only limited foreign ownership are listed in Notification No. 26/2016. In most cases, foreign companies must engage a fully domestic company to conduct trade activities in Myanmar. All foreign investors must register their companies with the DICA in order to receive a registration license and Permit to Trade, which allow businesses to commence activity in Myanmar. Foreign companies are also required to register with the Myanmar Investment Commission (MIC) under the Myanmar Foreign Investment Law of 2012 (MFIL) if they plan on receiving investment incentives, which include long term land leases. Small companies that will strictly provide services in Myanmar are not required to register with the MIC.

Branch offices are also allowed to generate profits within Myanmar and represent a viable investment vehicle for certain endeavors. Companies using branch offices are restricted from participation in any of the industries listed in Notification No. 26/2016. However, branch offices are not required to register under the MFIL. Thus, they can register strictly under the Myanmar Companies Act of 1914 and skip approval from the MIC. Because they will use the name of their parent company, branch offices can also bypass a name check. The necessary documentation to register a branch office, however, is more extensive than that for establishing a private limited company.

Source: ASEAN Briefing