YANGON — The new Myanmar Companies Law takes effect on Aug. 1 and is intended to encourage foreign investment in Myanmar. Despite strong GDP growth, however, recent surveys suggest the business community is losing faith in the government’s economic reform agenda.
Replacing and incorporating elements to two older laws, the Myanmar Companies Law aims to make it easier for foreigners to invest in Myanmar via joint ventures while making business regulation more efficient and effective.
U Aung Naing Oo, Director General of the Directorate of Investment and Company Administration (DICA), spoke with The Irrawaddy’s Nan Lwin about the main changes the new law and accompanying regulations will bring about, his views on the future of Western investment in Myanmar, and the country’s business landscape heading forward.
Do you firmly believe the Myanmar Companies Law will encourage foreign investment after Aug. 1?
Yes, I expect it. The new Myanmar Companies Law will allow foreign investors to own up to 35 percent of local companies. I believe foreign investors have been waiting for this chance and for the law to take effect. The law will take effect in August. However, we have a [six month] reregistration period. I can say that we cannot expect a huge amount of foreign investment during the reregistration period. But investment will definitely increase after we pass the reregistration period.
What are the key aspects of the Myanmar Companies Law that will encourage foreign investment?
We have sectors that are off limits to foreign investors. For example, foreign investors are not allowed to invest in the trade sector or the insurance sector. Once the Myanmar Companies Law takes effect, they can invest in local companies in those sectors. The law creates new opportunities for them.
In the past, foreign investors had to apply for a “permit to trade” after they registered a company. Now we have abolished it. The Myanmar Companies Law will make it easier to do business in Myanmar.
Companies can pay registration fees, penalty fees and upload company reports by using the online system. We also designed the online process to be easy.
Many local investors are concerned that Western investors won’t come to Myanmar. They believed Western investors are under pressure over human rights abuses relating to the Rakhine crisis and the civil war in ethnic states. What is your opinion about their concerns?
It is a political issue. People have been wildly exaggerating the crisis. That crisis affects us. It also affects the country’s image. Especially among Western and European countries, the way they see our country has changed. Honestly, we cannot expect investment from Western and European countries for the time being.
However, the ASEAN economic community has been accelerating and we can expect more investment from ASEAN countries. We also have countries that fully understand the reality of our country, for example [East] Asian countries like China, Japan, Korea and Hong Kong. Their investments have never decreased during difficult times. If we can’t expect investment from the West, we will try hard to get investment from the East.
Some economists say the Myanmar Companies Law puts foreign investors at an advantage. Local investors are concerned they won’t be able to compete with them. Are there any restrictions in the regulations to protect local investors?
There are no restrictions in the Companies Law regulations. The essence of the Companies Law is to provide guidelines on how to form a company and how to dissolve it. As for protecting the interests of local investors, only the government can do that.
What are the most important aspects of the Companies Law regulations?
We have imposed the most important regulations on the company owners. They must know the changes under the new Companies Law. They must know the reregistration period. Under the old law investors needed both memoranda and articles of association, but that will no longer be necessary.
Under the new law we only have a constitution. In the past the company owners needed to specify the purpose of the company. They don’t need to do that under the new one. They also needed to show the amount of capital they had when they registered the company, but they don’t need to show it under the new law.
Another important thing is that we have added two important chapters for company directors in the Myanmar Companies Law. Company directors must follow rules and regulations under the new law. We have imposed specific duties and powers on company directors. We also have an “offence and defence” chapter for company directors. If directors fail to do their duties, they will face legal proceedings. We didn’t have that chapter in the past. They need to be aware of those regulations. We have plans to publish a journal for company directors. They can read it on our website later.
The new law does not discard the existing Companies Act in its entirety. So what does the new law not change?
The company categories have not changed. The company dissolution process remains the same. We used 50 percent of the old law.
Now we have both the Investment Law and the Myanmar Companies Law. So what is the future for Myanmar’s business landscape?
We need to look at the country’s economy as a whole. We need to consider whether we are making progress with financial, banking and trade sector reforms. We need to look at all the sectors that will create a new business landscape in Myanmar.
The Investment Law was approved successfully. The law is strong enough legally. We also changed the 104-year-old Companies Act into the modern Myanmar Companies Law. I can assure that we have new laws that are legally strong. We have made a lot of improvements. I hope these laws will help increase investors’ trust.
However, this is not enough. We have a lot more to do. For example, we need an intellectual property law, and laws dealing with the trade sector need to be legally strong. But we can say that we have established the foundation for foreign investment.
Foreign investors have complained that the Myanmar Companies Law was delayed and said Myanmar has missed its chance. Do you think we have missed our chance?
It is literally just exaggeration. The law couldn’t take effect as soon as it was approved by Parliament. It does not work that way. We need to impose rules and regulations. They criticized us because they just wanted to attack our country. In Hong Kong, they took one year and eight months to bring their companies law into effect after they approved it in Parliament. Singapore also took one year and three months. Malaysia also took 13 months to bring its companies law into effect.
Here, we only took eight months. During that period we also managed to finish the online registration system. Let’s compare with other countries. We are not delayed. We are not late. Our law aims to give equal opportunity to foreign investors, local individual investors and also to small and medium enterprises in the country. If you register online under the new law, you will see opportunities.
