Road to reform: Youngsters on their motorbike as they travel outside Pansang, Wa territory. Photo: Reuters/Soe Zeya Tun
Road to reform: Youngsters on their motorbike as they travel outside Pansang, Wa territory. Photo: Reuters/Soe Zeya Tun

Turning over a new leaf

While challenges remain, like the uncertainties of the legal environment, Myanmar is now thinking hard about how to achieve a genuine economic opening

January 10, 2017 8:00 AM (UTC+8)

Under the semi-civilian government of President Thein Sein, the country hastily rolled out reforms, with many resulting ups and downs. Here is a brief timeline:

November 2010: The military-backed Union Solidarity and Development Party wins widely criticized elections, marking a transition from military rule to a semi-civilian administration led by ex-uniformed president Thein Sein.

2011: Creation of a privatization commission that hands over state-owned companies to close friends of government officials in an often opaque process.

April 2012: The EU suspends most of its sanctions against Myanmar.

Myanmar's outgoing president Thein Sein (right) hands over presidential power to newly elected counterpart Htin Kyaw at the Presidential Palace in Nay Pyi Taw, Myanmar, March 30, 2016. Photo: Getty Images
Myanmar’s outgoing president Thein Sein (right) hands over the powers of the office to newly elected Htin Kyaw on March 30, 2016. Photo: Getty Images

November 2012: Foreign Investment Law is enacted, allowing formation of joint ventures with a local partner and the leasing of land from the state and authorized companies. Critics say the law encourages land grabs by cronies in anticipation of a deal with a foreign investor.

October 2013: Liberalization of the telecommunications sector, boosting foreign investment with the arrival of Telenor and Ooredoo a year later. The government aims to extend telephone access to 90% of the population by 2020.

November 2015: The National League for Democracy (NLD) wins the first free and fair elections in 25 years.

January 2016: Arbitration Law is passed, an important step toward building a safe environment for investors and displaying an intention to follow international standards on commercial disputes. (Although this also means that disputes will often be settled in secret tribunals in foreign jurisdictions.)

September 2016: The US announces lifting of remaining sanctions.

Myanmar State Counselor Aung San Suu Kyi attends a meeting event with Myanmar citizens residing in Japan in Tokyo, Japan November 2, 2016. Photo: Reuters/Issei Kato
Myanmar State Counselor Aung San Suu Kyi at a meeting with Myanmar citizens residing in Japan in Tokyo, Japan in November. Photo: Reuters/Issei Kato

While the NLD has been quiet on the side of economic reforms in the first six months since coming into power, the draft of a new Investment Law was announced in October.

The legislation would put in motion a new package of market-oriented laws, without the weaknesses created by the hasty passage of their predecessors. said Robert San Pe, a Hong Kong-based partner at Gibson, Dunn & Crutcher and legal adviser to Aung San Suu Kyi. “The inclination under the previous government was to rush through lots of laws. At one point, around 130 draft laws were waiting to be approved by the parliament. There is no parliament in the world that could cope with that volume of legislation.”

Simplifying & harmonizing

The new Investment Law mainly intends to simplify and harmonize existing, overlapping legislation. For example, by merging two laws that discriminate between foreign and domestic investors. While they won’t both enjoy the same privileges under the new rules, the law will seek to create incentives to invest into certain sectors, such as labor-intensive manufacturing, and decentralize some of the decision making of the Investment Commission. Still, the Devil’s likely to be in the details of bylaws that have yet to be written.

 

It is now clear that when you get an MIC permit, it does not constitute an environmental clearance. They have to go through an environment assessment process. That is a good step forward

A list of sectors that will be open to foreign-invested joint-ventures is yet to be released, and the degree to which SOEs will agree to cede market share and stop being unavoidable partners remains a concern.

As foreign investors entering business in Myanmar face close scrutiny, the clarity brought by the new Investment Law is welcome. “It does now start to untangle the confusion between doing an Environmental Impact Assessment and getting a Myanmar Investment Commission permit,” Vicky Bowman from the Myanmar Center for Responsible Business explains.

“It is now clear that when you get an MIC permit, it does not constitute an environmental clearance. They have to go through an environment assessment process. That is a good step forward.”

Local communities have always had serious concerns about the social and environmental impact of foreign investment in the country’s vast array of natural resources. The new law, while offering a clearer process, remains blurry on environmental constraints on projects. Once again, the details in the implementing legislation will be crucial.

Limbo dancing down the pipeline

Other efforts to modernize the legal framework are on the way. A long-awaited Condominium Law finally reached Parliament in 2016. Foreigners will be allowed to buy up to 40% of condominium apartments in any given block, provided the units are on the sixth floor or above. This law too is still waiting for its bylaws to be completed.

Meanwhile, a Company Law to clarify the legal status of businesses remains stuck in legal limbo. New rules on land acquisition and use — which would help reassure foreign companies that they won’t be tied to illegal land grabs by local partners — are nowhere to be seen.

Still, given the lessons learned from rushing through earlier laws, it’s probably a good thing that the NLD government is taking the slow lane.

As the international lawyer Pe says: “You have to focus on quality rather than speed when it comes to new legislation.”

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