After a landslide victory in Myanmar’s general election held on 8 November 2015, Daw Aung San Suu Kyi’s National League for Democracy (NLD) government took office on 30 March 2016, with U Htin Kyaw named as President.
The new NLD government (the Government), which now consists of 22 Ministries rather than 36 under the previous government, announced that it would issue a “100-day plan” setting out the government’s priorities in the first few months after taking office. To date, the government has not published a comprehensive 100-day plan and we understand that it does not intend to do so. However, various Ministries have announced individual 100-day plans on their websites and/or through interviews on the relevant Ministry’s website, Facebook page or in government newspapers. In this client bulletin, we highlight the main points of interest for foreign investors in these 100-day plans.
100 days in context
ThThe inauguration of the Government on 30 March 2016, the first civilian government in decades, has been accompanied by a surge of optimism but has also placed huge expectations on Aung San Suu Kyi’s government to roll out a widespread and fast-paced reform programme.
Faced with this expectation, the Government announced that it would publish an agenda of reform for its first 100 days in office. Two months after taking office, the Government has still not published an official and comprehensive 100-day plan and we understand it does not intend to do so. However, various Ministries have made announcements both in the press and on government websites and newspapers in Burmese in relation to the priorities they have set out for their respective Ministries. We set out below key points announced by the main Ministries.
These announcements seem to be communications with the public on quick wins to manage expectations rather than setting out clear medium-term or long-term policies or strategies. They cannot be interpreted as official policy since there has been no official announcement by the Government. In addition, while some of the announced changes have already been implemented, nothing prevents the Government doing something other than as announced. In the same vein, less than two months after taking office, there have already been several changes in the composition of the Government, which indicates that on the one hand, the Government is still trying to determine its strategy and shape, but on the other hand, it shows it is able and willing to adapt quickly.
100-day plans – main points of interest
While the Government has not made any official announcement of its 100-day plan, various Ministries have made their intentions and policy and implementation priorities public. Most of the announcements are vague and contain mainly high level statements as to what the priorities of the relevant Ministry will be, but there are some important points to take away for foreign investors.
Development of transport infrastructure
The Ministry of Transport and Communications (MOTC) (which has been created through the merger of the Ministry of Railway Transportation, the Ministry of Transport and the Ministry of Communications and Information Technology) has announced an ambitious 100-day plan and its intention to develop a national transport policy.
The Government has identified the development of the Yangon-Mandalay axis as a clear priority. The Ministry of Construction (MOC) has announced that it will proceed with repairs needed on the Yangon-Mandalay highway within 100 days of taking office. The MOTC has also stated that of the 17 projects currently being contemplated concerning existing railway infrastructure, it will prioritise projects on the Yangon-Mandalay railway. The MOC is also working with the World Bank, the Asian Development Bank and the Japan International Cooperation Agency to assess the state of roads and develop a plan to improve roads over the coming years.
The MOTC also announced that Myanmar National Airlines will initiate a repair and maintenance program on 30 ATR aircrafts with supervision from manufacturers.
For water transportation, the MOTC is currently negotiating a loan from the Japanese (although it is unclear whether it is with a Japanese bank, development agency or with the Japanese government) in order to finance the rapid development and construction of a river port in Mandalay. The MOTC has announced it intends to finalise the negotiation of the financing agreement within 100 days. The MOTC also stated that it would implement a five-year development plan of the Ayeyarwaddy River with assistance from the World Bank.
The MOTC has an ambitious list of projects and while these will not be achieved within 100 days, the plan indicates which projects the Government intends to champion. This is particularly interesting for companies active in construction and engineering (including dredging and marine engineering), but there will also be opportunities on the financing side.
Telecommunications - new call for tender
One interesting announcement for companies active in the telecommunications sector is that the MOTC intends to organise a tender by the Post and Telecommunications Department (PTD) for the 2600 MHz frequency. Currently only the 900 MHz and 1100 MHz frequencies have been assigned. However, the MTC has not announced a timeline for this.
The MOTC also intends to develop the Myanmar National Satellite programme and has announced that it will proceed with upscaling underground fibre optic and power cable installations.
Boosting power production and distribution
One of Myanmar’s main challenges lies in meeting the ever-increasing energy needs (particularly in Yangon) and updating an ageing and unreliable power infrastructure. In an interview with Myanma Alin (Global New Light of Myanmar) on 16 May 2016, U Pe Zin Tun, Minister of Electricity and Energy was quoted saying that the Ministry of Electricity and Energy (MOEE) is tasked with a huge responsibility over electric power, oil and gas, and energy projects.
The MOEE has been restructured into four departments, five state-owned enterprises and two corporations. It aims to promote projects which serve the public interest, and in particular projects which will increase power, stabilise distribution and transmission through the construction of additional power plants, as well as additional power transmission lines (and the repair of existing infrastructure).
The MOEE identified two major projects to be completed within the first 100 days in office: (i) additional power generation through the Mawalamyaing combined cycle 30 MW power plant (which should have been completed on 18 May 2016), and (ii) the completion of the Myingyan 133 MW natural gas power plant on 31 May 2016.
In addition, the MOEE has said that it will replace or build new power transmission lines and expand the capacity of transformers in sub-stations during the first 100 days. In Yangon, the MOEE announced that it intended to complete the 33 KV Wah Ta Yar-Shwe Pyi Thar overhead transmission line and the 11 KV Hlaing Thar Yar overhead transmission line. In other regions, the MOEE has announced that it is working to complete five other transmission lines before July 2016.
The MOEE has made it a priority to ensure the enforcement of the relevant laws and rules to promote foreign investment and partnership in the energy sector. Investment in the electric power and energy sector already contributes to over 60% of foreign exchange received by the country and the Government intends to further prioritise this sector.
Championing SMES
The Ministry of Industry (MOI) is tasked with the development of the industry sector in Myanmar and has announced that it would focus on developing technical knowledge (through higher education and technical workshops), opening of factories/plants of public interest (production of medical and pharmaceutical supplies, construction material, etc.) and completion of major industrial projects such as the Myingyan and Pin Pet steel plants.
In addition, the MOI observed that SMEs constitute the most important part of the industrial sector, but these SMEs lack the financial means and know-how needed to fully reach their potential. Recognising this need, the MOI set up an SME development department in 2012. The MOI has announced that it would continue to support the development of SMEs, with the assistance of international organisations, and it would aim to supply adequate financial, know-how and human resources to support SMEs.
Reform of DICA registration frees - a positive signal to investors
The Director General of the Directorate of Investment and Company Administration (DICA), U Aung Naing Oo, under the auspices of the newly formed Ministry of Planning and Finance (MOPF), announced as part of the MOPF’s 100-day plan that DICA would introduce changes to registration fees payable to DICA.
Until recently, registration fees for both listed and private companies were MMK1 million. In order to encourage Myanmar SMEs to register companies, DICA has reduced the fees for private limited companies to MMK500,000 and increased the registration fees for public listed companies to MMK2.5m.
While DICA anticipates that this move will result in a decrease of DICA’s annual income by MMK3 billion, it has compensated for this loss by increasing fees for other types of services, such as change of name, amendment of the statutory documentation, increase of capital, etc.
The new rates are effective as of 1 June 2016. In its announcement, DICA stressed that these changes are in line with the Government’s efforts to promote local and foreign investment.
While these changes may be considered minor, their rapid implementation is a sign of the Government’s commitment to promote business and investment in Myanmar.
The MOPF (through the Internal Revenue Department) has also mentioned that the Myanmar commercial tax (currently at 5%) is the lowest in the region, since in neighbouring countries the average is 10%. This may be an indication that there will be a reform of the tax regime in the coming months.
Continued improvement and development of the legal framework
While this was not mentioned in the context of the Government’s communication regarding the so-called 100-day plans, the early trend for parliament and the Government seems to be prioritising laws relating to politics, public administration, and human rights.
This does not necessarily mean that the Government does not prioritise the economy or investment, however, most elected MPs who started their term on 1 April 2016 are more familiar with issues regarding politics and human rights. The first law enacted by the parliament was the State Counsellor Law 2016 which was signed off by President U Htin Kyaw. Through this law, the Union Parliament appointed Daw Aung San Suu Kyi as the State Counsellor, who is accountable to the Union Parliament. The objectives of the law are to promote a multi-party democracy, to ensure a market-oriented economy, and to improve peace and development in Myanmar.
The parliament has also revoked laws which had been enacted by previous administrations such as the Protection of State from Harm Law 1975, the State Council Law 1974 and the People Council’s Law 1974.
We set out below the list of enacted legislation since 1 April 2016:
In addition, the Foreign Investment Law is currently under review by DICA with assistance from the International Finance Corporation/World Bank and a draft bill is currently being discussed and negotiated. While it is not entirely clear how much the new Foreign Investment Law will amend the current regulatory framework, it is likely to significantly impact the framework for investment in Myanmar. The Myanmar Companies Act is also under review by DICA with assistance from the Asian Development Bank and has passed through public consultation with revised drafts being published by DICA on their website. It is anticipated that the latest draft will be presented to parliament for consideration in the coming sessions.
