Myanmar Now More Economically Free Than RP

  • NOTE: This blog post was first posted on my old website on March 17, 2012. 
Upcoming election: Aung San Suu Kyi standing in vote next month seen as key indicator for potential lifting of sanctions. Photo from Upstreamonline.com

Upcoming election: Aung San Suu Kyi standing in vote next month seen as key indicator for potential lifting of sanctions. Photo from Upstreamonline.com

In essence, Burma is now more economically free than the Failippines! The Burmese learned from their failed socialist past. After years of keeping its socialist experiment under a military government, this long isolated Marxist utopia has recently drafted new legislation covering foreign investment.

Here are details of the new legislation drafted by Myanmar’sForeign Investment Commission. The draft must first be approved by parliament and signed into law by the president.

  • Foreigners can make investments in Myanmar, owning 100 percent of businesses, without the need for a local partner.
  • Joint ventures between foreigners and Burmese citizens or the government are permitted, but 35 percent of the investment must be foreign capital.
  • Foreign firms may be entitled to a tax holiday for the first five years upon start-up. Other forms of tax relief may be available depending on the investment and if deemed in the national interest.
  • Foreign manufacturing companies may be entitled to tax relief of up to 50 percent on profits made from exports.
  • Tax exemption or relief on profits can be granted providing it is re-invested in the business within one year.
  • Foreigners can lease land for business purposes from the state, or from private citizens renting from the state who are authorized to lease that land.
  • Foreigners will be entitled to lease land for an initial period of up to 30 years, then extend it for up to 15 years, then another 15 years upon expiry of the second contract.
  • All unskilled workers in foreign firms must be Burmese. After five years, 25 percent of the skilled workforce in foreign firms must be Burmese, increasing to 50 percent after the next five years, then 75 percent by 15 years.
  • Hiring of workers must be made through state-run labor offices or local employment agencies. Firms must make arrangements to train and develop the skills of workers.
  • Investments by foreigners can be private, or as a limited company.
  • In a vaguely worded article, the draft states that the government guarantees no foreign business will be nationalized during the contract period. However, it also states that if that did occur, in the public interest, compensation would be provided based on the market price at that time.

Expect Myanmar to surpass the Philippines in terms of foreign direct investment and economic stability in just a few years. The law suggests that Myanmar is ready to embrace economic liberalization, as foreigners would be allowed to either own companies 100 percent or set up a joint venture with Burmese citizens or government departments.

The most important thing about Myanmar’s free market reforms is its commitment to rule out nationalization. Here’s exclusive report from Yahoo:

The draft law goes some way to reassuring investors worried about a reversal of the reforms and the possible seizure of assets.

“The government gives a guarantee that permitted businesses will not be nationalized during the period allowed in the contract or extended in the contract other than by giving compensation based on current prices in the market, in the interest of the general public,” it says, according to a Reuters translation.

The law is likely to be approved by parliament during the current session, which is expected to end later in March. The president then has 14 days to either approve it or send it back to parliament, according to the constitution.

The latest reforms will heighten debate over Myanmar’s economic potential.

In the Philippines, the country’s draconian protectionism in the New Constitution is the very reason why the country’s economy is an epic failure, why we have unemployment and more taxes and higher tax rates, and why more and more Filipinos are forced to work abroad. It is also the reason why we have few oligarchs who benefit from the system, high prices of commodities and services, poor quality of telecom and media services, among others. The primary beneficiaries of protectionism and regulations of foreign investment are not the middle class and poor Filipinos, but the old rich or oligarchs and those who possess and maintain political connections.

2 thoughts on “Myanmar Now More Economically Free Than RP

  1. myanmar’s law is not too different from ours:

    “We have now seen an unofficial translation of the long-awaited new Foreign Investment Law, signed intolaw by President Thein Sein on 2 November 2012. We highlight some of the key features of the new law. Certain activities are designated as restricted or prohibited, and the Myanmar InvestmentCommission (the “Commission”) may only permit these activities with the permission of the Union Government when doing so would be deemed to be in the best interest of the State and its citizens. Other than these restric­tions, the Commission may allow foreign ownership of any level in its discretion. The restricted and prohibited activities include:

    any that would adversely affect public health or the environment or that would involve bringing hazardous or toxic waste mate­rial into Myanmar;

    the use or production of hazard­ous chemicals;

    service and manufacturing activities reserved for Myanmar nationals under foreign invest­ment rules (Rules) to be promulgated within 90 days of the date of the new law (2 November 2012);

    the use of technologies, medi­cines, or accessories (as well as any activities) that are still at the testing stage or are not yet permitted to be used abroad;

    agriculture and livestock breeding;

    activities within 10 miles of the national boundary except in designated Economic Zones

    The new law lays down objectives and basic principles, and any activi­ties that promote these objectives and follow these principles are more likely to be approved.

    Objectives include: natural resource exploitation, infrastruc­ture development, human resource development, job creation, educational development.

    Principles include: the promo­tion of exports, import substitution, large investment projects, the development of advanced technology, energy saving, the development of modern industry, environmental conservation, the exchange of information and technology, improving knowledge and technical know-how, developing banking services, promoting modern service provision, securing energy resources.”

    If anything, the difference is that our law doesnt have an approval mechanism, a mechanism which may lead to more corruption down the line.

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