Myanmar Investment Law – Tilt to Attract Foreign Investment?

22 September 2016
Myanmar Investment Law – Tilt to Attract Foreign Investment?
Upendranadh Choragudi, project manager with ActionAid Myanmar, Photo: ActionAid

It may not be a coincidence that while State Counsellor Daw Aung San Suu Kyi was visiting the UK and USA during the third week of September that the Myanmar Investment law (MIL) was submitted by the President to parliament for discussion and approval.
The announcement by the President of the USA on ending the sanctions imposed by the USA and an open invitation from Daw Suu to foreign businesses to “invest and make profits in Myanmar” was received with enthusiasm by the western press and business associations. 
While it is true that there has been arbitrary and discriminatory practices vis-a-vis foreign investment in the past, there has been a widespread perception that creating a “level playing field and equal treatment to domestic and foreign investors” would lead to economic development. Would this MIL be a balancing act?
The proposed Myanmar Investment law (MIL) combines hitherto separate provisions for domestic and foreign investors and creates a single document that outlines in 19 chapters, policy and provisions of the government vis-a-vis investment for industrial, business and other commercial operations. One of the explicit purposes of such a law is to give foreign investors ‘treatment no less favourable than that accorded to Myanmar citizens’.  This has been a long pending demand from foreign investors.
While such an approach is laudable in principle, particularly from the point of transparency and rule of law, there are disquieting concerns as to whether such a uniform approach leads to strengthening of domestic investment capabilities or not. How to encourage and promote domestic capital is something to be addressed by the nascent democracy as the world over, countries developed through the strengthening of self-reliant domestic capacities. In its current form, MIL appears to be focused on attracting foreign investment. The principle of equality has the inherent provision of differentiated treatment, meaning treating different people based on their initial capabilities and conditions. Such a nuanced approach would be required in order to ensure effective implementation of the investment law.  This is possible with the formulation of rules of business and by-laws that would ensure fair interpretation of the policy. Synchronising other laws in tandem with MIL would also require a sensitive approach so that it would not negate the principles of fairness.
There are several positives in the MIL; which need to be acknowledged as the country is poised for a turn-around in terms of economic and social development. Of particular importance is to provide consistency, predictability and clarity in terms of the application of provisions. This is something that foreign investors are looking for, especially after experiencing ad-hoc and arbitrary decision-making in the past.  There are also provisions that ensure that environmental concerns are taken care of, particularly in relation to clearance/prohibition of investments in environmentally sensitive sectors and locations (paragraph 42). Differentiated tax incentives in order to attract investment in backwards areas is one provision aimed at balanced regional development. Similarly, in a spirit of deliberation and participation, stakeholder consultations are suggested in order to affect changes and modifications to the MIL. However, it would be prudent for the government to include civil society groups and expert think-tanks that have proven experience in the area of trade and investment policies into this consultation process as they would be able to provide ground-level evidence to enrich the decision making.
However, one critical question that needs to be addressed is whether MIL provides any indication on how the government proposes to strengthen domestic industrial and business capacities and the potential for domestic investors to start, expand and consolidate their businesses. Except for generic promotional measures suggested, in one paragraph (77), there is very little by way of using MIL to promote and support domestic investment. What are the ways to strengthen domestic investment while simultaneously encouraging foreign investment? The government may explore the possibilities of providing favourable treatment to domestic SMEs in terms of government procurement policies, stipulating a certain proportion of domestic content in the production particularly with intent to promote ancillaries, domestic procurement in foreign investment in trade and businesses and fair practices of global value chains. There is a host of such measures which would ensure healthy growth of domestic investment. Some of these can be incorporated into MIL.
As a follow up to MIL, there is a host of other laws and provisions that need to be amended so as to have a synchronised effort. Similarly, regional growth strategies need to be developed as there are certain regional specific investment opportunities which can be tapped by the domestic as well as foreign investors.
The author works with ActionAid in Myanmar.  The views expressed are personal