Viewpoint: Cheah Swee Gim
Following almost six decades of isolation, Myanmar reopened its doors in 2011. The country has since significantly modernised its legal system. The government has made concerted efforts to replace antiquated legislation that dates back to the British colonial era, plug legal loopholes, and build public awareness of the importance of laws and corporate social responsibility.
Notably, the newly elected democratic government’s approach to legislation has been less hurried, with greater emphasis on social issues and enhancing overall governmental capacity. For this reason, there have been, on average, fewer laws passed by the legislature during parliamentary sittings compared to the previous regime. Nevertheless, there have been significant improvements to the legal bedrock, which have levelled the playing field for foreign investors.
In particular, the investment regime was overhauled and refreshed through the enactment of the Myanmar Investment Law in 2016 and its accompanying rules and regulations in 2017. Apart from providing incentives to both local and foreign investors, the law seeks to remove differentiation between both types of investments. It creates a platform to accelerate smaller-scale investments by limiting the circumstances under which an investment permit from the Myanmar Investment Commission is necessary, empowering regional and state governments to make certain types of decisions.
Additionally, the government has taken a first step to put to rest the centenarian Companies Act by enacting a new Companies Law. The law allows for 35% foreign equity participation in domestic companies and offers opportunities that were previously reserved for local entities, including the direct acquisition of interests in existing businesses. A progressive piece of legislation, it also sets up-to-date standards for corporate governance and company and management structure. Indeed, this law is an exemplar of the government’s ability to work with foreign partners to come up with policies and laws on a par with international best practices.
That being said, legal development still has much ground to cover, and significant challenges remain. For example, intellectual property protection remains inadequate. While there are draft laws, it is unclear when these will be enacted, and even then, implementation may be delayed due to the mechanisms needed for their enforcement. Similarly, while foreign banks have successfully integrated into local industry, an archaic legal framework for banking and securitisation arrangements – including those that cover immoveable property – continue to restrict foreign and local banks.
Moreover, the implementation and administration of new laws remain inconsistent and somewhat disconnected from their actual text. Some authorities find comfort in historical rules that have been made obsolete by new laws. Regulations on foreign participation are also sometimes perceived as necessary to protect local players, and there is insufficient emphasis on allowing free competition, which would ultimately favour consumers. Much could be learned from the telecommunications sector, which sought to allow parity in competition, with positive results for consumers.
The country has made notable legal progress. Investment laws were overhauled twice between 2012 and 2017, due to the government’s willingness to fix inadequacies in the investment regime. Employment laws have also been refined and are strictly enforced. Furthermore, ministries have taken steps to be more transparent in their dealings with investors and to make foreign participation possible in previously restricted sectors. To this end, the insurance sector is expected to soon be liberalised, allowing foreign businesses to enter.
Myanmar has come a long way since 2011. Despite ongoing challenges, there have been yearly improvements to the legal system. Indeed, 2017 affirmed the country’s increasing openness to foreign involvement in enterprises that will bolster its economy. Hence, with the support of patient and persevering foreign investors, Myanmar should continue to make great strides.
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