DOING BUSINESS IN MYANMAR

An Overview

Myanmar, located in Southeast Asia, is a country with a rich cultural heritage, diverse resources, and emerging economic potential. Over the past few years, it has attracted interest from international businesses looking to tap into its developing market. However, doing business in Myanmar requires a deep understanding of its political, economic, legal, and cultural landscape. Below is an overview of key considerations for doing business in Myanmar.

1. Economic Overview

Myanmar’s economy has been growing in recent years, driven by sectors like agriculture, manufacturing, natural resources, and services. Following political and economic reforms in the early 2010s, Myanmar became more open to foreign investment. Key sectors for growth include:

Agriculture: Myanmar is a major producer of rice, pulses, and other crops. Agricultural businesses, including food processing, have significant potential.

Energy & Resources: The country is rich in natural resources such as oil, gas, and minerals. The energy sector, in particular, offers investment opportunities.

Manufacturing: With its low labor costs, Myanmar is becoming a manufacturing hub, especially in textiles and garments.

Tourism: Myanmar’s rich cultural history and natural beauty are attracting tourists, which is stimulating growth in the hospitality and tourism industries.

2. Investment Climate

Myanmar has made considerable progress in opening up its economy to foreign investment, particularly after 2011 when the military-backed government transitioned to a quasi-civilian government. However, the political environment remains volatile, and businesses must exercise caution:

Foreign Investment Law: The Myanmar Investment Law of 2016 and its amendments provide a legal framework for foreign investment, offering incentives such as tax holidays and land use rights in some sectors. However, foreign ownership is still restricted in certain sectors, and the government plays a central role in many industries.

Investment Incentives: There are incentives for foreign businesses that invest in certain sectors such as manufacturing, tourism, and infrastructure. Special Economic Zones (SEZs) offer tax exemptions and other advantages to foreign investors.

Challenges: Myanmar’s investment climate is still challenging due to issues such as political instability, a lack of infrastructure, corruption, and a complex regulatory environment. It’s essential for businesses to perform due diligence and build relationships with local partners.

3. Business Registration and Corporate Structure

To establish a business in Myanmar, foreign investors need to go through the registration process, which can be complex and time-consuming. The key steps include:

Choose the Business Structure: Foreign companies can set up as:

Wholly Foreign-Owned Companies (WFOC) in permitted sectors.

Joint Ventures (JV) with Myanmar nationals or local companies.

Representative Offices for companies conducting market research but not direct business operations.

Company Registration: Register the business with the Myanmar Directorate of Investment and Company Administration (DICA), which is responsible for company registration and compliance.

Tax Registration: The company must also be registered with the Internal Revenue Department (IRD) for tax purposes. Myanmar has a relatively simple tax structure, but businesses should understand corporate tax rates, VAT, and other applicable duties.

4. Legal and Regulatory Considerations

Understanding Myanmar’s legal framework is essential for businesses:

Foreign Currency and Banking: Foreign businesses must open a local bank account and ensure they comply with regulations regarding currency exchange and international transactions. Myanmar has a dual exchange rate system (official and market rates), which can present challenges for financial operations.

Labor Laws: Myanmar’s labor market is young and growing. The country has laws governing worker rights, salaries, and conditions, but enforcement can be inconsistent. Businesses should also be aware of restrictions on hiring foreign workers in certain industries.

Intellectual Property: Myanmar has started to develop its intellectual property (IP) laws. While the government passed a new Trademark Law in 2019, intellectual property protection is still evolving, and enforcement can be weak.

5. Cultural Considerations

Understanding local culture and business practices is key to building strong relationships and successful ventures in Myanmar. Some cultural considerations include:

Building Relationships: Business in Myanmar is often relationship-driven. Establishing trust and long-term relationships with local partners is crucial for success.

Respect for Authority: Hierarchical structures are common in Myanmar’s society and business. It’s important to show respect for seniority and authority, especially when engaging with government officials and senior business leaders.

Language and Communication: Myanmar’s official language is Burmese, but English is widely used in business settings, especially in Yangon and Naypyidaw. Having a local representative or translator is helpful for effective communication.

Punctuality: While punctuality is appreciated, meetings in Myanmar can sometimes run late, and the pace of business may be slower than in other countries.

6. Challenges and Risks

Despite its potential, Myanmar presents several challenges for businesses:

Political Instability: Myanmar’s political situation is unstable, particularly after the military coup in 2021. This has led to widespread protests, economic disruption, and sanctions, creating significant uncertainty for businesses.

Corruption: Corruption remains a challenge in Myanmar, particularly in dealings with government officials. Transparency International ranks Myanmar poorly on corruption indices.

Infrastructure: The country’s infrastructure, including roads, utilities, and telecommunications, is still underdeveloped. This can pose challenges for logistics, supply chains, and daily business operations.

Ethnic Conflicts: Myanmar has ongoing ethnic conflicts, particularly in areas like Rakhine, Kachin, and Shan states. These conflicts can disrupt business operations and impact investor confidence.

7. Conclusion: Opportunities and Outlook

Despite its challenges, Myanmar offers significant opportunities for foreign businesses, especially in sectors like agriculture, energy, manufacturing, and tourism. The country’s young and dynamic population, along with its strategic location in Southeast Asia, positions it as an attractive destination for investment in the long term.

However, businesses looking to operate in Myanmar should carefully consider the risks, including political instability and the complexities of the legal and regulatory environment. Local partnerships, thorough due diligence, and a clear understanding of Myanmar’s cultural and business practices are essential to navigating the opportunities and challenges in this emerging market.