Myanmar's balancing act
Readers that are listening carefully will realise that, nowadays, most of the buzz behind Southeast Asian investment involves Myanmar. Many foreign companies are looking to put roots down in Myanmar and have been sending representatives there to scout out
As characteristic of many developing nations in this region, Myanmar recognises the need for foreign investment but is nonetheless wary of the impact it will have on locals who are clearly not ready to compete with foreign businesses.
Recently, Myanmar relaxed its protectionist stance to allow more freedoms to foreigners than in the past. As we can see with the introduction of the Myanmar Investment Committee (MIC) permits, special economic zones (SEZs), and emerging real-estate in key cities, Myanmar is finally accepting and even positively anticipating foreign influence. Nevertheless, in reality, it is still not easy for foreign companies to set up businesses and operate in Myanmar.
Skilled employees are needed to ensure that operations ensue as per company guidelines and to manage the day-to-day functions of the companies. Local employees may be established to eventually fulfill such roles but that is a long-term result of a developing economy.
For now, assuming that a foreign company receives all required approvals to function in Myanmar, the company must find a way to overcome the lack of skilled workers in the country. Foreign companies may need to bring in at least a portion of its employees from abroad. These non-local employees can be foreigners or they can be ex-Myanmar citizens working abroad; regardless, they will need approval to live and work in Myanmar.
Moreover, in addition to the legally imposed ratio of non-local employees to local employees, it is very challenging for foreign companies to apply for and receive stay-permits for their foreign employees to live and work in Myanmar.
As we previously discussed, it is marginally easier for companies that have either MIC or SEZ permits to apply for a limited number of stay-permits for foreign employees to live and work in Myanmar. Still, the process of applying for stay-permits may pose some practical and administrative challenges.
But operating under both the MIC and the SEZ involve certain restrictions: MIC permits are generally only available to manufacturing companies and SEZ permits involve certain geographic restrictions. Stay-permit applications are, in overall, quite cumbersome and must be renewed quite regularly.
Myanmar recognises the difficulties in balancing its desire to protect local interests with its attractiveness as a prime location for investment. And, in December 2014, Myanmar amended the Myanmar Immigration (Emergency Provisions) Act of 1947 to introduce Notification No. 1/2014 – or, the Permanent Residence of a Foreigner Rules. These new permanent residency (“PR”) rules allow foreigners, including ex-Myanmar citizens and individuals related to Myanmar citizens, to apply for a PR permit.
However, the PR permits are only available to skilled foreigners who have resided in Myanmar for at least a period of three years (with any trips abroad not lasting for more than 90 consecutive days in a year) prior to submitting the application.
Each PR permit grants the successful applicant a PR period of five years but the applicant must register their PR and pay renewal fees on an annual basis. The application procedure itself seems relatively straight-forward but requires an initial application fee of US$500 and US$1,000 in renewal fees for every year afterwards for the first five years.
At the termination of the first five years, the applicant may request to apply for a new permit. The PR permit cannot be transferred and may be revoked by Myanmar in case the prescribed PR rules and/or local laws are violated.
As these PR rules are still relatively new, the practical challenges and effectiveness of this Notification 1/2014 cannot be accurately ascertained at this time.
However, they are indicative of Myanmar’s gradual drift towards ‘openness’, towards globalization and, hopefully, towards a stable and prosperous market-economy. It appears that Myanmar recognises its human resources deficit and is attempting to project a more welcoming image to the global community in order to rectify this problem.
A welcoming Myanmar is likely to attract more foreign skills to the country, which not only addresses the need for skilled workers but also helps develop the local workforce in the long-term.
On that note, Myanmar is also negotiating visa exemption schemes with several governments (including the ASEAN members). If successful, the visa exemption schemes will complement the PR rules in marking Myanmar as a popular investment spot in Southeast Asia.
The next article will discuss Myanmar’s budget for the 2015-2016 fiscal year.
Anthony Visate Loh is partner, tax services of Deloitte Touche Tohmatsu Jaiyos Co Ltd