investing and doing business in fisheries sector in myanmar
TRANSCRIPT
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Myanmar - Investing and Doing Business in Fisheries Sector
February 2015
OLIVER MASSMANNPartner - Duane Morris - Myanmar
This outline should not be construed as legal advice or as pertaining to specific factual situations.
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Agenda:• An Introduction to Myanmar
• Investment in Myanmar’s fisheries sector
• Why choose Myanmar?
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Myanmar at Glance:• Official Name: Republic of the Union
of Myanmar• Location: South East Asia • Neighbors: Bangladesh, China, Laos,
India and Thailand• Area: 676,578 Km2 • Capital: Naypyidaw• Largest city: Yangon (Rangoon) • Currency: Kyat (MMK) (01 USD =
1029.50 MMK)• Language: Burmese• Population: 61 million
MYANMAR IN 2014
GDP US$ 60 billion
GDP per capita US$ 910
GDP Growth 7.8 %
Inflation 6.6 %
Cumulative FDI as of Dec 2014
859 approved projects with a value at US$52.84 billion
Import turnover (2012)
US$ 17,670 million
Export turnover (2012)
US$ 9,203 million
Labor force 31.4 million
Minimum wage No general minimum wagePublic sector: US$48.6/monthLaborer: About US$1.94/day
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First impressions from Myanmar
Confucius never arrived!
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MYANMAR: New Asian Tiger?§ Democratic reforms occurred very recently, in March 2011
§ International sanctions have been lifted, opening up tremendous opportunities for foreign investors
§ GDP growth rate is projected to average around 6 per cent per year until 2020, with GDP doubling to $124 billion by 2020
§ Myanmar has all the elements required to create another Asian economic miracle
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MYANMAR: New Asian Tiger?
• The challenges of Myanmar:§ US$1,500 : Average income of a worker in Myanmar today,
about 70% below that of benchmark Asian countries§ 4 years of schooling on average in Myanmar § 10 million additional will migrate from the countryside to
Myanmar’s large cities by 2030§ US$650 billion: Total investment needed by 2030 to support
growth potential, US$320 billion in infrastructure alone
Source: McKinsey&Company
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MYANMAR: New Asian Tiger?
• The Opportunities in Myanmar:§ Potential to achieve US$ 200 billion+ GDP in 2020, over four times
as high as today§ Consumer spending expected to triple from US$ 35 billion to US$
100 billion, with the consumer class rising from 2.5 million members in 2010 to 10 million members in 2030
§ Potential to create more than 10 million additional non-agricultural jobs by 2030
§ 500 million people living in near in close proximity to the Myanmar border, a huge potential market
Source: McKinsey&Company
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INVESTMENT IN MYANMAR’S FISHERIES SECTOR
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INVESTMENT IN MYANMAR - Introduction • With its natural resources, large labor market, and untapped market, Myanmar represents
excellent potential for business investment.
• Myanmar welcomes foreign investments in all forms. The Government is intending to maintain good and strong economic relationship with all countries, foreign organizations, and investors.
• The nation has a young population and a high number of English speakers.
• A fertile and resource-rich country strategically located in the heart of Asia, one of the world’s largest growing economic regions.
• Firms involved in precious stones, agricultural products, or other industries may find Myanmar a fascinating place to begin developing longer term interests.
• Significant legal reforms recently passed which aim to improve investment climate.
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Form of Foreign Investment• Under the recent Foreign Investment Law 2012, foreigners are now
allowed to set up foreign-owned companies (whether this company was incorporated in Myanmar or abroad), or go into a joint venture with a Myanmar citizen or the Myanmar government
• Any company with one or more foreign shareholders is classified as a Foreign Company, and is subject to Foreign Investment Law rather than Myanmar Companies Act (1914)
• Possibility of establishing a Special Company created under the Special Company Act of 1950 (where part of the equity belongs to the State)
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Form of Foreign Investment (cont.)• Foreign companies with business relations or investment projects in
Myanmar may apply to set up representative offices in Myanmar (this is a common practice for banks).
• In contrast with a branch, a Representative Office of a company incorporated outside Myanmar is not allowed to perform direct commercial or revenue-generating activities in Myanmar.
• However, a representative office is permitted to liaise with its head office and collect data useful for the head office.
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Form of Foreign Investment (cont.)• A foreign investor may incorporate a 100% foreign owned company in
Myanmar when permitted by the Myanmar Investment Commission.
• A foreign company may establish a place of business or carry on business in Myanmar as a branch of a foreign incorporated company with a Permit to Trade from the Ministry of National Planning and Economic Development.
• A foreign investor can join with any individual, firm, company, co-operative, or state-owned enterprise from Myanmar to establish a joint venture, either as a partnership firm or a limited company on the basis of a joint venture contract (ratio of foreign capital is now decided by the JV parties)
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Form of Foreign Investment (cont.)• Foreign companies with business relations or investment projects in
Myanmar may apply to set up representative offices in Myanmar (this being a common practice for banks).
• In contrast with a branch, a Representative Office of a company incorporated outside Myanmar is not allowed to perform direct commercial or revenue generating activities in Myanmar.
• However, it is permitted to liaise with its head office and collect data useful for the head office.
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General Types of Companies• Private Limited Liability Company
• Public Limited Liability Company
• Sole Proprietorship
• Company Limited by Guarantee with Share Capital
• Company Limited by Guarantee without Share Capital
• General Partnership
• Branch of a Foreign Company
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Capital requirement• Minimum capital required to register for a Permit to Trade:
§ Kyats 133,333,333 for an industrial company
§ Kyats 66,666,666 for a trading company
§ Kyats 40,000,000 for a service company
Note: Fifty percent (50%) of the prescribed capital must be brought in as foreign currency before the Permit to Trade is issued and the balance 50% must be remitted within 30 days prior to the date of renewal of Permit to Trade
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Investment Incentives• Exemption or relief from income tax on reinvested profits within one year• Accelerated depreciation rates approved by the Commission• Fifty per cent relief from income tax on profits accrued from exports• The right to pay income tax on behalf of foreign experts and technicians employed in
the business, and the right to deduct such payment from assessable income• Right to pay income tax on the income of foreign employees at the rate applicable to
Myanmar nationals• Right to deduct Research and Development expenditures from the assessable income• The right to carry forward and set off losses up to three consecutive years from the
year the loss is sustained• Exemption or relief from customs duty and other internal taxes on import of
machinery, equipment, instruments, machinery components, spare parts, and other materials used in business during the period of construction
• Exemption or relief on customs duty and other internal taxes on imported raw materials for the first three years of commercial operation after completion of construction
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Investment Guarantee• Enterprises operating under the Foreign Investment Law have a State
guarantee against nationalization and expropriation.
• Guarantee is subject to exception if the nationalization or expropriation is in the national interest, in which case the investor is to be compensated for the market value of the investment.
• Government also guarantees that investment will not be terminated during the permitted term, and foreign capital will be transferred to investors upon the expiration of the term of the investment contract.
• Myanmar has investment protection agreements with China, India, Kuwait, Laos, the Philippines, Thailand, and Vietnam.
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Investment in Myanmar’s Fisheries Sector - Overview
• Geographical endowments:– Long coastal line: ~ 2,832 km– Continental shelf covers 228,751 km2
– Myanmar fishing water (including the EEZ): 486,000 km2
• Rich and varied fishing resources: a production potentials of 1.05 million metric tons per annum from marine sources
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Myanmar’s Fisheries Sector - Overview• The fishing sector is considered one of the most
important agriculture sectors in terms of food security, employment, and rural development
• Fishery products are a staple of the Burmese diet, a major source of animal protein in Myanmar
• Per capita consumption of fish: 42.5 kg/year in 2007. In 2000, per capita consumption of fish was three times higher than that of meat
• The fishery sector contributed 9.1% to the national GDP in 2005-2006 fiscal year
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Main fishery resource in Myanmar
• Freshwater through:– Fish culture– Leasable resource– Open fisheries
• Marine fishery through:– In-shore fisheries– Off-shore fisheries
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Main fishery resource in Myanmar
• 2 main categories for management purposes:– “Inn” leasable fisheries: Lease holders enjoy exclusive
rights to fish the lease area including preventing access by others and a certain degree of environmental management and control. This is referred to locally as the "Inn" fishery
– Open fisheries: These are fisheries in all other areas including all types of fishing operation. License by DoF is needed to fish in these areas. All fishing gears require a license.
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Leasable Fisheries• Floodplain fishing grounds leased to individuals or groups for
fishing activities on an annual basis• Rights of the lessee:
– Stock species of their choice, numbers not defined– Sole right to exploit all fish resources, using any gear
• Leasing through auction process:• Auction committee: the DoF, the Revenue Department,
the Land Allocation Committee, the Township Committee, and some other higher authorities
• Duration of lease: 8 years – can be renewed
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Open fisheries
• Strictly speaking, all fishing gears require a license from the DoF
• In practice, it is not easy to collect license fees from small gears
• Scope of fishing activities in open fisheries is unclear, and it is hard to control widespread fishing activity in water bodies, streams, lakes, reservoirs, and rice fields
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Investing in Fisheries Sector – Institutional Framework• The Myanmar Fisheries Federation (“MFF”)
– Administers applications for undertaking fisheries and aquaculture activities
– Administers applications to the Livestock and Fisheries Bank for loan applications.
• The Department of Fisheries (“DOF”)– Issuing licenses for fisheries gear/vessels/sites and
aquaculture sites/ventures– The evaluation of sites for aquaculture or fisheries– Auctioning of Leasable Freshwater Fisheries– Etc.
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Fishery regulatory framework• Law Relating to the Fishing Rights of Foreign Fishing Vessels (1989)• Myanmar Aquaculture Fisheries Law (1989)• Myanmar Marine Fisheries Law (1990)• Freshwater Fisheries Law (1991)• Law amending the law relating to the fishing rights of foreign fishing vessels (1993)• The Fisheries notification on prohibition of fish importing’ lists fish species that may not be imported,
exported, sold or kept in captivity;• Notification 2/92 protects spawners, breeders and fingerlings of freshwater fishes, specifying those species
that it is forbidden to catch, export, kill or keep during the closed season;• Notifications 8/94 controls trade in mud crabs under section No. 35 of the Aquaculture Law;• Notification 9/94 defines the measuring systems for crabs, and sets limits;• Notifications 2/95 and 3/95 prohibit trade in spawners, breeders and juveniles of marine and freshwater
prawns, which cannot be caught, exported, sold, killed or kept in captivity in the closed season;• Notification 5/2001 controls the import, export, culture, production, sale, propagation or possession of the
African catfish (Clarias gariepinus) under Sections 35 and 20 of the Aquaculture Law;• The Notification for control of endangered fish species lists all the species of aquatic animals and fish that
are protected and included in the list of endangered species in the Convention on International Trade of Endangered Species (CITES);
• Notification 2/2001 protects the Whale shark (Rhincodon typus), which is a CITES listed specie
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Restrictions• Prohibited foreign-invested activities in fisheries sector: None• Economic activities only allowed in the form of Joint Venture with citizens
(Cap on foreign capital ratio: 80%) by recommendation of the Ministry of Livestock, Fisheries and Rural Development : (Notification No. 49/2014)– Manufacturing of fishing nets– Construction of fishing jetty and fish auction market– Research work related to livestock and fisheries– Marine fisheries– Manufacturing of marine products– Import, export and breeding of animal and fish species– Breeding of fresh water fish, marine fish, and prawns– Laboratory check for marine products– Culture of fresh water fish and marine fish
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Restrictions• Economic Activities which require Environmental Impact
Assessments: (Notification No. 50/2014)• Large scale of breeding and production of fresh water and marine fish,
prawns, and aquatic animals • Encouraged business activities for foreign investors:
• fish meal plant• dockyard and fishing port and fish-net making factory• development of shrimp hatchery• establishment of shrimp farm
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Myanmar’s Fisheries Sector - Challenges
• Lack of capital and technology• Lack of good management practices and codes of
good practice for aquaculture sector• How to minimize the harmful effects of farm-bred
species to the ecosystem
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WHY CHOOSE MYANMAR?
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WTO ANALYSIS OF LIBERALIZATION OF MARKET ACCESS: MYANMAR IS AT SAME
LEVEL WITH INDIA – NOT TOO BAD?
• *Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement
Country Limitation of market access*
Country Limitation of market access*
Malaysia medium Myanmar highIndonesia medium Cambodia medium
Philippines medium Laos mediumSingapore low India highThailand medium China mediumBrunei high Vietnam low
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WHY CHOOSE MYANMAR?
Last untapped market in Asia with great potential to become new FDI hub
Whether Myanmar meets potential depends on commitments on institutional reforms:• OPEN OR ISOLATED?• MODERN OR REGRESSIVE?• Remember:
§ Myanmar is the founding member of WTO that means WTO service sector commitment : Unbound
Þ Myanmar must move fast on concluding free trade agreements
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Questions & Answers
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