Accountancy in Myanmar

Country overview

The Republic of the Union of Myanmar. Some nationals still refer to their country as Burma. The name change occurred in 1989. Myanmar has an area of 676,578 square kilometres. Myanmar is the second largest country in South East Asia after Indonesia.

Myanmar is a country rich in natural resources; Agricultural land, Renewable energy, Minerals, Forests, and Gas. A new administration, new laws, removal of sanctions and rapidly growing foreign investments are all transforming Myanmar.

Myanmar shares borders with India, Bangladesh, Laos, Thailand and China. Myanmar has 5,876kms of borders of which 1,930kms is coastline providing access to the Bay of Bengal and the Andaman Sea.

The census of 2017 reported a population of approximately 54 million, in fifteen regions or states, within which there are 67 districts, these being subdivided into townships, then towns, wards and villages. The main areas of urban population by percentage are approximately, Yangon 70%, Kachin State 36% and Mandalay 34%.

Muslims, Hindus, Christians and Buddhists all live in Burma. It is a rural country but urbanisation is growing rapidly, 34% in 2015, and forecast 40% in 2025.

Many languages are heard in Myanmar. 136 are officially recognised and includes all the languages spoken within ethnic groups. However, approximately 67 percent of the population speak Burmese, which is the official language. This originates from the language spoken by the Bamar people, who have been and are the largest ethnic group within the country.

The languages used can be traced back to Sino-Tibetan, Austro-Asiatic, Tai–Kadai, Indo-European, Austronesian, and Hmong–Mien. There is also a sign language for Burmese.

Yangon, formerly known as Rangoon is the country’s largest city, the heart of the growing economy with numerous parks and lakes, and the sacred Shwedagon Pagoda. A gold plated stupa, which is said to house Buddhist relics and which dates back to the 6th century.

However, Myanmar’s capital was moved North to Nay Pyi Taw, 320kms from Yangon. Construction took place over ten years, starting in 2002 and completed in 2012. Having the ability to start from scratch the City has plenty of wide open areas. Relative to its area it has a low number of inhabitants. Two ASEAN (Association of Southeast Asian Nations) Summits have been staged here, and also the South East Asian Games. Myanmar joined ASEAN in 1997. Its location is being harnessed more every year for trade and also to provide trading routes to neighbouring countries.

Myanmar Regions and States: Ayeyarwady Region, Bago Region, Chin State, Kachin State, Kayar State, Kayin State, Magway Region, Mandalay Region, Mon State, Rakhine State, Shan State, Sagaing Region, Tanintharyi Region, Yangon Region, and Nay Pyi Taw, Union Territory under direct administration of the President.

Knowing some of the history of Myanmar allows a better perspective on the enormous changes that have taken place and which continue at a rapid pace, spurring the economy. Myanmar is recognised as one of the last areas ripe for development with huge economic potential for growth.

Burma was a monarchy prior to the 19th century. The country then became part of British India and this would remain the status until 1938. In 1927 British Burma with some self rule saw escalation of tensions due to opposing powerful groups in Burma. This would become even more of an issue when groups joined opposing sides in World War II. The dominant group was the Bamar.

In 1946 a Myanmar had a transitional government. The Deputy Chairman was Aung San (from the Bamar Group). This gave him authority over all areas of Burma, including regions not previously under Bamar control. In 1947, he was assassinated together with some members of the cabinet.

Burma gained its independence from Great Britain in 1948, allowing the formation of a parliamentary system. The first President appointed was Sao Shwe Thaik.

However, despite independence Burma did not become a member of The Commonwealth. A bicameral parliament was created, (a legislative body having two chambers). The Assembly of the Union Pyidaungsu Hluttaw is the national level bicameral legislature of Myanmar, officially known as the Republic of the Union of Myanmar. The Pyidaungsu Hluttaw has two assemblies. The Amyotha Hluttaw (House of Nationalities). This is the Upper House with 224 members. There is the Pyithu Hluttaw, the Lower House with 440 members (House of Representatives).

The area of Myanmar brought together regions that were known as Lower Burma, Upper Burma and Frontier Areas. These regions had previously been registered separately when under jurisdiction from Great Britain.

Myanmar gained further recognition when in 1961 the Permanent Representative to the United Nations, Mr U Thant became Secretary-General. He had been The Secretary to the Prime Minister. He was the first appointee not from a Western country to be selected as head of any international organisation. He retained this appointment for ten years.

In 2008 changes appeared with Myanmar’s military drafted constitution being overwhelmingly approved by 92.4% of the 22 million voters with reported voter turnout of 99%, this being phase one of a two-stage referendum leading to elections in 2010 and 2012.

In November 2015 further general elections were held, which led to the National League for Democracy winning an absolute majority of seats in both chambers of the national parliament, to make its candidate president. As you may have seen in other reports, there are laws that prevent Aung San Suu Kyi from taking the title President

President: Win Myint, National League for Democracy

State Counsellor: Aung San Suu Kyi, National League for Democracy

Vice-President: Myint Swe, Union Solidarity and Development Party

Vice-President: Henry Van Thio, National League for Democracy

Aung San Suu Kyi is The State Counsellor of Myanmar, the de facto head of government. The President is the de jure (in accordance with law) Head of State and Head of The Government. Note: The charter does allocate 25% of seats in parliament to the military.

Within Myanmar there are regions each with their own assembly, or Hluttaw.

However, the elections meant that 50 years of military rule were ended and this placed Myanmar on the international stage. Trade sanctions were removed, leading to change of forecasts for the economy, which point to a future of prosperity for Myanmar.

Economic overview

The currency in Myanmar is The Burmese Kyat, currency code MMK, currency symbol K.

The removal of trade sanctions by The Obama Administration was a huge positive step, opening up investment flows and boosting economic growth that had effectively been blocked.

There have been many news laws and legal reviews continue to arrive rapidly. These are opening up the country to overseas investments and adding greater flexibility for business and financial institutions. Legal reforms such as The Foreign Investment Law and The Financial Services Law have opened doors for foreign investors. Also there have been identified areas requiring priority

investment, encompassed within The Special Economic Zone Law. Furthermore, overseas banks have been provided more flexibility to operate in Myanmar. These reforms and other changes have grown and continue to boost investor confidence. The Myanmar Investment Law 2016, inter alia, introduces a faster Government Endorsement process for companies seeking approval for new projects for non-restricted business activities. More flexible rules for land leases are also included in the updated guidelines.

The new Myanmar Companies Act will come into force on 1st August 2018 and is eagerly awaited, providing much greater investment flexibility for foreign ownership. The changes are very extensive. The existing restrictions for foreign investment have been reformed. A holding of up to 35 percent of shares in a local company is now authorised. Furthermore, a 100 percent foreign ownership is now permitted for operations in the education sector and as of May 9, 2018, wholesale and retail services. Note: If a Myanmar domestic business acquires investments with over 35 percent of its shares being from a foreign entity the company is considered to be a foreign company.

Myanmar headline figures for 2017/2018

GDP US$66.2billion

GDP per capita US1, 4250.50 (2016)

Export revenues increased by to US$11.9 billion. (+6.9% annual growth)

Imports revenues increased grew by 3.7% to US$17.2 billion. (3.7% annual growth)

Sector results: 2017/2018

Agriculture 25%

Industry 35%

Service Industries 40%

Inflation 5.8%

Unemployment rate 0.9 (Source: World Bank)

Foreign direct investment was over US$4.5billion as at the end of November 2017.

Economic growth

In 2012 this was 5.9%, with ongoing yearly positive change, rising to 8.7% in 2013/14, largely due to telecommunication, mining, oil and gas, construction and manufacturing sector investments. Last year, 2017/2018, growth was 6.7%. The forecast for 2018/2019 is 7.48%, driven mainly by services, industry and agriculture. The forecast for 2022 is 7.55%. (Source: World Bank).

All sectors are growing, notably service industries due also to the growing prosperity of the population. There has been strong demand for Internet and mobile telephone services, as well as private education, institutions and entertainment. Tourist numbers also show continual growth; 1 million visitors in 2012. 2 million in 2013. Over 3.4 million in 2014. 4.7 million in 2015.

The banking structures have been revitalised and radically changed with key names now being; Myanma Investment and Commercial Bank, Myanmar Economic Bank (MEB), Myanma Foreign Trade Bank (MFTB) and Myanmar Agriculture Bank. Now with the new Financial Institutions Law 2016, 13 foreign banks have opened and 48 representative offices of foreign banks. Developments also continue apace with new IT networks and reporting systems. There are operations from Union Pay, Western Union, MasterCard, Visa Card and ATM systems.

Myanmar will also soon be introducing new laws that cover trademarks and Intellectual Property (IP). You should soon, within legally binding timescales, act to protect your trademark and IP in Myanmar.

Myanmar is already signed up to the World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights, the TRIPS Agreement.

Special Economic Zones SEZs

There are currently three coastal SEZs: Thilawa, Kyaukphyu and Dawei. Sizeable benefits are offered for investors and incentives, such as special custom duty rates, tax exemptions and other incentives.

Myanmar’s membership to ASEAN states will be increasingly important as these SEZs grow adding more port facilities.

ASEAN. This is a group of ten Southeast Asian countries. The aims of this group are to encourage Pan-Asia interests, generate cooperative initiatives between member countries, seeking broad improvements to grow their economies. Other objectives are to facilitate better security and

interaction between countries, ranging from social, to educational, to new business initiatives. Member countries are Myanmar, Indonesia, Malaysia, The Philippines, Singapore, Brunei, Cambodia, Laos, Vietnam and Thailand. The total land area for all ASEAN countries is 4.4 million square kilometres. This is 3% of the total land area of Earth, and a total population of approximately 640 million people.

Due to its geographic location, Myanmar is becoming an important logistics hub. It is recognised that there are faster transit times to Thailand by road in Myanmar, as opposed to existing maritime routes. (See OBOR, below).

One company that have seized this opportunity is Yamato, the N°1 Japanese logistics company. They recently announced major new plans for operations in Myanmar. Another new logistics centre has also opened bringing together Damco, a global provider of freight forwarding, chain management services and Myanmar based construction company Star Light Group. Damco is part of A.P. Moller – Maersk.

For Myanmar by volume of exports, key destinations are China 39% and Thailand 20%. Myanmar is a key destination for imports from China, 33%, Singapore 15%. These countries top the list for sources of investment, which also include Japan and a long list of international parties, all now focussing on Myanmar.

There is unmistakeable change of Government approach, focus and solid intent to stimulate more manufacturing, increased power generation, improved transport links, all with the aim of growing exports worldwide and notably to ASEAN states.

Promoted Sectors have been announced by the Government together with multiple investment incentives and tax breaks. Key areas being; telecommunications, information technology, electricity generation, renewable energy, city development, hotels and tourism, construction of roads, bridges, railways, sea and river ports and dry ports, health services, scientific research, airport operations, education services, agriculture, forest conservation and plantation, livestock production, transport services, and manufacturing excluding cigarettes and alcohol.

Natural resources have been a continual source of revenue for many years. A new Joint Venture has added to this prosperity. These private/Government joint ventures offer win win opportunities. The state owned company Myanmar Petroleum Enterprise (MPE) is working with Myanmar Company Yandanar Su for the production of Liquid Petroleum Gas LPG. MPE figures indicate that state owned LPG plants produce about 800 metric tons of LPG per day. This covers only about 19 per cent of the country’s demands. The actual LPG demand in a year in Myanmar is between 50,000 to 60,000 metric tons.

With the roll out of mobile telecommunication services three network providers emerged. MPT with 42 per cent market share, Telenor (Norway) at 35 per cent and Ooredoo (Qatar) at 23 per cent. Recently MyTel became the 4th Telco in Myanmar and is launching a 4G network. There has been a huge rise in the purchase of SIM cards due to a big drop in price to just over US$1, and because these are available in many more sales outlets.

Burma’s judicial system is limited. Laws and processes introduced by the British remain largely unchanged.

Transport infrastructure

It is widely recognised that substantial investment is required. An infrastructure improvement plan for the transport sector has been published by The Government. Also, publications have appeared showing Myanmar’s links to OBOR the One Belt One Road Project from China. At a recent conference, in China, an extra $113 billion in funding was announced for the entire project. The plans show that Myanmar will benefit from new transport corridors through Myanmar to India, and also to Thailand and Malaysia.

The Myanmar government has officially stated that improving the transport infrastructure is a recognised premier priority. The poor road and rail services are not sufficient for the growing markets and public requirements. There are 150 designated planned transport projects for road, rail, sea and air transport facilities.

There are a growing number of public-private partnerships (PPP) also in this sector. The Asian Development Bank (ADB) was awarded contracts by the Myanmar Government with the focus on initiatives to improve transport facilities. A Government authored National Transport Master Plan has been created. Investment of $60 billion is required over the next 15 years.

Transport by road is still the dominant solution, taking over 90 per cent of all freight in the country. Even for passenger journeys the figure is 86 percent. Thilawa (SEZ) on the coast is important, with new terminal buildings and warehousing. Currently, Yangon Port handles most of the import and export traffic.

Myanmar Railway (MR) is state owned and has the longest network of all the ASEAN states but it requires extensive overhaul. A $2.5 billion Yangon railway station project was recently announced, with the winning consortium of companies being Oxley Holdings from Singapore, Sino Great Wall Co. from China and Min and Dharma Co. from Myanmar.

Myanmar has 25 airports; three airports offer international flight services – Mandalay, Yangon, and Naypyidaw (Nay Pyi Taw) plus Hanthawaddy International Airport which is due to open in 2020 in the Bago Region. This is 77 km from Yangon. Plans show an initial capacity of 12 million passengers a year, rising to 30 million. Yangon International Airport handles the largest number of flights and is currently 15kms from Yangon. There are reports of a new airport site being planned. Flight services are provided by Myanmar carriers and approximately 30 international carriers.

Investments from Japan have been numerous and well publicised in Myanmar especially within the transport area. The World Bank announced facilities of US$40m to help develop the key ports. This is just phase one, with the overall project valued at $200m. China is also linked to the Kyaukphyu Special Economic Zone project, with reports valuing this at US$14 billion to create a commercial port with associated services in Rakhine state.

Summary of foreign investment by sector since 2005.

US$M Foreign Investment Foreign Capital to be brought in 2017 – 2018 end of 31/03/2018
Oil & Gas 22,410
Power 21,000 405
Manufacturing 9,533 1,769
Transport & Communication 9,055 902
Real Estate 4,976 1,262
Hotel & Tourism 3,027 177
Mining 2,898 1
Other Services 1,886 1,005
Livestock & Fisheries 585,424 585 27
Agriculture 384 134
Industrial Estate 237 34
Construction 38

The figures reflect strong, recent resurgence in confidence for all sectors, notably in Oil and Gas, Power, Manufacturing, Real Estate, Transport and Communication and Mining.

Source: Myanmar Government Statistics.

Doing business in Myanmar

As of November 2017 the number of entities registered since 1988 is as follows:-

Myanmar Companies: 52554

Foreign Company/Branches: 5843

Partnerships: 1072

Associations: 138

Joint Ventures: 69

Total 59676

 


Latest version updated 11th April 2019

Country Breakdown

53.85

Million

Population

K

Burmese kyat

Currency

$ 69.32

Billion

GDP

676,575

km2