The Myanmar legislature enacted the Myanmar Investment Law (the "MIL") late last year. The MIL repealed the 2012 Foreign Investment Law (the "FIL"). In relation to the MIL, the Myanmar Ministry of Planning and Finance has drafted the Myanmar Investment Rules (the "MIL Rules").
The new regulatory framework relates to various matters relating to employment. Specifically, some of MIL's objectives relate to employment matters – ranging from job creation to development of human resources. Investors should consider these provisions in managing their Myanmar workforce.
The FIL previously provided requirements in relation to worker ratios in accordance for domestic skilled employees. For instance, investors were required to (in most cases) ensure that domestic skilled employees constitute 25% to 75% of the total workforce within the first two to six years of commencing the business. These restrictions have been removed in the MIL. Another provision which required pay parity between certain categories of domestic and foreign employees has also been removed.
However, other MIL provisions provide restrictions in relation to hiring. For instance, positions for labour which "does not require skill" must be filled by domestic employees. The MIL also lays down various other requirements which businesses need to consider, especially in relation to compliance with labour laws and resolution of disputes between employers and employees.
Some provisions which are aimed specifically at foreign employees may require special attention from a human resource perspective. For instance, investors are responsible for supervising certain employees such as "foreign experts", "supervisors" and their families, and ensuring compliance with a wide range of matters ranging from domestic law to the "culture and traditions of Myanmar". Further and under the MIL Rules, investors looking to hire a "foreigner" as "senior management, technician expert or consultant" are required to seek approval after submitting "expertise evidence or degree and profile".
In relation to offshore remittances, MIL permits investors, subject to certain restrictions, to remit (or "transfer abroad") funds including remuneration and earnings of "foreign expert(s)". Further, it permits offshore remittances by "foreign workers with legal work permits". However, MIL gives the government power to "prevent or delay" a funds transfer if it relates to "social security, public retirement, or compulsory savings schemes" or "severance entitlements of employees".
Additional changes relating to incentives, reporting and compliance
The MIL contains a chapter which provides various "responsibilities of investors". These include the responsibility to "close" or "discontinue" an investment only after paying compensation to employees in accordance with domestic law, to pay wages due under law even if an investment is 'suspended', to pay compensation for injury or death, and to comply with domestic labour laws in general.
The MIL Rules also connect reporting and compliance requirements to employment matters. For instance, a submission relating to a proposed investment must be accompanied with information relating to the number of employees which will be "appointed". Further, investors are required to report any "material variations" relating to "employment performance" of the investment. The MIL permits the government to take action in cases where there is evidence to suggest that false information was dishonestly provided or concealed in relation to "evidence of employment".
The MIL Rules also link various incentives and regulatory permits to employment matters. For instance, applications for tax incentives are supposed to be considered on the basis of a range of factors, including whether the investment will "assist with the creation of new employment opportunities" and "development of a skilled labour force". Further, senior managers of a business are subject to additional scrutiny under the regulatory framework. While assessing applications for permits, regulatory authorities are required to consider whether directors, secretaries or other persons who 'control' the company have demonstrated "financial commitment" to the relevant investment, and are "of good character and business reputation".
As can be seen from the above, the new regulatory framework in Myanmar contains various provisions which apply to employment matters.
Under the new regulatory framework, misrepresentations, omissions or other similar acts can lead to a range of possibilities, including the revocation of approvals, which may seriously affect business operations. Businesses should therefore review the provisions and ensure they are compliant with employee requirements.
With more than 30 years' experience in Southeast Asia and a presence in Myanmar, we can help businesses navigate through Myanmar's regulations, institutions and culture.
Written by Fatim Jumabhoy (Partner), Tess Lumsdaine (Senior Associate), Sarah Yazid (Associate) and Dheer Bhatnagar (Associate)