Glynn Cooper, Mark Robinson, Kathryn Thornton and Su Wai Nang
Myanmar has been continuing its push to attract foreign investment. Rapid developments in the legal environment has taken place to facilitate such investments, including the passing of the Myanmar Investment Laws, and the revamped Myanmar Companies Law, all in the last five years.
Against the backdrop of the global coronavirus pandemic, concerted efforts by the Myanmar government to get the economy back on track before the upcoming elections in November 2020 are making the second half of 2020 a promising time for investors seeking out opportunities.
COVID-19 Economic Relief Plan
The COVID-19 Economic Relief Plan (“CERP”) announced in April 2020 provides opportunities for investors to benefit from government support in various areas including financing, tax and other relief packages.
CERP sets out seven goals, and detailed strategies and action plans to achieve such goals. These goals are:
- to improve macroeconomic environment through monetary stimulus;
- to ease the impact on the private sector through improvements to investment, trade and banking sectors;
- to ease the impact on labourers and workers;
- to ease the impact on households;
- to promote innovative products and platforms
- to strengthen the healthcare systems; and
- to increase access to COVID-19 response financing.
Increased measures to promote strategic projects and infrastructure development
In line with the second goal, CERP contemplates:
- for large private investments by reputable international firms already in the pipeline but experiencing delays, an expedited approval process;
- for new renewable energy projects and strategic infrastructure public-private partnership (“PPP”) projects, the expediting of the solicitation process before the end of 2020; and
- for the manufacture of key COVID-19 or medical-related products using currently vacant state-owned factories, a call for investments via a simplified government procurement process.
The Government is also focused on public spending in healthcare, key economic infrastructure and other strategic and ready projects.
Details of nationally strategic investment projects will be made available on the Myanmar Project Bank, a centralised and publicly accessible online platform to provide transparent information.
As an example of Myanmar seeking to attract cross-border investment, the Ministry of Planning, Finance, and Industry (“MOPFI”) will work with Singapore-based Infrastructure Asia (“Infra Asia”), established by Enterprise Singapore and the Monetary Authority of Singapore, to advance priority infrastructure projects.
A Strategic Roadmap for Tourism Recovery was announced by the Ministry of Hotels and Tourism in June 2020 to assist the tourism sector, which was heavily impacted by the pandemic. The roadmap provides for amongst other things, reduced license fees, the provision of loans, and promotion of domestic and international tourism, with plans to create travel bubbles through bilateral agreements with neighbouring countries such as Thailand, Cambodia, Laos and Vietnam.
Continued liberalisation and disruption to financial services
Headline deals have been announced following regulatory changes introduced in 2019 to liberalise the banking and insurance sectors.
In January 2019, the Central Bank of Myanmar (“CBM”) issued an order allowing foreign banks and financial institutions to invest up to 35% in local private banks.
In April 2020, an affiliate of GIC (a sovereign wealth fund established by the Government of Singapore), Greenwood Capital Pte Ltd and Norfund, the Norwegian Investment Fund for Developing Countries, acquired equity stakes in Yoma Bank, one of the largest private banks in Myanmar in a transaction valued at approximately MMK 131 billion.
Similarly, in January 2019 it was announced that that the Myanmar insurance sector would be liberalised by opening it up to participation by foreign insurers. Provisional licenses have since been awarded to five foreign companies, Prudential, Dai-ichi Life, AIA, Chubb and Manulife, through their wholly owned subsidiaries.
In the CERP action plans, the Government of Myanmar has set out plans to promote the use of mobile financial payments (including but not limited to KBZPay, CB Pay, Wave Money, m Pitesan, and Ok Dollar), and the Government itself will use mobile payments whenever it is feasible. In addition, by the end of 2020, e-commerce and social-commerce electronic money transactions must be through bank transfers or mobile payments or card payments.
Significant disruptions to financial services has occurred. In particular, a host of mobile and digital payment solutions offered by providers such as Wave Money, Ongo, KBZPay, M-Pitesan, MPT Money are making significant headway in new user acquisition in a traditionally cash-driven economy.
These disruptive companies are fast attracting the interest of global investors seeking to partner with local players to access a promising new market. In May 2020, Ant Financial, the operator of Alipay, disclosed that it would invest US$73.5 million in Myanmar-based Wave Money, a joint venture between telecommunications services provider Telenor and local conglomerate Yoma Group.
Such partnerships provide ready access to local expertise and customers, enabling global services to be quickly adopted in the local market. Local companies have a chance to benefit through such collaborations from the experience, technology and foreign capital brought in by foreign counterparts.
In light of such developments, investor interest and activity in the mobile payments, fintech solutions and the ecommerce sectors, as well as ancillary supporting services and digital infrastructure, are expected to remain strong in the coming months and years.
We understand that further regulatory changes are anticipated which would be complementary to such developments, for example in areas such as cybersecurity, cybercrime, and intellectual property.
Changes continue to provide opportunities
Despite the uncertainties brought about by the pandemic and an upcoming general election, Myanmar continues to offer strong opportunities and has the potential to attract significant investment in strategic sectors. Investors are likely to be able to benefit from the recent government support and policy in various areas.
Herbert Smith Freehills LLP is licensed to operate as a Qualified Foreign Law Firm in Malaysia. Where advice on Malaysian law is required, we will refer the matter to and work with licensed Malaysian law practices where necessary.