Myanmar

Myanmar
Picture: Stock exchange opened in 2015
Picture: Myanmar opened stock exchange in 2015 as part of economic reforms
Picture: Hong Kong: Myanmar’s 4th largest FDI contributor
Picture: Hong Kong was Myanmar’s 4th largest FDI contributor as at March 2016
Picture: Electricity production surged by more than 40% from 2010-2014
Picture: Myanmar’s electricity production increased by more than 40% between 2010 and 2014
Picture: A land bridge between South Asia and Southeast Asia
Picture: Strategic location enhances regional logistics hub prospects
Picture: One of the fastest-growing mobile markets in Asia
Picture: Mobile subscription surges after the 2013 telecom sector liberalisation
Picture: Garment exports nearly tripled between 2010 and 2014
Picture: Myanmar garment exports nearly tripled between 2010 and 2014
Picture: SEZs built to boost economic growth
Picture: Three SEZs with generous investment incentives under development
Picture: Lowest minimum wage among ASEAN countries
Picture: Myanmar set its first minimum wage in September 2015
Picture: Over half of population below the age of 30
Picture: More than 50% of Myanmar’s population aged under 30
Picture: Vehicle demand more than doubled
Picture: Number of registered vehicles more than double between 2011 and 2014
Table: Major Economic Indicators of Myanmar
Table: Major Economic Indicators of Myanmar

Recent developments

  • Myanmar has shown solid GDP growth in recent years, expanding by 7% in 2015 and well above the ASEAN bloc’s average growth of 4.5%. For 2016, GDP growth is expected to accelerate to 8.6%, driven mostly by foreign direct investment (FDI). 
  • In late March 2016, Htin Kyaw, a close ally of Aung Shan Suu Kyi, was sworn in as Myanmar's new president, which followed the landslide victory of the National League for Democracy (NLP) in the country’s parliamentary elections in November 2015.
  • In March 2016, the Myanmar Investment Commission (MIC) issued a new directive to amend economic activities subject to joint-venture (JV) requirements and grant ministries greater flexibility to review FDI proposals.
  • Cumulative FDI into Myanmar reached US$63.7 billion in March 2016. Major FDI sources were the Chinese mainland, Singapore, Thailand and Hong Kong. Myanmar is part of the China-ASEAN Free Trade Area (CAFTA). It has entered double tax agreements (DTAs) with the UK, Singapore, Malaysia, Thailand, India, Laos, Vietnam and Korea, and concluded an investment protection agreement (IPA) with Hong Kong.
  • Myanmar’s exports slipped by 11% to US$11 billion in the fiscal year ending March 2016, with imports dropping by 0.4% to US$16.5 billion.
  • In the first three months of 2016, Hong Kong’s exports to Myanmar dropped by 28.7% year-on-year (YOY) to US$47 million, and imports from Myanmar shrunk 2% YOY to US$16 million.

Current Economic Situation

Myanmar is the seventh largest economy of the 10-member ASEAN[1] bloc. It has a large agriculture sector which accounts for about 35% of GDP, with services and industry respectively accounting for 40% and 25% of GDP. Major sectors include processing, manufacturing, construction and transportation.

Myanmar’s GDP growth has been solid in recent years. Despite investment reticence ahead of the general election in November 2015, the economy expanded by 7% in 2015, well above the ASEAN bloc average growth of 4.5%. For 2016, GDP growth is expected to accelerate to 8.6% in light of the country’s continued economic reforms and FDI inflows.

Economic reforms

After the NLP’s landslide victory in the parliamentary elections in November 2015, Htin Kyaw, a close ally of Aung Shan Suu Kyi, was sworn in to become Myanmar's first democratically-elected president and the first NLD president in late March 2016. In keeping with the election platforms, the new government has pledged to continue reforms. This includes reduction of the number of ministries to 21, with Aung Shan Suu Kyi now overseeing the Ministry of Foreign Affairs and the President’s Office.

Important reform measures are being introduced within the new government’s 100-day tenure. For example, the Ministry of Information is currently reviewing a controversial broadcasting law passed by the former government. On the infrastructure side, two road sections on the Yangon-Mandalay highway are being upgraded as a pilot project, which are a part of the reform projects being adopted by the new government during its 100 days taking office.

As part of Myanmar’s continued liberalisation process, foreign exchange control was abolished in April 2012. Under the new managed float system, the Central Bank of Myanmar (CBM) announces a reference rate for the kyat against the US dollar following daily foreign exchange auctions conducted with authorised domestic dealer banks. It also allows FDI to be set at market exchange rates. In July 2013, Myanmar’s president signed a new law granting CBM greater independence from the Ministry of Finance. In the same month, the Securities Exchange Law was passed, which facilitates the establishment of a stock exchange that was launched in December 2015.

In October 2014, the CBM started granting operation licences to nine foreign banks. Each of the licensed foreign banks is permitted to open one branch and restricted to lending to foreign companies in foreign currency. With four new banks gaining approval in March 2016, a total of 13 foreign banks have now been given permission to operate inside the country. FDI in the banking sector was barred previously, making it the first time in 50 years that Myanmar let in foreign banks.

In February 2013, Myanmar’s Ministry of Commerce passed a bill to allow exports and imports of 318 items of goods (except prohibited ones) without licences from March 2013. The 318 items included152 export items and 166 import items. Major categories of licence-free exports included agriculture, forestry and industrial products. Licence-free imports included electrical appliances, consumer products, clothing and textile. Abolition of licence requirements is expected to help improve trade efficiency and reduce uncertainty.

In a bid to upgrade the infrastructure, Myanmar’s government liberalised the telecom sector and allowed foreign investors to bid for the national telecom licences. In January 2014, two licences were granted to international telecom operators (Norway's Telenor and Qatar's Ooredoo) for a licence period of 15 years. The opening up of the telecom sector is considered an important step for economic reforms and infrastructure upgrading. According to the World Bank, the mobile subscriptions rate of Myanmar jumped from 13% in 2013 to 54% in 2014, reflecting the huge growth potential of the country’s largely under-served telecom market. In the same year, subscription rate of Cambodia and Laos recorded 133% and 67% respectively.

Myanmar’s reforms and opening up have caught the attention of foreign companies seeking to relocate their labour-intensive production facilities. After implementing a temporary monthly minimum wage of US$65 (including overtime and allowances) for workers in industrial zone, the government announced in September 2015 to introduce the first country-wide minimum wage of Kyat 3,600 (US$2.8) for employees working a standard eight-hour day.

International relations

After the formation of the new government under President Htin Kyaw, Chinese Foreign Minister Wang Yi visited Myanmar in the first week of April 2016, meeting his counterpart Aung Shan Suu Kyi, who said that the new Myanmar government was willing to strengthen friendly cooperation with China, which would be conducive to the national development of Myanmar.

Since early 2012, Western countries started to ease their sanctions against Myanmar in response to the latter’s political reforms and parliamentary elections. The EU lifted its economic sanctions (except military arms sales) in April 2013. Under the EU's Generalised System for Preferences (GSP) reinstated in July 2013, exports from Myanmar enjoy both duty and quota free access to the EU (except arms and ammunition).

The US suspended its investment ban against Myanmar in May 2012 (except parties tied to the military junta) in tandem with EU sanction suspension. In September 2012, the US announced to ease its import ban against Myanmar. In February 2013, the US Treasury issued a general licence to four Myanmar banks, allowing them to engage in financial transactions with US institutions. It further allows US companies trading with Myanmar to get letters of credit and fund transfer to the county. Following Myanmar’s then-president Thein Sein’s visit to the US in May 2013, the US-Myanmar Trade and Investment Framework Agreement was signed to strengthen bilateral economic ties.

In January 2013, Myanmar entered into an agreement with the Paris Club of creditor nations (including the UK, France, Germany and Japan) and multilateral lenders such as the World Bank, cutting down the outstanding debts owed to allow the country seeking fresh lending, which will be helpful in upgrading its transport and telecom infrastructure. With Western countries suspending economic sanctions and expanding their investment in Myanmar (including in its manufacturing sector), this will bode well for the country’s external sector.

Myanmar’s construction industry is expected to have a growing contribution to economic growth on the back of rising infrastructure projects from private and overseas investment and aid from multinational donors. In November 2012, the World Bank announced the resumption of lending to Myanmar. In January 2014, the World Bank committed US$2 billion of lending to supporting the government’s plans of universal healthcare coverage and access to electricity by 2030.

Investment Policy

In November 2012, Myanmar's Parliament passed the new Foreign Investment Law (FIL) to foster a more investment-friendly environment. Under the FIL, FDI in the form of 100% foreign ownership or joint venture is allowed. Sectors open to FDI include manufacturing, services, infrastructure construction, retail and wholesale businesses. Moreover, foreign firms are entitled to a tax holiday in the first five years of operation and other forms of income tax or customs duty reliefs are also available.

In March 2016, the Myanmar Investment Commission (MIC) issued a new directive to amend the list of economic activities subject to JV requirements under the 2012 FIL and grant ministries greater flexibility to make exceptions for FDI proposals. The new government has also taken steps recently to update and streamline its foreign and citizen investment laws into a single Myanmar Investment Law (MIL), and to overhaul the century-old Myanmar Companies Act. For details of the 2012 FIL, please refer to Myanmar’s Directorate of Investment and Company Administration (DICA).

In addition, foreign investors may invest under the new Myanmar Special Economic Zone (SEZ) Law, which took effect in January 2014. Besides incentives such as income tax holidays, income tax relief, and customs duty and import tax exemptions, investors can lease land from the government or authorised private owners for up to 50 years and renew for further 25 years. The main SEZ watchdog is the Central Body for the Myanmar Special Economic Zone. 

Foreign investment

According to DICA, the country’s cumulative inward FDI reached US$63.7 billion as at March 2016. Major sources of FDI were the Chinese mainland (US$18.1 billion, 28.4% of the total), Singapore (US$13.1 billion, 20.5%), Thailand (US$10.5 billion, 16.5%) and Hong Kong (US$7.4 billion, 11.5%). Under its national economic development plan, the government targets to attract US$140 billion of FDI by 2030.

About 66% of the FDI stock in Myanmar was tied to the sectors of oil & gas and power, while FDI in the sectors of manufacturing, transport and communication accounted for 10% and 8% of the total respectively.

Further information is available in the Myanmar Investment Guide.

Trade Policy

Myanmar has been a member of the World Trade Organisation (WTO) since January 1995. Import tariffs are imposed mostly on an ad valorem basis. The average MFN applied duty rate on agricultural imports is 8.6%, and more than half of the agricultural products are subject to tariff rates of less than 15%. Meanwhile, the average MFN applied duty is 5.1% for non-agricultural products. For example, textiles imported into Myanmar are subject to an average MFN applied tariff of 8.3%, with electrical machinery at an average MFN applied tariff of 4.5%. 

Myanmar is a member of the Association of Southeast Asian Nations (ASEAN), a regional bloc consisting 10 countries. As an ASEAN member 1997, Myanmar is part of the China-ASEAN Free Trade Area (CAFTA), the world’s largest free trade area by population. Under CAFTA, China’s average import tariff rate on products from Myanmar was gradually lowered from 8.3% in 2005 to 0.6% in 2012. For example, China’s tariff rate on imports of textile and clothing items from Myanmar was lowered from an average of 15% in 2005, to 5% in 2009, and zero-rated in 2012. Similarly, Myanmar will gradually lower the tariff rates on China-origin products. The average tariff rate on Chinese furniture was cut from an average of 9% in 2010 to 0.02% by 2015.

Myanmar has double taxation agreements (DTAs) with the UK, Singapore, Malaysia, Thailand, India, Laos, Vietnam and Korea, with the negotiation of an Investment Promotion and Protection Agreement (IPPA) with Hong Kong concluded in 2013.

External trade

Myanmar’s total exports slipped by 11% to US$11.0 billion in FY2015/16 (April-March). Major export destinations included China, Thailand, Singapore, India and Japan. Major exports included fuels, minerals, agricultural products and garment. During the same period, the country’s total imports dropped 0.4% to US$16.5 billion. Major import sources were China, Singapore, Japan and Thailand. Myanmar’s imported goods mainly comprised machinery, transport equipment, basic metals and manufactures.

Hong Kong's economic ties with Myanmar

Hong Kong’s exports to Myanmar represented only 0.7% of its total exports to the 10-member ASEAN during 2015 and ranked 8th among ASEAN countries in absorbing Hong Kong exports (ahead of Brunei and Laos). In the first three months of 2016, Hong Kong’s exports to the country dropped by 28.7% YOY to US$47 million. Major Hong Kong exports to Myanmar included telecom equipment and parts (29.1%), knitted or crocheted fabrics (9%) and optical goods (7.9%).

In the same period, Hong Kong’s imports from Myanmar shrunk by 2% YOY to US$16 million. Major imports from the country during the period were crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (25.4%), optical goods (22.6%), and telecom equipment & parts (12.9%).

Table: Hong Kong Trade with Myanmar
Table: Hong Kong Trade with Myanmar

More Information

More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.

 

Related Information: Myanmar infographics


[1]  ASEAN consists of 10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.