A directive issued at the end of March by the Myanmar Investment Commission has added an additional layer of complexity for foreign investors and granted ministries greater scope to make exceptions on a case-by-case basis.
The notification – designated 26/2016 – adjusts the list of economic activities that require a joint venture under the Foreign Investment Law.
In addition to relaxing restrictions in several areas, it adds a single new restriction on foreign investment – described by investment adviser U Shine Zaw Aung as “ominously broad”.
“Economic activities endangering watershed forests, religious sites, traditional worship sites, farm and grazing lands, water resources” are now off-limits to foreign companies, according to an unofficial translation.
“The broad language could technically be used to exclude foreign investment from any sector on a whim,” said U Shine Zaw Aung. “A careful review and reconsideration is needed.”
This addition is aimed at monitoring the location of an enterprise, not just the economic activity in question, an MIC official told The Myanmar Times last week.
Cheah Swee Gim, director at Kelvin Chia Yangon, said the prohibition is inevitably vague, as it would be “impossible” to define the full range of endangerment.
“On the other hand, the foreign investor will be at liberty to present its investment proposal in a manner that establishes that there is no endangerment, which will allow the MIC to evaluate the matter on a case-by-case basis,” she said.
It appears now that investors must take responsibility for proving their projects will not have an adverse impact on the environment, she said.
Some observers believe the new rules are problematic even if well intentioned, as they may create parallel legal requirements.
There should be one consistent framework which requires all businesses to address the adverse environmental and social impacts of their business, said Vicky Bowman, director of the Myanmar Centre for Responsible Business.
This should be enforced regardless of whether companies invest via the MIC, she said, and should be overseen and enforced by regulators in the new Ministry of Natural Resources and Environmental Conservation with the relevant knowledge, powers and resources.
“Having a separate body of law under the Investment Law can create confusion and lead to unclear lines of accountability.”
Other activities off-limits to foreign companies remain unchanged, including manufacturing arms and ammunition for national defence, the exploration and production of jade and producing “ethnic language” periodicals.
For Edwin Vanderbruggen, partner at VDB Loi, the endangerment rule is less concerning than a line at the bottom of the directive, which allows ministries to impose a local partner requirement for any investment, if they feel it is called for.
“[The statement] really confounds me. It kind of makes you wonder why there is a list to begin with,” he said.
“It is not helpful and creates additional work for investors and for ministries. Now instead of going through MIC you will need to check with the relevant ministry beforehand. It reduces the predictability of exploring an investment.”
In reality, he hopes the MIC will persuade ministries not to add any unpublished restrictions on a case-by-case basis.
“I guess it must have proved too difficult to get together an exclusive list,” he said.