Myanmar's combined houses of parliament passed hotly debated amendments to the foreign investment law on September 7, leaving President U Thein Sein with the final decision on whether to enact the changes immediately or return them with comments to the hluttaw.
In a move that is likely to please prospective foreign investors, the Pyidaungsu Hluttaw abolished the controversial US$5-million minimum capital threshold required for joint ventures and upped the maximum share that foreign firms can hold in 13 restricted sectors by 1 percent, to 50pc.
A vote was taken on each amended paragraph following the reading of a report on the draft from the Pyidaungsu Hluttaw Bill Committee.
Another significant change was the removal of a clause that said Myanmar citizens had the right to offer to buy out a foreign investor “if they have the ability to buy and acquire by way of compensation at market rate during the original life of the contract or its extended life if the extended life is allowed”.
Representative U Win Than said the change was significant because it signalled to foreign firms that their investments could not be nationalised.
“Overall, I see the law has been made in response to the public’s voice,” U Win Than said.
Representative U Kyi Myint, of Latha in Yangon Region, conceded the draft was still somewhat protectionist and hinted that the president’s office might seek further, “subtle” changes.“The law was approved to protect the interests of the country. Since MPs are the people’s representatives, there remains a little one-sidedness towards our people,” he said.
“As the discussion continued, the top level seemed to know what should be changed because of the strong interest from the public as well as input from experts and the media.”
Macquarie University associate professor and expert in Myanmar’s economy, Dr Sean Turnell, said the passed law appeared more favourable to foreign companies that the last draft.
He said the previous requirement that foreign firms provide a minimum of $5 million in capital was self-defeating, especially when coupled with the maximum 49pc foreign ownership ratio, which left the foreign partner providing significant funding but getting little control.
However, Dr Turnell said there is still room for improvement in the law. “I am not sure, for instance, why investment in small- to medium-size enterprises continues to be limited; likewise the agricultural processing sector,” he said.
“In both these sectors Myanmar’s potential is great but they remain afflicted with a shortage of financial capital – exactly what outside investors can supply,” he said.“Similarly, I have not heard whether the far-too-rapid easing out of foreign expert employment has been revised or not. This one is a significant dis-encouraging factor for foreign investors if it is still there,” he said.
The approval of the law comes as global corporate giants from Coca-Cola to General Electric jockey for a share of an expected economic boom in Myanmar. But one of the major complaints of businesses eager to enter the country is the lack of a clear legal framework, said Romain Caillaud, who heads the Yangon office of business advisory firm Vriens and Partners.
“The law is likely to give confidence to foreign investors, but it is part of a long process to reform the legal framework of investment,” Mr Caillaud said.