Wednesday February 27, 2013
Malaysians invest RM6b in O&G, hospitality sectors in Myanmar
By CHERYL POO
KUALA LUMPUR: Myanmar is rife with business opportunities in the resource and non resource-based industries as well as domestic markets, according to speakers at seminar here.
The keynote speakers were Matrade (Malaysia External Trade Development Corp) Yangon's marketing representative M.T. Rajah, Myanmar Vigour managing director U Soe Win and Myanmar Investment Commission (MIC) member Prof Dr Aung Tun Thet.
Rajah told StarBiz that investments of US$2bil (RM6.2bil) from Malaysian companies in the hospitality and oil and gas industries had been injected into the second largest country in South-East Asia, which has a population of 60 million people of which 5 million are based in Yangdon.
The seminar gave local investors an overview of the amendments pertaining to companies, joint ventures and for individuals under the Myanmar Income Tax Law, Commercial Tax Law, Union of Myanmar Foreign Investment Law (FIL) and latest notifications issued by the ministry.
“Malaysia is perceived to be competent in high-tech industries and manufacturing quality products, so this opens us to big local markets that have yet to be saturated,” Rajah said.
Myanmar is rich in natural resources but challenges in this cash-based, underdeveloped nation mean poor infrastructure, high land premiums and rents, power shortages, no financing facilities offered by local banks and untrained labour.
The speakers encouraged investors to take advantage of the low but growing wages.
“We're looking at substantial investments toward the power, electricity generation and mining industries that will stay for the long haul. These are billions of dollars worth in resources,” he said.
The seminar outlined that foreigners can run businesses with Myanmar via foreign direct investments (FDIs) or joint ventures and that land acquisition by foreigners was prohibited.
Currently, demand is higher than supply so investors will have to put up with high lease fees.
The MIC has been formed under the FIL for governance.
FDIs that are not registered with the MIC will not benefit from tax incentives, receive a licence to import, nor receive the covering of the FIL, which entails employment requirements, dispute resolution and tax incentives.
Dr Aung listed further opportunities in industries such as transportation, energy, food security and physical infrastructure.
“We have huge projects in place such as the Dawei Dee Seaport in Kyauk Phyu (on the country's west coast),” he said, adding that their government would welcome all businesses that edify its economy.
“We cannot afford to repeat past mistakes, where we allowed investors to leave in a hurry with their gains. In our quest to attract FDIs, we cannot ignore the political sensitivities as we need to protect the domestic interest. This is the challenge we face.”
Agriculture, livestock and breeding, as well as marine fisheries are among 11 restricted activities as stated in the FIL issued last November.
“We welcome investors, but we must be discretionary about sectors that benefit the citizens. It will be case-to-case. Ultimately, we will not have Myanmar a guinea pig for untested businesses,” Aung said.
Income tax for non-resident companies start at 35%, while corporate gains tax has increased from 10% to 40%.
The Double Taxation Agreement (DTA) treaty between Myanmar and Malaysia has yet to be activated, although it has been firmed up for Singapore, India, Vietnam, South Korea, Thailand and the UK.
PricewaterhouseCoopers Tax Services executive director Pauline Lum, who also spoke at the talk, urged investors to review their business structure, implementation strategies and repatriation processes.
“Many charge in without a wholistic perspective of the scenario in Myanmar. Likewise with foreign investors who start business in Malaysia,” she said.
“Look at legal form incentives, environmental issue upon entry into Myanmar. When exiting, consider the exchange controls, repatriation and regulations.”