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www.pwc.com/mmMyanmarBusiness GuideThird editionJuly 2015

Table of Contents2 PwC1.Foreword42.The economy82.1Economic prospects92.2Regulatory environment surrounding foreign investment112.3Major foreign investors in Myanmar122.4Key sectors for foreign investment132.5Domestic investments142.6Major deals in Myanmar162.7Special Economic Zones183.Conducting business in Myanmar193.1Form of business193.2Foreign investment restrictions223.3Investment incentives233.4Investment guarantee and protection263.5New laws in pipeline264.Accounting and audit regulations in Myanmar274.1Statutory requirements274.2Myanmar financial reporting standards284.3Books and records295.Taxation in Myanmar305.1Corporate income tax305.2Personal income tax365.3Commercial tax385.4Other taxes40

6.Human resources and employment law416.1Employment of foreigners416.2Work permit processing and requirements(Managerial, supervisor, expertise)426.3Labour Laws in Myanmar426.4Permanent residency in Myanmar427.Other considerations437.1Commercial registration and licensing requirements437.2Exchange control447.3Foreign exchange447.4Foreign ownership of land and property457.5Arbitration law457.6Economic and trade468.Banking in Myanmar488.1Financial structure of Myanmar488.2Capital markets558.3Foreign exchange rates579.Country overview589.1Country snapshot589.2Brief history609.3Demographics619.4Political system and governance structure62Myanmar Business Guide 3

1. ForewordThis is our third edition of the Myanmar Business Guide. Since our lastGuide in early 2014, Myanmar has progressed quickly and we are pleased toincorporate both economic and political developments in our update.Interested investors are heartened to note that great strides have been madeon the economic front. Key initiatives include banking reforms which allowforeign banks to enter the market (albeit within a restricted capacity);drafting the new Myanmar Companies Act, which will modernise companystructures (in particular foreign shareholdings in Myanmar companies);the new Myanmar Investment Law, which will merge the current ForeignInvestment Law with the Myanmar Citizens Investment Law (to create amuch more transparent investment environment and allow for a significantimprovement in the investment incentives regime); and the planned openingof a national stock exchange in November 2015 (with the expectationof listing 5–10 qualifying companies). Taken in totality, these initiativesrepresent significantly improvements in the investment proposition forinternational investors since the re-opening of the economy in 2011 andcompliments other investment infrastucture initiatives such as the Thilawa,Dawei and Kyaukphyu special economic zones.On the political front, 2015 could be another watershed year for Myanmar.All signs point to a first free and fair election in over half a century. Theelection date has been scheduled for 8 November 2015. It will also be the firstelection after major political, economic and social reforms which transformedthe country were undertaken in early 2011, and will be a litmus test ofwidespread support for these reforms going forward. The negotiation oflasting peace agreements with ethnic groups will also be a key political issue.On a balanced note, substantial challenges remain. The country needsimmediate investments in infrastructure in order to facilitate businessinvestments. This will in turn create jobs for its people. In particular, powerand commercial real estate are in critical short supply. Banking reform, slatedin 2015, have quickened as both local businesses and foreign investors arehampered by the lack of local credit to finance their growth. Finally, besidesthe hard infrastructure, the country needs to invest in the soft infrastructureof human capital development and building of civil service competencies andinstitutions. These changes will go a long way to grow the country’s economyand to fulfill maximise its enormous potential.We trust that this updated Guide will continue to guide you on your businessventures in Myanmar.4 PwC

Contact usPwC Myanmar is located at:PricewaterhouseCoopers Myanmar Co., LtdRoom 9A, 9th Floor, Centrepoint Towers,No. 65, Corner of Sule Pagoda Road and Merchant Road,Kyauktada Township, Yangon, MyanmarJovi SeetJasmine Thazin AungOng Chao ChoonChris WooSenior Executive DirectorPwC MyanmarOffice: 959 440230 341jovi.s@mm.pwc.comManaging DirectorAdvisory ServicesPwC Myanmar (based in Singapore)Office: 65 6236 3018chao.choon.ong@sg.pwc.comDirectorPwC MyanmarMobile: 959 450023 688jasmine.t.aung@mm.pwc.comManaging DirectorTax ServicesPwC Myanmar (based in Singapore)Office: 65 6236 3688chris.woo@sg.pwc.comMyanmar Business Guide 5

6 PwC

PwC service offerings:1Mergers and acquisitions advisory2Capital projects and infrastructure advisory3Market entry strategy and advisory4Initial public offer and other capital market services5Corporate governance and risk advisory services6Taxation, customs and excise duties advisory services7Assurance services8Business and technology consulting services9Human resources advisory and international assignment services10Incorporation and corporate secretarial services11Anti-corruption and corporate restructuring servicesCommonly used SEZYSXDefinitionsASEAN Economic CommunityMyanmar Companies ActCentral Bank of MyanmarCompany Circle Tax OfficeCommon Effective Preferential TariffCompanies Registration OfficeDirectorate of Investment and Company AdministrationForeign Exchange Management BoardForeign Exchange Management LawForeign Exchange Regulation Act 1947International Financial Reporting StandardsInternational Labour OrganisationInland Revenue DepartmentIncome Tax LawLarge Taxpayers’ OfficeMyanmar Accounting CouncilMyanmar Economic BankMyanmar Foreign Investment LawMyanmar Financial Reporting StandardsMyanmar Foreign Trade BankMyanmar Investment CommissionMyanmar Investment LawMyanmar KyatState Commercial BankState-Owned Economic EnterpriseSpecial Economic ZoneYangon Stock ExchangeMyanmar Business Guide 7

2. The EconomyMyanmar stands at a pivotal junctureamidst a slew of social, political andeconomic reforms. Since the era ofcivilian rule which began in 2011, thegovernment has launched a seriesof progressive reforms, focusing onboth on the political system as well aseconomic and social programmes.The results are highly promising,with a general improvement in mosteconomic and some social indicators.Myanmar’s well-known advantages—its huge growth potential as the lastfrontier economy in Asia, a youthfulworkforce, and ample naturalresources—hold promise for thecountry to become one of the region’smajor successes in time to come.Myanmar is rich in natural resources,arable land, forestry, minerals, as wellas freshwater and marine resources,gems and jade. In recent years,the country has also emerged as anatural gas exporter, with exports toneighbouring countries providing anincreasingly important revenue stream.There are visible signs of economicprogress in Myanmar. For example,mobile phone services have neverbeen more accessible. Myanmar hashistorically had the lowest mobile phonepenetration in the region (with onlyunder 10% of the population havingaccess to mobile services). Withthe entry of Ooredoo and Telenor,telephone penetration is expected togrow to approximately 40% by 20171.Automated teller machines, which didnot exist a few years ago, are startingto dot the major cities as well.The economy is expected to grow byabout 6.4% a year in the fiscal yearending 31 March 2015 (FY14). Theeconomy continues to perform well:tourist arrivals were up by nearly 50%in 2014, foreign investment is poised tomore than double in FY14 (comparedwith the previous FY) and two-waymerchandise trade was up by morethan 30% year on year in JanuaryAugust 20142.8 PwC

2.1. Economic prospectsGrowth is expected to accelerateto an expected 7.3% per year overthe next 5 years, which will bedriven mainly by foreign investmentin large projects, particularly inheavy industries such as oil andgas, power and infrastructure.Despite the significant fall in globalenergy prices, recent oil and gasdeals suggest that the mediumterm prospects of Myanmar’supstream oil and gas sector remainpositive. The rapid growth of thetelecommunications sector, withmobile network coverage of thepopulation expected to grow fromthe current level of 12% to 70% by2017, will also boost investment. Inaddition, the construction sectorwill also contribute significantlyto growth as more infrastructureprojects continue to be undertaken.The progress of regulatory and legalreforms will attract further foreigninvestment. The establishment of123Yangon Stock Exchange, scheduledto be opened by the end of 2015,will facilitate and improve access tocapital markets. Business confidenceremains high which is evidencedby the significant inflow of foreigninvestment (close to US 7 billion inFY14, compared to US 4 billion inFY133).Economic reform is expected tocontinue in concert with politicalliberalisation. However, thereremain risks and uncertaintiesin the pathway of reform. The 8November 2015 general election andthe constitutional reforms will beclosely watched by foreign investors.Negotiating lasting peace agreementswith ethnic groups, the handling ofthe Rohinyas minority and managingracial and religious tensions will alsobe key issues. Political-event riskremains high – in particular, if the2015 election does not result in aclear winner, investors may stay onthe side-lines.“Sizing the Opportunity: Green Telecoms in Myanmar”, June 2014, International FinanceCorporation, World Bank GroupMyanmar Country Report, February 2015, Economist Intelligence Unit“Foreign investment just under USD7 billion this fiscal year”, Eleven Myanmar,6 March 2015Myanmar Business Guide 9

Clearly, continuing economic andpolitical reforms will be necessaryto draw and retain long-termWestern investments. Infrastructureinadequacies also appear to bethe main bottleneck in economicdevelopment. Shortage of qualitycommercial and residentialproperties, instability in powerand telecommunication, andunderdeveloped transportationnetworks are the frequent grousesby businessmen. To address theseconcerns, the government isexpected to continue its deficitbudget to support spending onmajor infrastructure projects.Greater financial assistance frominternational aid agencies is beingpursued by the Myanmar governmentto reduce its reliance on taxes andsovereign borrowings.45610 PwCTalent demand and together withwell-educated workforce are the keycontributing factors for future growthin Myanmar4. During the previousmilitary administration, a significantnumber of technicians, intelligentsiaand businessmen moved overseas.In recent years, we have seen thereturn of overseas Myanmar diasporato participate in the country’stransformation. The public has alsodemanded additional governmentspending on the education sector5.Assuming Myanmar maintains a highlabour productivity growth, improvesits use of capital, innovates, andgains operational efficiency throughincreased competition, many believeits economy could quadruple in sizeby 20306.“Myanmar: Unlocking the Potential”, Asian Development Bank, August 2014“Louder calls for more spending on education sector”, the Nation, 16 March 2015“Myanmar’s Moment: Unique opportunities, Major Challenges”, McKinsey GlobalInstitute, June 2013

2.2. Regulatory environmentsurrounding foreigninvestmentFollowing the introduction of theMyanmar Foreign Investment Law(MFIL) in November 2012 whichimproved the regulatory environmentfor foreign investors across varioussectors, a new draft of the MyanmarInvestment Law (MIL) is beingdeveloped, for which public feedbackis being elicited7. The draft MIL, ifenacted, will consolidate and replacethe MFIL enacted in 2012 and theMyanmar Citizens Investment Lawenacted in 2013. This new draftlaw demonstrates the government’scommitment in supporting directinvestments.The existing century-old CompaniesAct 1914 is also undergoing a reform.The new Myanmar CompaniesAct will be a critical foundationto facilitate the economic reforminitiatives in the banking andfinancial sector, including theestablishment of Yangon StockExchange and providing support tosmall and medium enterprises8.78The Special Economic Zone Law (SEZLaw) enacted in 2014 allows investorsto obtain the required investmentlicences, permits and approvals fromthe management committee of therespective SEZs instead of othergovernment ministries.The 2015 Myanmar Union Tax Law(an update of the 2014 Union TaxLaw), has just been enacted whichput forth a series of changes incommercial tax regulations andreduction in the non-residentialtax rate.The Competition Law was enactedon 24 February 2015 and currentlyawaiting detailed implementationrules. The law introduces a basicframework to regulate competition,monopolies, mergers and acquisitionand unfair trade practices.The introduction of PermanentResidence rules in November 2014allowed foreign experts and formerMyanmar nationals to extend theirstay in the country and contribute tothe economy.“Myanmar kicks off investment law modernization”, the Nation, 9 March 2015“Rewrite of Companies Act still in progress, ADB says”, the Nation, 9 October 2014Myanmar Business Guide 11

2.3. Major foreign investors in MyanmarIn 2014, the main foreign investors in Myanmar remained. China (87companies with investments of US 14.49 billion) and Thailand (83 companieswith US 10.26 billion in investments), followed by Singapore and Hong Kong(this includes Hong Kong incorporated companies with businesses primarilyin China) and the UK (including British Virgin Island and Bermuda Island).Recent trends show that other investors such as South Korea, Malaysia andVietnam have also invested significantly. Japan has a large signature locally,with high profile government visits and active participation of aid agencies ledby JICA.Table 1: Foreign investments by Country as of 31 January 2015No.CountryUS in e8,48615.964Hong Kong7,11813.385U.K.3,7136.986Republic of e ource: Information as of 31 January 2015 by the Directorate of Investment and CompanyAdministration, Ministry of National Planning Economic Development, Myanmar.12 PwC

2.4 Key sectors for foreign investmentThe key sectors for foreign investment are currently infrastructure (roads,power plants, telecommunications and logistics) and oil and gas, followed bymanufacturing, mining, real estate developments and hotel and tourism (seeTable 2).Table 2: Foreign investments by sector as of 31 January 2015No.IndustryUS in mil%1Power19,32536.342Oil and gas16,99331.963Manufacturing5,1659.714Transport & communication3,1835.995Mining2,8695.406Real estate2,2784.287Hotel and tourism2,1484.048Livestock & fisheries4530.859Agriculture2430.4610Industrial estate1930.3611Construction370.0712Other services2840.54Total53,171100.00Source: Information as of 31 January 2015 by the Directorate of Investment and CompanyAdministration, Ministry of National Planning Economic Development, Myanmar.Myanmar Business Guide 13

2.5 Domestic InvestmentsDomestic investments are mainly concentrated in the manufacturing,construction, hotel and tourism sectors. The Ministry of Hotels and Tourismis expecting 4.5 million foreign visitors in 20159. Domestic investments willplay an important role in infrastructural improvement for the hotel andtourism sectors.Table 3: Domestic investments by sector in MMK billion as at 31 July 2014No.IndustryMMK in Hotel and ort3998.737Industrial estate3016.578Real estate development1673.669Livestock & al4,574100.00Source: Information as of 31 July 2014 by the Directorate of Investment and CompanyAdministration, Ministry of National Planning Economic Development, Myanmar.914 PwC“Myanmar targets 4.5m tourists in 2015”, the Nation, 5 February 2015

Various domestic companies areplaying their part in domesticinvestments: Investment by militaryaffiliated companies such asMyanmar Economic HoldingsLimited. (MEHL) and MyanmarEconomic Corporation(MEC). MEHL is an industrialconglomerate which engagesin gem production and invarious industries includingbanking, tourism and transport.Recently MEHL is reported tobe in unconfirmed talks withSABMiller on the remaining stakein Myanmar Brewery currentlyheld by Fraser and Neave10.MEC, a conglomerate whichsupplies natural resources usedby the military, recently fundedthe Ahlone International PortTerminal project in Yangon11. The Myanmar government’sprogram to privatise stateowned enterprises (SOEs)which started in 2010 formsanother part of the domesticinvestments. For example, in2013, local conglomerate KBZGroup announced its intention tofully control Myanmar AirwaysInternational (MAI) by buying theremaining 20% stakes from theMyanmar government. YangonElectricity Supply Board (YESB)became a government corporationin 2014 with the aim of eventuallybeing privatised12. The plannedprivatisation will generateinvestors’ interest in Myanmar’spower sector. Overseas-listed Myanmarcorporations are partnering withinternational investors to investin the country. For example,Singapore-listed Yoma StrategicHoldings Ltd, 37% owned bychairman Serge Pun, is partneringwith Sumitomo Corporationand Mitsubishi Corporation inestablishing joint ventures inMyanmar. Domestic public and privateplayers are also seekingbusiness expansion. Asia GreenDevelopment Bank (AGD),First Myanmar Investment CoLtd (FMI) and the MyanmarAgribusiness Public CooperationLimited (Mapco) are seen tobe interested on a listing in theYangon Stock Exchange. Localmajor beverage company Loi Heinhas entered into joint ventureswith Japan’s Asahi in 201413 andThailand’s Osotspa in 201514.10“SAB Miller eyes stakes in Myanmar brewer”, Reuters, 11 February 2015“One more Myanmar International port terminal put into service in Yangon”, Xinhua,9 March 201512“Yangon electricity board to receive its first budget”, Myanmar Times, 2 March 201513“Japanese drinks giant to launch new beverage line in 2016”, Nikkei Asian Review,23 November 201414“Osotspa, Myanmar’s Loi Hein set up beverage joint ventures”, the Nation, 5 March 201511Myanmar Business Guide 15

2.6 Major deals in MyanmarCross-border M&A activity has gainedmomentum in the last two years.Some of the major deals announcedduring 2014 and 2015 were:Oil and gas sector UK-based BG Group andAustralia’s Woodside Energycommitted to invest more thanUS 1 billion in two shallowwater blocks and two deep waterblocks.15 Unocal, subsidiary of Americanbased Chevron, signed theProduction Sharing Contracts forits investment in block A-5.16Infrastructure sector Japanese mobile carrier KDDICorp. teamed up with tradinghouse Sumitomo Corp. to investabout US 2 billion in Myanmar’stelecommunication businessover 10 years. The two Japanesecompanies signed a deal withstate-owned Myanmar Posts andTelecommunications to jointlyoperate a mobile phone networkin the country.171516171819202116 PwC A consortium led by YongnamHoldings is participating, alongwith others, in a governmenttender for the new HanthawaddyInternational Airport on the basisof a public-private partnershipagreement for a 30-yearconcession period. The project isvalued at US 1.4 billion.18Consumer retail sector Mitsubishi Corporation enteredinto an agreement with MyanmarMotors Pte. Ltd. for the purposeof establishing a joint venturecompany, First Japan, Tire ServiceCompany Limited, to provide salessupport for Bridgestone tires inMyanmar.19 Asahi Group is to partner withLoi Hein to form a major newsoft-drinks company in Myanmar.Asahi would invest

PwC Myanmar is located at: PricewaterhouseCoopers Myanmar Co., Ltd Room 9A, 9th Floor, Centrepoint Towers, No. 65, Corner of Sule Pagoda Road and Merchant Road, Kyauktada Township, Yangon, Myanmar Jovi Seet Senior Executive Director PwC Myanmar Office: 959 440230 341 jovi.s@mm.pwc.com Jasmine Thazin Aung Director PwC Myanmar Mobile: 959 .

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