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The regulatory framework is still outdated and needs to be seriously updated for modern times
Myanmar opened to the international community in 2012. Since then, there has been some venture capital investments in the country, but it still seems to have a glass ceiling.
Just to give context, here is a list of noteworthy deals in Myanmar from the last year or so.
- International Finance Corporation (IFC) invested US$3 million in Oway (online travel agent) in May 2016
- 500 Startups injected an undisclosed amount into Myanmar’s mobile news aggregation startup Bindez in January 2016.
- Anthem Asia, an independent investment and advisory group made an undisclosed, six-digit investment in Revo Tech in January 2016.
- Star Ticket, a bus ticketing startup, has raised US$200,000 from local Internet company, BOD Tech in October 2016.
- Omidyar Network supplied Phandeeyar – the Myanmar innovation lab – US$400,000 in 2014 and US$2,000,000 in June 2016.
But despite this, VC firms still hesitate to bet on Myanmar. Here are the problems need to be urgently solved:
The registration of foreigner rules, 1948
Foreign businessmen and startup employees need Multi Journey Special Re-entry Visa (MJSRV) because they fly back and forth between many countries.
A one-time Visa is fairly useful — people are granted a 70 days stay upon entry. But, if an investor has money in a company they will want to enter the country often. After 70 days, the foreigner must leave the country.
Also Read: 4 ways to boost e-commerce in Myanmar
For the MJSRV Visa, passholders must travel to Myanmar three times a year, but the VISA itself can range in length of validity (from three months to a maximum of one year).
This visa is subject to approval by the Ministry of Foreign affairs and is approved on a case-by-case basis.
If the person wants to stay for 90 days continuously, they must register for a Foreigner’s Registration Certificate within the three-month time period. If they leave the country, they must leave the certificate at the airport and revalidate when they return.
Even though, the central government has issued visa, this document seems not meaningful to local officials, which creates a whole different headache.
Company law
The Myanmar Companies Act was enacted in 1914 and it is out of touch with the modern economy.
Because of its old age, when the Directorate of Investment and Company Administration (DICA) drafted the new law in year 2015, thousands companies were at risk of being struck off by the regulator — including local conglomerates and multinationals — after failing to respond to a request for confirmation that they were still in business.
In June 2015, DICA invited businesspeople and members of the public to submit opinions on the draft law.
The Asian Development Bank is helping with the reform of the Companies Act 1914 and will be in due course assisting with the establishment of an electronic companies registry.
However, if there is a latency of enactment, foreign capital will lack patience because they do not need to wait for Myanmar in Southeast Asia. There are plenty of other countries to invest in.
Investment law
The Foreign Investment Law was enacted in 2012. The Myanmar Citizen Investment Law was enacted in 2013. The two previous laws have been combined to the new Myanmar Investment Law which was approved by both houses of parliament in October 2016. It will come into force next year.
However, the scope of the Law is only applicable to direct investments.
For example, on March 25th 2016, the Yangon Stock Exchange (YSX) held a ceremony of the first trading of stocks. However, foreign investors can not buy/sell stock and would need another new company law.
There still is no law directly targetting SMEs and startup investment, and industrial associates in the country have been calling for policy clarity.
Other investments are based on family relationship and personal trust, but those can end in disaster if all parties involved are not careful.
Banking law
Since the abolition of the official peg and the introduction of a managed float in April 2012, the Central Bank of Myanmar has operated the daily two-way auctions of foreign exchange aimed at smoothing exchange rate fluctuations.
Despite the reforms to the foreign exchange regime, however, informal trading of foreign exchange remains pervasive.
In September 2015, the Central Bank issued anti-money laundering guidelines to fight money laundering and terrorist financing and in February 2016, Parliament passed Banking and Financial Institutions Law.
Even though Central Bank strengthened its regulations, the informal market is still workable.
As such, once the Central Government solves these problems, more foreign capital will inflow into Myanmar than has ever been seen in history.
And, hopefully, the country is great again.
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About author: Peter Nguyen is serial entrepreneur in emerging markets (Vietnam, Cambodia, Laos, Myanmar).
Copyright: platongkoh / 123RF Stock Photo
The post Myanmar has opportunity, so why are investors hesitating? Here are four reasons appeared first on e27.
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