THOUGH recent surveys have stressed a drastic decline of investor confidence in Myanmar, the government still believes it is on the right track given the recent enactment of long-awaited new companies law.
Aung Naing Oo, director general at the Directorate of Investment and Company Administration (DICA) and secretary of Myanmar Investment Commission, said the law was a game changer that would bring optimism back to the nation.
He said that allowing more foreign participation in Myanmar companies would obviously draw investors’ interest in the country while also protecting the interests of local businesses. He foresees a stronger inflow of foreign investment next year, particularly after August 1 when the law comes into effect.
“We are striving for the law to be enforced expeditiously. Now we are working on necessary regulations and the online registration process with the technical support of a US company. We are targeting both processes to finish by the end of July 2018,” he said.
“We still need to improve our staff’s knowledge about the new law. We have planned training for them to digest the whole law before it takes effect so they can facilitate companies. We are also planning for the whole company registration process to go online.”
According to the official, the law will encourage partnerships with overseas businesses, as foreigners will be allowed to hold up to a 35 per cent stake in a Myanmar company. Previously, an enterprise with even 1 per cent of its shares owned by a foreign investor was classified as a foreign company, which meant it missed out on certain citizens’ opportunities including land ownership.
“Allowing 35 per cent foreign ownership is the most far-reaching change from the old law. Other major changes include ease of company registration process, simplification of office procedures, flexibility on capital management and protection of minority shareholders, all of which are in line with international standards,” he said.
The new law allows any citizen to establish a private company on their own, and requires only three people to set up a public company. The old law requires at least two people to run a private firm and seven people to establish a public company.
“It is a boost to the development of SMEs (small and medium enterprises). Family businesses and start-ups can easily become companies. As simplified and streamlined procedures will reduce the regulatory burden and compliance costs, a lot of unregistered business will get registered. That will help enhance the accuracy of our macroeconomic indicator,” he said.
Aung Naing Oo said local businesses could easily partner with their foreign counterparts, which would raise their capital and promote technology transfer. Additionally, modernised provisions of the law would enhance competitiveness among local businesses.
Once fully implemented, the new law would replace the Burma Companies Act and its rules enacted during British rule.
He said the law was comprehensive and would allow foreign investors to trade in shares on the Yangon Stock Exchange, which was previously restricted.
If foreign investors’ shares in a Myanmar company increase beyond the prescribed limit of 35 per cent, the firm needs to notify the DICA to transform its legal status to that of a foreign company. It also explicitly details the duties of corporate directors, in relation to the obligations of a company and their duty to act with diligence.
Aung Naing Oo said the modification of the century-old companies act was initiated in 2013 under the previous Thein Sein administration. Drafting the new law commenced a year later with the support of the Asia Development Bank. The bill was submitted to the Parliament in July last year, and President Htin Kyaw approved it earlier this month.