Asean Guide Myanmar

ASEAN Business Guide Myanmar

2018 edition 1

ASEAN Business Guide This country report is extracted from ASEAN Business Guide: The economies of ASEAN and the opportunities they present.

MYANMAR Myanmar has quickly risen to become one of the fastest-growing economies in the world. Its GDP growth rate currently outpaces most major economies in East and Southeast Asia. As a developing country, Myanmar holds economic potential due to its rich abundance of natural resources, large and increasing workforce, and government initiatives to support trade and industries with new investment laws, infrastructure projects and the removal of structural impediments to growth. While Myanmar is becoming an investment ground because of recent moves to support political stability and drive foreign direct investments through improved relationships with other nations, it also needs to continuously develop itself in terms of infrastructure, easing legal restrictions, and building a strong education foundation for its workforce.

Sie Sie Htun Partner in Charge KPMG in Myanmar

With our expertise in various industries, along with a network of global support, KPMG in Myanmar is here to help foreign and local businesses build a strong foundation in Myanmar as well as navigate the complexities of doing business within the country.

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MYANMAR

KEY COUNTRY FACTS

In 2016, Myanmar recorded the fastest economic growth in the world1, following political progress and a successful national election in 2015 which led to the easing of most sanctions against the country. This will further accelerate economic growth and help Myanmar achieve its goal of becoming a modern and developed nation. Myanmar has many attributes that will attract foreign investors including natural resources, a large and young population, rich culture and strategic location. The new Myanmar Investment Law is also positive for the overall business environment, foreign investment and infrastructure development as the government looks to build roads, electricity and ports over the coming years.

GOVERNMENT

A republic with a democratic government

POPULATION

56.8 MILLION

CURRENCY Kyat (MMK)

(2017)

LANGUAGES Myanmar (official)

RELIGIONS

Buddhism, Christianity, Islam, Other

Source: Economist Intelligence Unit, Association of Southeast Asian Nations

GROWING ECONOMY

Economic Performance GDP constant prices* 2015

The relaxation of sanctions as well as a peaceful election have helped Myanmar open up to international markets, facilitating trade, driving foreign direct investment (FDI) and helping remove structural impediments to growth. It has continued to post growth and attract foreign investment. Moreover, the development of special economic zones (SEZs) also helps to attract FDI, including spurring developments in transport infrastructure. Three SEZs are currently being developed at Thilawa, Dawei and Kyaukpyu2.

2016

2017

2018

2019

5.4

7.5

7.5

7.3

% CHANGE

7.3 *

2010 market price; percentage change after 2016 are estimates

Source: BMI Research; UN Statistics Division

GDP per capita, current prices (CAGR 5.75%) 2015

2016

2017

2018

2019

1,309

1,137

1,353

1,540

1,731

2015

2016

USD

Figures after 2016 are estimates Source: BMI Research, second quarter of 2017

Foreign direct investment inflows 2012

2013

2014

USD MILLION

16,121.4 16,705.7

17,651.9 20,475.9 22,665.9

Source: BMI Research; UNCTAD Statistics

Main FDI investors Singapore

China

Netherlands

USD 4.25 bil

USD 3.32 bil

USD 0.44 bil

Malaysia

Thailand

USD 0.26 bil

USD 0.24 bil

Source: Central Statistical Organization, Myanmar Ministry of Planning and Finance. Figures are for FY2015-2016

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ECONOMIC POTENTIAL AS A REGIONAL TRANSIT HUB Myanmar is rich in natural resources, which makes it a promising location for hydrocarbons, mining, agriculture and forestry. The products from the natural resources industry constitute Myanmar’s largest export with strong growth in manufacturing and tourism as well. Consequently, economic growth is expected to remain robust over the medium term as investment continues to pour in and the operating environment improves under the new civilian government. Myanmar is gradually embracing wide-ranging reforms including politics, economic openness, and intellectual property laws. The reforms together with its low-cost of labor allow investors to tap into its strong potential for growth.

More economic openness

• Improved engagement with the West and the lifting of remaining US sanctions in October 2016 • New Myanmar Investment Law (MIL) represents a positive sign that the government is seeking to improve the business environment • Simpler new Myanmar Investment Commission (MIC) endorsement of investments for faster project approvals3 • Expected major investment from China, the US, Japan, India and Singapore in light of ongoing efforts to improve bilateral ties with these countries4

New intellectual property laws

Rankings

• New intellectual property laws in accordance with the Association of Southeast Asian Nations Framework Agreement on Intellectual Property Cooperation. This law is likely to be enacted before the deadline of 2021 stipulated by the World Trade Organization5

Index

Ranking+

Ease of Doing Business

171

All rankings are global unless otherwise indicated

Intellectual Property Protection

134

Source: Doing Business 2018, World Bank; Global Competitiveness Index 2015-2016, World Economic Forum; Corruption Perceptions Index 2016, Transparency International; Global Innovation Index 2015, Cornell University, INSEAD and WIPO

Transparency of Government Policymaking

136

Corruption Perceptions Index

136

Global Competitiveness Index

131

Global Innovation Index

138

+

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Growing economy

•

Real GDP growth underpinned primarily by large projects funded by foreign investors in a number of areas, notably critical infrastructure, manufacturing and energy including oil and gas development

•

SEZ, particularly the Thilawa SEZ, attract foreign interests and help address infrastructure issues within the SEZ

•

Fast growth in telecommunications with efficiency gains across many industries6

Low-cost and flexible workforce

• Regionally competitive minimum wage with low additional labor costs

Tax regime

• Resident and non-resident individuals taxed at progressive rate of up to 25%

• Low-cost and flexible labor force which is a key asset to grow its manufacturing base.7

• Corporate tax starts at 25%8 • Corporate tax and incentives –­­ Incentives available under MIL9 –­­ Incentives available under SEZ law10 –­­ Corporate income tax holidays or reductions –­­ Research and development tax deduction –­­ Accelerated tax depreciation on asset –­­ No withholding tax on dividends –­­ 10% capital gains tax except for oil and gas related investments11 –­­ Double taxation agreements with Korea, Thailand, Laos, Singapore, India, Malaysia, United Kingdom and Vietnam

Trade agreements

• Economic agreements with China, Cuba, Kuwait and Singapore • Trade agreements with Bangladesh, China, India, Israel, Korea, Laos, Malaysia, Pakistan, The Philippines, Sri Lanka, Thailand and Vietnam • Economic and trade agreements with Australia, Cambodia, Indonesia, New Zealand and Turkey

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Regional FTAs13 Agreements signed between Myanmar and a group of trading partners

3 5 6

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ASEAN

1

ASEAN Free Trade Area

• Elimination of tariffs on more than 99% of products • Allows for back-to-back shipment of goods between member countries • Allows for third-party invoicing of goods • Allows for ASEAN cumulation

2

ASEAN-AustraliaNew Zealand Free Trade Agreement

• Elimination of tariffs on more than 90% of the products with the exception of exclusions • Allows for back-to-back shipment of goods between member countries • Allows for third-party invoicing of goods

3

2

ASEAN-People's Republic of China Comprehensive Economic Cooperation Agreement

• Elimination of tariffs on at least 90% of the products • Allows for back-to-back shipment of goods between member countries • Allows for third-party invoicing of goods • Allows for ASEAN cumulation

• Allows for ASEAN cumulation

4

ASEAN-India Comprehensive Economic Cooperation Agreement

5

ASEAN-Japan Comprehensive Economic Partnership

6

ASEAN-(Republic of) Korea Comprehensive Economic Cooperation Agreement

• Elimination of tariffs on at least 80% of product lines with the exception of exclusions

• Elimination of tariffs on at least 90% of product lines with the exception of exclusions

• Elimination of tariffs on at least 90% of product lines with the exception of exclusions

• Allows for back-to-back shipment of goods between member countries

• Allows for back-to-back shipment of goods between member countries

• Allows for back-to-back shipment of goods between member countries

• Allows for third-party invoicing of goods

• Allows for third-party invoicing of goods

• Allows for third-party invoicing of goods

• Allows for ASEAN cumulation

• Allows for ASEAN cumulation

• Allows for ASEAN cumulation

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Concluded / signed FTA

FTA under negotiation

Completed negotiations • ASEAN-Hong Kong, China Free Trade Agreement

• Regional Comprehensive Economic Partnership

INVESTING IN GROWTH Myanmar expects to achieve its goal to become a modern, developed and democratic nation by 2030. The country’s improved relationships with developed nations should be positive for FDI. There are incentives for foreign corporations investing in SEZs and for foreign investors, the incentives include an increasingly probusiness environment, its endowment of natural resources, large labor force, rich culture and strategic location.13 Myanmar’s GDP growth in 2018 is expected to reach 7.5%14, driven by the relaxation of sanctions, increasing openness to international markets, efforts to facilitate trade, drive for FDI and removal of structural impediments to growth.15

Emerging industries

Agriculture16

Infrastructure17

Manufacturing18

• Agricultural production prospects are bright over the long term based on the country’s resource endowment, strategic location and encouraging foreign investment regulation

• Myanmar’s infrastructure sector is more attractive for foreign investors and contractors especially in the Asia Pacific region which receives Asian development funds

• Investment in SEZs will be positive for its fledging manufacturing sector

• The country enjoys a diversified agricultural sector with varied sub-segments

• Robust tourist arrivals and rising urbanization levels are driving demand for infrastructure

• The country’s low-cost and flexible labor force is a key asset to growing its manufacturing base

• Production and exports of rice and corn will remain on an ascent in the coming years

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Endnotes 1

 orld Economic Forum. Retrieved from W https://www.weforum.org/agenda/2016/04/ worlds-fastest-growing-economies

2

Industry Forecast - Infrastructure & Construction - Q2 2017, BMI Research. Retrieved from http://www.ibtimes.com/myanmars-market-capitalization-reach-15-billion2020-first-it-must-launch-its-stock-1403766

3

4

5

6

 exology. Retrieved from http://www.lexoloL gy.com/library/detail.aspx?g=cbde9d27-01fb4b44-9aa5-c5f949f48935  MI View – Cambodia, Laos, Myanmar B Country RIsk, BMI Research. Retrieved from https://bmo.bmiresearch.com/reports/ viw?productid=2543&issue=20170401&archive=1&iso=MM&active_pillar=Reports%20Subtab  MI View –Myanmar Trade and Investment B Risk Report, BMI Research. Retrieved from https://bmo.bmiresearch.com/reports view?productid=3950&issue=20170401&archive=1&iso=MM&active_pillar=Reports%20Subtab  yanmar: Country outlook, The Economist M Intelligence Unit. Retrieved from http:// viewswire.eiu.com/index.asp?layout=VWArticleVW3&article_id=1535283737®ion_id=&country_id=1080000308&channel_id=190004019&category_id=&refm=vwCh&page_title=Article

7

 yanmar Labor Costs Analysis Q2 2017, M BMI Research

8

 nion Tax Law 2017, effective from 1 April U 2017

9

 yanmar Investment Law, promulgated on M 18 October 2016

10

 pecial Economic Zone Law, promulgated S on 21 July 2013

11

 nion Tax Law 2017, effective from 1 April U 2017

12

 SEAN Free Trade Agreements, ASEA SecA retariat. Retrieved from http://www.jterc. or.jp/koku/koku_semina/pdf/130306_presentation01.pdf; The Signing of the ASEAN– Hongkong, China Free Trade Agreement and ASEANHongkong, China Investment Agreement, ASEAN. Retrieved from: http:// asean.org/the-signing-of-the-asean-hongkong-china-free-trade-agreement-and-asean-hongkong-china-investment-agreement/

13

 MI View –Myanmar Trade and Investment B Risk Report, BMI Research. Retrieved from https://bmo.bmiresearch.com/reports/ view?productid=3950&issue=20170401&archive=1&iso=MM&active_pillar=Reports%20Subtab

14

 MI Research. Retrieved from: https://bmo. B bmiresearch.com/data/datatool

15

 yanmar: Country outlook, The Economist M Intelligence Unit. Retrieved from http:// viewswire.eiu.com/index.asp?layout=VWArticleVW3&article_id=1535283737®ion_ id=&country_id=1080000308&channel_ id=190004019&category_id=&refm=vwCh&page_title=Article

16

 yanmar: Limited Improvement For M Now, But Bright Prospects Ahead, BMI Research. Retrieved from: https://bmo.bmiresearch.com/article/ view?article=1263690&advanced_ search=1&matches=1834&page=1&position=8&keyword=myanmar%20agriculture

17

 MI Research. Retrieved from: https:// B bmo.bmiresearch.com/reports/view?productid=4027&issue=20180401&archive=1&iso=MM&active_pillar=Reports%20Subtab

18

 0 Years Forecast - Much Potential, 1 But Many Challenges Remain, BMI Research. Retrieved from: https:// bmo.bmiresearch.com/article/ view?article=1265582&advanced_ search=1&matches=3856&page=1&position=10&keyword=myanmar%20manufacturing

Contact Us

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Winid Silamongkol Chief Executive Officer KPMG in Thailand, Myanmar and Laos T: +66 26772000 E: [email protected]

Sie Sie Htun Partner in Charge T: +95 1 8603361-3 E: [email protected]

Sean Severn Partner, Head of Markets T: +66 26772000 E: [email protected]

Thomas Chan Partner, Head of Tax & Regulatory Services T: +95 1 8603361-3 E: [email protected]

KPMG HAS A PRESENCE IN EVERY ASEAN NATION

25

over 8,000

Offices

Staff

more than 300

Partners

BRUNEI 1 office

CAMBODIA 1 office

INDONESIA 1 office

LAOS 1 office

MALAYSIA 9 offices

MYANMAR 1 office

PHILIPPINES 5 offices

SINGAPORE 1 office

THAILAND 1 office

VIETNAM 4 offices

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KPMG SERVICES

Audit

Tax

Advisory

•

Fundamental to a risk-based audit approach is understanding the way our clients run their businesses and drive performance.

•

KPMG focuses on the areas which are critical to our clients in delivering their strategies and meeting goals.

•

KPMG’s extensive experience and proprietary tools have enabled us to provide seamless services to clients across industry sectors and geographical boundaries.

•

Against a backdrop of increasing complexity in the business and tax landscapes, clients will need to weigh its tax options against many factors, such as tax ramifications against the financials, increased information sharing between tax authorities, evolving regulations, global competitions and new economies.

•

Through two main service lines: tax consulting and tax planning and compliance, KPMG’s tax practice consistently provides proactive advice and quality service. Our tax consulting service lines cover mergers & acquisitions & government incentives, global transfer pricing services, global indirect tax services, financial services tax and international tax. Our multi-national clients enjoy this single point of contact in Asia Pacific for all regional tax issues.

•

In addition, our tax planning & compliance services include global mobility services, global immigration services network, global compliance management services, dispute resolution & controversy, tax management consulting and property tax / stamp duty advisory. With KPMG’s vast network, clients’ business commitments and tax needs will be best served by KPMG member firms in the region.

•

KPMG’s Advisory team works with a range of clients, helping them meet challenges associated with growth, performance and governance.

•

Our professionals can cover both operational and transactional activities.

•

Our Advisory practice assembles skilled and experienced professionals in multidisciplinary groups tailored to the needs of individual clients and their unique circumstances.

•

In our clients’ interests, we also draw on the capabilities and knowledge resources of KPMG’s global network.

•

We offer our clients a single point of contact to help streamline the relationship and enhance its productivity and usefulness to them.

•

We understand and respect clients‘ needs and aspirations. Clients can draw from a range of management and risk consulting services covering a broad spectrum of business activity.

Contributors to the research, analysis, and development of this paper: Managing Partners, Head of Markets and teams from KPMG member firms in ASEAN, Sreetama Ray, Chris Zaharatos

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NOTES

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NOTES

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For further information about this guide and how KPMG member firms can help your business, please contact [email protected]

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