1. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM New Foreign Investment Law, Nov. 2, 2012 AMCHAMs Yangon James Finch, Partner jamesfinch1023@yahoo.com

2. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM  Myanmar’s New Foreign Investment Law (FIL) was passed on November 2, 2012. It replaces the MFIL of 1988.  Background: Generally the FIL is optional except in the case of a) major infrastructure deals 2) manufacturing and 3) State Owned Enterprise Law of 1989 (SOE Law). With FIL approval comes waiver from the relevant ministry of the restrictions of the SOE Law. There must be a notification issued under the SOE Law to grant an exemption. MIC will prescribe, by notification, economic activities applicable by the FIL.  Where the FIL is optional, the reason investors use the FIL is to get the benefits, like the tax holiday, discussed later. Foreign Investment Law--Perspective

3. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM FIL went through several drafts and the last draft reflected pressure from those in the Myanmar private sector who wanted the law to set limits on foreign equity ownership in several sectors. The legislature passed these limits in a version of the law on September 7 limiting foreign investment to 50% of the equity of a venture in several sectors. The president and others in the executive branch opposed this because they feared it would not attract foreign investment. This law was sent back and has been replaced. The compromise in the replacement law passed the week before last is that Foreign Investment Rules (FI Rules) will be issued by the Ministry of National Planning and Economic Development within 90 days of the bill being signed into law, with the approval of the Union Government. These rules will set limits in foreign ownership in some sectors, but this will be done by the above ministry, part of the executive branch, which wants to attract foreign investment. Political Comment

4. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM 100% foreign ownership allowed unless provides otherwise. In certain sectors foreigners will be prevented from holding 100% of a venture. These sectors will include, amongst others, the following activities: - Matters that can affect public health, natural resources and the environment; - Activities related to manufacturing and services that can be done by Myanmar citizens that will be specified in the FI Rules; and - Matters that involve agriculture, livestock farming or fisheries (as will also be specified in the FI Rules). FI Rules Limitations

5. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Administration—by the MIC --Same for both old and new laws Minimum capital --Old law: the foreign must party contribute at least 35% equity to the venture rule removed from the new law. --New law: new requirements sector by sector will be set in the new FI Rules (only for some activities). The current rules, regulations and procedures will continue to be effective until then. The minimum investment of USD500,000 for industrial projects and USD 300,000 for services related projects will thus continue to apply for the time being. FIL—Basic provisions

6. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM.  Real Estate Leasing, 1987 Law: --Old law 35+ 15+ 15 by notifcation --New law depending on the type of enterprise and investment amount the MIC would allow investors to enter into a lease up to 50 years + 10 + 10 (negotiable under special circumstances) Government lessor: Land and building, private party lessor: land only.  Tax [Full list in questions] -- Old law three year tax holiday, accelerated depreciation customs exemption and customs exemption in the construction phase and for raw materials following completion. ---New law. Tax holiday raised to five years. Accelerated depreciation and customs exemptions are the same as the old law with added incentives FIL— Additional Basic Provisions 6

7. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM  Government guarantee against expropriation. Same in old and new law.  Foreign exchange benefits ( guaranteed remittance of profits; remittance upon exiting the investment) Same in both laws.

8. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM  MIC may nominate some investments that are not eligible for tax holiday.  Equity in an MFIL company owned by foreigners can be transferred to other foreigners or Myanmar citizens. This implies that Myanmar citizens can’t transfer their equity to foreigners.  Oil & gas and Mining and other large-investment projects—upfront costs (e.g. exploration and drilling) must be borne by the foreign party (same as present PSCs) Profits are then shared. Cost recovery, now allowed under PSCs, still allowed.  All MFIL investors must now form companies. What about PSCs in extractive industries? FIL—All New Provisions

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10. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Labor For skilled positions, the MFI Law provides an obligation to increase the use of local Myanmar staff over time. The investor is to achieve: - At least 25 % of its workforce to be Myanmar nationals during the first two years, - At least 50% during the second two years; and - At least 75% during the third two years. Labor

11. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Approvals The law formalizes the requirement that certain State and Regional approvals, in addition to that of the Myanmar Investment Commission (“MIC”) which administers the foreign investment regime (as well as a regime that is applicable to Myanmar citizens under the Myanmar Citizens Investment Law), are also required in respect of a given project. Separate approvals

12. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Key activities eligible for an MIC Permit As with the 1988 Foreign Investment Law, the MFI Law identifies certain key activities which may secure from the MIC an investment permit. These include a number of new activities, including as relate to “import substitution” and the “development of a modern industry”. Makeup The makeup of the MIC is set to be broadened as experts from non-governmentorganizations and presumably economic entrepreneurs will be added to the public servants already serving thereon. Key activities, makeup of MIC

13. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Powers The powers of the MIC are reaffirmed but certain changes have now been formalized, as the MIC will now by law review and approve the conditions pursuant to which the ratio in respect of a given project between foreign investor and local investor may fluctuate (including through resale to Myanmar citizens). Timing The MFI Law introduces new rules relating to timing as the MIC is required to evaluate proposals for completeness and accept/reject these within 15 days of submission of the application, and will thereafter issue (or deny) an investment permit within 90 days. Investor’s rights and duties The MFI Law sets out for the first time an investor’s duties and rights. These provisions have been derived from the provisions of the Myanmar Citizens Investment law. MIC, Timing, Investors’ Rights

14. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM 5-year tax holiday can be extended Thereafter exemption for re-invested profits Accelerated depreciation on capital assets Relief on income tax up to 50% on profits from exports Deductions for R & D Exemption from customs duties on capital assets to be used in the business imported during construction period Exemption from customs duties on raw materials imported during first 3 years of production Can pay and deduct expat salaries at normal rates. Tax

15. BANGLADESH | CAMBODIA | INDONESIA | LAO P.D.R. | MYANMAR | SINGAPORE | THAILAND | VIETNAM Relief on customs duties on imports for expansion of the business Exemption from commercial tax for exports Tax II

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