27 Feb 2017

Myanmar: Market Profile

Recent developments

Myanmar has shown solid GDP growth in recent years, expanding by 6.5% in 2016.
For 2017, the economy is expected to grow by 6.9% as private and public
investments in infrastructure, light manufacturing and hospitality are forecast to
rise.

In July 2016, the NLD government released its first economic policy, promising to
provide support in agriculture, industry and infrastructure development, as well as
highlighting the need to boost foreign investment and improve the ease of doing
business in the country.

A new investment law, which consolidates and replaces the Foreign Investment Law
of 2012 and the Myanmar Citizens Investment Law of 2013, will be implemented in
April 2017, levelling the playing field between local and foreign investors.

Cumulative FDI into Myanmar reached US$67.2 billion in December 2016. Major FDI
sources were the Chinese mainland, Singapore, Thailand and Hong Kong. Myanmar
is part of the China-ASEAN Free Trade Area (CAFTA). It has entered double tax
agreements (DTAs) with the UK, Singapore, Malaysia, Thailand, India, Laos, Vietnam

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Myanmar: Market Profile

and Korea, and concluded an investment protection agreement (IPA) with Hong
Kong.

Myanmars exports slipped by 11% to US$11 billion in the fiscal year ending March
2016, with imports dropping by 0.4% to US$16.5 billion.

In 2016, Hong Kongs exports to Myanmar dropped by 24.2% year-on-year (YOY) to

US$196 million, while imports from Myanmar rose 20.2% YOY to US$77 million.

Current Economic Situation

Myanmar is the seventh largest economy of the 10-member ASEAN[1] bloc. It has a
large service sector which accounts for about 46% of GDP, with industry and agriculture
respectively accounting for 28% and 26% of GDP. Major sectors include processing,
manufacturing, construction and transportation.

Myanmars GDP growth has been robust in recent years. In 2016, GDP growth
decelerated to 6.5% due to a slow recovery in the agricultural sector from the 2015
floods and slowing foreign investment. For 2017, GDP growth is expected to grow by
6.9% as private and public investments in infrastructure, light manufacturing and
hospitality are projected to rise.

Economic reforms

After the NLPs landslide victory in the parliamentary elections in November 2015, Htin
Kyaw, a close ally of Aung Shan Suu Kyi, was sworn in to become Myanmar's first
democratically-elected president and the first NLD president in late March 2016. In
keeping with the election platforms, the new government has pledged to continue
reforms. This includes reduction of the number of ministries to 21, with Aung Shan Suu
Kyi now overseeing the Ministry of Foreign Affairs and the Presidents Office.

In July 2016, the new NLD government released its first economic policy with 12 main
points, highlighting the importance of developing a market-oriented system in Myanmar
and providing support to development of the agriculture, industry and infrastructure
sectors. The policy also emphasised the need to boost foreign direct investment (FDI)
and improve the ease of doing business in the country. Prior to that, important reform
measures were introduced within the new governments 100-day tenure. For example, on
the infrastructure side, two road sections on the Yangon-Mandalay highway are being
upgraded as a pilot project.

As part of Myanmars continued liberalisation process, foreign exchange control was

abolished in April 2012. Under the new managed float system, the Central Bank of
Myanmar (CBM) announces a reference rate for the kyat against the US dollar following
daily foreign exchange auctions conducted with authorised domestic dealer banks. It also
allows FDI to be set at market exchange rates. In July 2013, Myanmars president signed
a new law granting CBM greater independence from the Ministry of Finance. In the same
month, the Securities Exchange Law was passed, which facilitates the establishment of a
stock exchange that was launched in December 2015.

In 2014, the CBM started granting operation licences to nine foreign banks. Each of the
licensed foreign banks is permitted to open one branch and restricted to lending to
foreign companies in foreign currency. With four new banks gaining approval in 2016, a

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total of 13 foreign banks have now been given permission to operate inside the country.
FDI in the banking sector was barred previously, making it the first time in 50 years that
Myanmar let in foreign banks.

In a bid to upgrade the infrastructure, Myanmars government liberalised the telecom

sector and allowed foreign investors to bid for the national telecom licences. In January
2014, two licences were granted to international telecom operators (Norway's Telenor
and Qatar's Ooredoo) for a licence period of 15 years. The opening up of the telecom
sector is considered an important step for economic reforms and infrastructure
upgrading. According to the World Bank, the mobile subscriptions rate of Myanmar
jumped from 13% in 2013 to 77% in 2015, reflecting the huge growth potential of the
countrys largely under-served telecom market. In the same year, subscription rate of
Cambodia and Laos recorded 133% and 53% respectively.

Myanmars reforms and opening up have caught the attention of foreign companies
seeking to relocate their labour-intensive production facilities. After implementing a
temporary monthly minimum wage of US$65 (including overtime and allowances) for
workers in industrial zone, the government announced in September 2015 to introduce
the first country-wide minimum wage of Kyat 3,600 (US$2.7) for employees working a
standard eight-hour day.

International relations

After the formation of the new government under President Htin Kyaw, Chinese Foreign
Minister Wang Yi visited Myanmar in the first week of April 2016, meeting his counterpart
Aung Shan Suu Kyi, who said that the new Myanmar government was willing to
strengthen friendly cooperation with China, which would be conducive to the national
development of Myanmar.

Since early 2012, Western countries started to ease their sanctions against Myanmar in
response to the latters political reforms and parliamentary elections. Following Aung San
Suu Kyis visit to the US in September 2016, the US reinstated Myanmars eligibility for
the benefits under the GSP scheme in November 2016, allowing Myanmar to export duty-
free approximately 5,000 products to the US. As early as in 2013, the EU had lifted its
economic sanctions (except military arms sales) against Myanmar.

In January 2013, Myanmar entered into an agreement with the Paris Club of creditor
nations (including the UK, France, Germany and Japan) and multilateral lenders such as
the World Bank, cutting down the outstanding debts owed to allow the country seeking
fresh lending, which will be helpful in upgrading its transport and telecom infrastructure.
With Western countries suspending economic sanctions and expanding their investment
in Myanmar (including in its manufacturing sector), this will bode well for the countrys
external sector.

Myanmars construction industry is expected to have a growing contribution to economic

growth on the back of rising infrastructure projects from private and overseas investment
and aid from multinational donors. In November 2012, the World Bank announced the
resumption of lending to Myanmar. In January 2014, the World Bank committed US$2
billion of lending to supporting the governments plans of universal healthcare coverage
and access to electricity by 2030.

Investment Policy

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Myanmar: Market Profile

To promote and facilitate both foreign and domestic investment in Myanmar and open
more economic sectors to private investment, a new investment law will be implemented
in April 2017. This new investment law, which consolidates and replaces the Foreign
Investment Law of 2012 and the Myanmar Citizens Investment Law of 2013, is expected
to level the playing field between local and foreign investors.

Under the investment law, FDI in the form of 100% foreign ownership or joint
venture is allowed. Sectors open to FDI include manufacturing, services,
infrastructure construction, retail and wholesale businesses. Moreover, foreign
firms are entitled to a tax holiday in the first three to seven years of operation and
other forms of income tax or customs duty reliefs are also available. For details of
the new investment law, please refer to Myanmars Directorate of Investment and
Company Administration (DICA). In addition, the new government has adopted an
overhaul of the century-old Myanmar Companies Act, which is due to take place in the
first half of 2017.

In addition, foreign investors may invest under the new Myanmar Special Economic Zone
(SEZ) Law, which took effect in January 2014. Besides incentives such as income tax
holidays, income tax relief, and customs duty and import tax exemptions, investors can
lease land from the government or authorised private owners for up to 50 years and
renew for further 25 years. The main SEZ watchdog is the Central Body for the Myanmar
Special Economic Zone.

Foreign investment

According to DICA, the countrys cumulative inward FDI reached US$67.2 billion as at
December 2016. Major FDI sources were the Chinese mainland (US$18.5 billion, 27.5%
of the total), Singapore (US$15.7 billion, 23.3%), Thailand (US$10.6 billion, 15.8%) and
Hong Kong (US$7.5 billion, 11.2%). Under its national economic development plan, the
government targets to attract FDI of US$140 billion by 2030.

About 63% of the FDI stock in Myanmar was tied to the sectors of oil & gas and power,
while FDI in the sectors of manufacturing, transport and communication accounted for
11% and 10% of the total respectively.

Further information is available in the Myanmar Investment Guide.

Trade Policy

Myanmar has been a member of the World Trade Organisation (WTO) since January
1995. Import tariffs are imposed mostly on an ad valorem basis. The average MFN
applied duty rate on agricultural imports is 8.6%, and more than half of the agricultural
products are subject to tariff rates of less than 15%. Meanwhile, the average MFN applied
duty is 5.1% for non-agricultural products. For example, textiles imported into Myanmar
are subject to an average MFN applied tariff of 8.3%, with electrical machinery at an
average MFN applied tariff of 4.5%.

Myanmar is a member of the Association of Southeast Asian Nations (ASEAN), a regional

bloc consisting 10 countries. As an ASEAN member 1997, Myanmar is part of the China-
ASEAN Free Trade Area (CAFTA), the worlds largest free trade area by population. Under
CAFTA, Chinas average import tariff rate on products from Myanmar was gradually
lowered from 8.3% in 2005 to 0.6% in 2012. For example, Chinas tariff rate on imports

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Myanmar: Market Profile

of textile and clothing items from Myanmar was lowered from an average of 15% in
2005, to 5% in 2009, and zero-rated in 2012. Similarly, Myanmar will gradually lower the
tariff rates on China-origin products. The average tariff rate on Chinese furniture, for
example, was cut from an average of 9% in 2010 to 0.02% by 2015.

Myanmar has double taxation agreements (DTAs) with the UK, Singapore, Malaysia,
Thailand, India, Laos, Vietnam and Korea, with the negotiation of an Investment
Promotion and Protection Agreement (IPPA) with Hong Kong concluded in 2013.

External trade

Myanmars total exports slipped by 11% to US$11.0 billion in FY2015/16 (April-March).

Major export destinations included China, Thailand, Singapore, India and Japan. Major
exports included fuels, minerals, agricultural products and garment. During the same
period, the countrys total imports dropped 0.4% to US$16.5 billion. Major import
sources were China, Singapore, Japan and Thailand. Myanmars imported goods mainly
comprised machinery, transport equipment, basic metals and manufactures.

Hong Kong's economic ties with Myanmar

Hong Kongs exports to Myanmar represented only 0.6% of its total exports to the 10-
member ASEAN during 2016, and Myanmar ranked 8th among ASEAN countries in
absorbing Hong Kong exports (ahead of Brunei and Laos). In 2016, Hong Kongs exports
to the country dropped by 24.2% YOY to US$196 million. Major Hong Kong exports to
Myanmar included telecom equipment and parts (24.6%), knitted or crocheted fabrics
(12.4%) and optical goods (9.5%).

In the same period, Hong Kongs imports from Myanmar increased by 20.2% YOY to
US$77 million. Major imports from the country during the period were optical goods
(26.6%), crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or
in brine (21.7%), and telecom equipment & parts (11.5%).

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Myanmar: Market Profile

More Information

More information on the Belt and Road countries economic and investment environment,
tax and other subjects that are important in considering investment and doing business
are available in The Belt and Road Initiative: Country Business Guides.

Related information: Myanmar infographics

[1] ASEAN consists of 10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia,

Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

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