By KYAW LIN HTOON | FRONTIER
YANGON — The Directorate of Investment and Company Administration has rejected criticism of an eight-month preparation period to implement major corporate law reform at a time of rising concern about the government’s economic management.
The long-awaited Myanmar Companies Law was approved by President U Htin Kyaw on December 6 but DICA said at a briefing a week later that it could not be implemented until August 1, 2018.
“This is not a delay,” DICA director general U Aung Naing Oo told Frontier on the sidelines of the briefing in Yangon on December 13.
Much had to be done to prepare for the introduction of the law and ensure its smooth implementation, Aung Naing Oo said.
DICA had to draft bylaws and regulations, set up an online company registration system, and train staff and educate the public about the new law, he said.
Aung Naing Oo said there would be no negative impact on foreign investment because the Myanmar Investment Commission would continue to evaluate applications.
There was dismay from some in the business community when DICA announced that it needed until August 1 to implement the new legislation, which combines elements of the 1914 Companies Act and the 1950 Special Companies Act and significantly eases restrictions on foreign business activities.
The most far-reaching reform in the new law allows a Myanmar company to have up to 35 percent foreign ownership and retain its status as a domestic entity. The government has been hoping the new law would encourage foreign investors and enable Myanmar companies to access new sources of financing.
Some businesses, including those involved in joint ventures, have expressed concern about the impact of an extended implementation period on the economy.
U Myo Tun, the general manager of True IDC Myanmar, said he was worried about a slow-down in foreign direct investment at a time when more was needed urgently.
“This decision could also fuel the blame about our country’s economic condition,” he said.
U Htay Aung, president of the property-to-trading conglomerate Sakura Trade Center, told Reuters that putting off implementation of the law “was bad for business as it will bring delays and extra costs, which result in losses”.
“Foreign investment will be postponed and local businessmen will be disappointed,” said Htay Aung, whose company is seeking US$100 million in overseas financing for a condominium project in Yangon.
Mr Chris Hughes, a lawyer in Yangon with Berwin Leighton Paisner who was commissioned to help draft rules for the new law, told Reuters the delay was a “missed opportunity” for the National League for Democracy government.
“I can’t see a compelling economic reason or policy behind the delay. It seems more driven by technology or administrative factors,” he said.
U Myo Min, a DICA director, told Reuters up to eight months was needed to develop a “guidance and operating manual” for an online company registration system being introduced under the new law to strengthen transparency.
From August 1 the 60,000 companies registered with DICA will have six months to re-register their information online, which it said was a simple matter of filling in forms.
However, there’s speculation that some companies that had been planning to register would wait until after August 1.
U Kyaw Sithu, director of Success Property Consultant Co Ltd, said “nobody” would register under the old law. “They will surely choose just to wait eight months,” he told Frontier.
The Asian Development Bank, which has supported the development of the new law under a $1.5 million Japan-funded technical assistance grant approved in 2014, has said smooth implementation is crucial.
“You can enact a perfect law, but if the implementation is bad, that will impact on the credibility of the law,” said Mr Kelly Bird, a director at the Southeast Asia Department of the Manila-based ADB.
“So, it’s worth spending the time to get other preparations and implementations right,” he said at the December 13 event.
Under previous legislation, companies with even a single foreign-held share were regarded as being foreign and subject to a range of restrictions, including being unable to own land or export and import finished products, such as industrial equipment and pharmaceuticals.
The new law will also permit companies with up to 35 percent foreign ownership to invest in retail and wholesale businesses and trade on the Yangon Stock Exchange.