Burmese lawmakers on Friday passed an eagerly awaited foreign direct investment (FDI) law which is expected to help bring the economy of the impoverished nation up to speed after decades of stagnation under military rule.
The law, which was approved on the last day of the parliament’s current session, omitted several requirements present in an earlier draft, including a U.S. $5 million minimum initial investment and clause limiting foreign firms to 49 percent of any joint venture.
The new FDI law still requires Burmese President Thein Sein’s signature before it can go into effect.
Sandar Min, a member of parliament from opposition leader Aung San Suu Kyi’s National League for Democracy opposition party, praised the law’s passage, but warned that further legislation was needed to strengthen Burma’s investment environment.
"The Parliament passed the foreign direct investment law today,” she said.
“It changes two factors, on which no consensus could be reached. One sets the level of initial investment according to the nature of the business, and the other allows foreign investors to invest up to a 50 percent stake in a joint venture.”
Another provision in the new law allows foreign investors to lease land for up to 50 years with the option to renew. Under the previous system, investors could only sign a lease for 35 years.
Sandar Min said that the commission that will oversee and make recommendations on FDI in the country will include experts from nongovernmental organizations and from various types of business industries.
"Where there is 100 percent foreign investment, the commission will recommend how much the required [initial minimum] investment should be, based on the nature of the investment,” she said.
“It will not be a fixed amount as required [in the original draft].”
Recommendations will be sent to parliament via the federal government, she said, meaning that the commission will not have the sole authority to make decisions over large investments by foreign companies.
More laws needed
But more legislation will need to be passed to ensure that foreign firms feel comfortable investing their money in the country, the MP said, after nearly five decades of foreign sanctions, restrictive laws, and military law under the former junta regime hamstrung Burma’s economy.
“This is the first FDI law and we need more laws to protect these investments, such as patent legislation, laws governing the right of transportation, and others. So we still have a lot of laws to pass,” Sandar Min said.
“Parliament is working on the issues one by one. Only when all the investment laws are passed, will it be possible for foreign investment to come to Burma,” she said.
“The FDI law alone is not good enough [to protect] investment."
Thein Sein has launched a number of economic and political reforms since his nominally civilian government took power in March last year. Western nations responded earlier this year by easing economic sanctions they had in place against the former junta, which ruled the nation with an iron fist.
Reduced sanctions, along with reforms to the financial system which included the eradication of a dual exchange rate system, have made Burma’s business environment increasingly attractive to potential foreign investors.
Two areas of potential investment might include Burma’s underdeveloped and inefficient agricultural sector and small industrial base. The country also has a limited range of exports, making most of its earnings from extractive industries like natural gas.
Reported by Khin Khin Ei for RFA’s Burmese service. Translated by Khin May Zaw. Written in English by Joshua Lipes.