The Ministry of Commerce (MOC) has issued Notification 25/2018 (the 2018 Notification), which allows 100% foreign ownership of businesses operating in the wholesale and retail sectors (other than “small” convenience stores). Previously, retail and distribution had been permitted in joint ventures, subject to MIC and MOC approval but the 2018 Notification marks a welcome step in the liberalisation of the sector by the Government and follows other recent developments designed to attract foreign capital into the country. The 2018 Notification removes a lot of the red tape and structuring undertaken by foreign-invested businesses in the past to import and then sell their goods in Myanmar and may prove significant in ramping up activity and encouraging new B2B and B2C businesses into the market.
Since 2017, foreign investors had been able to operate certain limited types of trading businesses (seeds, pesticide, fertilizers, medical equipment, agricultural equipment and construction material) with MOC approval pursuant to MOC Notification 15/2017. However, the 2018 Notification liberalises the sector further and permits foreign entities, and joint ventures between foreign and Myanmar entities, to now conduct trading and distribution of all commodities (whether locally sourced or imported) without further approval, but subject to certain capital and registration requirements that are set out in more detail below. Myanmar companies are not required to meet the capital requirements but it remains to be seen whether the MOC will adopt the anticipated definition of Myanmar Company in the draft Companies Law Regulations once these are in force or prefers to retain the distinctions drawn in the 2018 Notification.
Registration requirements
In order to conduct wholesale or retail activities in Myanmar, a foreign owned or invested entity must be registered with the MOC and must have an initial investment (excluding rental costs) equal to or greater than the amount set out in the table under “Initial investment requirements” below.
Those applying to register must provide, inter alia, a company incorporation certificate, MIC permit or endorsement (to the extent required), a recommendation from city or township development committees, a list of the category of goods for sale and distribution, and a detailed business plan.
Initial investment requirements
The initial investment requirements for an entity engaging in retail and wholesale activities vary depending on whether the business is in the wholesale or retail sector and whether the entity is a joint venture with 20% or more of direct equity owned by a Myanmar national, a joint venture with less than 20% of direct equity owned by a Myanmar national, or a 100% foreign-owned company.
| |
Joint venture (with 20% or more Myanmar equity) |
100% foreign-owned or joint venture (with less than 20% Myanmar equity) |
| Wholesale |
USD 2,000,000 |
USD 5,000,000 |
| Retail |
USD 700,000 |
USD 3,000,000 |
Other restrictions
No foreign owned companies or Myanmar-foreign owned joint venture companies are allowed to operate minimart and convenience stores with a floor area of less than 929 square metres. However, this could be considered large for a convenience store or minimart format and as such will need to be considered carefully by foreign retailers looking at smaller stores or a multi-format strategy.
No entity is permitted to conduct wholesale or retail of products that are prohibited under the existing laws which we take to mean to include, for example, prohibited substances.
The 2018 Notification requires each registered entity to give 90 days’ prior notice to the MOC where it opens any new branch or expands an existing branch.
Conclusion
The 2018 Notification is a very welcome development that is anticipated to open up the Myanmar retail and wholesale sector to a whole host of new market participants and we are already seeing significant interest.