Myanmar remains one of Southeast Asia’s more alluring destinations for foreign investment, and the recent victory of the national league should ensure the trend continues. In the meantime, the country has launched a stock exchange, announced new foreign banking licences and is also looking to update outdated laws. By Ranajit Dam. With additional reporting by Timothy Mclaughlin and Martin Petty

As Myanmar’s economy continues its impressive emergence from five decades of military rule and isolation, foreign direct investment (FDI) remains strong. FDI in Myanmar reached $3.58 billion in the first seven months of fiscal year 2015/16, according to data from the Directorate of Investment and Company Administration. It also received a shot in the arm from landslide victory of Aung San Suu Kyi’s National League for Democracy (NLD) in the country’s Nov. 8 election. There are hopes that the NLD, which will take power this year, will draw more investment to the country.

And reforms carry on at pace. In December, Myanmar’s central bank announced that it will open a second round of foreign bank licensing early this year, following the successful granting of nine licences in 2014. Also in December, the country launched the Yangon Stock Exchange (YSX), with 10 securities firms offered conditional licences for trading and underwriting. And the parliament, currently in session, is considering a number of draft laws that will update outdated legislation, and bring the country up to speed with its more development neighbours.

INVESTMENT HOTSPOT

According to Albert T. Chandler, senior partner and founder of Chandler & Thongek Law Offices (CTLO), there are a number of sectors in Myanmar that continue to attract investment. “One sector receiving serious attention is the energy sector, and development of gas, coal, hydro and renewable power projects to meet domestic electricity demand,” he says. “There have been delays in the publication of a model power purchase agreement, and assurance of financial support for offtakers.”

He adds that the development of the Thilawa SEZ is progressing well, and the recent commitment of Japan to the Dawei SEZ provides some assurance that this cross-border project will materialise. Additionally, “a number of oil and gas (O&G) contractors will be investing in initial exploration obligations under production- sharing contracts, both onshore and offshore.” The telecom sector is also rapidly expanding, with substantial increase in users of mobile phones, he notes. Other sectors receiving attention include agriculture, garments and other light manufacturing, mining and tourism.

The central bank also hopes that Myanmar’s second round of foreign bank licensing will attract further foreign investment. Banks from countries that have already been granted licences - Australia, Japan, Malaysia, China, Singapore, and Thailand - will not be eligible for the new licences. New licences will instead be given to “additional neighbouring and important trading-partner economies,” the central bank said.

While it did not specify how many licences would be granted, the central bank did say banks would be able to provide wholesale onshore banking through a branch office. Additionally, “banks applying must have a representative office, or be in process of applying for one,” says Chandler.

This continued interest in Myanmar has kept Myanmar Legal Services Limited, CTLO’s affiliate firm in the country, quite busy, says Chandler. “We are busy with a variety of M&A and banking transactions,” he notes. “Many of our clients who seek incorporation services also need assistance processing applications to the MIC for approval under the Foreign Investment Law 2012. In the banking sector, we are involved in helping to structure security for foreign loans. In the upstream O&G sector, we are advising a number of contractors under production-sharing contracts awarded in the 2011 and 2013 tender rounds.”

UPDATING LAWS

Chandler notes that the country is looking to revise a number of archaic laws that pose issues for FDI. “There are a number of draft laws under consideration in the parliament, which is currently in session,” he says. “First, the Companies Law 1914 is out of date in many respects. The Asian Development Bank is providing support for the draft bill, which would bring the law more into line with international law and practices.”

Second, while Myanmar acceded to the- New York Convention on Recognition and Enforcement of Foreign Arbitral Awards in July 2013, the Arbitration Act 1944 was antiquated and did not provide for enforcement of foreign arbitration awards. On Jan. 5, the new Arbitration Law was enacted revoking the Arbitration Act 1944. The new law is based in part on the UNCITRAL Model Law, says Chandler. Third, there is a draft new Bank and Financial Institutions Law which would provide for a more comprehensive regulatory regime for the banking and finance sector.

He also notes that “drafts bills covering trademark, copyright, patents and industrial designs have been prepared, but there is no indication as to when they may be enacted. In the meantime, Myanmar provides very limited rights for IP.” And there are at least 10 other bills important to investors that are pending in parliament. In addition, the recently enacted laws and proposed laws require rules and regulations to help regulators implement them in a consistent fashion.