Burma’s long-anticipated foreign direct investment (FDI) law was approved by Parliament on Friday, paving the way for foreign firms to begin to enter the country.
The law, which was approved on the last day of Parliament’s current session, omitted several controversial requirements contained in an earlier draft, including a US$ 5 million minimum initial investment and a clause limiting foreign firms to 49 percent of any joint venture, items which were opposed by Burma’s President Thein Sein.
Sandar Min, a member of Parliament with the National League for Democracy opposition party, praised the law’s passage, but warned that further legislation was needed to bring Burma’s investment environment up to international standards, according to an article by Radio Free Asia (RFA) on Friday.
“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,” she said.
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 sign a lease for 35 years.
Reuters news agency said some of the points in the early draft law were deemed protectionist by the president's aides, who said they would scare off foreign companies and benefit the crony capitalists who dominated Burma’s economy under the junta and remain a force in the country's economy.
An earlier draft had also put restrictions on 13 sectors including manufacturing, farming, agriculture and fisheries, limiting foreign firms to a maximum 49 percent of any investment there. Thein Nyunt said that had now been altered to 50 percent.
Sandar Min said that the commission that will oversee and make recommendations on FDI in the country would include experts from nongovernmental organizations and from various types of industries.
“Where there is 100 per cent 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, and the commission will not have the sole authority to make decisions over large investments by foreign companies.
She said the government needs to pass more investment-related laws, such as patent legislation, laws governing the right of transportation, and others.
“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."
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.