Wednesday, September 28, 2016

Seminar invitation: Investing in Myanmar's power sector

Date and time
Thursday, 27 October 2016, 2:30pm - 4:00pm
Place
Sule Shangri-La, 223 Sule Pagoda Road, Yangon
Topics
- Institutional and legal framework of the power sector
- Opportunities for foreign investors in power generation: selling turnkey facilities; construction and operation of coal-fired, gas-fired and hydro power plants; power generation with renewable energy
-Opportunities for foreign investors in supply, engineering and distribution
- Project documentation: MoA, BOT contract, power purchase agreement, fuel supply agreement
- Land issues
- Project finance
- Government guarantees
Speakers
- Sebastian Pawlita
- U Nyein Chan Zaw
Language
English
Fee
The event is free of charge.
Registration
Please register by sending an e-mail to sebastian@lincolnmyanmar.com or nyeinchanzaw@lincolnmyanmar.com, stating the name of your company and the names of the participants.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Sunday, August 7, 2016

National economic policy

Much has been made of the government’s perceived “vague and thin” national economic policy announced on 29 July 2016 (http://tinyurl.com/jtzqs2p), but this criticism fails to take into account that there exists a detailed industrial policy (http://tinyurl.com/zbz54j8); Frontier Myanmar provides a good summary (http://tinyurl.com/jauqk28).

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

How foreigners can engage in trade

A few days ago, Aeon, a Japanese supermarket chain, announced (http://tinyurl.com/zt9yask) that its Myanmar joint venture is to acquire 14 supermarkets from the local joint venture partner and start “supermarket business” on 1 August. Does this mean that the government has changed its policy and now allows foreigners to trade? Japanese press reports that Aeon acquired government approval because of past merits (http://tinyurl.com/zgmbvyg).

In reality, however, nothing has changed. A company search on DICA’s homepage reveals that the joint venture company, Aeon Orange Co., Ltd., is set up as a simple services company (http://tinyurl.com/hwsrmxl). Being foreign-invested, it is impossible for it to import goods. It appears that the importing is done by the local joint venture partner; the goods then seem to be sold by the joint venture company.

As the joint venture company would have signed, when applying for company registration, an undertaking not to engage in trade, this is a “gray zone” set-up, and theoretically competitors could try to lobby DICA to deregister the joint venture company. Against this background, it is a bit surprising that Aeon should have chosen to announce its entry into the Myanmar supermarket business with so much fanfare.

We have taken this story as an opportunity to summarize how foreigners can engage in wholesale and retail activities in Myanmar.

(The following text first appeared as two articles in the Myanmar Times on 14 and 21 July 2014. We have updated it and included information from a previous newsletter on trading in the Thilawa SEZ).

1. How foreigners are barred from trading


With few exceptions, foreigners are barred from engaging in trading activities: They are not allowed to buy or import goods in order to resell or export them.

The definition of “foreigner” includes companies incorporated in Myanmar where as little as one share is held by a foreigner. It is not possible for a foreigner to set up a company whose business scope includes trading activities, and it is likewise not possible to register as an importer or exporter with the Ministry of Commerce with the objective of engaging in trade.

It does not matter whether it is wholesale or retail - the sector is, as a general rule, off limits to foreigners. It is also not possible for, say, a foreign producer of machines to set up a distribution company in Myanmar in order to import and sell machines of its own brand.

There is no explicit legal basis for this prohibition. Rather, it is administrative practice that appears to have set in rather suddenly in 2002. Until then, it seems to have been possible for foreigners to establish trading companies in Myanmar and import goods for trading purposes.

However, these business permits have long expired.

Foreigners may set up factories in Myanmar, import machines and raw materials, produce goods and sell and/or export these goods. However, they cannot - officially - outsource production to a local manufacturer (so-called contract manufacturing), pay him a fee and sell the goods thus produced. This is rather surprising as the creation of value through production takes place in the country in both cases.

This means most foreign goods on the market locally are traded through domestic importers and distributors. This is often not a bad thing as it can be difficult to penetrate the market without some local help.

Leaving everything to the local distributor is not always the preferred option, though, and there are several other alternatives.

2. Joint ventures in certain sectors


The Ministry of Commerce has in the meantime relaxed the trading ban a little: In certain sectors, it is possible for foreigners to set up joint ventures with locals in order to import and sell goods. These goods are:
  • Brand-new cars (MoC Notification 20/2015)
  • Fertilizer, seeds, pesticides, hospital equipment (MoC Notification 96/2015)
  • Construction materials (MoC Notification 56/2016)

The Mitsubishi car showroom in Yangon was set up under this policy.

3. Trading in the Thilawa SEZ

On 27 May 2015, the Thilawa SEZ Management Committee published details of the scope of trading activities that foreign investors can engage in if they invest in the Thilawa SEZ (http://tinyurl.com/zwh3b5t). Wholesale trade outside the SEZ of goods stored in warehouses located in the SEZ is permitted if a large-scale investment is made.

Foreign investors in the Thilawa SEZ can operate a trading business on the following conditions:
  • Foreign investors can register their business as a “free zone business” or a “promotion zone business”. Free zone businesses have to export at least 75% of their goods (by value), but enjoy more tax incentives than promotion zone businesses. Trading is allowed for both types of businesses, but the conditions are different.
  • Irrespective of the type of business, the trading of 4-wheel vehicles, motorcycles, goods of which trading is restricted by other laws (presumably, these are products such as alcoholic beverages whose import is restricted, and products such as arms or drugs of which the trade and often possession are banned) and goods specified by the Thilawa SEZ Management Committee from time to time is prohibited. 
  • “Wholesale” means the sale of products to other businesses for resale or for use in the manufacture of goods or supply of services. Additionally, the direct sale to end-users is included if (i) industrial materials are sold in bulk or (ii) industrial machinery and equipment with a sales price of USD 500,000 or more per transaction are sold.
  • A free zone business may sell products manufactured by itself or obtained from a group company or a third party to promotion zone businesses and outside the SEZ if (i) it has a factory or warehouse in the SEZ and (ii) its annual turnover from such sales does not exceed 25% of its total annual turnover from sales. There are no limits on the export of products manufactured by a free zone business or purchased from other free zone businesses. The Instruction is silent on whether a free zone business may purchase products from promotion zone businesses or outside the SEZ in order to export them.
  • A promotion zone business may sell products manufactured by itself without restrictions (note: this is not stated in the Instruction, but it is clear that an investor setting up a factory can sell the goods produced in this factory; restrictions only apply to free zone businesses as they are obliged to produce predominantly for export purposes).
  • A promotion zone business may sell products imported from a group company within the SEZ and, provided that it restricts itself to wholesale trade, outside the SEZ if it (i) has a warehouse in the SEZ, (ii) adds value (e.g. through repacking, labelling, other forms of processing, quality control, testing, laboratory services, maintenance or other technical services) and (iii) the investor has invested at least USD 2 million (excluding the rent for the land) for providing the value-adding services.
  • A promotion zone business may sell products imported from a third party within the SEZ and, provided that it restricts itself to wholesale trade, outside the SEZ if (i) the investor is certified as an “official agent” or “official distributor” of the manufacturer, (ii) the investor or a group company has been active in international trade for at least 10 years with an annual turnover of at least USD 500 million for a minimum of 3 years and an established place of business in at least 5 countries, (iii) the paid-up capital of the investor or a group company amounts to at least USD 25 million, (iv) the business has a warehouse in the SEZ, (v) the business adds value (e.g. through repacking, labelling, other forms of processing, quality control, testing, laboratory services, maintenance or other technical services) and (vi) the investor has invested at least USD 3 million (excluding the rent for the land) for providing the value-adding services.
  • A promotion zone business may sell locally sourced products within the SEZ and, provided that it restricts itself to wholesale trade and does not sell agricultural, fishery or mineral products or precious stones, outside the SEZ.
  • A promotion zone business may export goods manufactured by itself or other promotion zone businesses.
  • Investors may set up sales offices outside the SEZ with the proviso that the lease term must not exceed one year.
4. An aggressive approach: Ignoring the ban

When foreign-invested companies are being registered with the Directorate of Investment and Company Administration (DICA), the applicant has to sign an undertaking not to engage in trading activities. Nevertheless, trading joint ventures exist where (i) the local partner imports the goods (as it is impossible for a foreign-invested company to register as importer) and (ii) the foreign-invested joint venture company then sells the goods locally.

This is of course a “gray zone” approach, and investors theoretically risk that competitors try to lobby DICA to deregister the joint venture company.

5. Franchising

Retail is also possible through a franchising structure. The foreign partner (franchisor) and the local partner (franchisee) conclude a franchise agreement by which the franchisee pays a franchise fee to the franchisor; the franchisor allows the franchisee to use the franchisor’s trademark; and the franchisor provides the franchisee with a business concept (e.g. design of the shops, assistance with sourcing goods at a low price, marketing services, training of employees, etc.).

Franchising, although not specifically regulated,is more and more common in Myanmar. It is a legal business model and foreigners are not prohibited from entering into franchise agreements with locals. Internationally, franchise models are tried and tested models in the retail sector; for example convenience stores in Japan are often operated as a franchise. The idea of a franchise is appealing as there is a wealth of experience with franchise models internationally from which the parties can draw.

The services provided by the franchisor usually justify a substantial remuneration, meaning that the franchisor is entitled to a substantial portion of the profits of the retail business. The local partner, in return, may, amongst others, acquire access to cheap financing (if the franchisor extends a loan at advantageous conditions), profit from low purchase prices when acquiring stock (as the franchisor is usually able to buy in bulk), profit from the franchisor’s reputation with producers (if, for example, the franchisor is already their distributor in other countries) and use the franchisor’s experience in setting up and managing a chain of retail stores.

6. Other methods

It is possible to set up joint ventures outside of Myanmar to participate in the Myanmar retail market. Sojitz, for example, announced in 2013 that it had set up a joint venture company in Singapore together with the City Mart group to purchase consumer goods in bulk in order to distribute them through the City Mart network.

Foreign manufacturers cannot set up a distribution company in Myanmar in order to sell their goods if these goods are manufactured abroad. However, a manufacturer of machines could set up a services company in order to install the machines and provide customer support. The machines would have to be imported by a local importer or the customer.

Foreign sellers wishing to support their local distributor so as to increase sales can provide marketing and management assistance.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

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Saturday, July 23, 2016

Tender for temporary power plant

We (somewhat belatedly) wish to draw your attention to this tender opened by Electric Power Generation Enterprise for a temporary power plant with a capacity of 300 MW: http://tinyurl.com/hje5f94.

Deadline to submit quarterly performance report to the MIC

The MIC wishes to make investors aware that businesses with an MIC permit have to submit quarterly performance reports; the deadline for the submission of the performance report for the first quarter of the 2016/17 financial year has been set for 27 July (http://tinyurl.com/gl4chjq). Section 42 Foreign Investment Law and section 32 Citizens Investment Law specify penalties for non-compliance.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Will foreigners soon need work permits?

The Myanmar Times reports (http://tinyurl.com/htbueom) that the Ministry of Labour is about to submit the draft of a work permit law to the Union Attorney General’s Office for review. This law, if enacted, will require foreigners working in Myanmar to obtain work permits - a development which is maybe not so welcome and which requires monitoring.


To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Review of Yangon’s high-rise building projects: Legal implications included in our land law seminar on 4 August

The review of Yangon’s high-rise building projects has caused quite a stir: Developers have been told to significantly alter the designs of projects and dismantle floors already built. For some developers, these requirements seem to be life-threatening. Against this background, we will change the topics of our land law seminar on 4th August a bit and include a section on (i) zoning in Yangon, (ii) obtaining building permits and (iii) legal protection against unilateral measures by the government

Date and time
Thursday, 4 August 2016, 2:30pm - 4:00pm
Place
Sule Shangri-La, 223 Sule Pagoda Road, Yangon
Topics
- The different types of land and their uses
How to register lease agreements
- How to use farmland for other purposes
Frequent issues in land due diligences
- The Yangon high-rise building projects review: (i) zoning in Yangon, (ii) obtaining building permits and (iii) legal protection against unilateral measures by the government
- Stamp duty
Speakers
- Sebastian Pawlita
- U Nyein Chan Zaw
Language
English
Fee
The event is free of charge.
Registration
Please register by sending an e-mail to sebastian@lincolnmyanmar.com or nyeinchanzaw@lincolnmyanmar.com, stating the name of your company and the names of the participants.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Latest version of the draft of a new Myanmar Investment Law

On 12 July 2016, DICA published the latest version of the draft of the new Myanmar Investment Law. The new law will, if enacted, merge the present Foreign Investment Law and the Citizens Investment Law. Foreign investors in non-MIC businesses may, according to the draft, be eligible to lease land long-term and obtain tax exemptions. Furthermore, they benefit from other advantages under the draft law (e.g. guarantee against confiscation, explicit right to repatriate profits) that are presently only available to MIC companies.

Please find an analysis of the draft below. We have prepared an English translation of the draft which is available on our homepage.

1. Domestic investor and foreign investor

A domestic investor is defined as a citizen investing in the country. The term “citizen” includes business entities established only by citizens. This is at odds with the draft of the new Companies Law (the latest version can be found here: http://tinyurl.com/jm4vu9x) according to which companies with a foreign shareholding not exceeding a “prescribed ownership amount”are treated as a local company.

A foreign investor is a person who is not a citizen. 

2. Two routes to invest

As is also the case now, the draft law provides for two routes to invest in the country: (i) with permission from the Myanmar Investment Commission (“MIC permission”) and (ii) without it.

MIC permission is required for businesses that (i)are important for the State’s strategy, (ii) require a high amount of capital, (iii) have a high impact on the natural environment and residents, or (iv) are classified by the Government as requiring MIC permission. Further details will be provided in implementing rules. It should be noted that the requirement to obtain MIC permission applies to both foreign and domestic investors.

Other businesses do not require MIC permission. Differently from now, however, the draft provides that foreign investors in non-MIC businesses may be eligible to lease land long-term and obtain tax exemptions. Furthermore, they benefit from other advantages under the draft law (e.g. guarantee against confiscation, explicit right to repatriate profits) that are presently only available to MIC companies.

3. Approval application

Foreigners wishing to invest in businesses for which no MIC is required may file an application to obtain MIC approval for the long-term lease of land (50+10+10 years) and/or obtaining tax exemptions. 

4. Market access restrictions

The draft provides for the following market access restrictions:

(a) Certain businesses which are deemed to be harmful are prohibited to domestic and foreign investors alike.

(b) Concerning state monopolies, the draft only states that access is “restricted” without differentiating between domestic and foreign investors. One would expect, however, that - as is the case already now - access may be possible on a case-by-case basis.

(c) Businesses which a foreign investor is not allowed to engage in, or only allowed to engage in if he forms a joint venture with a citizen.

(d) Businesses which require approval of the relevant ministries. The draft does not distinguish between local and foreign investors in this regard.

The MIC shall, with the approval of the Cabinet, issue a notification which shows the restricted businesses (b)-(d).

5. Tax incentives

The draft provides for the following tax incentives:

(a) For investments in sectors listed in a notification issued by the MIC in order to promote investment: Exemption from corporate income tax for seven, five or three years depending on whether the investment takes place in an underdeveloped, reasonably developed or well-developed region or state.

(b) Exemption from customs duties and other domestic taxes on the import of machines, equipment and other specified items required during the construction period of a new business, or during the expansion period of an existing business that obtained permission from the MIC to increase the investment amount.

(c) Exemption from customs duties and other domestic taxes on the import of raw materials and partially manufactured goods by an export-oriented business if these items are used in the production of goods for export.

(d) Exemption from corporate income tax on profits reinvested within one year.

(e) Accelerated depreciation (although this would often not work as an incentive).

(f) Right to deduct R&D expenses from the corporate income tax base if R&D is done in the interest of the State (although these expenses would be deductible under the ordinary tax laws anyway).

(g) Better incentives may be granted to citizen-owned businesses.

6. Labour matters

Unlike the present Foreign Investment Law, the draft contains no requirement as to the hiring of a specified percentage of skilled employees. However, investors (both domestic and foreign) are obliged to implement skill development programmes.

7. Dispute resolution

The draft obliges the MIC to implement a mechanism by which disputes can be resolved before reaching the official dispute resolution stage.

Investors are free to agree on a dispute resolution method of their choice.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

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Monday, July 11, 2016

Seminar invitation: Land law (as an aside: stamp duty)

Date and time
Thursday, 4 August 2016, 2:30pm - 4:00pm
Place
Sule Shangri-La, 223 Sule Pagoda Road, Yangon
Topics
- The different types of land and their uses
How to register lease agreements
How to use farmland for other purposes
Frequent issues in land due diligences
Complicated stuff: Leasing land from the government
Complicated stuff (II): Splitting the floor space between the owner and the construction company
Stamp duty
Speakers
- Sebastian Pawlita
U Nyein Chan Zaw
Language
English
Fee
The event is free of charge.
Registration
Please register by sending an e-mail to sebastian@lincolnmyanmar.com or nyeinchanzaw@lincolnmyanmar.com, stating the name of your company and the names of the participants.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Our latest newsletter

The Ministry of Commerce issued a notification on 7 July 2016 allowing Myanmar/foreign joint ventures to import and sell “construction materials”. Although there may presently not be so much demand - given that the Yangon Region government has shut down the construction of high-rise buildings -, the notification marks a welcome liberalization of the Ministry’s otherwise restrictive policy of disallowing foreign-invested companies to trade. We will, however, have to wait and see how the notification will work out in practice as it is quite vague - it implies, for instance, that there should be a minimum local shareholding, but does not specify the percentage.

Please find a translation of the notification inside the newsletter.

The MIC is operational again and so far has given out 19 investment permits.

More than 80 participants attended our debt collection seminar last Thursday.  Our next seminar is on land law and stamp duty. It will take place on 4 August; please find the invitation inside the newsletter.

Please welcome U Lynn Shein, a Higher Grade Pleader who joined our firm on 1 July 2016.

We are looking to expand our office and are in search of an enterprising foreign lawyer wishing to join as a partner. The ideal candidate has a bit of a business case of his own in Myanmar and either (i) speaks Korean or Chinese or (ii) has a track record of advising companies in the oil and gas sector and the electricity sector.

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com

Monday, June 27, 2016

Registering long-term lease agreements

Foreign investors report that they cannot register lease agreements. According to section 17(d) Registration Act 1908, leases of immovable property for any term exceeding one year have to be registered. Failure to register such a lease agreement results in it being void.

This is a cause of concern especially for telecom tower companies: They have a massive number of long-term lease agreements which are the basis of their business, and if they don’t manage to register them, potential investors may not be willing to pay as much as they would otherwise.

It has been reported that land record departments have refused to register lease agreements if one party was a foreign-invested company on the grounds that “foreigners cannot lease land long-term”. This is of course wrong - foreign-invested companies operating under an investment permit from the Myanmar Investment Commission can lease land for up to 50 years and may prolong this period to 70 years in total.

Although a hassle, it is certainly possible to register long-term lease agreements, even if the tenant is a foreign-invested company. However, registration poses logistical challenges if a lot of agreements have to be registered all over the country in a short period of time.

Here is what we think is important to obtain registration:
  •  Registration can only be obtained within four months after the date of signing of the agreement (section 23 Registration Act). This is something the officer checks, so you don’t have too much time to obtain registration. This provision is - together with stamp duty - a reason for leaving dates blank.
  • The person obtaining registration on behalf of the company must have a notarized power of attorney, and he has to take a witness along.
  • The landlord has to appear in front of the registration officer together with a witness (or, alternatively, has to send someone with a notarized power of attorney). If many lease agreements have to be registered in different places in a short period of time, this is difficult to organize, as someone basically has to pick up the landlord from his home and make sure that he doesn’t complain to the registration officer all the way through registration about having so many better things to do than being here…
  • The lease agreement has to be properly revenue-stamped. Without paying a fine of 10 times the applicable stamp duty, this is only possible if the agreement is presented for stamping within one month after signing. A lot of trouble can be saved in practice if the contract does not contain a date.
  • It is difficult to obtain registration when you’re unfortunate enough to crash into the middle of an inspection of the land record department or the registration of deeds office by a higher-ranking office.
  • Amazingly, proper title documentation or the existence of an MIC permit do not seem to be of paramount importance when trying to secure registration of a lease agreement.
To contact the author or subscribe to our newsletter, please visit our homepage: www.lincolnmyanmar.com

Investment in the power sector - institutional framework

1. The various ministries

The power sector is presently overseen by several Union Ministries:

Union Ministry
Minister
Brief description of the area of competence
Electric Power and Energy (formerly divided into the Ministry of Electric Power and the Ministry of Energy)
U Pe Zin Tun (since 6 April 2016; former permanent secretary of the Ministry of Energy; no party affiliation)
- Electric power: Planning, generation (coal, hydro, gas, oil, solar, wind, geothermal), transmission, distribution
- Energy: Production, import/export, distribution of oil and gas and derived products
Natural Resources and Environmental Conservation
(formerly divided into the Ministry of Mines and the Ministry of Environmental Conservation and Forestry)
U Ohn Win (since 30 March 2016; former professor of forestry at Yezin University; no party affiliation)
- Production, import/export and distribution of coal
- Biomass and firewood
- Environmental impact assessment
Agriculture, Livestock and Irrigation (formerly divided into Ministry of Agriculture and Irrigation and Ministry of Livestock, Fisheries and Rural Development)
U Aung Thu (since 30 March 2016; former rector of Yangon University, NLD)
- Rural electrification (off-grid), e.g. mini-hydro 
Hydropower facilities connected to irrigation
Ministry of Industry
U Khin Maung Cho (since 30 March 2016; engineer; no party affiliation)
Energy efficiency and conservation, (theoretically:) nuclear power, formerly: off-grid rural electrification (was transferred to Ministry of Livestock, Fisheries and Rural Development)

It is not as apparent now that a number of ministries were merged in the wake of the handover of power to the new NLD led government (in particular the Ministry of Energy and the Ministry of Electric Power), but energy and electricity policy was rather fragmentized due to the high number of ministries under the previous government whose areas of competence were sometimes not clearly demarcated. In order to create a framework for the establishment of a coherent policy, the previous government instituted a “National Energy Management Committee” on 9 January 2013 which comprised at the time members of the following Union Ministries and other organizations:

Composition of the National Energy Management Committee under the old government
Old Ministry name/name of the organization
Fate of the old Ministry/organization after the change of government
Ministry of Energy
Merged to Ministry of Electric Power and Energy
Ministry of Electric Power
Ministry of Agriculture and Irrigation
Merged with the Ministry of Livestock, Fisheries and Rural Development to the Ministry of Agriculture, Livestock and Irrigation
Ministry of Mines
Merged to Ministry of Natural Resources and Environmental Conservation
Ministry of Environmental Conservation and Forestry
Ministry of Industry
Still exists
Ministry of National Planning and Economic Development
Merged with the Ministry of Finance to the Ministry of Planning and Finance
Ministry of Science and Technology
Ministry abolished
Myanmar Engineering Society
Still exists
Renewable Energy Association Myanmar
Still exists

The National Energy Management Committee made good on its intended role and published, on 8 January 2016, a “Myanmar Energy Masterplan” (http://tinyurl.com/zw93vw6), a 900+ pages document with projections up to the year 2030.

It remains to be seen how the new government will reshape the National Energy Committee. Its former members consisted largely of Union ministers who are not in office any more.

It should be noted that, although the Ministry of Electric Power and Energy is the lead ministry in almost every power project, a number of other ministries and government entities will often have to be consulted. Examples:
  • The Ministry of Transport and Communications (Department of Meteorology and Hydrology) is responsible for “measurements, assessment and monitoring for rivers” in hydropower projects (Myanmar Energy Masterplan page 193).
  • The Chief Minister of the State or Region in which the project is located has to approve if the project (as will usually be the case) involves the long-term use of land

It is furthermore clear that foreign-invested power projects require an investment permit from the Myanmar Investment Commission or, if they are located in a special economic zone, from the relevant Special Economic Zone Management Committee.

2. The Ministry of Electric Power and Energy

The Ministry of Electric Power and Energy (“MoEPE”) was merged, on 30 March 2016, from two previously separate ministries, the Ministry of Electric Power and the Ministry of Energy. The previous Ministry of Electric Power had been separated from the Ministry of Energy in 1997 and split, from 2006 to 2012, into No. 1 Ministry of Electric Power and No. 2 Ministry of Electric Power.

MoEPE is central to the production, transmission and distribution of electric power. Electricity is produced either by Myanmar Electric Power Enterprise (which now seems to have morphed into Electric Power Generation Enterprise), a state-owned economic enterprise under MoEPE, local or foreign independent power producers or joint ventures between MoEPE and local or foreign investors. The electricity is then purchased by MoEPE (previously, through Myanmar Electric Power Enterprise, now - presumably - through Electric Power Generation Enterprise) and distributed to the consumers (through Yangon Electricity Supply Corporation, Mandalay Electricity Supply Corporation and Electricity Supply Enterprise). MoEPE acts as the single buyer of electricity, similar to models in Thailand and Indonesia.

MoEPEis presently composed of the following departments (http://tinyurl.com/zoq35ep).

Department
Under which Ministry previously?
Functions (to the extent we can make them out - online resources on MoEPE’s homepage have not been fully updated yet)
Myanma Oil and Gas Enterprise (MOGE)
Ministry of Energy
- Owner and operator of oil and gas exploration and production (in production sharing contracts with local or foreign companies)
- Owner and operator of onshore gas pipeline grid
Myanma Petrochemical Enterprise (MPE)
Ministry of Energy
Operates small refineries and plants to produce petroleum and petrochemical products (petrol, diesel, jet fuel, urea fertilizers, liquefied petroleum gas (LPG) and others), sometimes in joint ventures with, or by leasing out the plants to, local or foreign investors.
Myanma Petroleum Products Enterprise (MPPE)
Ministry of Energy
Wholesale and retail of petroleum products; intends to partly do so in joint ventures with local or foreign investors
Department of Electric Power Transmission and System Control (DEPTSC)
Ministry of Electric Power
Engineering service for power system operation, power system planning, operation and maintenance of transmission lines and sub-stations, operation and maintenance of power system telecommunication facilities
Electricity Supply Enterprise (ESE)
Ministry of Electric Power
Operation of the national grid and distribution of electricity in all areas of Myanmar with the exception of Yangon and Mandalay
Department of Electric Power Planning (DEPP)
Ministry of Electric Power
Planning of the production of electric power (coal, hydro, gas, oil, solar, wind, geothermal)
Electric Power Generation Enterprise (EPGE)
Ministry of Electric Power
Production of electric power (coal, hydro, gas, oil, solar, wind, geothermal)
Department of Hydropower Implementation (DHPI)
Ministry of Electric Power
Planning, design, quality control, project appraisal and feasibility evaluation of hydropower projects
Yangon Electricity Supply Corporation (YESC)
Ministry of Electric Power
Operation of the national grid and distribution of electricity in Yangon
Mandalay Electricity Supply Corporation (MESC)
Ministry of Electric Power
Operation of the national grid and distribution of electricity in Mandalay

A note on the word “enterprise” in the table above: MOGE and the other enterprises are so-called state-owned economic enterprises (SEEs) which makes them more akin to a government unit than a corporation. The function of SEEs is two-fold: They are supposed to generate income through business activities (and nowadays they even have to pay tax on it) and, at the same time, function as the regulator of the industry in which they operate. It is clear that this gives rise to conflicts of interest and is not an ideal situation. It is expected that medium-term, the SEEs will be transformed into ordinary public companies (in which the state may still have exclusive or majority ownership) and stripped of their regulatory functions. YESC and MESC reportedly underwent corporatization to become public companies in mid-2015 (http://tinyurl.com/h4dodtf).

To contact the author or subscribe to our newsletter, please visit us on our homepage: www.lincolnmyanmar.com