Retail And Wholesale Trading In Myanmar Permitted For Foreign Investors.

 

29 May, 2018

 

 

Pursuant to Notification No. 25/2018 dated 9 May 2018 issued by the Myanmar Ministry of Commerce (Notification), wholly foreign-owned companies and joint ventures with foreign shareholdings are now permitted to engage in retail and wholesale trading in Myanmar, subject to compliance with certain minimum investment criteria and various restrictions. This much welcomed general liberalisation is expected to greatly facilitate foreign investment in retail and wholesale activities. 

 

Subject to the requirements set out below, the Notification permits retail and wholesale of domestically produced and/or imported goods, save for any goods which are prohibited or restricted under applicable law (which would include, for example, the prohibited imports listed on the Ministry of Commerce's Myanmar National Trade Portal). 

 

Minimum capital requirements 

 

Wholesale trading
 

The Notification permits wholesale trading by:

 

• a 100% foreign owned company or a joint venture company in which less than 20% of the equity is held by Myanmar citizen(s) and/or citizen-owned companies, provided the company has an initial investment amount of no less than USD 5 million (excluding the value of the goods to be traded and the land lease rent); and
• a joint venture company in which at least 20% of the equity is held by Myanmar citizen(s) and/or citizen-owned companies, provided the company has an initial investment amount of no less than USD 2 million (excluding the value of the goods to be traded and the land lease rent).

 

Retail trading
 

The Notification permits retail trading by:

 

• a 100% foreign owned company or a joint venture company in which less than 20% of the equity is held by Myanmar citizen(s) and/or citizen-owned companies, provided the company has an initial investment amount of no less than USD 3 million (excluding the value of the goods to be traded and the land lease rent); and
• a joint venture company in which at least 20% of the equity is held by Myanmar citizen(s) and/or citizen-owned companies, provided the company has an initial investment amount of no less than USD 700,000 (excluding the value of the goods to be traded and the land lease rent), provided that no company with any foreign shareholding is permitted to conduct retail activities in any premises less than 929 square metres in floor area, including any mini market or convenience store. This prohibition in respect of premises below 929 square metres reinforces Notification 15/2017 issued by the Myanmar Investment Commission (MIC). 

 

100% Myanmar-owned companies
 

There are no minimum investment requirements for a 100% Myanmar citizen-owned company to conduct wholesale or retail business.  

 

Registration requirements

 

In addition to expressly permitting foreign participation in wholesale and retail activities in Myanmar, the Notification introduces requirements for all companies involved in retail or wholesale trading to register with the Ministry of Commerce, save for wholly Myanmar citizen-owned companies with an initial investment below USD700,000, which are exempt from the registration requirements. 

 

Registration to commence retail and wholesale trading
 

Companies wishing to start retail and wholesale activities thanks to the liberalisation afforded by the Notification must submit the following to the Ministry of Commerce in order to register:

 

• certificate of incorporation;
• copy of MIC permit or MIC endorsement (if any);
• recommendation letter from the relevant City Development Committee or Township Development Committee in each region/state in which the company proposes to trade; 
• list of goods proposed to be traded; and
• detailed business plan (including the initial investment amount and the proposed trading location(s) and related size).

 

Registration for existing Myanmar-owned companies
 

Wholly Myanmar citizen-owned companies already engaged in retail and wholesale trading must register with the Ministry of Commerce within 150 days of the issue of the Notification (unless exempt because their initial investment amount is less than USD 700,000). To register, they must submit copies of the following to the Ministry of Commerce:

 

• certificate of incorporation;
• list of goods currently traded;
• detailed business plan (including certain financial information and the trading location(s) and related size); and
• if the company has more than one trading business, details of the various businesses, including detailed business plans and a list of goods currently traded.

 

While the Notification expressly provides that it applies to all companies currently conducting retail and/or wholesale trading (including joint ventures with foreign shareholdings and wholly-foreign owned companies), the Notification does not specify registration requirements for foreign companies already conducting retail and wholesale activities in Myanmar as permitted under the various product-specific notifications issued as part of the gradual 'liberalisation' over the past few years (for example, Notification No. 36/2017 issued by the Ministry of Commerce in respect of chemical fertilizers, seeds, pesticides, hospital equipment and construction materials). We understand that all wholly foreign-owned companies and joint ventures with foreign shareholdings currently conducting retail and wholesale activities in Myanmar, are also required to register with the Ministry of Commerce pursuant to the Notification, and we recommend prompt registration (notwithstanding that the Notification does not specify any time period). 

 

Expansion of trading activities

 

Companies registered under the Notification are required to notify the Ministry of Commerce within 90 days of opening any additional trading branches or any other 'expansion'. 

 

Other requirements

 

The registration requirements stipulated in the Notification are in addition to any registration and approval requirements that apply under applicable law or regulations, including product-specific registration requirements. The Notification expressly provides that companies must comply with the requirements of relevant city development committees, township development committees and district authorities, including stipulations as to permitted locations and related sizes, the permitted number of locations and permitted trading days and trading hours.

 

Looking ahead

 

Foreign investors have long awaited the general opening-up of retail and wholesale trading in Myanmar brought about by the Notification, following the gradual piecemeal liberalisation over recent years. The Notification provides welcome clarity for these business sectors with promising potential for foreign investment. This in turn should contribute to providing a welcome boost to Myanmar's economy, not only in greatly expanding consumer offerings, but also in facilitating a far greater breadth of machinery, equipment and raw materials for domestic production. It is also hoped that the Notification will contribute to a more compliant business culture, and assist in putting an end to non-compliant 'creative business structures' historically allegedly used by some in efforts to circumvent the previous restrictions. 

 

For a multitude of reasons the Notification is a progressive step towards improving Myanmar's legal framework and developing its economy.

 

 

For further information, please contact:

 

Tom Platts, Partner, Stephenson Harwood

tom.platts@shlegal.com