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1 OECD Investment policy Reviews MYANMAR . MM. R. OECD Investment policy Reviews: MYANMAR 2014. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2014), OECD Investment policy Reviews: MYANMAR 2014, OECD Publishing. ISBN 978-92-64-20643-4 (print). ISBN 978-92-64-20644-1 (PDF). Series: OECD Investment policy Reviews ISSN 1990-0929 (print).

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3 Foreword T his OECD Investment policy Review of MYANMAR represents the first international co-operation with the Government of MYANMAR on investment climate reform. Undertaken in partnership with the Secretariat of the Association of Southeast Asian Nations (ASEAN), it charts the dramatic economic reforms in MYANMAR since 2011 and draws lessons from the earlier reform experience after 1988, as well as from other countries that have undergone similar transformations. The Review uses the policy Framework for Investment to discuss the challenges and opportunities for MYANMAR as it opens to the outside world. Covering a broad range of policy areas, it looks not only at how to increase private investment in MYANMAR but also at how to ensure that investors act responsibly and contribute to inclusive and sustainable development.

4 It was prepared in collaboration with a government task force of 17 ministries and agencies chaired by the Director General for Investment and Company Administration in the Ministry of National Planning and Economic Development. A draft version of the Review was presented to the task force in Nay Pyi Taw and to stakeholders in Yangon in June 2013. A delegation led by the Deputy Minister for National Planning and Economic Development Dr Khin San Yee discussed the Review with the OECD Investment Committee in October 2013. The Review has been prepared by a team comprising Stephen Thomsen, Mike Pfister, Coralie David, H l ne Fran ois, Fernando Mistura and Geraldine Ang of the Investment Division of the OECD Directorate for Financial and Enterprise Affairs and Narin Nersesyan of the OECD Centre for Tax policy and Administration.

5 Secretariat inputs were received from the Financial and Corporate Affairs Divisions. The Review was supported by the ASEAN-Australia-New Zealand Free Trade Area Economic Co-operation Support Programme. The information in this Review is current as of end- November 2013. OECD INVESTMENT policy REVIEWS: MYANMAR 2014 OECD 2014. 3. TABLE OF CONTENTS. Table of contents Preface by Dr Kan Zaw, Minister of National Planning and Economic Development, Republic of the Union of MYANMAR and Angel Gurr a, Secretary-General, OECD .. 11. Acronyms and abbreviations .. 13. Executive summary .. 17. Assessment and recommendations .. 21. Improving the investment climate in MYANMAR .. 28. Promoting sustainable investment in MYANMAR 's agriculture.. 43. Notes .. 47. References.

6 47. Chapter 1. Trends in foreign investment in MYANMAR .. 49. Trends in FDI in MYANMAR .. 54. Notes .. 60. Chapter 2. Responsible business conduct in MYANMAR .. 61. Investment and human and labour rights and environmental protection in MYANMAR .. 65. International options for promoting responsible investment in MYANMAR .. 71. Case study: Responsible business conduct in the mineral sector in Africa's Great Lakes Region .. 79. Notes .. 80. References .. 81. Chapter 3. Regulation and protection of investment in MYANMAR .. 83. Legislative and regulatory framework for investment .. 86. MYANMAR 's ranking under the OECD FDI Regulatory Restrictiveness Index .. 96. Key investment protections provided in the Foreign Investment Law.. 100. Principle of non-discrimination in laws relating to investment.

7 105. Steps taken to improve processes of land ownership registration .. 106. Protection of intellectual property rights .. 108. Protection against expropriation .. 110. OECD INVESTMENT policy REVIEWS: MYANMAR 2014 OECD 2014. 5. TABLE OF CONTENTS. Access to justice for investors and alternative dispute resolution .. 113. International treaty practice.. 119. Notes .. 121. References .. 121. Annex Do bilateral investment treaties promote FDI inflows? .. 124. Chapter 4. Investment promotion and facilitation in MYANMAR .. 129. MYANMAR has launched measures to improve the investment climate 132. Need for a private sector development strategy .. 138. Investment promotion and facilitation.. 140. Active SME promotion in MYANMAR is in its infancy.. 144. Special economic zones are central to MYANMAR 's investment attraction strategy.

8 146. Notes .. 155. References .. 156. Chapter 5. MYANMAR 's tax policy .. 159. What factors matter to investors in MYANMAR , and how should tax policy makers respond? .. 161. Tax system constraints .. 164. Recommendations .. 170. Notes .. 171. References .. 171. Chapter 6. Developing MYANMAR 's financial sector .. 177. MYANMAR 's financial sector is still at an early stage of development .. 179. Regulatory deficiencies have prevented the development of the banking sector .. 182. State-owned financial institutions play a dominant role in the financial sector .. 186. Foreign banking institutions are expected to be allowed to entry in the near future .. 188. Strengthening the banking sector requires upgrading the institutional framework .. 192. Equity and corporate debt markets have yet to be developed.

9 195. Notes .. 197. References .. 198. Chapter 7. Developing MYANMAR 's infrastructure .. 201. Introduction and summary.. 202. Access to infrastructure is one of the weakest in the region.. 204. Investment needed is substantial but prospects for infrastructure development are improving .. 207. 6 OECD INVESTMENT policy REVIEWS: MYANMAR 2014 OECD 2014. TABLE OF CONTENTS. Overview of policy challenges for attracting private investment in infrastructure .. 210. Transport .. 218. Telecommunications .. 232. Electricity .. 239. Notes .. 257. References .. 259. Chapter 8. Other aspects of the policy Framework for Investment in MYANMAR .. 265. Corporate governance of state economic enterprises.. 266. Trade policy .. 274. Human Resource Development .. 285. Notes.

10 287. References .. 288. Chapter 9. Promoting sustainable investment in MYANMAR 's agriculture .. 291. Summary .. 292. Context.. 296. Investment policy and promotion in agriculture.. 310. Responsible investment in agriculture .. 329. Sectoral policies encouraging investment in agriculture .. 337. policy recommendations .. 357. Notes .. 361. References .. 363. Annex MYANMAR 's agricultural policy since the 1960s .. 366. Annex Human resource development and research institutions in MYANMAR .. 368. Tables 1. Key legislation affecting the investment climate in MYANMAR .. 26. Approved foreign investment by country, as of 31 October 2013 .. 56. Approved foreign investment by sector, as of 31 October 2013.. 57. Sectors prohibited to foreign investors in MYANMAR .