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Myanmar: Market Profile

Picture: Myanmar factsheet
Picture: Myanmar factsheet

1. Overview

Myanmar is currently in a democratic transition – the government has launched new economic policies, finalised new health and education sector strategies, stated new priorities, such as nutrition and rural development. There are challenges to achieving a sustainable and inclusive peace agreement as well as to addressing the heightened tensions in Rakhine State.

Source: World Bank, Fitch Solutions
Date last reviewed: August 14, 2018

2. Major Economic/Political Events and Upcoming Elections

November 2015
Elections. Opposition National League for Democracy – led by Aung San Suu Kyi – won enough seats in parliament to form a government.

April 2017
Myanmar held scheduled by-elections to fill the position of 19 parliamentary seats.

November 2020
General Elections to be held – the second such election after transitioning from Junta rule.

Source: BBC Country Profile – Timeline, Fitch Solutions Political Risk Analysis
Date last reviewed: August 14, 2018

3. Major Economic Indicators

Graph: Myanmar real GDP and inflation
Graph: Myanmar real GDP and inflation
Graph: Myanmar GDP by sector (2017)
Graph: Myanmar GDP by sector (2017)
Graph: Myanmar unemployment rate
Graph: Myanmar unemployment rate
Graph: Myanmar current account balance
Graph: Myanmar current account balance

e = estimate, f = forecast
Source: IMF, World Bank
Date last reviewed: August 6, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Myanmar merchandise trade
Graph: Myanmar merchandise trade

e = estimate
Source: WTO
Date last reviewed: August 6, 2018

Graph: Myanmar major export commodities (2017)
Graph: Myanmar major export commodities (2017)
Graph: Myanmar major export markets (2017)
Graph: Myanmar major export markets (2017)
Graph: Myanmar major import commodities (2017)
Graph: Myanmar major import commodities (2017)
Graph: Myanmar major import markets (2017)
Graph: Myanmar major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: August 16, 2018

4.2 Trade in Services

Graph: Myanmar trade in services
Graph: Myanmar trade in services

Source: WTO
Date last reviewed: August 6, 2018

5. Trade Policies

  • Myanmar has been a member of WTO since January 1, 1995.

  • International tariff standards cover only 18% of its goods and services. While its commitment to binding international tariffs agreements is limited, Myanmar generally levies tariffs that are comparable or lower than that of other countries in the region.

  • Myanmar is a member of the ASEAN Free Trade Area (AFTA), and has committed the Common Effective Preferential Tariff Scheme (CEPT) to reduce intra-ASEAN import tariffs for 100% of the total tariff lines by 2018. Myanmar has been a member of ASEAN since July 23, 1997.

  • Generally, agricultural products have an average tariff rate of 8.7%, while non-agricultural products have an average tariff rate of 5.1%. Myanmar typically imposes tariffs that are similar to or lower than its regional peers.

  • Myanmar, in its obligations to its fellow AFTA members, aims to abolish all import tariffs affecting regional peers throughout 2018. By 2015, 93% of all tariffs affecting AFTA members were eliminated by notification no. (222/2013).

  • VAT or commercial tax is charged at a general rate of 5% on the sale of most goods and services, although this does vary.

  • The government may impose three different levies on a given import: an import duty, a commercial tax, or licensing fees. The taxes applied are determined via customs, insurance, and freight value. Certain commodities follow a Myanmar-specific customs schedule – often, the schedule prices commodities in local currency and in terms of their price locally; as such, price/tax disparities may equally favour or disadvantage traders.

  • The Government of Myanmar maintains an unpublished list of restricted imports, but amidst recent reforms, it is unclear what, if any, regulations are currently enforced. The Myanmar Customs Department requires the following documentation: 1. Import license or permit; 2. Invoice; 3. Bill of Landing or Air Consignment Notice; 4. Packing List; and 5. Other certificates and permits issued by the relevant government departments as a condition for import.

Source: WTO – Trade Policy Review, Fitch Solutions
Date last reviewed: August 15, 2018

6. Trade Agreements

6.1 Trade Updates

In line with its increasing openness to trade and the continued formalisation of its economy, numerous trade barriers have been removed and are expected to continue falling over the medium term. In particular, a dual exchange rate that caused complications for businesses has been abolished, and the Myanmar kyat is now on a managed float, which has eased foreign currency controls and improved access to dollars for importers.

6.2 Multinational Trade Agreements

Active

  1. Myanmar is a member of WTO (Effective date: 1995).

  2. ASEAN FTA (AFTA): AFTA comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam: From 2015, almost all tariffs between member states have been removed. The rewards of lower tariffs within the area will be significant in growing regional trade, although most member states are not currently significant trading partners of Myanmar. By end of 2018, countries aim to eliminate all tariffs affecting trade with other members.

  3. ASEAN-China FTA (ACFTA): China is Myanmar’s largest trade partner. Reduction of tariffs will ease the trading process.

  4. ASEAN-South Korea FTA (AKFTA): South Korea is a top trade partner, and removal of tariffs benefits both exporters and importers.

  5. ASEAN-Japan FTA (AJCEP): Japan provides a large market for garment exports, with tariff-free trade therefore benefiting the manufacturing sector in particular.

  6. ASEAN-India FTA (AIFTA): Both a prominent exporting and importing partner, as well as close geographically, enhancing trade flows between the countries.

  7. EU Everything But Arms Agreement: EU states are not major trade partners, but duty free access to the EU market will be beneficial for exporters and facilitate expansion of trade flows.

  8. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong is a key export market and the reduction of tariffs will ease the trading process; Hong Kong’s potential as a key export market increases the importance of AHKFTA.

Under Negotiation

Regional Comprehensive Economic Partnership (RCEP) ASEAN members, Australia, China, India, Japan, South Korea, New Zealand: If successful, the RCEP will supersede a number of Myanmar’s more ad-hoc FTAs, consolidating a number of ASEAN’s already-existing free trade agreements. The agreement is expected to be signed in November of 2018.

Note: Only major FTAs cited
Source: WTO Regional Trade Agreements database, Fitch Solutions
Date last reviewed: August 15, 2018

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Myanmar FDI stock
Graph: Myanmar FDI stock
Graph: Myanmar FDI flow
Graph: Myanmar FDI flow

Source: UNCTAD
Date last reviewed: August 6, 2018

7.2 Foreign Direct Investment Policy

  1. The Myanmar Investment Commission (MIC) is responsible for investment into the country (providing verification and approval) and was established in 1994.

  2. Through its membership in ASEAN, Myanmar is also party to the Comprehensive Investment Agreement, which contains an investment chapter that provides protection standards to qualifying foreign investors.

  3. The country continues to publish a 'negative list' of sectors that are either completely barred from foreign involvement or are reserved for SOEs. This restricts the ability of foreign firms to participate in some of the country's most lucrative industries, particularly resource extraction, banking and telecommunications. The MIC is responsible for reviewing and approving all foreign investment projects, a process which is subject to a high level of discretion.

  4. New foreign enterprises must have a workforce comprised of at least 25% Myanmar citizens in the first two years of operations; this figure rises to 50% in the subsequent two years, and a further 75% by the third two-year period. The law also grants the MIC the power to extend the time limit to employ local workers for 'knowledge-based business'.

  5. Myanmar's expropriation regime does not protect investors against indirect expropriations and there is no specific provision in Myanmar's legislation against expropriation without compensation.

Source: WTO – Trade Policy Review, the International Trade Administration (ITA), US Department of Commerce, Fitch Solutions
Date last reviewed: August 15, 2018

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Incentives available under the Myanmar Foreign Investment Law– Income tax exemption for five years, extendable depending on the success of the enterprise
                                            
– Deduction of depreciation on capital goods

– Income tax relief of 50% on the sale of exported goods

– Inclusion of foreign employees under domestic income tax law

– Deduction of business expenses, such as research and development

– Exemption from customs duties on imported capital goods, construction materials and raw materials

– Exemption from sales tax on goods produced for export
SEZs located at Thilawa (open), Dawei and Kyaukpyu (under construction)– Income tax exemption for seven years in exempted zones

– Income tax exemption for five years in business-promoted zone

– Income tax relief of 50% for a further five years for businesses in exempted zones or business promoted zones

– Income tax relief of 50% for a third period of five years if profits are held in a reserve fund and re-invested within one year of the reserve being made

– Ability to lease land for up to 75 years

Source: US Department of Commerce, Fitch Solutions
Date: Agusut 15, 2018

8. Taxation – 2018

  • Value Added Tax: 5%
  • Corporate Income Tax: 25%

Source: PwC Tax Summaries 2018
Date last reviewed: August 16, 2018

8.1 Important Updates to Taxation Information

  • Myanmar's taxes fall under the auspices of the country's Internal Revenue Department. 

  • Companies residing in Myanmar, considered to be those incorporated in the country, are liable to pay corporate income tax on their worldwide income, while non-resident firms are charged on Myanmar-sourced income only. Both resident and non-resident companies pay income tax at a flat rate of 25%, as the 35% rate formerly applied to branches of foreign companies was reduced as of April 2015.     

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax25% on profits for resident and non-resident companies
Capital Gains Tax10% assessed separately from other income (applicable to residents and non-residents)
Commercial Tax5% flat rate, or 5%-120%, depending on the types of goods and services
Social security contributions3% on gross salaries (to a maximum of MMK9,000 per worker)
Property Tax20% on property value
Stamp Duty5% on sale price
Withholding Tax– 20% on royalties for non-residents; 15% for residents
– 15% on interest for non-residents; 0% for residents
– 0% on dividends (residents/non-residents)

9. Foreign Worker Requirements

9.1 Business Visa

Valid for 70 days. A Multiple Entry Business Visa can also be acquired if the individual has had two single entry Business Visas.

Documentation required:

  • A recommendation letter from the employer, including details about the type of business, purpose of visit, applicant’s name, passport details, position in company, and intended entry and exit dates
  • Invitation letter from a Myanmar registered company on its official letterhead
  • A guarantor from the Myanmar registered company who is the one officially inviting the applicant. The guarantor must be the managing director or owner of the company and must give a copy of the Myanmar company registration certificate. The guarantor may be contacted by the immigration authorities during the application process.
  • Visa application form
  • Two recent color photographs with white background size 35mm x 45mm
  • Passport valid for at least six months and a copy of the passport details page

9.2 Multiple Entry Business Visa (MEBV)

Determined on a case-by-case basis. The Visa itself allows for unlimited entries during a period of three months, six months, or one year. Any single period of time stayed within Myanmar during which the MEBV is held may not exceed 70 days.

9.3 Stay Permit

Applied for in order to remove the 70 day limitation applied to both the MEBV and Business Visa, allowing holders to stay for continuous stretches of three months, six months, or a year. The stay permit, however, is only valid for one entry into the country. Re-entering Myanmar requires another Stay Permit (if so desired) or application for a Multiple Journey Special Re-entry Visa. The Stay Permit falls under the auspices of Myanmar's Ministry of Immigration and Population.

9.4 Multiple Journey Special Re-entry Visa (MJSRV)

If an individual holds a MEBV, they may apply for a MJSRV. The Visa acts like a combination of the Stay Permit and the MEBV and is valid for three months, six months, or a year. The MJSRV falls under the auspices of Myanmar's Ministry of Immigration and Population. The Stay Permit and the MJSRV both have the same requirements, although the MJSRV has a set of stricter additional requirements as well.

Additional requirements for the MJSRV:

  • The applicant must have travelled to Myanmar on a Business Visa on three separate occasions
  • The applicant must produce documentation proving their employment as consultant, director, or manager

9.5 Requirements for Stay Permit or MJSRV

  • A recommendation letter from the employer, including details about the type of business, purpose of visit, applicant’s name, passport details, position in company, and intended entry and exit dates
  • Invitation letter from a Myanmar registered company on its official letterhead
  • Applicant’s CV
  • Authorisation letter notarised and legalised by the relevant Myanmar Embassy or Consulate
  • Company documents, including certificate of registration, permit, company affidavit
  • Visa application form
  • Two recent colour photographs with white background size 35mm x 45mm
  • Passport valid for at least six months and a copy of the passport details page

Source: Government websites, Fitch Solutions
Date last reviewed: August 15, 2018

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody'sNot ratedNot rated
Standard & Poor'sNot ratedNot rated
Fitch RatingsNot ratedNot rated

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
170/190171/190171/190
Ease of Paying Taxes Index
117/189121/190125/190
Logistics Performance Index
113/160N/A137/160
Corruption Perception Index
136/176130/180N/A
IMD World CompetitivenessN/AN/AN/A

Source: World Bank, Transparency International

10.3 Fitch Solutions Risk Indices


World ranking
201620172018
Economic Risk Index
107/202
Short-Term Economic Risk Score51.350.651
Long-Term Economic Risk Score43.351.550.9
Political Risk Index
176/202
Short-Term Political Risk Score57.957.957.9
Long-Term Political Risk Score42.942.944.3
Operational Risk Index  174/201
Operational Risk Score36.132.832

Source: Fitch Solutions

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK

Myanmar's economy has started to emerge from the decades-long rule by the junta that led to the stifling of development, and we hold a rather positive outlook on the economy over the long-term amid the shift towards a more open government. The country's wealth of natural resources and low levels of development indicate that there is considerable room for economic development. However, weak institutions and the lack of a strong banking system present challenges. The passing and eventual implementation of Myanmar’s new Companies Act aimed at increasing foreign participation in the economy is a positive sign that the government is seeking to improve the business environment and will likely encourage FDI inflows. However, the lack of transparency will continue to present headwinds to investment.

OPERATIONAL RISK

Myanmar remains a very high risk location for investment despite generating much investor interest due to its economic potential. Foreign businesses must be aware that, in order to reap the rewards of the country's largely untapped market, they must navigate a series of severe operational risks, largely stemming from an underdeveloped logistics network, a weak rule of law, an unclear environment for foreign direct investment and numerous layers of red tape. Myanmar remains one of the world's least developed states, and essential investment in infrastructure and education - as well as an improvement in political stability and security - will take many years to achieve.

Source: Fitch Solutions
Date: August 15, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: Myanmar short term political risk index
Graph: Myanmar short term political risk index
Graph: Myanmar long term political risk index
Graph: Myanmar long term political risk index
Graph: Myanmar short term economic risk index
Graph: Myanmar short term economic risk index
Graph: Myanmar long term economic risk index
Graph: Myanmar long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 16, 2018

10.6 Fitch Solutions Operational Risk Index 


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Myanmar Score32.045.528.229.524.9
East and Southeast Asia Average55.356.555.754.454.4
East and Southeast Asia Position (out of 18)1716161718
Asia Average48.950.647.747.150.1
Asia Position (out of 35)3321323233
Global Average49.749.850.049.349.9
Global Position (out of 201)174127180171176

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Myanmar vs global and regional averages
Graph: Myanmar vs global and regional averages
Country
Operational Risk
Labour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Singapore83.077.8
89.9
74.7
89.7
Hong Kong81.371.2
88.5
75.9
89.5
Taiwan74.466.4
74.3
77.9
79.2
South Korea70.663.5
67.5
78.1
73.1
Malaysia67.861.6
73.5
75.4
60.5
Macau62.464.2
66.9
50.5
68.0
Brunei60.962.8
57.2
53.0
70.6
Thailand58.856.7
65.2
68.2
45.2
China56.653.9
52.2
65.8
54.4
Vietnam53.452.6
55.5
54.5
51.3
Indonesia52.851.5
53.9
57.6
48.4
Mongolia51.657.8
52.4
41.9
54.1
Philippines43.651.3
47.3
44.6
31.3
Cambodia42.546.7
46.0
37.9
39.5
Laos38.744.2
38.0
36.0
36.7
North Korea32.649.6
20.3
29.6
30.8
Myanmar32.045.5
28.2
29.5
24.9
Timor-Leste31.940.5
26.6
28.0
32.5
Regional Averages55.356.555.754.454.4
Emerging Markets Averages46.84847.545.8
46
Global Markets Averages49.749.850
49.3
49.9

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 16, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Myanmar

Graph: Major export commodities to Myanmar (2017)
Graph: Major export commodities to Myanmar (2017)
Graph: Major import commodities from Myanmar (2017)
Graph: Major import commodities from Myanmar (2017)
Graph: Merchandise exports to Myanmar
Graph: Merchandise exports to Myanmar
Graph: Merchandise imports from Myanmar
Graph: Merchandise imports from Myanmar

Official exchange rate HK$/US$, average
7.76 (2012)
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: August 6 2018


2017
Growth rate (%)
Number of Myanmar residents visiting Hong Kong13,220-5
Number of Myanmar nationals residing in Hong KongN/AN/A

Source: Fitch Solutions


2017
Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong54,482,5383.5
Number of East Asians and South Asians residing in Hong Kong2,784,8701.6

Source: Fitch Solutions, United Nations Department of Economic and Social Affairs - Population Division
Date last reviewed: August 16, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Myanmar companies in Hong KongN/AN/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census & Statistics Department

11.3 Treaties and Agreements between Hong Kong and Myanmar

Myanmar has a Bilateral Investment Treaty with China that entered into force in May 2002.

Source: Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

Consulate of the Republic of the Union of Myanmar

Address: Rooms 2401 - 2436, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Email: myancghk@biznetvigator.com
Hours of Business: Monday to Friday, 9:00 a.m. - 5:00 p.m.
Tel: (852) 2845 0810, 2845 0811
Fax: (852) 2845 0820

Source: Hong Kong Protocol Division of Government Secretariat

11.5 Visa Requirements for Hong Kong Residents

A tourist visa to Myanmar is valid for 3 months (as of the date of issue) and is applicable to all Hong Kong citizens. The duration of a stay covered by the tourist visa may not be longer than four weeks (28 days). The visa takes, on average, four days to process.

In order to apply for the visa, the applicant needs: one recent colour photograph with a white background (size 35mm x 45mm); one visa application form; a passport which is valid for at least six months. In addition, applicants may be requested to provide any other document deemed necessary.

Content provided by Picture: Fitch Solutions – BMI Research
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