These highlights from the OECD Investment Policy Review of Myanmar were presented at launch events in Myanmar on 1 and 4 March 2014. Myanmar's Union Minister of National Planning and Economic Development, Dr. Kan Zaw, praised the comprehensive nature of the report and said that it would help to guide the government in solidifying investment climate reforms and in promoting more and better investment. Find out more at http://www.oecd.org/daf/inv/investment-policy/investment-policy-reform-in-myanmar.htm

1. OECD INVESTMENT POLICY
REVIEW OF MYANMAR
Mike Pfister
Investment Policy Reviews, OECD
4 March 2014, Yangon
Supported by the AANZFTA Economic Cooperation Support Program

2. Investment Policy Review of Myanmar
INVESTMENT PROMOTION &
FACILITATION AND OTHER AREAS
OF THE PFI

3. • Strong reform momentum, very quick
reforms
• Pushing up against capacity of MIC and
other agencies in charge of “investment
promotion”
• This calls for eventual de-regulation: but
not all cost – need accompanying capacity
• Attractiveness of SEZ models: careful!
Context

4. • Effective investment promotion a function of sound policy
environment
• Need for clear demarcation of Promotion and Facilitation
– DICA mandate broad
• Focus should be on:
– Transparency (criteria based system, reducing discretion)
– Accountability (feedback from private sector, UMFCCI etc...)
– Efficiency (streamlining, cutting down red tape, 1-stop shop)
– Monitoring policy effectiveness (DICA to develop KPIs, objectives)
• Need to improve data for better policy development
Investment Promotion & Facilitation

5. DICA’s broad mandate

6. Ideally: DICA as interface for investors
Investors
1 stop shop

7. Need for effective policy advocacy
Policy Advocacy
investor feedback to
policies: surveys, public-
private committees for
business climate reforms...

8. Main recommendations
• Investment promotion is perhaps less important for
Myanmar at present than investment facilitation.
• Continue to streamline procedures (ease of doing
business)
• Ensure that one-stop shops include single-point
authority.
• DICA should take responsibility for addressing investor
grievances and serve as a policy advocate within
government for the private sector.
• Keeping existing investors happy is the best form of
promotion.

9. • SMEs form:
– 90% of the industrial sector
– 92% of the manufacturing sector
• Active SME promotion is at an infant stage
• SME Law: need accompanying capacity building
• Vibrant SME sector key to developing linkages:
absorptive capacity to break away from low-technology
with limited manufacturing equilibrium
• Myanmar will benefit more from FDI if domestic
investment grows
• Renewed focus on Human Resources needed – 2%
GDP of public investment too low…. Skills?
• Other SME issues: microfinance etc.
SME Development and linkages

10. Backward linkages:
technology & knowledge transfer
Technology, know-
how, management and
product standards
Domestic
market,
Export,
GVC
TECH&KNOWLEDGE
TRANSFER
Role of
policy:
SME policy,
financing,
vocational
training

11. • Zones can help pilot reforms (Shenzen, Shanghai)
• A lot of FDI expected to come through SEZs in Myanmar;
• 3 SEZs, 18 zones, 34 sub-zones – many not fully
operational, land prices high;
• Thilawa can be promising, given its strategic location, but
governance will be key to its success;
• Need to link with the broader domestic economy; not just
become import-export hubs;
• Promote linkages, monitoring general and environmental
performance of companies in zones; develop training and
R&D locally.
– Example: CSR Unit in Clark Development Corporation, Philippines
• SEZ success depends on broader economic reforms
Role of SEZs

12. • Trade related challenges, TBs and NTBs; including
imported counterfeit products;
• Increased trade facilitation measures could particularly
benefit SMEs (incl. standardisation, certification…);
• Need to enhance competition in the banking sector,
improve financial intermediation, microfinance
• Infrastructure: develop comprehensive sector
development plans with clear roles for private sector,
government and SEEs
• Build independent and effective regulatory agencies
(transparency, regulatory certainty…)
• Ensure level playing filed between SEEs and private
investors important to attract private sector
Trade, finance, infrastructure

13. Investment Policy Review of Myanmar
PROMOTING SUSTAINABLE
INVESTMENT IN AGRICULTURE
IN MYANMAR

14. Context
• Around 34.8% of GDP and 61.2% of employment
• Potential for rapid agricultural development relying on abundant
land and water resources
• 30-year Master Plan for Agriculture Development:
 Improve food security and farmers’ incomes and reduce poverty by
increasing production (rice, oilseed and bean) through better technologies
and access to finance and market liberalisation
• Relatively low public expenditures in agriculture:
 Among ASEAN countries, lowest per capita agricultural expenditure and
lowest share of agricultural expenditure to agricultural GDP
• Growing investment from neighbouring countries in both food and
non-food crops

15. Investment policy in agriculture
• Land legislation revised in 2012: adoption of the
Farmland Law and the Vacant, Fallow and Virgin (VFV)
Land Management Law
• Foreign Investment Law enacted in 2013
 Particularly favourable to large agricultural investors:
– Time and size limits on land use rights can be lifted for projects
approved by the government
– Foreign investment restricted in a few agricultural activities
– Generous tax incentives

16. Challenges
• Insecure land tenure rights
– Complex and long registration process:
 Involvement of three government levels for farmland and application to the
central level combined with heavy requirements for VFV land.
– Lack of recognition of customary land use rights:
 No mention of customary rights in the new legislation; smallholders at risk.
– Overlapping responsibilities of agencies responsible for managing land:
 Farmland Administration Bodies as line agencies within the MOAI; Central
Committee for the Management of Vacant, Fallow and Virgin Land as a multi-
ministerial committee formed at the President’s discretion; and the MECF
– Promotion of large-scale land allocations with weak safeguards:
 Increase of large-scale allocations to 1.38 million ha in 2012, with large areas
remaining undeveloped and uncultivated by companies. 16

17. Challenges
• Limited access to finance
– Small short-term loans from the MADB
– High interest rates from informal lenders
• Limited access to and low quality of agricultural inputs
• Weak extension services and R&D
17

18. Recommendations
Securing land tenure rights
• Harmonise the land legislation
 Develop a unique comprehensive land law;
 Enhance the co-ordination across the Ministries responsible for land.
• Accelerate land registration
 Set up an efficient institutional structure at national and local level for land titling
and land surveys;
 Establish a one-window service.
• Recognise customary rights
 Protect customary rights, including collective rights and rights on land used for
shifting cultivation;
 Consider the diversity of customary law across different ethnic groups and
geographic areas.
18

19. Recommendations
Attracting investment
• Develop clear selection criteria before granting investment incentives
• Establish independent and accessible procedures to address grievances
• Promote the free choice of crops
• Reform the MADB to expand its coverage
• Strengthen extension services and increase public funding on R&D
 Myanmar could recover its place as a major agricultural producer
and exporter in Southeast Asia
19

20. Recommendations
Promoting responsible investment
•Develop adequate safeguards for large-scale land acquisitions:
 Promote transparent and inclusive consultations
 Protect existing land tenure rights
•Establish transparent and fair expropriation and compensation
mechanisms
•Set up a regulatory framework to support inclusive business
partnerships
•Impose Environmental and Social Impact Assessments, especially for
large-scale investments.

21. Policy Framework for Investment (and User’s Toolkit)
www.oecd.org/investment/pfi.htm
www.oecd.org/investment/toolkit/
FDI Index
www.oecd.org/investment/fdiindex.htm
Investment Policy Reviews
www.oecd.org/investment/countryreviews.htm
ASEAN-OECD Investment Programme
www.oecd.org/daf/inv/mne/seasia.htm
ASEAN Investment website
www.investasean.asean.org
For further information