Overview Of M&A Activity



Myanmar’s economic climate has been lifted by recent political developments. The National League for Democracy won nearly 80 per cent of contested seats in the Myanmar parliament during the general elections on 8 November 2015, and successfully transitioned into civilian-led power with Daw Aung San Suu Kyi as State Counsellor and U Htin Kyaw being sworn in as President in March 2016. In October 2016, former US President Barack Obama also issued the Burma-related executive order terminating the national emergency relating to Myanmar. The executive order in effect terminated the US sanctions policy against Myanmar.

According to the International Monetary Fund’s recent World Economic Outlook, Myanmar is currently ranked as the world’s fast-growing economy, with expected projected growth of 8.6 per cent. Statistics recently released by the Directorate of Investment and Company Administration (Myanmar’s company regulator) (DICA) show that, during the period between 1 April 2016 and 31 March 2017 (2016 financial year), foreign direct investment (FDI) in Myanmar reached US$6.649 billion. In the 2016 financial year, transportation and telecommunications were the highest-yielding FDI sectors, followed closely by the manufacturing industry, which reached a high of US$ 3.081 billion. Generally, Myanmar’s other high-performing FDI sectors include oil and gas, power, manufacturing, real estate, mining, hotel and tourism, livestock and fisheries, agriculture, industrial estates, and construction. The top investor countries into Myanmar include China, Singapore, Thailand, Hong Kong, the United Kingdom, the Republic of Korea, Vietnam, Malaysia, the Netherlands, India, Japan and France.

Myanmar remains very attractive to foreign investors: it is one of the most natural resource-rich countries in Asia with plentiful supplies of oil and gas reserves (both on and offshore), various minerals, jade, precious stones and gems, forest products, and solar and hydropower project potential. While there has been very little exploration of Myanmar’s natural resources due to a lack of developed exploration techniques and availability of equipment, Myanmar’s geographical location is central to key markets. In addition, the cost of local labour remains low, with the minimum wage set at approximately US$56 per month for a standard five-day working week.

Reforms undertaken in Myanmar’s financial sector further support the country’s growth, as evident from the kyat-managed floated exchange rate system established in 2012, the creation of a Central Bank licensing mechanism for new foreign banks and the expansion of foreign branch networks. Development of special economic zones4 (SEZs), such as the opening of Thilawa SEZ Zone A and approval of developments in Kyaukphyu and Dawei SEZs, similarly point to a promising financial sector.

Substantial progress has been made in recent years with the passing of relevant laws on investment.5 The Financial Institutions Law 2016 (FIL) permits mergers between banks and allows foreign banks to acquire all or part of another bank established in Myanmar. However, this is subject to Central Bank of Myanmar (CBM) approval. Another recently enacted Arbitration Law 2016 (AL) gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and provides a reliable option for dispute resolution concerning M&A deals.

The Yangon Stock Exchange (YSX), which launched on 9 December 2015, made notable progress in Myanmar’s capital markets sector, which began trading in March 2016. On 25 March 2016, First Myanmar Investment Co6 was the first company listed on the YSX on 25 March 2016, followed by Myanmar Thilawa SEZ Holdings Public Ltd on 20 May 2016.

M&A activity into the country will continue to be delayed until the government allows foreign investors to buy shares in local companies, which includes local companies trading on the YSX. This will require the government to remove its existing policy of prohibiting foreigners from purchasing shares in local companies. We are hopeful that an updated version of the Myanmar Companies Act (NMCA) allowing foreigners to buy and sell shares in local Myanmar companies will pass this year.

The chapter for Myanmar was published in the 11th edition of The Law Reviews The Mergers & Acquisitions Review . The full Myanmar chapter can be found here. The chapter includes: I OVERVIEW OF M&A ACTIVITYII GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&AIII DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACTIV FOREIGN INVOLVEMENT IN M&A TRANSACTIONSV SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIESVI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTSVII EMPLOYMENT LAWVIII TAX LAWIX COMPETITION LAWX SANCTIONSXI OUTLOOK

Rory J. Lang, Duane Morris & Selvam LLP

rjlang@duanemorrisselvam.com