Last updated: September 17, 2012 2:10 pm

Myanmar to delay foreign investment law

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Myanmar is to delay the implementation of controversial foreign investment legislation passed this month, but will step up reforms in areas including the financial sector and land use and will streamline government structures.

U Soe Thane, chairman of the Myanmar Investment Commission who also oversees 11 ministries, told the FT that President Thein Sein had decided to return the legislation to parliament for further amendment when it reconvenes in late October.

Mr Soe Thane was speaking shortly before news emerged that Myanmar had released up to 424 political prisoners among 514 detainees granted amnesty on Monday. The exact number was not confirmed but the timing, ahead of the president’s visit to the US next week, was a direct response to Washington’s demands as President Barack Obama considers lifting a blanket ban on Myanmar imports.

Mr Soe Thane said his priorities include streamlining and restructuring ministries to speed up policy implementation, campaigning against corruption and accelerating reforms particularly in the financial sector – including plans for central bank independence.

“We are drawing up good policies and plans but implementation is slow – we are going step by step but also want to push ministries to go faster . . . we also have to promote good governance – and involve civil society in this,” he said.

The draft legislation, which aroused concern among investors because of its protectionist provisions, would have become law on Friday,14 days after its initial passage through parliament, without the president’s intervention.

Mr Soe Thane acknowledged growing impatience among would-be investors for clarity on investment rules but said the president was “more concerned about getting the law right” than rushing through an imperfect code.

He pointed to concerns regarding protectionist provisions among nearly 100 parliamentary amendments to the bill, including a so-called “50-50” provision that limits foreign investment in 13 vaguely defined areas including “agriculture” and business that “harms the environment or eco-system”. Such restrictions and general concerns about investor protection dominated discussion last week among nearly 700 participants at a Euromoney conference in Naypyidaw.

“This bill is an important yardstick for investors – we have to get it right,” Mr Soe Thane said.

Mr Thein Sein’s decision to delay the legislation came on the eve of back-to-back visits to China and the US where he will address the UN General Assembly in New York next week.

His US visit comes amid expectations that Washington will proceed with a proposal to lift a ban on Myanmar imports, and that opposition leader Aung San Suu Kyi will support the end of the embargo.

Ms Suu Kyi, who arrives in the US on Monday, has softened her earlier support for sanctions against the former military regime in Myanmar and on Monday indicated she would support a lifting of the ban, according to officials and people close to her.

A provision in the act enables the US president to use executive powers to waive the ban, although Mr Obama is seeking tacit support from Congress for such a move.

The easing of the Myanmar import ban is more likely after Myanmar directly answered a key US demand for the release of political prisoners. Ms Suu Kyi’s National League for Democracy said that more than 420 of the 514 released prisoners were political detainees, a figure which would account for nearly all remaining political prisoners after nearly 700 were released in the past year. However sources close to the government said the total number of political detainees released was much lower.

A Myanmar government adviser confirmed the US had specifically requested the release of political prisoners in earlier discussions about the import ban. He said the government would not release those on terrorism charges or former military officers purged under the previous regime, for now.

Derek Mitchell, the new US ambassador to Myanmar, told the Napyidaw investment forum last week that under an “action for action” approach the US would give more help to Myanmar but expected concessions in return.

Washington has indicated to Myanmar’s government that Mr Obama will not waive the ban if Ms Suu Kyi opposes the action. Officials close to the opposition leader and some Myanmar officials have indicated that she is prepared to support lifting the embargo – a move that would provide a desperately needed boost to important export industries, such as garments and seafood processing.

Myanmar’s clothing exports to the US plunged nearly 40 per cent the year after Congress imposed the ban in 2003 and have declined steadily since, while nearly 100,000 jobs were lost as factories closed, according to western studies.

Until Myanmar’s law is amended, Mr Soe Thane said, the existing 1988 foreign investment law was “quite adequate”. Foreign investors and legal experts have said the existing code is “better than the new draft with its amendments” – although some noted this week that the new legislation contains incentives including better terms on land leases and tax exemptions.

It is unclear whether new investment under the existing framework would benefit from the new code once it is completed, although Myanmar officials said it was likely as Mr Soe Thane’s MIC, the key foreign investment regulator, had been given a “great deal of discretion” to interpret the laws.

Mr Soe Thane dismissed concerns that Ms Suu Kyi’s US tour – in which she will accept the Congressional Gold Medal awarded in 2008 for her pro-democracy work – will upstage Mr Thein Sein’s visit.

Mr Thein Sein has not been invited to Washington, with US officials citing Mr Obama’s election campaign commitments as the reason. However, the US president is expected to meet the woman he has described as one of his “heroes”, possibly at a White House dinner featuring former president Bill Clinton and Microsoft founder Bill Gates.

Relations between Ms Suu Kyi, who heads a minority opposition of just 43 MPs, and Mr Thein Sein have been “increasingly co-operative”, Mr Soe Thane said. “It’s not an issue, she is doing her job, our president is doing his job . . . She will explain in America how we are aligned on issues ranging from peace efforts to economic development and general reforms.”

Aung Min, another reform-minded minister in the president’s office, who is accompanying Mr Thein Sein to the US, said he would attend Ms Suu Kyi’s congressional medal ceremony in Washington. “We are good friends; I want to be there to support her,” he added.

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