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After a number of years of heightened investor interest, Myanmar is beginning to see this rush receding. According to Myanmar’s Directorate of Investment and Company Administration, inflows of foreign capital totaled only $3.3 billion between April and December 2016, with the figures for the fiscal year ended March likely to be lower than the $9.4 billion the country received in 2015-16.

And law firms in Myanmar are feeling the effects. “We had a drop in business starting in mid-2015 leading up to the elections in November 2015 as international investors likely wanted to make sure the elections went smoothly,” said William D. Greenlee, Jr., partner and managing director of DFDL in Myanmar. “Of course as you know, they did. However, FDI did not immediately pick back up as I believe many international investors were likely waiting to see how the transition would go and then later waiting to see if the new National League for Democracy (NLD) government would be supportive of foreign investment.” 

One of the main reasons for the reduced FDI in 2016 is the delay in forming a new Myanmar Investment Commission (MIC) following the establishment of the new government led by Htin Kyaw, the first elected president of the country to hold the office with no ties to the military since 1962.

Another factor is the wait-and-see response from foreign investors to the new Myanmar Investment Law. Even though this law came into force in October 2016, its implementing rules and regulations have not yet been finalised. In addition, the pending Myanmar Companies Act is currently being considered by the Parliament, but is not yet in force.

Reuters reported that foreign companies invested $380 million from April to July 2016, the first four months of Myanmar's fiscal year, plummeting from $2.6 billion in the corresponding period last year.

Takeshi Mukawa, a partner at the Yangon office of Mori Hamada & Matsumoto (MHM), said that there had “obviously” been a reduction in FDI-related work in 2016. “But work on approved projects and previously made investments continues,” he noted.

Not all firms, however, are affected badly by the slowdown. “Our strategy has always been to engage in the big-ticket work that has a long gestation period,” said Krishna Ramachandra, managing director of Duane Morris & Selvam. “As a result, we have not felt the pinch. Actually, we are currently expanding… our China-Myanmar and India-Myanmar practices are particularly busy.”

Ramachandra also observed that slowing dealflow would weed out law firms that have undertaken an entry strategy based on high-volume, low-margin commoditised legal services. “These firms will definitely feel the pinch, and will perhaps be reviewing their continued presence,” he said.

STILL GOT IT

That said, there might be light at the end of the tunnel, and it will appear soon.

In a report jointly released by Mergermarket and MHM, manufacturing and infrastructure stood out as the sectors with the brightest prospects. And according to the Reuters report, 102 projects submitted since April are awaiting approval, of which half are foreign investment projects totalling around $2.3 billion.

“In the last three to five months, we have seen a significant increase in foreign investors and projects in Myanmar. So it appears that a growing number of foreign investors are satisfied and encouraged by newly promulgated laws like the new Investment Law and updated Companies Act,” said Greenlee Jr.

He added that in mid-2015, the firm moved a number of international lawyers from Yangon to other DFDL offices in the ASEAN. “In the last couple months, we started moving some lawyers back to Yangon and have also made several new hires,” said Greenlee Jr. 

Mukawa of MHM also said his firm was bullish about Myanmar’s prospects. “We actually increased the size of our team in Myanmar last year and will do so again this year,” he added.