POLITICS
Politics continue to be dominated by fighting between the Tatmadaw and the ethnic armed groups, and by the situation in Rakhine state.
The following article from the Myanmar Times provides a useful summary of events in the last year in respect of the conflict with the ethnic armed groups, including recent events such as the formation of the Northern Alliance—Burma, and their attack on Muse, which precipitated the most recent round of fighting in the Northern Shan State. There has also been fighting in Chin state against the Arakan Army, and in Kachin state against the KIA. For now, the government is expressing hope the next round of the 21st Century Panlong peace process will proceed as planned, although the immediate prospects do not look positive. http://www.mmtimes.com/index.php/national-news/24383-a-rigid-timeframe-and-escalating-conflicts.html
At the same time, the Myanmar government has been facing international criticism for its crackdown in Rakhine state. In the following report, the BBC summarises the situation and the comments of former UN secretary general Kofi Annan, who visited the region in early December. http://www.bbc.co.uk/news/world-asia-38223055
ECONOMICS
Central Bank plans change to Kyat reference rate mechanism
In order to narrow the gap between its reference rate and the market’s Kyat/USD rate, the Central Bank has indicated that, from January 2017, it will adjust its reference rate mechanism to reflect transactions in the interbank market rather than just the rates at which it auctions Dollars to private lenders.
By doing so, the Bank is hopeful that it will reduce the incentive for users of Dollars to source the currency in the informal market, which has had the result of reducing Dollar supply at the banks.
In the course of time, the Bank has also hinted that it will introduce more than one daily currency auction.
In the last 6 months, the Kyat has fallen from around Ks 1,200 to the Dollar to Ks 1,350. http://www.mmtimes.com/index.php/business/24253-central-bank-exchange-rate-reforms-to-start-from-january-next-year.html
Berger business confidence survey
German consultancy Roland Berger has published its first Myanmar Business Confidence Survey, which has been posted to its website.
According to the survey, 73% of businesses expect the business landscape in Myanmar to improve and 83% have expressed a willingness to invest in staff training and development. The lack of skilled staff is cited by 85% of firms as their main business challenge.
93% of respondents have indicated that key to the releasing of Myanmar’s potential is greater clarity on the government’s economic policies. According to Berger, the clear majority of firms have said that the lack of a clear economic policy, an unpredictable legislative environment, selective enforcement of regulations and lack of intellectual property rights protection all present major obstacles to business growth and investment in the country.
The results follow a survey of 200 companies of all sizes and across a wide range of sectors. According to Berger, 50% of companies are satisfied with their performance in periods of up to 5 years, a figure that rises to 70% of firms after 5 years—which, Berger concludes, is suggestive of a need to invest sooner rather than later, in order to reap the benefits of experience as rapidly as possible.
The following is a link to Roland Berger’s website, which provides full details of the survey: https://www.rolandberger.com/en/press/Press-Release-Details_15232.html
Tourism investment rises
According to the Ministry of Hotels and Tourism, investment in the sector has risen by 15% in the last year, although the number of visitors has fallen from 3.3mn to 3.1mn in the year to the end of September. Investment has risen from $2.6bn (48 projects) in 2015 to $3bn (56 projects) in the year to November 2016.
The ministry has said that the removal of the visa requirement for visitors from Singapore should result in a healthy growth in Singapore tourist numbers in 2017. http://www.mmtimes.com/index.php/business/24159-tourism-investment-up-despite-drop-in-visitors.html
Gas export earnings decline
As expected, the drop in the crude oil price has caused Myanmar’s export earnings from natural gas to decline significantly compared to 2015/2016.
According to the Ministry of Commerce, earnings to the beginning of December have fallen from around $3bn last year to $1.8bn in the current fiscal. Natural gas typically accounts for about half of export earnings. http://www.mmtimes.com/index.php/business/24359-natural-gas-export-earnings-slump.html
BUSINESS
ADB plans 70km road to connect Kayin and Mon states to Thailand
The Asia Development Bank is proposing a plan to reconstruct the last remaining segment, in Myanmar, of the Greater Mekong Subregion’s East-West Economic corridor connecting Danang in Vietnam with Myanmar’s coast. It is expected that the new 70km section of road will dramatically improve connectivity between Myanmar and Thailand and, at the same time, support the economies in Kayin and Mon states, including through tourism. https://www.adb.org/news/features/myanmar-s-new-road-prosperity
Government plans support for Hpa-an industrial zone in Kayin state
Along similar lines, the Myanmar Times has reported the government has a plan to invest in infrastructure and worker development in the 400 Ha (1,000 acre) Hpa-an industrial zone to attract more inward investment.
Development of the zone has been delayed by land ownership issues and because of the general sluggishness of the Kayin economy, according to the Myanmar Times. http://www.mmtimes.com/index.php/business/24044-government-plans-hpa-an-zone-to-kick-start-kayin-economy.html
Limits lifted on foreign trading JVs
According to the Myanmar Times, the Ministry of Commerce has simplified the system for securing approval for the quantum of funds that can be made available to foreign-local trading JVs. Previously, such JV’s were required to declare the amount of funds they intended to remit into Myanmar to the Central Bank, and then had to obtain approval from the Ministry of Commerce if they wanted to increase the amount. As of the end of November, this system of limits has been abandoned. http://www.mmtimes.com/index.php/business/24068-limits-lifted-on-joint-venture-trading-firms.html
World Bank loan to support financial services sector development
The World Bank is to make available $100mn in commitments to support its programme for the development of the financial services sector in Myanmar. Its Financial Sector Development Programme comprises 5 main components—reform of the state-owned banks, upgrading the regulatory and legal framework, modernization of the Central Bank, project co-ordination with the Ministry of Planning and Finance, and a contingent emergency facility to support the rapid allocation of credit in the event of a crisis. http://projects.worldbank.org/P154389?lang=en
Plan to expand Thilawa SEZ further
Citing a report in JOC.com, The Irrawaddy has indicated the area to be developed at the Thilawa Special Economic Zone is to be increased by 20% to 500 Ha. The timing of the SEZ’s expansion will depend on progress with land acquisition and population resettlement.
BASF to build first Myanmar plant
German chemical major BASF has announced that it is planning its first manufacturing plant in Myanmar in 2017. Subject to regulatory approvals, the plant is to be located in Yangon and will be producing tailor-made construction chemical solutions.
https://www.master-builders-solutions.asiapacific.basf.com/en-asia/about-us/news/4763
XL Catlin to use Stonestep micro-insurance technology platform to enter Myanmar
XL Catlin’s venture capital arm has announced that it is to use a new partnership with Stonestep as a route to entering the Myanmar market—Stonestep’s first in Asia. Stonestep’s technology platform is designed to enable insurance products to be sold using distribution networks of other corporations such as mobile phone operators and retailers. http://www.carriermanagement.com/news/2016/12/18/162222.htm
