Myanmar - Business and Investment Digest – Q3 2018

ECONOMICS / POLICY NEWS

Myanmar Living Conditions Survey

The Central Statistical Organisation, the UNDP and the World Bank have published a report that reveals changes to living conditions in Myanmar:

• there have been gains in electrification, with the biggest changes occurring in rural areas. However, the majority of households are still not connected to the grid and, in rural areas, 63% of households are not yet connected
• consumer goods have enjoyed substantial growth since 2015, with the rise in the use of small home appliances, especially mobile phones, possibly due to increased electrification
• computers are not yet widely used, but their use is spreading in some population pockets, with one in thirty households (3.3%) owning a computer at the Union level (10.9% in Yangon)
• there has been an improvement in access to drinking water since 2015, most of which has been driven by the private sector (eg. usage of bottled water) rather than through gains in piped and groundwater sources. Ayeyarwaddy and Rakhine states are weakest in terms of water access
• steady progress has been made in education over the last decade, with gains in school enrolment rates and in literacy. However, substantial regional variation remains
• labour participation amongst women aged over 15 has risen from 49% to 55% between 2005 and 2017 and there has been an increase in the share of households earning their income from outside the agricultural sector.

A link to the full report follows:

http://documents.worldbank.org/curated/en/739461530021973802/pdf/127618-REVISED-Myanmar-Living-Conditions-Revised-Artwork-English-FINAL.pdf

 

Report calls for reform of State-Owned Economic Enterprises

A report prepared by the Renaissance Institute and the Natrural Resource Governance Institute has called for reform of state owned enterprises (SOEs).  Some of the points raised by the report follow:

• the SOEs include entities that operate mainly as regulators and tax collectors, or combine these with other business interests
• many of the taxes collected by the SOEs have been transferred to the Myanmar Economic Bank, which have been deposited in savings accounts that do not earn interest for the SOEs. This has resulted in a significant misallocation of resources. Quite how MEB manages these deposits is not clear.  (For some SOEs, these deposits have been transferred “off-budget” where they are subject to less oversight.)
• oversight of the SOEs business activities is weak. The scope for efficiency improvements is substantial. In some cases, the true picture of their performance is being obscured by their role in collecting taxes and fees (as, for example, MOGE collects revenues from offshore gas production). In others, huge unexplained expenses are allowed to go unchecked
• none of the enterprises examined have clear, measurable performance targets, public annual reports or are subject to independent external audit.
• less than a quarter of jade transactions are made through formal channels and those stones that are price-checked are systematically undervalued. If MGE collected the true taxes due on jade production, the report argues it would collect more than MMK 1trillion more than it does today
• combined, the SOEs generate about half the government’s revenue, spend half of its budget and regulate much of the formal economy, from telecommunications, to forestry and mining

A link to the full report follows:

https://rimyanmar.org/sites/rimyanmar.org/files/publication_docs/state-owned-economic-enterprise-reform-in-myanmar_0.pdf

 

Myanmar seeks to trim Kyaukphyu cost

As the regional debate continues about the risks attached to China’s “Belt and Road” initiative, Myanmar has announced plans to reduce the overall cost of the Kyaukphyu deep sea port and industrial park project.  Sean Turnell, the government’s economic adviser, had earlier called the $7.5bn price tag excessive and, drawing a parallel with the Hambantota project in Sri Lanka, argued that the government should not be required to borrow $2bn to $3bn from the China EXIM Bank to finance it.

Meanwhile, U Set Aung, deputy finance minister and chair of the Thilawa SEZ Management Committee, has been appointed chair of the Kyuakphyu SEZ Management Committee.  The hope is that, with this, there will be an improvement in transparency surrounding the project, as well as an acceleration in the pace of its implementation, with a proposal having been apparently accepted to develop the port in four stages in order to control expenditure.

https://www.mmtimes.com/news/myanmar-trim-kyaukphyu-cost-drops-annans-strategic-review-suggestion.html

The following article from the Myanmar Times summarises comments made, at a Myanmar Infrastructure summit held in September, by Sean Turnell (on project prioritisation) and Serge Pun (on the PPP arrangements for the Yangon New City project):

https://www.mmtimes.com/news/viability-infrastructure-projects-essential-investments.html

 

Foreign insurers to be allowed to operate locally by 2018-19

The Insurance Business Regulatory Board has announced that foreign insurance companies are to be permitted to enter the Myanmar market for life and general policies in 2018-19.  A process for appointing foreign advisers to assist in screening the suitability of applications has started.

At present, just three foreign firms are only permitted to do business at the Thilawa SEZ, although 27 have established representative offices.  Myanma Insurance, the state-owned provider, is said to represent just under half of the domestic market.

https://www.mmtimes.com/news/foreign-insurers-will-be-allowed-operate-locally-2018-19-ibrb.html

 

Investment in mining blocks to be permitted again after a two-year hiatus

The Ministry of Natural Resources and Environmental Conservation has announced it has inspected 519 mining sites for compliance with environment rules and regulations and, with the implementation of reforms, “the mining sector is now ready to contribute to the nation’s development.”

The ministry has been willing to accept applications for new developments since the end of July.   Foreign investors are now permitted to invest in large-scale sites (of more than 500,000 acres) as well as smaller sites of up to c. 250 acres.

https://www.mmtimes.com/news/foreign-investment-permitted-mining-sector-under-new-govt-regulations.html

 

CBM will permit foreign banks to provide import trade financing

The Central Bank of Myanmar has announced it is to allow the 13 foreign banks with operating licences in Myanmar to expand their services to include import trade finance.  (They have been permitted to participate in the financing of export trade since the end of 2017.)

The CBM announced it is also examining requests submitted by the foreign banks to expand the range of permitted services further, but set no timetable for future announcements.

https://www.mmtimes.com/news/cbm-will-permit-foreign-banks-provide-import-trade-financing.html

 

New tenders for oil and gas production blocks

The Ministry for Electricity and Energy has announced that the next round for tenders will take place in the first half of 2019.  Foreign bidders will no longer be obliged to partner with local firms, although Myanmar firms are being encouraged to work with foreign firms if they can, in order to gain access to their expertise and superior financing capability.

The last round of tenders took place in 2014, under the previous U Thein Sein led government

https://www.mmtimes.com/news/oil-and-gas-companies-urged-partner-foreign-firms.html

 

DICA releases additional guidelines for education sector

Following MIC’s earlier notification that foreign entities are to be permitted more freedom to invest in education, DICA has published a new set of investment guidelines for the sector.

The guidelines outline requirements and restrictions on types of investment, educational institutions and certifications.  There is also guidance on the experience and qualifications required of instructors, codes of conduct etc.

https://www.mmtimes.com/news/dica-releases-additional-guidelines-education-investments.html

 

Gambling Bill submitted to parliament

According to the new Gambling Bill, submitted in August, foreign-owned casinos are likely to be permitted to operate in Myanmar.  The hope is that they will result in a boost to tourism numbers and in receipts of foreign exchange.

According to the secretary of the Bill Committee, priority is likely to be given first to casinos in border regions in order to attract visitors from Thailand and China.   Myanmar citizens will not be given casino access.

https://www.mmtimes.com/news/bill-enabling-casinos-operate-submitted.html

 

UMFCCI Business Confidence Survey

The UMFCCI has published the results of its most recent survey of 1,500 businesses in the services, manufacturing and trade sectors, recording a five percentage points decline in overall sentiment over the last three years.

The main concerns of business include higher taxes and tariffs, the difficulty of obtaining access to finance, the depreciation in the value of the Kyat, fluctuations in regulations, slow import and export procedures, a shortage of skills, poor infrastructure and increased foreign competition.  Respondents noted that taxes are unsustainably high when illegal trade is not properly controlled.

According to the survey, local retail firms are pleased foreign firms are to participate in the sector, but have concerns about their ability to compete without changes to the regime for withholding tax, a relaxation in the licencing process and the introduction of a Foreign Investment Law pertaining to the sector.

https://www.irrawaddy.com/business/ten-reasons-behind-myanmars-economic-slump.html

 

Government submits spending plan for 2018-19; projects deficit of MMK 4.9trn

At the end of July, the government submitted a spending plan for 2018-19 calling for spending of MMK 24.9trn and an expected deficit of MMK 4.9trn.  (According to the Myanmar Times, this approximates to c.5% of GDP.)

The deficit in 2017-18 was MMK 4.1trn.

According to the Minister for Planning and Finance, around 20% of the deficit is to be financed by the Central Bank.

https://www.mmtimes.com/news/spending-plan-resulting-k49-trillion-budget-deficit-submitted.html

 

Investments declined in 2017-18 according to MIC

According to MIC, aggregate investment for the fiscal year 2017-18 totaled $5.7bn on 222 projects (2016-17 $6.6bn on 135 projects.)  Last year’s total includes $1bn of capex on existing projects.  The contribution to the investment pie by Myanmar citizens was MMK 3.5trn, of which MMK 400bn was channeled into existing projects.

For FY 2018-19, DICA is targeting FDI of $5.8bn.  In the first 5 months of the fiscal year, FDI has been $1.4bn.  This year, nvestments from the West are likely to be impacted by the Rakhine crisis, but investment from the rest of Asia is expected to be robust, with additional hopes for a pick-up of interest in recently de-regulated sectors such as retail and education.

https://www.mmtimes.com/news/investments-declined-2017-18-mic.html

 

Myanmar signs $80mn agreement with ADB for Greater Mekong Corridor towns development project

The Ministry of Construction has signed an $80mn loan agreement with the ADB to finance the development of towns along the East-West economic corridor within the Greater Mekong development plan.  The objective for the project is to improve urban services in the cities of Mawlamyine, Hpa-An and Myawaddy, including urban planning, social infrastructure such as water supply and waste management, as well as urban management capacity / project implementation.

https://www.adb.org/sites/default/files/project-documents/48175/48175-002-lna-en.pdf

 

Woodside confirms successful Shwe Yee Htun-2 appraisal well

Australia’s Woodside has announced further drilling success at the A-6 Block with tests confirming “good reservoir quality, permeability and well production deliverability.”  Woodside and Total each have a 40% interest in the block, with MRPL holding 20%

https://woodsideannouncements.app.woodside/25.09.2018+Media+Release+-+Woodside+confirms+successful+Shwe+Yee+Htun-2+appraisal+well+offshore+Myanmar.pdf

BUSINESS / COMPANY NEWS

Several companies express interest in Yangon ring road project

According to the Myanmar Times, 53 local and international companies/consortia have submitted expressions of interest in the elevated expressway in Yangon, which was put out to tender by the Ministry of Construction in May of 2017.  The road is to connect Yangon, Yangon port, Yangon International Airport, the Mingalardon Industrial Park and the Yangon-Mandalay highway.

17 local companies have submitted EOIs.  The international companies that have expressed interest include 13 Chinese firms, 7 firms from Japan, 3 Korean firms, 3 Indian companies, 2 from Thailand, 2 from Turkey and 1 from each of Malaysia, the Philippines, Indonesia, Vietnam and France.

The issuance of a Request for Proposals is expected to follow in the last quarter of this year.  The Miinistry has indicated that the project may be split into sections to be implemented individually.

https://www.mmtimes.com/news/53-companies-express-interest-building-yangons-ring-road.html

 

Yangon, South Korean firm plan industrial park in Dala township

The Yangon regional government has signed an MOU with Myanmar Wooree Co., of South Korea, to establish an industrial zone on the western side of the Yangon River, connecting with the proposed Dala Bridge, in Dala township.  The bridge is scheduled to open in 2020.

The Korean firm mainly manufactures and exports electronic products.

Korea Land and Housing Corp. is currently building a 500 acre industrial complex in Hmawbi township, Yangon Region.

https://www.mmtimes.com/news/yangon-south-korean-firm-ink-industrial-agreement.html

 

PanAust receives licences for exploration of gold and copper in Myanmar

The mining group, PanAust, has announced it has secured three exploration licences in Myanmar.  The licences permit the company to conduct an exploration programme on an area totaling 562 square kilometres in Sagaing division.

PanAust currently has copper and gold operations in Laos and a stake in a copper and gold operation in Papua New Guinea.  In Myanmar, it holds an 80% interest in Wontho Resources Company Limited, and has established a JV with Myanmar Energy Resources Company, which holds the rights to the area covered by the new exploration licences.  PanAust’s ultimate parent is Guangdong Rising Assets Management Co., a state-owned company in China.

https://panaust.com.au/sites/default/files/201807_PanAust%20secures%20new%20Exploration%20Licences%20in%20Myanmar_FINAL_0.pdf

 

Shan State hydro project permitted to proceed

The Ministry of Electricity and Energy has issued a notice to proceed for the Shweli-3 hydropower project, to be developed by Electricite de France, Marubeni Corp., and Myanmar Ayeyar Hinthar Company.

Once it receives the other permissions needed, the plan is for the project to produce 670MW or power, sufficient for about 60,000 households.  Taken together, Shweli projects 1 to 3 are designed to produce 1,790MW of power between them.

https://www.mmtimes.com/news/shan-state-hydropower-project-permitted-proceed.html

 

EGATi seeks Myanmar power plants

EGATi, a subsidiary of the Electricity Generating Authority of Thailand, has announced it is in discussions with local companies in Myanmar to construct up to 10 small gas-fired power plants, each with a capacity of 5MW to 10MW.

EGATi has indicated to the Bangkok Post that it expects to reach conclusions about these projects “very soon”, suggesting that they should provide power at significantly lower cost than that supplied to local communities using diesel generators.

EGATi earlier conducted a feasibility study for the construction of a hydroelectric power plant on the Salween River in Karen state, but this project has not received approval to proceed.  Otherwise, outside Thailand, it operates a 289MW hydro power plant in Laos.

https://www.bangkokpost.com/business/news/1507302/egati-seeks-myanmar-power-plants

 

145MW gas-fired power plant for Kyaukse

MoEE has announced that a 145MW gas-fired power plant is to be built in Kyaukse, using generators supplied by Wartsila.  According to the Ministry, land at the site has already been cleared and civil works for the installation of the generators has started.

https://www.mmtimes.com/news/gas-fired-plant-kyaukse-be-built.html

 

TPG to acquire Pan Asia Majestic Eagle, to consolidate leading position as telecom tower operator

According to Japan’s Nikkei Asian Review, TPG, the majority owner of Apollo Towers Myanmar, is to acquire one of Apollo’s key competitors, Pan Asia Majestic Eagle, the third largest tower operator in Myanmar.

Apollo operates 1,800 towers in Myanmar which, if added to Pan Asia’s 1,200, would put the combined group ahead of the market leader, Irrawaddy Green Towers, a Middle Eastern-owned company operating 2,500 towers.

https://asia.nikkei.com/Business/Business-Deals/Myanmar-telecoms-tower-deal-puts-TPG-in-pole-position

 

HGC acquires majority stake in GTMH

HGC Global Communications, a HK-based fixed line operator and ICT provider with international network coverage and infrastructure, has signed a conditional purchase agreement for a majority stake in GTMH Telecom.  The acquisition marks the first overseas expansion of HGC’s local fixed-line business post its acquisition by I Squared Capital.

Coupled with HGC’s international operations, the expectation is that the combined group will be well positioned to provide end-to-end solutions to local and overseas corporations and operators in Mayanmar.

https://www.prnewswire.com/news-releases/hgc-acquires-a-majority-stake-in-gtmh-a-leading-network-service-provider-in-myanmar-300692985.html

 

MIC approves investment in new ILBC campus

MIC has given its approval to the International Language & Business Centre’s plan to invest $52mn in educational services in Yangon, Mandalay and Nay Pyi Taw.

ILBC currently has 30 campuses in Myanmar covering pre-school, kindergarten, primary and secondary school education.  Its student population is 13,000.

https://www.mmtimes.com/news/mic-approves-investment-new-ilbc-campuses.html

 

Mall operator, Thai healthcare group launch Yangon hospital

Thailand’s Thonburi Healthcare Group has announced it is to partner with a Myanmar mall operator, Ga Mone Pwint Co., in an investment in a general healthcare hospital in Yangon.

Together, they are to invest $70mn in the Ar Yu International hospital, which is to target patients who would otherwise seek medical treatment abroad.  The hospital will offer 200 beds, 8 operating theatres and 16 intensive care units, with scope to expand further at a later stage.

https://www.mmtimes.com/news/mall-operator-thai-healthcare-group-launch-yangon-hospital-high-demand.html

 

IFC mulling loan to support expansion of Metro wholesale in Myanmar

The IFC has disclosed it is considering a loan to Metro Wholesale Myanmar Ltd., a JV between Metro AG, a global diversified cash and carry group, and Yoma Strategic Holdings.  If granted, the loan would be used partly to finance the joint venture’s 3-year capex plan, comprising a central warehouse in Yangon, and satellite warehouses and cross-docking platforms across the country.   The central warehouse is currently under construction at the Thilawa Special Economic Zone.

https://disclosures.ifc.org/#/projectDetail/ESRS/40001

 

Memories Group makes $40.7mn investment in Myeik

Singapore-listed Memories Group has acquired development rights on three islands in the Mergui archipelago, as well as a 24-villa hotel on Kyun Pila island.  The development rights are for a 50-year lease period from 2013, extendable for two extra terms of 10 years each.

In addition, the group is acquiring a 72-room hotel at Mawlamyaing, Mon State, which is scheduled to open in December.

The combined investment in these projects is $40.7mn, to be financed by a combination of cash and a rights issue.

Memories Group comprises the tourism business of FMI Group, and listed on the Singapore stock exchange in January 2018.

https://investors.memoriesgroup.com/wp-content/uploads/2018/08/media-release-acq-of-smah-VmGwKc-25-July-2018.pdf

 

Anthem Asia completes first close on Myanmar SME / venture fund

Anthem Asia has announced that it has successfully raised a total of $34.5mn from institutional investors in a first closing for its debut investment fund, the Anthem Asia Myanmar SME Venture Fund.  The fund is being backed by IFC, the Dutch Good Growth Fund and CDC Group, the UK-government development finance institution.

The fund is targeting up to a total of $50mn in subscriptions and will target asset-light businesses serving primarily domestic demand in sectors such as agri-business, business & financial services, education & training, food & beverage, healthcare, logistics and marketing communications.

https://www.svca.org.sg/editor/source/AA%20Myanmar%20fund%20first%20close%20announcement%2030_08_2018%20FINAL.pdf

 

Krispy Kreme enters Yangon

Krispy Kreme has entered the Myanmar market, opening its first store in Yangon in September.  According to the Myanmar times, it has set itself the target of commissioning around ten outlets in Myanmar in the next 2 to 3 years, whilst exploring opportunities in other states and regions.

https://hotnews.krispykreme.com/press-release/corporate/krispy-kreme-doughnuts-set-open-first-shop-myanmar

 

Accor Hotels plans further expansion in Myanmar

The Myanmar Times has reported that, despite the tourism downturn and a slippage in room rates consequent to an increase in supply, the Accor Hotels group is negotiating with local investors for seven more hotels in Myanmar.

The group entered the market in 2013 and now runs nine hotels in the country.   It indicated that business is down by about 20% so far in 2018 compared to 2017.  However, it hopes to mitigate its exposure to the recent trend in international arrivals by also catering to domestic tourism demand, which is enjoying strong growth.

https://www.mmtimes.com/news/unperturbed-setbacks-accorhotels-expand-myanmar.html

 

Eaton to optimise Myanmar’s power solutions

Eaton Corporation, a US-based power management company, has announced it is expanding into Myanmar by signing a partnership agreement with Myanmar Golden Rock International.

 

Together, they will seek to help improve the reliability of Myanmar’s power infrastructure through the application of Eaton’s technology.

 

https://www.mmtimes.com/news/us-power-firm-expands-myanmar.html

 

Swiss media group Ringier acquires Pyramid Solutions

In conjunction with its local partner, Information matrix, Ringier has made another acquisition in Myanmar, to follow those it has already made in Duwun.com, Marry.com, and Kalay.com.

 

Pyramid Solutions operates Myanmar’s classified jobs portal My Jobs.com, which opened its operations in 2012.

 

https://www.ringier.com/en/press-releases/corporate/ringier-ag-acquires-myanmars-no-1-online-job-platform-myjobscommm