ECONOMICS/POLICY NEWS
World Bank issues its latest update on the Myanmar economy
In the latest edition of its Myanmar Economic Monitor, the World Bank says that performance in 2017/18 was strong and the outlook remains favourable, but adds hat “risks have emerged that could affect business sentiment and weaken performance if not addressed.”
Growth in real GDP last year is estimated at 6.4% YoY, up from 5.9% YoY in 2016/17 and was accompanied by lower inflation and improved fiscal and external balances. Growth was driven by an improvement in agriculture, improved manufacturing and strength in services, despite a slight slowdown in tourism and banking.
“The pick-up in growth and improvement in the macroeconomic situation are encouraging,” said Ellen Goldstein, World Bank Director for Myanmar, Cambodia, and Lao PDR. “Government is also finalizing its Myanmar Sustainable Development Plan, which we hope will serve as a platform to accelerate economic reforms, modernize the financial sector and make progress in resolving conflicts that jeopardize inclusive and sustained growth.”
For 2018/19, the World Bank is forecasting a further improvement in the growth rate, to 6.8% YoY, and a moderation in inflation from 5.5% to 4.9% YoY. In terms of policy priorities, the World Bank highlighted the need for well-targeted public investments, and private sector activity encouraged by macro-economic stability and policy certainty. It has suggested policy should focus particularly on electricity provision and pricing, the implementation of the Companies Act, servicing taxpayers and securing the environment for financial transactions.
In a second section of the report, the World Bank has included some deeper analysis on the drivers of FDI, key factors influencing productivity, and the importance of a sound, inclusive financial system.
http://documents.worldbank.org/curated/en/111271527015535987/pdf/126403-WP-v2-PUBLIC-MEM-MASTER-clean-with-cover.pdf
ADB advocates continued reforms as the key to Myanmar’s growth
In its Asian Development Outlook report for 2018, the ADB has indicated Myanmar should be able to stay on a steady growth path in the medium term and that it “should be able to leverage limited public resources by effectively engaging development partners, foreign investors, and the domestic private sector to help finance its staggering infrastructure requirements, narrow regional socioeconomic disparities, and support the long-term development agenda.”
It estimates real GDP growth at 6.8% YoY in the half year to September 2018 and forecasts growth of 7.2% in the full year to September 2019.
It thinks agriculture should be supported by better weather and favourable commodity prices. Industry and services are expected to enjoy faster growth over the next two years as a result of robust manufacturing production and buoyant telecommunication services.
It adds that progress in December 2017 towards enacting a new company law, and the government’s policy agenda, as outlined in the Myanmar Sustainable Development Plan, should keep investors engaged – although the ADB urges policymakers to “implement reforms expeditiously and effectively” to support investor confidence and attract FDI.
https://www.adb.org/publications/asian-development-outlook-2018-how-technology-affects-jobs
Government to borrow MMK 640bn from Central Bank to finance deficit in six months to September
The indication, given by a representative of the Ministry of Planning and Finance, represents about 20% of the government’s permitted borrowings from local resources in the Union Budget Law.
The maximum borrowing envisaged under the Budget Law for the year is MMK 4.2trn, of which no more than 20% is meant to be funded by the CBM.
In two years, the government has committed to eliminating its reliance on the Central Bank for budget financing.
https://www.mmtimes.com/news/central-bank-loans-k640-billion-govt-finance-deficit.html
Yangon government forms New Yangon Development Company to develop landmass twice the size of Singapore
There have been a number of major announcements, and some debate about, infrastructure investment in Myanmar in the second quarter of 2018.
At the end of March, the Yangon city government incorporated NYDC as a wholly owned company in a re-launch of the “new city” development project it abandoned in 2017.
In its first phase, NYDC envisages infrastructure investments of USD1.5bn centred on five new townships, bridges, roads, power facilities, water supplies and 10 square kms of industrial estates. Phase one is concentrated in the Kyeemyindaing area to the west of central Yangon.
Including its second phase, New Yangon City is intended to cover a total area of 1,500 square kms predominantly to the south of the city, running from Dala to the Gulf of Martaban.
Mr Serge Pun, head of SPA Myanmar, has been appointed the CEO of NYDC. He is to be supported by a board at which various ministries are represented and on which U Tub Myat, a former UN Security Coordinator, and George Yeo, former foreign minister of Singapore, are to serve as independent directors.
https://www.mmtimes.com/news/yangons-new-city-vastly-ambitious-govts-role-called-question.html
Ministry of Construction commits to four mega infrastructure projects in 2018.
In May, the Myanmar Times reported that Ministry of Construction has announced plans for four large-scale infrastructure projects in the districts of Mandalay and Yangon.
In Pyin Oo Lwin, it is planning the New Mandalay Resort City, on an area of just under 10,000 acres. Phase 1 is planned to include an IT facility, a convention centre, schools and a commercial zone. Phase 2 is to be divided into zones for industry and tourism. A third phase is intended to include housing, a golf course and a hotel. Discussions with candidate companies to act as the master developer are ongoing.
In Yangon, Shwe Taung has been selected as the leading developer for a mixed housing and commercial development on a 1,100 acre site 8 miles from the CBD and an hour’s drive from the site of the new Hantharwaddy airport.
In Hllegu township, which lies a little to the north east of Mingalardon on the main road to Bago, Korea Land and Housing is to cooperate in the development of an new USD110mn industrial zone. In this G to G project, the Korean interest is to be 60%. Construction has commenced and is due for completion in 2023. (Hllegu is about 30km from Hmawbi, where KL&H is already working on another industrial development.)
Also in Hllegu, the government is to partner with the Alliance Start Group to build an Eco Green City, incorporating low cost housing, a transportation hub, government offices and shopping malls in the first phase. This will be followed later with the development of a new hospital, a school and a hotel zone.
https://www.mmtimes.com/news/ministry-construction-commits-four-mega-projects-2018.html
Yangon plans construction of an international sea port on the Yangon River
In early April, Yangon’s Chief Minister announced plans to develop a new port on the Yangon River, which will have better access to the sea than the existing port at the centre of the city. An area of 50,000 acres near Thanylin has been earmarked for the project, which would include a Special Economic Zone.
Thanyln is located a little to the north of Thilawa, to the southern side of the Bago River.
It is envisaged that the SEZ would include a power plants and commercial and residential areas, in addition to an industrial zone.
https://www.mmtimes.com/news/yangon-focus-construction-deep-sea-port-new-sez.html
Sean Turnell intervenes in the debate over the debt implications of the plan for Kyaukphyu SEZ
In mid-June, Sean Turnell, the Australian acting as an economic adviser to the State Counsellor, spoke out about the price tag being attached to the development of the deep-sea port at Kyaukphyu. Calling the USD7.5bn cost proposed for the port “absurd”, he said the USD1bn spent in Sri Lanka on the Hambantota port provides a good precedent of the possible consequences for Myanmar of overspending of this sort.
When the Sri Lankan government was unable to repay the Chinese loans on the development, they ended granting China a 99-year lease on the facility. Mr Turnell has suggested it should not be necessary for Myanmar to accept this sort of debt risk in respect of Kyaukphyu.
However, as the deal is not yet finalized, Mr Turnell indicated there is scope to revise the terms of the project, and he hopes that it will prove possible to come to an agreement with Chinese-led developer consortium which better serves Myanmar’s interests.
https://www.mmtimes.com/news/myanmar-mindful-sri-lankas-debt-crisis-when-mulling-kyaukphyu-sez.html
https://www.bloomberg.com/news/articles/2018-05-25/china-s-7-5-billion-myanmar-port-crazy-suu-kyi-adviser-says
China proposes new infrastructure projects on the China-Myanmar economic corridor
Shortly after Mr Turnell’s intervention, a Chinese delegation visiting Myanmar presented proposals to DICA and UMFCCI for further infrastructure investments centered on Chinshwehaw, a township on the China-Myanmar frontier about 150km to the south east of Muse.
The proposals included the suggestion that Chinshwehaw host an SEZ to boost trade across the border and that transport links between the town and Lashio be improved by the construction of a new road and railway.
https://www.mmtimes.com/news/china-proposals-new-infrastructure-projects-myanmar.html
Government discusses plans for a new South Korean industrial zone during a visit by the Korean trade minister
During a visit to Myanmar in April, the South Korean minister of trade held discussions with State Counsellor Daw Aung San Suu Kyi and the Minister of Commerce. The focus of these talks was on inward investment and the sharing of technology.
According to a report in the Myanmar Times, the ministers discussed the possibility of establishing an industrial zone for Korean companies, including an automotive hub that would be used to manufacture or assemble vehicles for export purposes.
An area of 500 acres has apparently been earmarked for the project in Hmawbi township. This is in the same area that Korea Land & Housing Corp. is already building a $120mn industrial complex in conjunction with the Ministry of Construction.
https://www.mmtimes.com/news/south-korea-eyes-new-myanmar-industrial-zone-automotive-exports.html
Myanmar starts to prepare for next bidding round for natural gas exploration and production blocks
The Myanmar government announced in April that it plans to hold another round of bidding for gas production blocks later in 2018. The last round of bidding took place under the government led by U Thein Sein. There are 13 blocks that are available for tendering.
Since the last round of bidding, the oil price has fallen sharply and the costs of exploration in Myanmar are high. 11 of those blocks that were secured by foreign bidders earlier, including Reliance Industries, and Australia’s Tap Oil,have since been surrendered. Shell has dropped some deep-water assets and extended the study period for others.
In recent months, MIC has given approval to projects for the development of offshore supply bases which, it is hoped, may become operational as early as 2020, and would help to lower exploration costs. The government is also reported to be reviewing production contract terms to see whether there is scope for re-balancing them more towards investors in exploration and production blocks.
The following article published in the Myanmar Times summarizes some of the issues affecting the oil and gas sector in Myanmar today:
https://www.mmtimes.com/news/over-last-year-myanmars-energy-sector-stumbles-right-direction.html
Domestic natural gas to be made available by 2023
According to the Ministry for Electricity and Energy, larger volumes of natural gas will be made available from Myanmar’s onshore and offshore gas fields by 2023, producing fresh opportunities for international oil and gas firms to invest in the sector.
The government is hoping to import LNG in order to meet the requirements of its promised 6,000 MW boost to the electricity supply, until such time as an increase in domestic gas supplies are able to offset the expected decline in production at the Shwe, Zawtika and Yadana fields, and plug the gap in the power sector’s requirements.
The official quoted by the Myanmar Times indicated that the ministry recognises the need to attract foreign investment into field exploration and development and that it is prepared to be more flexible in the terms it offers in order to obtain it.
https://www.mmtimes.com/news/domestic-natural-gas-be-made-available-2023-moee.html
Myanmar Petrochemical Enterprise (MPE) reveals plans for modern oil refinery
According to the Myanmar Times, the refinery is to be constructed under a public-private partnership and will have a capacity of 2 million tonnes per annum. The intention is that it would use feedstock from the SE Asia crude pipeline, which runs between the Rakhine coast and Yunnan in China, and which was commissioned in 2015.
At present, there are just two refineries in Myanmar. They are between 50 and 60-years old. One is currently non-operational and the other is unable to produce refined products of consistent quality. As a result, Myanmar’s imports of refined petroleum products comfortably exceed the value of its natural gas exports.
According to the report, the Ministry of Electricity and Energy has commenced the environment and social impact assessments for the refinery. When these have been approved, the ministry will open tender negotiations with international firms. Construction of the refinery is expected to take between 3 and 5 years.
https://www.mmtimes.com/news/government-reveals-plans-build-first-modern-oil-refinery-myanmar.html
Retail and wholesale markets opened up to foreign investors
In early May, the Commerce Ministry announced that wholly foreign-owned companies and joint ventures with foreign shareholders are to be permitted to engage in retail and wholesale trading. The notification permits retail and wholesale trading of both domestically produce and imported goods, but specifies certain restrictions:
Wholesale Trading
- 100% owned foreign companies or companies in which foreigners have an interest of over 80% are required to make a minimum initial investment of USD5mn, excluding the value of goods traded and lease rent
- JVs in which Myanmar parties own at least 20% are required to make a minimum initial investment of USD2mn
Retail Trading
- The minimum initial investment for companies in which foreigners own at least 80% is USD3mn
- For companies in which Myanmar citizens own at least 20%, the minimum initial investment is USD700,000
No company with any foreign shareholding is to be permitted to conduct retail activities in any premises with a floor area of less than 10,000 square feet (929 square metres), including any mini market or convenience store.
All companies, except those wholly owned by Myanmar citizens with an initial investment of less than USD700,000, are required to register with the Ministry of Commerce, and to notify the ministry of the opening of any new branches or “expansion” within 90 days.
In its directive, the ministry explained that its intention is to foster competition, to provide consumers with more and cheaper purchasing options and to attract better quality products, facilitate the growth of SMEs and to attract inward investment.
https://www.mmtimes.com/news/myanmar-opens-foreign-retailers-and-wholesalers.html
https://www.thailand-business-news.com/asean/myanmar/69155-myanmar-announces-liberalization-of-trading-for-foreign-owned-companies.html
MIC permits full foreign capital investments in education
According to MIC notification (7/2018) foreigners will now be able to own and operate private schools fully, provided they are teaching an approved Myanmar or international curriculum.
Business projects may include basic education schools, technical, vocational and training schools, higher education schools, subject schools, and private schools designated by the Ministry of Education.
According to the Myanmar Times, the new private schools will be regulated under the Myanmar Investment Law and the 2014 National Education Law until new laws in relation to them are enacted.
According to the Oxford Business Group’s latest report on Myanmar, national spending on education doubled in 2015/16 to MMK 700bn and then rose in 2016/17 to MMK 1.7trn. Spending is expected to be at a similar level in 2017/18.
According to the Ministry of Education, the number of private sector schools has risen from 50 in 2012/13 to 585 in 2016/17.
https://www.mmtimes.com/news/myanmar-permits-full-foreign-capital-investments-education-sector.html
IFC partners with YCDC to reform the construction permit system in Yangon
In May, the IFC announced it had launched a partnership with YCDC to streamline and automate the construction permit system, to reduce paperwork and increase project efficiency.
Dealing with the issue is one of the 10 indicators measured by the Ease of Doing Business report prepared by the World Bank. In it, Myanmar currently ranks 73rd.
The aim is to have produced a more business and investor-friendly system by June 2019. The IFC is to be assisted in the project by Australia, the UK and Japan.
https://ifcextapps.ifc.org/ifcext/pressroom/ifcpressroom.nsf/0/1747400E375B96F985258287002D9271?OpenDocument
IFC and government release draft strategic environmental assessment report on hydropower
The draft report, which has been released for public consultation and review, was issued towards the end of May.
One of its key recommendations is to protect the mainstems of the key rivers in Myanmar – the Ayeyarwady, and Thanlwin are two of just a few rivers worldwide whose mainstem is still free-flowing – and to encourage decision makers to concentrate development on locations that bear less environmental, social and cultural risk.
The report notes that, despite the size and importance of Myanmar’s major rivers, relatively little is known about their hydrology, sediment movement and aquatic ecosystems, and that therefore great care needs to be taken to ensure that substantial changes to river processes and functions, with the environmental and social damage they might bring, are avoided.
In particular it notes that the hydropower sector has hitherto been developed on an opportunistic, individual-project basis focusing mainly on economic return and pre-engineering feasibility – an approach that locks in projects at a point before proper consideration is given to their cumulative impact within basins or sub-basins, or on mainstem rivers.
https://ifcextapps.ifc.org/ifcext/pressroom/ifcpressroom.nsf/0/CFFCEDDEDD1AEAB48525829500300CC1?OpenDocument
https://www.ifc.org/wps/wcm/connect/d31f99b4-4a2a-4fe3-a3c7-5c21a7904b18/SDF+Main+Report_May+21_For+Stakeholder+Review_English.pdf?MOD=AJPERES
Gambling law amendment may allow casinos to operate
The idea of a relaxation in the gambling law was made by the director general of DICA at the end of April, and followed requests made by the chief minsters of Mandalay, Tanintharyi, Shan, Kayin and Mon states that they be permitted to allow hotels in their regions to operate casinos.
U Aung Naing Oo added that interest in the Myanmar market has been received from casino operators in Macao and East Asia over the course of four years.
Currently, casinos are banned under the 1986 Gambling Law, although casinos for foreigners have been permitted in restricted areas since 2013. There are two casinos currently operating in Myeik, Tanintharyi Region, and two in hotels on Tha Htay Island and Yadana Island.
https://www.mmtimes.com/news/casinos-may-be-allowed-operate-after-gambling-law-amendment.html
Draft regulations of Companies Law released. To go into effect in August
The new law has twin objectives, to streamline practices and procedures for business, and to introduce new incentives for inward investment.
According to the regulations, all existing companies must re-register on a new electronic registry system by 1st August 2018.
Several sectors are being liberalised, allowing domestic businesses to seek foreign capital and expertise via joint ventures. Foreign entities are to be permitted to take stakes of up to 35% in domestic companies.
https://www.mmtimes.com/news/draft-regulations-companies-law-released-go-effect-august.html
Central Bank issues licence to Myanmar Credit Bureau
The Myanmar Credit Bureau is a JV between the Myanmar Bank Association and Asian Credit Bureau Holdings of Singapore and will collect information on borrowers for dissemination to banks and other financial institutions.
The Myanmar Credit Bureau is reported to be ready to set up operations within the next twelve months.
https://www.mmtimes.com/news/central-bank-issues-license-myanmar-credit-bureau.html
New Agriculture Development Strategy for Myanmar launched
The new strategy, which was developed by the Agriculture Ministry in conjunction with stakeholders, the ADB, the FAO and the Livelihoods and Food Security Trust Fund, was launched in early June, and has highlighted the following as key policy issues:
- integrated value chain development, encompassing smallholders as well as agribusiness
- agricultural diversification; the risks of over-emphasising paddy to the detriment of pulses, oilseeds, fruits and vegetables, livestock and fisheries
- institutional development – land rights, rural finance, research and extension, farmer organizations and cooperative societies, policy analysis, planning, and monitoring and evaluation
- infrastructure development
- imbalance between budget and policy – with research, extension, education, planning, land records and statistics, fisheries and livestock receiving only 5% of the capital budget between them
Use the following link to be able to read the full report:
https://www.lift-fund.org/sites/lift-fund.org/files/publication/MOALI_ADS_June2018_compressed_EN.pdf
