POLITICS
Continued fighting in Kachin and Shan states, crackdown in N. Rakhine state
The political scene in Myanmar continues to be dominated by fighting between the Tatmadaw and armed ethnic groups in Kachin and N. Shan states, and by the authorities’ crackdown in N. Rakhine state. Inevitably, this is having an effect on sentiment towards the peace process ahead of the next round of the 21st-Century Panlong Conference, which is scheduled for February. It is also resulting in international criticism of the NLD government.
For a summary of the recent events, please use the following link to an article posted in the Myanmar Times in early January: http://www.mmtimes.com/index.php/national-news/24434-will-2017-be-the-promised-year-of-peace.html
For a more detailed guide on the peace process, the following link provides a link to a recent report “Deciphering Myanmar’s Peace Process”, which was prepared with the assistance of the US Agency for International Development, and published towards the end of the month.http://mmpeacemonitor.org/images/books/dm%20peace%20process%20a%20reference%20guide%202016.pdf
U Ko Ni, NLD legal adviser shot at Yangon airport
A prominent Muslim lawyer, and adviser to the NLD, was shot and killed at Yangon International Airport on 29th January. U Ko Ni was an advocate of religious toleration and a critic of the “race and religion laws” being proposed by nationalists. http://www.mmtimes.com/index.php/national-news/yangon/24746-lawyer-driver-shot-and-killed-outside-rgn.html
ECONOMICS
World Bank issues updated outlook on Myanmar economy
In the latest edition of its Myanmar Economic Monitor, the World Bank has commended the steps the new government has taken to maintain fiscal prudence in a “difficult economic and security environment”, as well as its efforts to broaden the national ceasefire agreement into a national dialogue to resolve underlying grievances. At the same time, however, it notes that the fiscal deficit has widened to 3.2% of GDP (and is likely to widen further to 4.5% of GDP in the current year), and comments that recent intensified violence has underlined the political difficulties that lie ahead.
It expects economic growth to slow from 7.3% in 2015-16 to 6.5% in 2016-17. Productivity issues have hampered the pace of recovery from last year’s floods, and industrial activity – especially in food processing, gas production and construction – has slowed. Weaker commodity prices have dented export performance, causing the current account deficit to widen to 3.3% of GDP and, with slower foreign investment flows, Myanmar’s balance of payments produced a deficit equivalent to 0.7% of GDP. Although the World Bank has no immediate concerns over external sustainability, it advocates fiscal and monetary discipline to contain vulnerabilities.
Partly as a result of base effects, inflation has moderated to 3.5% YoY in the half year to October 2016. The World Bank accepts that the lingering effects of Cyclone Komen have continued to be felt through 2016-17, but notes that the growth in the money supply remained high (at 23% YoY) in 2015-16, as a result of the monetization of the fiscal deficit. It also suggests that the strength of credit growth to the private sector (+34% YoY) needs watching, especially as the sector and borrower concentration of lending has been on the rise.
Looking further ahead, the World Bank projects an acceleration of public and private investment to drive average GDP growth of 7.1% in the coming 3 years. With slower growth in demand and reduced fiscal monetization, inflation is forecast to ease to 8.9% on average in 2016-17, but the current account deficit is expected to widen further as gas exports moderate, demand in China slows, and investment-related imports remain strong. However, FDI is expected to remain solid and, as a result, the size of the balance of payments deficit should diminish.
Key longer-term risks include Myanmar’s narrow production base, its dependence on primary commodities, and its vulnerability to natural disasters.
The World Bank suggests that it would help stability if the government were to strengthen the communication and credibility of its economic vision and of the economy’s performance relative to its objectives. It suggests that, in its Medium Term Fiscal Framework, the government should target a fiscal deficit of less than 5% of GDP, with gradual consolidation over the medium term. It also sees a need to align borrowing more to longer-term investment needs, and away from inflationary financing, and specifically suggests the Central Bank needs to accept higher interest rates in its T-Bill auctions, and to tighten liquidity in the face of strong FDI flows and bank deposit growth. It says the phased relaxation of interest rate caps would help to encourage medium and longer-term deposits, which would be better matched to longer-term commercial loans.
The implementation of the new Financial Institutions Law (2016), with new regulations on capital governance, exposures, loan classification and provisioning, is seen as important for financial sector stability as, without them, it will be difficult to judge the health of the banking system.
Please use the following link to access the World Bank’s full report: http://documents.worldbank.org/curated/en/271301485510327677/Myanmar-economic-monitor-anchoring-economic-expectations
A slightly more detailed summary of the World Bank’s report has also been posted to this website.
Kyat volatility partly reflects currency mis-match in imports for re-export
In the last 6 months, the Kyat has weakened from approximately Ks/$ 1,200 to Ks/$ 1,350. The Central Bank has reissued its earlier guidance that public and private institutions should use Kyat rather than Dollars for domestic transactions and has urged importers not to purchase their own Dollars in the informal market, but to direct their purchases through the banks. At the same time, however, it has admitted that the banks themselves are short of US currency. http://www.mmtimes.com/index.php/business/24447-cb-issues-reminder-on-currency-use-but-dollar-shortage-remains-issue-for-banks.html
The Myanmar Times has indicated that the informal border trade in items such as sugar and fuel, which are bought using Dollars, but then re-exported to China in exchange for Yuan, lie at the heart of the problem, as the following articles suggest: http://www.mmtimes.com/index.php/business/24507-cb-says-sugar-re-export-softens-kyat.html
http://www.mmtimes.com/index.php/business/24706-fuel-imports-jump-on-chinese-re-export-trade.html
Meanwhile, it reports that the Central Bank and Commerce Ministry will be co-operating more to ensure that the fob value of goods exported, as reported to the customs department, is more closely matched to export earnings deposited with the banks. In the first 8 months of last year, it suggests, the shortfall was just under $2bn (on exports totaling $4.95bn.) http://www.mmtimes.com/index.php/business/24652-commerce-ministry-cracks-down-on-unreported-export-earnings.html
BUSINESS
Approved inward investment passes $6bn
DICA has reported that approved inward investment has passed $6bn in the fiscal year to mid-January.
From the end of December 2016, FDI will be subject to the new Investment Law.
In the period to the end of the last calendar year, approved FDI was $3.5bn, but it has risen by a further $2.5bn in January alone thanks, in part, to the fourth telecom operator (MyTel), which has a plan to invest $1.3bn.
DICA is now forecasting approved FDI for the full year should now reach $7bn, or so. http://www.mmtimes.com/index.php/business/24734-approved-investment-passes-us-6bn.html
A report from Dealstreet Asia on the award of the fourth telecom licence to the Viettel-led consortium and of its plans for the market follows: http://www.dealstreetasia.com/stories/myanmar-national-tele-communications-ltd-gets-license-to-provide-telecom-service-for-15-years-62661/
MAPCO plans agri-park in Ayerawaddy delta
The Myanmar Times has reported that MAPCO has a plan to develop small and medium-sized agricultural parks in specialized sector niches, in which it will provide the necessary infrastructure to attract foreign and local investment. The first of these, in the Ayerawaddy delta, is costing $12mn and is expected to be complete in November 2018.
MAPCO has indicated it has attracted interest from investors in Japan, Thailand, China and Taiwan. http://www.mmtimes.com/index.php/business/24473-mapco-courts-investment-for-agri-industry-park.html
Meanwhile, The Irrawaddy has reported MAPCO is to invest close to $7mn on a new rice mill at Kyaiklat in the Ayerawaddy Division. The plant has a planned capacity of 450 tons per day and MAPCO intends to use it to export up to 100,000 tonnes of rice a year.
YOMA Strategic announces approval for its Landmark project in Yangon
YOMA Strategic has issued a release to the Singapore exchange indicating that it has received MIC approval for its investment in a mixed used development and luxury hotel on the site of the old Railway Headquarters building on Bogyoke Aung San Road in Yangon. http://www.yomastrategic.com/attachment/201701131057201735513576_en.pdf
Singapore Myanmar Invesco to contest challenge on Myanmar Infrastructure Group sale
Singapore-listed SMI has announced it has received a complaint from German group GIG that it has breached the terms of its JV agreement in its plan to dispose of its 97% interest in MIG to HK-based Shining Star. SMI has indicated it will vigorously refute the complaint. Full details of SMI’s disclosures may be found in the following press releases: http://sin-mi.listedcompany.com/newsroom/20170118_184744_Y45_BL2YU7QDVZGOL0XG.1.pdf
http://sin-mi.listedcompany.com/newsroom/20170127_124655_Y45_Y6S8OBZ64VPGM2SG.1.pdf
Nissan starts assembly of cars in Myanmar
The first of the cars assembled by Tang Chong Motor at its plant in Hlaing Thayar hit the market in mid-January. The Sunnys are assembled using semi knocked-down kits, but the company plans to invest $50mn next year in a new facility in Bago, at which the cars will be assembled using complete knocked-down components from 2019. http://www.mmtimes.com/index.php/business/24651-first-myanmar-assembled-nissan-cars-go-on-sale.html
Myanmar Motor Corp. receives MIC approval for bus assembly plant
Dealstreet Asia has reported that MMC’s plan is to invest $10mn in the 4-acre plant in Mingalardon and that it targets capacity of 30 vehicles per month, some of which it hopes will be exported. However, its initial production target is for 100 units per year, rising to 200 units in the ninth year of operations. http://www.dealstreetasia.com/stories/myanmar-motor-corp-approved-for-the-10-m-bus-building-production-work-62212/
Sembcorp signs BOT agreement for power plant
Singapore’s Sembcorp Industries has announced it has now signed the BOT agreement with MoEE for its 225MW Miyngyan gas-fired power plant near Mandalay. Under the agreement, Sembcorp will build and operate the plant for 22 years. The plant, which is expected to cost $300mn, is expected to start operations in the first half of 2018. http://www.sembcorp.com/en/media/media-releases/utilities/2017/january/sembcorp-myingyan-project-powers-ahead-with-signing-of-build-operate-transfer-agreement-with-myanmar-s-ministry-of-electricity-energy
First Private Bank lists on YSE
First Private Bank, the fourth company to be listed on the new Yangon stock exchange, had its first day of trading on 20th January. Unlike the other three companies listed (First Myanmar Investment, Myanmar Thilawa SEZ and Myanmar Citizens Bank), its shares fell from its opening price of Ks 39,000/sh. At the time of writing, they stand at around Ks 31,000/sh.
Myeik tourism to benefit from planned upgrade of Kawthaung airport
The tourism minister has indicated to the Myanmar Times that the government has agreed to a plan proposed by Thanintharyi government for an upgrade to the airport at Kawthaung, in order to support tourism in the Myeik Archipelago on Myanmar’s southern coast.
It is hoped that, after the upgrade, it will be possible to accommodate flights from other parts of ASEAN. http://www.mmtimes.com/index.php/business/24668-kawthaung-airport-upgrade-to-bring-international-tourists.html
