Myanmar - Business and Investment Digest, March 2017

A domestic perspective of news from the past month with implications for business and investment in Myanmar.

Politics: Myanmar gears up for by-elections on April 1st, Rakhine Advisory Commission issues interim recommendations; Update on developments in the peace process

Economics: American Chamber comments on the NLD government’s performance at the end its first year; MADB taken over by Ministry of Finance; Central Bank favours directed lending to agriculture and SMEs; Parliament recommends suspension of 44 SOE projects

Business: UK InspireMe festival to promote education services; New Myanmar Investment Law comes into effect on 1st April; Garment sector revenues rising, MGMA denies reports of child labour abuse; UK group James Fisher forms JV in offshore oil and gas; KBZ offers $ transfers via SMBC (NY), suggests open to selling stake to foreign firm; Investments by Sahadharawat of Thailand, Soibuild of Singapore and Koryo Cable of Korea at Thilawa; MyPay acquires Singapore’s fastacash; Koryo Cable to build facility at Thilawa; Suzue of Japan in Myanmar logistics joint venture

… A WINDOW ON THE GOLDEN LAND …

The Mahamuni Buddha

According to tradition, the Mahamuni Buddha is one of only five likenesses made during the Buddha’s lifetime.

The story goes that, a little over 2,500 years ago, the Buddha himself visited Arakan and was met there by the king, who was so impressed by his teachings that he bid the Buddha rest and pose under a bo tree for a week, whilst a permanent memorial was prepared. The artist chosen was none other than Sakra, Lord of the Gods, a sculptor of supernatural power, and so the likeness was extraordinary. The Buddha was delighted with the result and, by breathing on the statue, was able “to make perfection even more perfect.” Before departing he pronounced the statue would last 5,000 years as his likeness on earth.

The statue used to be in the ancient city of Mrauk-U, from 1433AD the capital of the Arakanese kingdom. A Portuguese Jesuit priest, Fray Sebastien Manrique, visited Mrauk U in the 1640s and wrote an account of his stay and of the Mahamuni Buddha.  He claims that, whilst there, he expostulated with the king over his “idol worship”—though one assumes it’s possible he only did so from the safety of his desk, after his return to Rome.

In the 1784, Mrauk-U was conquered by the Burmese and the statue was cut up and transported to Amarapura, (near Mandalay), where it was reassembled. In a fire that broke out in 1844, significant damage was done to its temple, although the Great Image was saved. Gold recovered after the fire was made into the robe that now adorns it.

The Mahumuni Buddha gets his face washed and his teeth cleaned by the monks at the pagoda every morning at 4am and, in February, there’s a big festival (“Mahamuni Paya Pwe”) when everybody gets celebrate the history of the pagoda.

Some of the gold leaf applied to the statue during its worshippers’ devotions gets washed off or is improperly attached. We assume that the gold referred to in the following Myanmar Times article as “panned”, is the gold debris that the monks recover at the end of the festival.

If we have it correct, 5 visses of gold = 8.16kg = just over 262 troy ounces = just under $330,000 by value. As in 2016, total recoveries are expected to reach about $500k by the time this year’s “panning” is over. It’s not a small sum.

Find out more

POLITICS

Myanmar gears up for by-elections on April 1st

By-elections are to be held in 19 constituencies on 1st April in a process that is being overseen by a number of regional observers, including ANFREL (the Asian Network for Free Elections) and representatives from both the EU and the United States. Find out more

Rakhine Advisory Commission issues interim recommendations

The Kofi Annan-headed Advisory Commission on Rakhine has published an interim report containing recommendations for measures that will help address the state’s structural and long-term challenges. It expects its final recommendations to be released in a second report in August.

The recommendations include unimpeded humanitarian and media access, the establishment of a joint commission on Rakhine with Bangladesh, the establishment of a clear strategy and timeline for the citizen verification process and for the closure of the IDP camps, and improved training for the police and security forces.

In response, the State Counsellor’s office had indicated it agrees with the report’s recommendations and will speedily implement them, in so far as the situation on the ground permits. Find out more

In interviews with the Myanmar Times, a group of Rakhine MPs have indicated that, whilst they accept some of the interim report’s recommendations, others—such as the closure of all the IDP camps—are more controversial. They also suggested the Commission needs to give further consideration as to what is to be done with those members of the population in Rakhine who are not to be granted citizenship. Find out more

Update on developments in the peace process

March has seen meetings between the DPN, a delegation of representatives from the UNFC—a group of nine armed groups that have not yet signed the Nationwide Ceasefire Agreement (NCA)—and both the State Counsellor and the Government Peace Commission. In these meetings, they discussed ways of strengthening the ceasefire process.

Two members of the UNFC grouping, the Kachin Independence Army (KIA) and the Shan State Progressive Party (SSPP), did not accompany the DPN. They had attended a separate summit hosted by the militant United Wa State Army in Pangkham at the end of February. That summit called for the replacement of the NCA with a different ceasefire agreement—a demand that has already been rejected by the Commander-in-Chief of the army.

At the end of the month, the Myanmar Times has reported that five of the UNFC’s members are now likely to sign the NCA, although it appears the KIA and the SSPP may not.

The newspaper is suggesting that the Pangkham summit has created a split in the UNFC. Two other members of the UNFC—the Myanmar National Democratic Alliance Army (MNDAA) and the Ta’ang National Liberation Army (TNLA) left the UNFC at the end of 2016. They have joined the Arakan Army, forming the “Northern Alliance”, and have been engaged in fighting with the army since then.

The next session of the Panglong process is now expected to start in early April. Find out more

ECONOMICS

American Chamber comments on the NLD government’s performance at the end its first year

In an interview with the Myanmar Times, Aye Thiha has commented that the NLD government’s ability to execute business friendly policies has been weaker that had been hoped. Find out more

MADB taken over by Ministry of Finance

The Myanmar Times reports that control of the Myanmar Agricultural Development Bank (MADB) will be transferred from the Ministry of Agriculture to the Ministry of Finance in April. A number of weaknesses have been identified at the bank and it is hoped these will now start to be addressed. Find out more

Central Bank favours directed lending to agriculture and SMEs

The Myanmar Times has also reported that the Myanmar Central Bank’s director general is in favour of requiring local private sector banks to direct a minimum percentage of loans to the agriculture and SME sectors.

Currently the public sector banks are offering uncollateralized loans at between 8% and 8% interest. However, the private sector banks’ loans are collateralized, and they may charge up to 13% interest. According to this article, the director general as suggested that, in certain circumstances, they may be permitted to charge more than 13% on directed loans “as it is not realistic to have those banks lending without collateral and with a low(er) interest rate.”

Further details on the regulations, and on the possibility of the banks availing themselves of guarantees from the Central Bank, are to be released in due course. Find out more

Parliament recommends suspension of 44 SOE projects

According to the Myanmar Times, two parliamentary committees have reviewed 52 investment projects being undertaken by state-owned enterprises and have recommended that 44 of them should be cancelled, suspended, or reduced.

Of the 8 remaining, the committees have recommended 4 should be implemented as joint ventures, and two should proceed under the supervision of the government.

In addition to advocating these reductions in capital expenditure, parliament has also been advised to look into ways of reducing current expenditure. Find out more

BUSINESS

UK InspireMe festival to promote education services

At the end of the month, the UK’s Department of International Trade hosted its first educational fair in Myanmar. The UK is showcasing its expertise in international educational services and hopes to provide a platform for international networking and business matching.

Nay Shine, representing the UK government, explained to the Myanmar Times: “We want Myanmar to know the UK is out there with the best solutions that can help Myanmar shape the education sector … It is about exchanging knowledge, information, and forming education networks.” Find out more

New Myanmar Investment Law comes into effect on 1st April

The main changes affecting inward investment are the following:

• income tax exemptions will principally apply to investments in priority sectors and less developed regions
• certain investments of less than $5mn may be approved by regional governments without reference to MIC
• MIC approval will still be required or “strategic investments”, “capital intensive investments”, investments likely to have an impact on the environment and “investments selected by the Union government.”
• MIC endorsement will be required for applications for tax exemptions and long term land use rights

The government expects to issue detailed guidance on those projects requiring MIC approval or qualifying for tax exemptions later. It has already indicated that agriculture and food processing, infrastructure, employment creation, vocational training, and regional development are all priority areas for national development.

MIC has indicated that it will also be releasing an updated list of restricted and regulated businesses, in which foreign investment will not be permitted, or only permitted through local JVs.

The Myanmar Times has recently published an interview with MIC Secretary U Aung Naing Oo touching on some of these points. The Secretary indicated that total inward investment approvals for FY 2016-17 have now reached $6.9bn, exceeding the $6bn target set for the year. Find out more

Garment sector revenues rising, MGMA denies reports of child labour abuse

Quoting the Ministry of Commerce, The New Global Light of Myanmar has reported that, in the first 11 months of the current fiscal year, the value of Cut, Make & Pack (CMP) exports by the garments industry has risen to $1.6bn, compared to $0.7bn in the same period a year earlier. The Ministry predicts the value of exports could approach $1.9bn for the full year. Find out more

Meanwhile, the Myanmar Garment Manufacturer’s Association has issued a strongly worded rebuttal of a report, circulated by the Dutch Centre for Research on Multi-national Corporations, concerning the use of child labour in Myanmar’s garment factories. The full press release issued by the MGMA follows: Find out more

UK group James Fisher forms JV in offshore oil and gas

The Myanmar Times has reported that a UK offshore marine services firm, James Fisher & Sons, has entered to an MOU with a Myanmar company, Royal Marine Technology, to support the oil and gas extraction industry in Myanmar. The Managing Director of Royal Marine Technology was quoted as saying that the venture will be the first domestic enterprise able to provide international scale services, which have hitherto been supplied from abroad. Find out more

KBZ offers $ transfers via SMBC (NY), suggests open to selling stake to foreign firm

Kanbawza Bank (KBZ) has started offering a direct USD money transfer service for bilateral trade with the USA via a settlement account with Sumitomo Mitsui Banking Corp. in New York. It is hoping to open similar accounts with US banks in due course. Find out more

Separately, Dealstreet Asia has reported KBZ management as open to the idea of having a foreign partner invest in the bank and provide it with additional capital, once the regulations permit it. Find out more

Investments by Sahadharawat of Thailand, Soibuild of Singapore and Koryo Cable of Korea at Thilawa

Dealstreet Asia has reported that three companies are to make investments at the Thilawa SEZ.

Sahadharawat Co. Ltd. Has received approval to invest $5.1mn in a metal packaging plant.

Soibuild Thilawa, an affiliate of Singapore’s Soibuild, is investing $13.9mn in a facility to produce pre-fabricated steel bars and other steel products. Find out more

Korean company Koryo Cable is to invest $8.2mn in a new unit, its first foray into the SE Asian market. Find out more

MyPay acquires Singapore’s fastacash

According to Dealstreet Asia, Myanmar’s MyPay is to acquire a Singapore company, fastacash. Both companies specialize in mobile payments systems using social media. Fastacash had earlier invested in MyPay, when it first entered the Myanmar market.

MyPay has a service agreement with AIM-listed MySQUAR, which enables it to offer its services over MySQUAR’s mobile messaging app. MyCHAT. According to Dealstreet Asia, both companies are hopeful that this acquisition will help MyPay to grow its business in other countries outside Myanmar. Find out more

Suzue of Japan in Myanmar logistics joint venture

Japanese transportation and logistics firm Suzue has applied to the MIC for approval for a JV with Myanmar’s KMA Shipping to offer services in logistics, warehousing and cold storage. It hopes to start operations in April and plans to build a cold storage facility, which it will later transfer to the JV company. Find out more