Saturday, June 11, 2016

The Irrawaddy Magazine

The Irrawaddy Magazine

The Irrawaddy Business Roundup (June 11, 2016)

Posted: 10 Jun 2016 08:20 PM PDT

Dutch beer producer Heineken has faced setbacks while setting up operations in Burma. (Photo: Reuters)

Dutch beer producer Heineken has faced setbacks while setting up operations in Burma. (Photo: Reuters)

Sanctions Relief Not Sufficient, U.S. Businesses Argue

The American government's recent relaxation of sanctions on Burma is not enough, the US Chamber of Commerce argued in a white paper published this week, calling for the US to "normalize" relations fully and introduce preferable trade terms to encourage export-led industries in Burma.

A number of state-run companies and banks were removed from US Treasury's Specially Designated Nationals (SDN) list in May. The US introduced new measures to smooth financial dealings involving Burma and extended an exemption making it legal for US companies to finance shipments coming through Burma's largest port and airport, which are owned by a company on the so-called blacklist.

But President Barack Obama also extended the International Economic Emergency Powers Act, which underpins the sanctions regime against Burma. Advocates of sanctions argue that retaining some targeted measures enables the United States to encourage reform in Burma, particularly for companies with ties to the military that remain sanctioned.

But many businesspeople wanted the act scrapped completely. In a statement Monday, the US Chamber of Commerce's senior vice president for Asia, Tami Overby, said that after the successful elections in November, "we think it's time to normalize this relationship."

"Trade, investment and economic growth all promote progress in Myanmar," said Overby. "Sanctions do the opposite."

The body representing American business interests issued a white paper that called for sanctions to be totally lifted. It also called for Burma to be included once again in the Generalized System of Preferences (GSP), which would mean Burmese goods could be imported to the US duty-free. Burma was removed from the GSP in 1989 over child labor and forced labor concerns.

"Myanmar has benefitted to some extent from its ability to export to the United States, but greater access to the US market would be one of the quickest, most readily-actionable ways in which to support the country's growth," the white paper said.

It also warned that, with the European Union (EU) already reinstating preferential trade terms for Burma and other countries not holding back on investment, US companies were missing out on opportunities in Burma.

"Patience has worn thin, and should the US fail to grow into a significant presence this year, local Myanmar communities believe it may not happen for at least a decade," it said.

Japanese Firm Hopes to Win Market Share With Noodles for Burmese Tastes

Osaka-based Acecook, a company specializing in instant noodles and soups, reportedly wants to begin making noodles in Burma next year, and hopes to be shifting 100 million servings a year of its products by 2020.

Nikkei reports that Acecook will invest about $18.6 million to build a factory in an industrial park in Rangoon and become the first Japanese noodle maker to set up production in the country.

"Myanmar’s growing middle class has begun slurping more instant noodles," the report said. "With incomes rising, the market is seen expanding from 420 million servings last year to more than 1 billion in 2020."

Acecook already operates in Vietnam, where it makes products tailored to local tastes, replicating Vietnamese pho, for example. The firm wants to do the same in Burma, and believes it can win a 10 percent market share within the next four years, Nikkei said.

By doing so, Acecook believes it can compete with Thai imported noodles in Burma (It currently imports noodles made by its Vietnamese subsidiary, at an extra cost).

"While the Thai versions are mostly based on tom yum soup, Acecook released a new offering this February that has a flavor like the 'hin' simmered dishes of Myanmar," Nikkei reported. "That product is priced at around 250 kyat."

Report Details Heineken's Challenges in Burma

Heineken opened it's $60 million brewery in Rangoon's Hmawbi Township almost a year ago, but the return to the country hasn't been as smooth as the Dutch beer company would have hoped, according to details in an article published this week by the Financial Times.

Faced with having to take on the market dominant, part military owned Myanmar Brewery, which makes the ubiquitous Myanmar Beer, Heineken faced problems before production could even begin, the report said.

Citing Heineken's supply chain director Donald Otten, it said that the company's launch in Burma last year—in a joint venture with tycoon Aung Moe Kyaw's Alliance Brewery Company—in fact came half a year later than hoped.

"Heineken was delayed by more than three months be­c­ause customs officers rejected equipment over small errors in the import paperwork — delays Mr Otten suspects were aimed at extracting illegal bribes," it said.

Like all companies operating in the country, Heineken has also had to battle with power shortages, employing a backup generator 44 percent of the time during the hot season in March, according to the Financial Times.

Company officials quoted in the story were generally positive about the brewer's chances, and reported that sales targets were being exceeded, despite the teething problems.

There was also good news for the company in February, when it announced it had won back the right to brew its Tiger and ABC Stout brands in Burma. The brands had previously been brewed by Myanmar Brewery, a former partner of Heineken in an aborted 1990s attempt to enter the country.

Burma Tops Mekong Region for Oil and Gas Opportunities

Analysts at U.K.-based BMI Research believe that Burma offers the most opportunity in the Mekong region for investment in extracting oil and gas, with more exploration blocks possibly up for grabs this year.

In an industry trend analysis published this month, the firm said it expects encouraging exploration to be a priority for the new government, since much of the country's existing natural gas production is pledged to China or Thailand under contracts signed by previous governments.

"The popularly-elected political leadership under [President] Htin Kyaw, is widely anticipated to be open to attracting greater international investment into its oil and gas sector," the analysis said.

"This increases the likelihood of a licensing round in 2016, which could offer as many as 26 oil and gas blocks—comprising 13 onshore and 13 offshore blocks. While the exact date for the bidding round remains unconfirmed, it could pave the way for greater international investment in upstream activities."

The previous government signed production-sharing contracts with a number of international oil companies, including Royal Dutch Shell, Thailand's PTTEP, and Chevron of the U.S.

BMI Research pointed to the fact that 11 3-D seismic surveys had already been conducted in exploration blocks as evidence that the country's oil and gas sector would overcome an infrastructure deficit and the current low oil prices.

"Myanmar will be the most attractive country in the Mekong region for upstream investments," it said.

"Being well positioned for gas exports and home to a rapidly growing domestic market, the below-ground potential and greater certainty in Myanmar’s economic and political situation will support investments."

German Transport Giant Sets Up Logistics Company in Burma

DB Schenker, a division of the German state-owned railway and infrastructure group Deutsche Bahn AG, has set up a company in Burma to take advantage of rising trade volumes.

A statement said that Schenker Myanmar Company Limited had begun operating as of June 1. The company will manage logistics work for telecommunications and consumer goods clients, while the group's Thai subsidiary will continue to deal with freight customs and transport through it's existing office in Rangoon.

"Myanmar has seen a significant increase in investments and activities in infrastructure, manufacturing and distribution, since the lifting of sanctions in 2012," the new company's general manager, Nay Htoo Aung, said in the statement.

"We can enable the development and growth of the Myanmar market by bringing our expertise and technology in warehouse design & management, as well as employing and training the Myanmar talent pool with warehouse & supply chain management skills, to serve our customers' needs."

The post The Irrawaddy Business Roundup (June 11, 2016) appeared first on The Irrawaddy.

Dateline Irrawaddy: ‘It is Time for the Government to Clarify its Policies’

Posted: 10 Jun 2016 08:12 PM PDT

PHOTO 2Thalun Zaung Htet: Welcome to Dateline Irrawaddy! This week, we'll discuss Burma's economic potential under the new government. The Irrawaddy's business reporters Ma Kyaw Hsu Mon and Ko Thit Nay Moe will join me for the discussion. I'm Irrawaddy Burmese editor Thalun Zaung Htet.

The new government has been in office for more than two months now, and business circles have complained that President U Htin Kyaw did not talk about economic policies in his inaugural address. Both foreign and local investors have shared this criticism because they are not clear what economic policies the country will adopt. There has been no significant change in the country's economy over the past two months under the new government's 100-day plan. How much has this upset businessmen and investors?

Kyaw Hsu Mon: As everyone knows, the country faces many challenges and difficulties during the transition. Although the new government has articulated its economic policies, it failed to make the details clear to the public, businessmen and potential foreign investors—this is what people are currently criticizing. The NLD [National League for Democracy] government has good economic policies in hand, as they took their time designing them with the help of experts. The problem is that they failed to be transparent in explaining them, which made people raise questions. Businessmen now wonder what the economic policies and opportunities are, and how the new government will handle the bad legacy of their predecessor. The new government has not made clear statements regarding various economic sectors such as banking, financial services, production, or exports and imports, which also raises questions. We understand that the government has to give priority to political stability under the current circumstances, but it should also take care of the country's economy because the economy is the lifeblood of the country. It is time for the new government to clearly elaborate on the best possible policies. It would be best if they do this within the first 100 days.

TZH: There were laws enacted during former President U Thein Sein's government, like the Foreign Investment Law and the Myanmar Companies Law. Economic laws, however, are not ready to be put into practice. Businessmen claim that the laws are not ready to attract investment or business. Recently, the US Chamber of Commerce said that the existing economic laws in Myanmar do not offer any protections and they urged [Myanmar] to make sure they do. What is wrong with the laws? Ko Thit Nay Moe, why do businessmen say that the existing laws can't attract foreign investment?

Thit Nay Moe: [Business] laws were enacted under U Thein Sein's government. The Foreign Investment Law was enacted in 2012, and the administration also enacted the Myanmar Citizens Investment Law. The two laws were contradictory. Businessmen claimed that the Myanmar Citizens Investment Law favored Myanmar citizens while the Foreign Investment Law favored foreign investors. They tried to combine those two laws, but it couldn't be enacted. A previous Myanmar Companies Act was enacted a long time ago in 1914. This law was amended with the help of ADB [Asian Development Bank], but it has not been passed yet. These two laws directly concern foreign investment. The MIC [Myanmar Investment Commission], which scrutinizes and approves foreign investment had to reform itself, as required by law. To foreign investors, it is not a positive sign that the MIC still hasn't been reformed and that those laws aren't yet amended. Until the MIC is reformed, foreign investors who submitted investment proposals can't receive approval. I heard that there are as many as over 100 proposals. This is one reason for slow inbound investment.

TZH: So, you mean nothing is ready yet for investment. The concerned laws aren't ready and the MIC isn't ready, so investments aren't coming in as part of the 100-day plan.  People have said that it was difficult to do business in Myanmar previously because there were sanctions against the country, mainly by the United States. But on May 10, Americans extended their sanctions against our country. This mainly targeted individuals, while sanctions against the government have largely been lifted. Government banks like the Myanma Economic Bank [MEB], Myanmar Investment and Commercial Bank [MICB] and Myanmar Foreign Trade Bank [MFTB] were removed from the sanction list. So, it is fair to say that there are almost no sanctions against the government. But then again, lifting sanctions against the government does not immediately bring in investments. There is hardly any suggestion that lifting sanctions against the government will result in inbound investment. Why?

KHM: At the economic seminar between the United States and Burma yesterday, representatives said that sanctions only targeted specific individuals on the SDN [Specially Designated Nationals] list, like top businessmen U Teza, U Zaw Zaw and U Tun Myint Naing of Asia World to name a few. Those who remain on the list are key business players in the country. So, it is doubtful that the SDN does not affect the country's economy. Regarding sanctions against Burma, there are different views held by the government, Congress and businessmen in the United States. Some of them call for not lifting sanctions on Burma, while others, including some US businessmen, have called for them to be lifted. Both governments need to think about whether the sanctions impact Burma's economy. The US government needs to find out who is affected by sanctions, and whether they are only targeting top businessmen or people at the bottom as well. The Burmese government needs to ask itself if the country is ready for investment if the US government lifts all sanctions and invests in the country. Because Burma has suffered mismanagement and lack of infrastructure for ages, we still do not get full access to electricity. The government needs to question if the country is ready in terms of infrastructure requirements in regards to things like water and telecommunications. Without proper infrastructure, affordable land prices and affordable rent for office spaces, foreign investors won't come. Potential investors will take all these things into consideration. So, it is fair to conclude that foreign investments will not come in if the government fails to consider all of these aspects.

TZH: Our country is a developing country and taking a look at its import and export sector, exports are low and imports are high. For a household, if expenses are large and income is small, it will become poor. In our country, exports are very small, but import volume is large—we import cars and building materials into the country. Ko Thit Nay Moe, what actions is the government taking to boost exports?

TNM: As far as we know, the commerce minister has said that he intends to boost exports three-fold over the next five years. But, our export volume is at an all time low and our import volume is very high, so there has been trade deficit. In the 2012-13 fiscal year, the trade deficit was just over US$225,000, but it increased to $5 billion in the 2014-15 fiscal year because we could not export. The export total was $10 billion in the 2014-15 fiscal year, a small amount compared to our neighbors. Thailand's export total was about $220 billion and Vietnam's was over $130 billion at that time. So, it is clear that we don't have things to export. To address this situation, the government needs to consider which sectors should be prioritized. The commerce minister talked about boosting exports in the agricultural sector and improving small and medium enterprises [SMEs]. In reality, the agricultural sector receives less than one percent of foreign investment, just around 0.5 percent. So, it will be interesting to see how the new government will handle this. It is a real challenge. Regarding SME development, U Thein Sein's government provided loans, but they were not sufficient. The previous government also established SME centers, but businessmen say that those did not succeed. The previous government did something, but it was far from a success. It will be a tough challenge for the new government to handle and improve the failed SME policies.

TZH: So, there are two challenges: to boost exports and to develop SMEs. Regarding the banking sector, we also have shortcomings. One of the main problems is that banks can't provide loans for businesses. What measures has the new government taken to fix this?

KHM: It is critically important that the Central Bank of Myanmar has stable policies and adopts laws that can effectively encourage the private sector. It needs to adopt good regulations that can support local businessmen. We will have to see how much the Central Bank can back up private banks so that they can provide loans to local businessmen. Now, businessmen are pushing the Central Bank to make some of its policies more clear. I think the government needs to handle this in the best possible way if it wants to see private sector development.

TZH: Ma Kyaw Hsu Mon, Ko Thit Nay Moe, thank you for your contributions.

The post Dateline Irrawaddy: 'It is Time for the Government to Clarify its Policies' appeared first on The Irrawaddy.

This Week in Parliament (June 6-10)

Posted: 10 Jun 2016 08:02 PM PDT

A view of the Union Parliament in Naypyidaw during its opening session on Feb. 8, 2016. (Photo: The Irrawaddy)

A view of the Union Parliament in Naypyidaw during its opening session on Feb. 8, 2016. (Photo: The Irrawaddy)

June 6 (Monday)

The Union Parliament approved the President's proposal for Myanmar's ratification of the Agreement on the Privileges and Immunities of the Association of Asean. Under the agreement, Myanmar diplomats assigned to the Asean Secretariat will receive exemptions and privileges while they are performing their duties, said U Kyaw Tin, deputy minister of foreign affairs.

 June 7 (Tuesday)

The Lower House approved lawmaker Khin Nyo's proposal which called for the establishment of mangrove swamps in the Irrawaddy Division's Dedaye Township.

The Upper House approved the electricity laws sent to it by the Lower House with their proposed amendments. It also approved the bylaws for prevention of dangerous chemicals and related materials sent to it by the Lower House with their proposed amendments.

In the Lower House, Myint Oo of Thanatpin Township asked if the new government would follow through with the former government's plan to pay for half of the electricity supply costs in some of the villages in his township. Lower House Speaker Win Myint warned, "You are asking about a thing of the past, which was not clearly explained. You need to review you question first to see if it is relevant to the present time or not."

June 8 (Wednesday)

The Lower House approved the proposal of lawmaker Tin Maung Win of Seikkan Township to halt the Myanmar Investment Commission (MIC) approved jetty project being carried out by Kaung Myanmar Aung shipping company on land owned by the Myanmar Port Authority. The lawmaker said that construction work would block the waterway, negatively affect the nearby Botahtaung Pagoda and increase traffic congestion on Strand Road.

The Upper House approved the draft law to amend the Anti-Corruption Law sent to it by the Lower House. The law has been amended once already.

 June 9 (Thursday)

Lower House lawmaker Phyu Phyu Thin asked how long it would take to rebuild the Mingalar Market. The Minister for Social Welfare, Relief and Resettlement replied that the Rangoon Division Parliament would seek the approval of the divisional government to rebuild the market. The market caught fire in January this year and the damage toll was estimated at over 36 billion kyat (US$27.8 million), according to the Fire Services Department.

In response to a lawmaker's question about whether the government planned to reopen the border trade post at Three Pagoda Pass in Karen State on the Thai-Burma border, Minister of Commerce Than Myint replied that it would only be considered after border disputes were settled and the border was demarcated according to international law.

June 10 (Friday)

Lawmaker Htay Win Aung of Dawbon Constituency asked if the government had a plan to disseminate information about the International Declaration of Human Rights at schools and through state media. Education Minister Myo Thein Gyi replied that the Information Ministry would publish photos, articles and interviews about human rights as a priority if they were sent to state newspapers. The Ministry of Education will cooperate with the National Human Rights Commission to provide information about human rights, the education minister said.

The first regular session of the Lower House convened on Feb. 1 and came to an end on June 10. Four standing committees and 15 affairs committees were formed. Nine of 16 bills were debated, seven remain up for debate and two by-laws were approved. Over 6,000 observers visisted Parliament.

The first regular session of the Upper House convened on Feb. 1 and concluded on June 10. Four standing committees and 12 affairs committees were formed.

Nang Than Than Lwin of Hpa-an Constituency asked if the government had a plan to allow instruction of ethnic languages in schools in order to preserve and promote language, culture and literature of the various ethnic groups. The education minister replied that the Union government would continue to cooperate with divisional and state governments to promote the teaching of ethnic languages at state schools.

The post This Week in Parliament (June 6-10) appeared first on The Irrawaddy.
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