Economy

The Irrawaddy Business Roundup (Jan. 30, 2016)

By Simon Lewis 30 January 2016

Call for Reform of Burma’s State-Owned Companies

The Natural Resource Governance Institute (NRGI) has called for the Burmese government to prioritize reforms of state enterprises, in a report that draws attention to the “worrying” lack of oversight on such companies.

In its report, Gilded Gatekeepers, published this week, NRGI focused its attention on the so-called state-owned economic enterprises (SEEs) operating in the oil and gas sector, and especially the Myanmar Oil and Gas Enterprise, or MOGE.

MOGE is the entity with which all companies extracting oil or gas in Burma must form a joint venture. That means it receives vast sums of money on behalf of the Burmese state. It collects a massive 16 percent of all government revenues, the report said.

Mysteriously, MOGE also accounts for 10 percent of public expenditure—on what is it unclear. As NRGI noted, “There is not a clear link between the activities that SEEs like MOGE are charged with performing and the large sums they are entrusted with retaining and spending.”

Additionally, state-run firms are not obliged to hand over all their profits to the government, but instead can put them in “other accounts.” According to data released under the Extractive Industries Transparency Initiative, MOGE chose to squirrel away US$1.4 billion in this manner in the fiscal year 2013-14 alone.

The report’s co-author, Patrick Heller, NRGI’s director of legal and economic programs, in an editorial posted on the organization’s website and first published by the Myanmar Times, noted that MOGE could have accumulated a much larger sum in its own bank accounts over the years.

“The total sum that has accumulated in MOGE’s Other Accounts over many years remains unknown,” he wrote, also noting the “weak formal controls” over the management of state companies.

“We don’t know what MOGE does with this money. Is it simply leaving the money in an account? Is it using the money to finance other investments?” he added.

Asia World Looks to Clean Up Its Act

Asia World Company, the Burmese conglomerate that remains under US government sanctions for its alleged links to drug trafficking, has undergone a major restructuring that appears at least in part designed to improve the firm’s image.

The company said this week that it had offloaded certain parts of its business in order to “streamline” its operations and focus on the three sectors of infrastructure, energy and property development.

The parts of the business from which Asia World is divesting are its most visible and controversial, suggesting an element of rebranding in the move. The notoriously secretive company also overhauled its website recently, adding a lengthy document setting out the firm’s human rights policy and even including a previously unpublished email address specifically for media inquiries.

The company is headed by Htun Myint Naing, a.k.a. Steven Law, the son of the late Lo Hsing Han. Lo was an ethnic Kokang militia leader labeled by the US government as a major drug lord in Shan State, although Asia World has insisted that the company’s success has not depended on his money.

The company’s statement Wednesday said Asia World had exited entirely from its toll road business, was quitting a planned coal-fired power project in Rangoon, and had divested from the gas station brand Green Luck.

Notably, the company also said it was now completely out of the jade sector, which has come under intense scrutiny due to dangerous conditions for local miners, allegations of official corruption and suggestions that the industry is fueling the civil conflict in Kachin State.

The company had been involved in mining jade in Hpakant Township through a company known as Yadanar Taung Tann. The UK-based campaigners Global Witness reported last year that this company had been cutting both the Burma Army and a senior member of the Kachin Independence Organization (KIO) into part of its operation, in what the group labeled “an unholy trinity.”

The statement also offered a quote from Steven Law, Asia World’s chairman and managing director, who hinted at the company’s wish to be seen as a responsible business living up to international standards.

“AWC was founded with a strong belief in making lasting contributions to the people of Myanmar and the future of the country, and we reiterate our commitment to play a leading role in Myanmar’s economic growth and progress,” he said.

“We have streamlined our business to focus on infrastructure, energy and property projects, and we are confident this strategy will enable us to deliver more projects that are in compliance with international standards of quality and efficiency.”

Seven Foreign Firms Want to Join Fourth Telecoms License

Seven companies from overseas have expressed interest in partnering with a consortium of 11 local firms to operate mobile phone services in Burma, Reuters reports.

A tendering process is ongoing for the 15-year license that would be only the third to be given to a private operator.

Ooredoo from Qatar and Norway’s Telenor began operating mobile phone services in 2014. The former monopoly holder Myanma Posts and Telecommunications (MPT) and the military-run MecTel also have their own networks.

Reuters cited Chit Wai, deputy permanent secretary of the Ministry of Communications and Information Technology, saying that seven foreign firms had submitted formal expressions of interest in the tender.

The newswire pointed out, however, that the 11 local public companies involved in the consortium—who would together hold the majority of the shares in the venture set to operate on the new license—were little known and appeared to lack experience in the telecoms or IT sectors.

“The obscurity of the companies poses a potential problem in Myanmar, where some entities and businessmen are still targeted by US sanctions, connections to the military are not uncommon and reputational risk remains high,” Reuters said.

Malaysian Company Breaks Ground on Rangoon Private Hospital

Kuala Lumpur-based private healthcare company IHH Healthcare Berhad announced this week that it had broken ground on a $70 million hospital in Rangoon.

The 250-bed hospital will be known as the Parkway Yangon. The project is being led by Parkway Healthcare Indo-China, a subsidiary of IHH Healthcare, according to a statement.

The project also involves Singapore-incorporated Macondray Holdings and two Burmese companies—AMMK Medicare Company Limited and Global Star Company Limited—as minority shareholders.

It said the hospital project represented a “significant commitment to invest in the local community,” although the hospital will be run on a private basis and appears to be aimed primarily at the wealthy.

“The new hospital will be a boost to ongoing efforts in uplifting medical services to world-class standards,” the statement said. “This will provide an alternative for the many citizens who currently travel out of the country each year for healthcare.”

Analysts at BMI Research said the news was positive for the wider healthcare business in Burma.

“The influx of private healthcare providers into Myanmar will continue, creating positive spillover effects for both medical device and pharmaceutical firms,” said BMI Research’s Peter Hoflich in a note.

“This attraction is due to the confluence of a large unmet demand for medical services in the country, as well as the development of healthcare financing such as the introduction of private medical insurance. Due to the geographic proximity, Thailand-based healthcare providers are expected to be the most active in expanding into this frontier market.”

Thai Healthcare Provider Expanding in Burma

In another development for the private healthcare sector, Thailand’s Samitivej Hospital is planning to increase its presence in Burma, the company’s managing director told a Bangkok-based newspaper.

The Nation reported comments from Samitivej Plc managing director and CEO Dr. Chairat Panthuraamporn, who said the group wanted to build on its existing joint venture, through which it operates a clinic in Rangoon, as part of efforts to grow its business as Southeast Asia integrates under the Asean Economic Community initiative.

“We forged a joint venture with Parami Hospital in Myanmar, setting up Samitivej International Clinic at its medical complex in Yangon two years ago,” Chairat was quoted saying.

“We will also open our stand-alone medical clinic in Myanmar in April this year at a cost of Bt50 million [$1.4 million] to serve both expatriates and local people. About 80 percent of the clinic will be owned by Samitivej, while another 10 percent will be owned by Parami, and 10 percent by local investors in Myanmar. The clinic will be able to serve about 100 patients a day.”

Samitivej Plc is part of the Bangkok Dusit Medical Services network and operates five hospitals in Thailand.

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