Burma Business Roundup (Saturday, Dec. 22)

By William Boot 22 December 2012

Vietnam in $300 Million Hotel, Mall Project for Rangoon

Vietnam’s biggest private property developer has reportedly signed an agreement with Burma’s Ministry of Hotels and Tourism to build a hotel and shopping mall in central Rangoon.

The development will cost US $300 million, according to the Vietnamese state-owned newspaper Tuoi Tre.

The firm, Hoang Anh Gia Lai Group—known as HAG—will lease eight hectares of land, but it’s unclear under what terms the foreign firm acquired the leasehold or when work will begin.

“The realty market in Myanmar has become heated after the country opened to the world and we are speeding to grab this chance,” HAG chief executive Le Hung was quoted as saying.

The agreement has reportedly been made on a build-operate-transfer basis, which means the development would eventually be handed over to the Burmese partner. It’s also not been disclosed how long the operating concession will last, but it likely to be at least 10 years.

Dawei Port Development ‘May be Scaled Down’

New confusion and uncertainty surround development plans for a Dawei port and industrial zone.

Within hours of an on-site meeting between President Thein Sein and Thailand’s Prime Minister Yingluck Shinawatra to further discuss the plans, a Bangkok newspaper claimed that Burma wants to reduce the size of the development zone by 25 percent.

Thein Sein proposed cutting the development down to 150 square kilometers from 204 square kilometers, reported The Nation this week.

The Thai government subsequently said the report was inaccurate.

The multi-billion dollar project, originally proposed by Thai construction firm Italian-Thai Development (ITD), has been in limbo for a year due to lack of funds and other investors.

Yingluck and Thein Sein have met three times since September to try to push forward the project, which ITD has said would cost $50 billion.

The original plans included a large port to tranship crude oil from the Middle East to Bangkok and heavy industries such as a refinery, a petrochemicals plant and a steel mill.

Dawei would be linked to Thailand by a new highway and railway, said ITD.

The Thai government has said it cannot finance the development and is reportedly trying to interest Japanese conglomerates to invest.

Burma Has ‘High Potential’ if Reforms Continue

In a survey of the world’s growth markets Burma rates only a low ranking but is singled out as a country with “high potential” if reforms continue.

The survey says Burma “suffers from poor infrastructure and low levels of health and education” which stand in the way of progress as a developing economy.

However, Burma is rated with other countries considered to have “significant scope to change their fortunes in the future” and favorable demographic profiles.

The “Growth Markets 2013” survey by the British business risk assessor Maplecroft ranks Burma at No. 63 out of 175 countries. But Burma is in the region with the best prospects for economic success, East Asia.

Out of the top 30 ranked countries, 10 are in the region; Hong Kong is also in the top tier, although not a country.

Burma’s neighbors Thailand, Bangladesh, Malaysia, China and India make the top 30, along with fellow members of the Association of Southeast Asian nations Indonesia, the Philippines, Vietnam and Singapore.

China is first, India second and the rest of the top five are Indonesia (3rd), Vietnam (4th) and Bangladesh (5th).

East and Southeast Asia appear to hold the best prospects for economic growth “due to their openness to trade and capital flows, macroeconomic stability and favorable demographic outlooks.”

However, in another survey by Maplecroft (see The Irrawaddy, “Burma an ‘Extreme Risk’ for Business and Rights Abuse”) Burma was ranked very poorly for foreign investment companies concerned about human rights issues.

Yunnan-Burma Border Trade Rises as China Economy Improves

Despite recent increases in import taxes imposed by China, cross-border trade with Burma is growing again, according to official figures from a business fair on the border at Muse.

New two-way deals worth about $180 million were signed at the fair earlier this month, according to Burma’s border trade department.

The deals include imports of Chinese manufactured goods, such as machinery and equipment parts, pharmaceutical supplies, tools and mobile phones. Burmese exports are mostly fresh foodstuffs and fish.

In July, China increased imports tariffs on Burmese goods which cut profits margins, traders complained.

Unofficial trade across the border with China’s Yunnan Province is flourishing as a result, especially in rice which is subject to an import tax of 65 percent, The Irrawaddy reported.

The increased trade is attributed to China’s improving economy after a year of slow down.

China-Linked Airline to Start Rangoon Service

Hong Kong-based budget airline DragonAir is to start a regular schedule to Burma in January.

The airline, a subsidiary of major carrier Cathay Pacific, says it will fly four times a week to Rangoon.

“We see tremendous potential in this market with both tourism and commercial activities rapidly gaining momentum,” airline chief executive Patrick Yeung said in a statement.

DragonAir’s main services are between Hong Kong and mainland China and the new Burma service is expected to attract more Chinese visitors.

DragonAir joins a growing number of commercial airlines now operating or planning services with Burma, from across Asia and Europe.