Burma Business Roundup (Saturday, May 4)

By William Boot 4 May 2013

Tokyo Loans to Finance New Rangoon Harbor Project

Japanese low-interest loans totaling US $205 million will be provided to finance the first phase of the planned new harbor to form part of the Thilawa Special Economic Zone in Rangoon, said the Myanma Port Authority.

The funds will be provided as Official Development Assistance by the Japanese government, but work will not start on the harbor before next year, said the authority. No reason has been given for the delay, although Japanese officials have previously complained of land access and infrastructure problems associated with Thilawa.

Three major Japanese companies—Marubeni Corporation, Mitsubishi Corporation and Sumitomo Corporation—have agreed to construct Thilawa, which is to be built downstream of the old Rangoon port closer to the river estuary mouth.

In March, the deputy chief of mission at the Japanese embassy in Burma, Ichiro Maruyama, said land access problems at the 5,000-acre site south of the main city, as well as electricity and water supply shortages, had impeded initial development.

Singapore-led Consortium Bids for New Rangoon Airport Job

An international consortium led by a Singapore firm has disclosed that it is bidding for the contract to develop the proposed new airport outside Rangoon.

Yongnam Holdings said it had formed a partnership with the JGC Corporation of Japan and another Singapore infrastructure construction business, Changi Airport Planners and Engineers, to bid to construct and operate the Hanthawaddy International Airport in Pegu Division, 50 miles outside the commercial capital.

Work on the new airport was started by the former military regime more than 10 years ago but abandoned due to costs and lack of expertise.

Yongnam has previously worked on Singapore’s Changi Airport, Bangkok’s Suvarnabhumi Airport, and international-standard airports in Kuala Lumpur, New Delhi and Mumbai.

The contract is expected to be for 30 years.

Rangoon’s existing airport has seen a huge increase in traffic over the last two years, clocking 1 million international arrivals in 2012 for the first time.

The Minister for Hotels and Tourism, Htay Aung, was quoted by the state-run New Light of Myanmar newspaper on May 1 as saying the government is targeting to triple annual foreign tourist numbers by 2015 to 3 million.

However, apart from growing pressure on Rangoon’s current airport as more airlines start regular flights, Burma still suffers from a big shortage of visitor accommodation.

Furniture Factories Aim to Beat 2014 Timber Export Ban

Foreign companies plan to overcome a planned raw timber export ban from 2014 by building factories in Burma to make wooden furniture.

Burmese wood used in furniture for export will not be banned, said the Ministry of Environmental Conservation and Forestry.

“The ministry is promoting forestry products as the log export plan will begin next year and it is important that furnished wood products are able to be exported,” Eleven Media quoted an unnamed ministry official as saying. “The US and EU are going to build wood products factories in the country.”

Burma is one of the world’s biggest exporters of teak wood, but excessive legal harvesting of timber together with illegal logging and the effects of felling for firewood and slash and burn agriculture are taking a heavy toll on the country’s forests, a Natural Resources and Environment Conservation Committee report said.

Legal timber exports in the 2010-2011 financial year netted Burma US $600 million, according to government figures. However, illegal logging and sales to China are believed to be much higher.

Parliament to Examine Ways of Strengthening Tax Collection

A new, stronger tax collection system is to be considered by the Burmese Parliament when it meets again in June, according to the Bank and Finance Development Committee.

An overhaul of the country’s tax system is needed because it suffers from “many weaknesses,” said committee secretary Win Myint in a media statement.

There needs to be an improvement in tax collection in all areas, from commercial businesses to the state lottery, Win Myint said, suggesting that tax avoidance was high among many small traders.

The government is aiming to collect about 4.5 percent of Burma’s gross domestic product for the 2013-2014 financial year, which could be about US $2.5 billion. This percentage is still low compared with similar emerging economies in the region, such as Cambodia and Laos, according to the committee.

“We want to use revenue to boost spending on health and education,” Win Myint said.

The committee will also look at raising taxes on sales of some items, such as tobacco and alcohol.

Sinopec Sells Stake in Mandalay Oil Block

The Chinese state-owned oil company Sinopec has sold a 30 percent share in its wholly owned oil block in central Burma to a Taiwanese firm, CPC Corp.

Sinopec has held Block-D near Mandalay since 2004, but although some exploratory wells have discovered evidence of both oil and natural gas there has been no production yet.

The block covers a large 12,000-square-km zone.

Industry observers says the block share sale is part of a broader exchange of oil and gas interests between the two companies as China and Taiwan soften their old political animosities and engage in closer commercial links.

Sinopec, which acquired the block from the Myanma Oil & Gas Enterprise, would not say how much CPC has paid it for the stake.