Business Roundup (November 2, 2013)

By William Boot 2 November 2013

Burma Needs New Mining Law to ‘Attract Foreign Investors’

Investment in Burma’s mining sector is likely being hindered by current laws and restrictions, according to a major North American mining industry magazine.

Proposals to overhaul the 1994 mining law “could make life easier for foreign investors in the resource sector,” said Canada-based

One of the biggest hindrances to foreign investment is the compulsory production sharing contract between the investors and the Ministry of Mines, it said.

“Under the current Mines Law, the Ministry of Mines acts a non-equity partner but is still entitled to around 30 [percent] of minerals extracted, plus the relevant income tax and royalties owed,” said the magazine.

“Yet another area of concern for foreign investors is the rule banning exports of ore, coal and gold, a protectionist measure meant to ensure that processing is done in-country. There are also issues surrounding the ability of companies to move from one phase of an operation to the next, like from exploration to site development, without new contracts.”

The magazine said that early enthusiasm to invest in Burma has faded “due to a lack of administrative capacity within the country, a weak legal and regulatory system and crumbling infrastructure.”

Vodafone, Orange invited to Partner With Burma’s MPT Into Phone Partnership

Despite failing to win operating licenses earlier this year, foreign mobile phone firms Vodafone and Orange have been invited by the state-owned Myanmar Post and Telecommunications (MPT) to take part in a joint venture, the London Financial Times reported.

MPT has invited the two firms to join form a partnership with MPT’s telecoms arm, “separate from the company’s existing regulatory function,” the newspaper said, citing “people familiar with the process.”

Other companies approached include Singapore’s SingTel, the source claimed.

“The plan offers Orange—which was runner-up in June’s licence awards – and a cash-rich Vodafone the chance of a tantalising second bite at a country where mobile usage is less than 10 per cent of the population. But it also involves the uncertainty of partnering a government company,” said the newspaper.

The license bidding involving dozens of foreign companies was won by Telenor or Norway and Ooredoo of Qatar. The two winners “may now face significant extra competition,” said the Financial Times.

Poor Infrastructure Hinders Growth of Burma’s Medicines Market

An inadequate system of support for health care services in Burma is hampering investment in Burma’s pharmaceutical sector, a business analysis agency said.

“The growth potential of [Burma’s] pharmaceutical market can only be achieved over the long term as it is necessary for the country to improve on its basic infrastructure, which is required for the industry,” said Business Monitor International (BMI) of London.

It forecast that in the short-to-medium term, foreign pharmaceuticals firms were more likely to “set up bases in Vietnam or other countries in Southeast Asia and distribute the products from [there] to Myanmar and Cambodia in order to lower overall operation costs.”

Even so, BMI predicted that Burma’s pharmaceuticals market could grow in 2013 by 5.9 percent, with the country’s overall health care sector expenditure for the year being valued at US$1.2 billion, a rise of 2.6 percent.

But in BMI’s last quarter 2013 Asia Pacific Pharmaceutical Risk/Reward Ratings, Burma is ranked last out of the 18 markets, “given its small pharmaceutical market and the lack of general infrastructure to support healthcare services.”

Floating Hotels Planned to Avoid Planning Rules and Ease Rooms Shortage

Floating hotels are being built to try to ease Burma’s acute visitor accommodation problem without long waits for planning approval and construction time involved in bricks and mortar hotels.

A 105-room floating hotel is being readied for Rangoon and two or three others are being prepared for the Irrawaddy River at Mandalay, said the regional travel trade magazine TTR Weekly.

A 2,000 ton engineless vessel bought from Finland is being converted in a Rangoon shipyard to provide double rooms with attached bathrooms, two dining rooms and bars. TTR Weekly said it was commissioned by the Hla Hla Pa Pa Company which will moor it at a jetty in Rangoon’s Botahtaung Township.

“Company sources say they intend to have the accommodation open in time for the 27th [South East Asian] Games in December,” the magazine said.

Meanwhile, two other floating hotels are under construction in Mandalay, and a third is being proposed for Rangoon’s Kandawgyi Lake, it said.

A 120-room cruiser used to be moored in Rangoon harbor but was towed out of the country at the end of the 1990s.

US Law Firm Opens in Rangoon to Help Investors ‘Navigate Burma’s Laws’

A US law firm has opened an office in Burma’ commercial capital, Rangoon, becoming the first American lawyers to enter the Southeast Asian nation after it passed its 2012 investment law.

New York-based Herzfeld & Rubin said it wholly owned subsidiary Herzfeld, Rubin, Meyer & Rose Law Firm will be staffed by American and Burmese lawyers.

“An on-the-ground presence in [Burma] allows the firm to support the needs of its global clients as they navigate business opportunities in Myanmar and, more broadly, in Southeast Asia,” a company statement said.

Herzfeld and Rubin said it is the “first US investor in the professional services industry to hold a 100% ownership interest under the new 2012 Myanmar Investment Law.”

The company described itself as having “expertise in emerging and frontier markets.”