Business

The Irrawaddy Business Roundup (April 2, 2016)

By Simon Lewis 2 April 2016

Outgoing Government Wraps Up Unfinished Business

In almost its last act in power, the previous government’s main investment body approved a raft of new projects in a meeting March 25, according to local reports, adding a barrage of deals that appear to have been pushed through in the “lame duck” period since the formerly ruling Union Solidarity and Development Party (USDP) lost November’s election.

Last week the Port Authority announced that it had awarded a potentially lucrative wharf concession in Rangoon to a subsidiary of Kaung Myanmar Aung Group, a conglomerate owned by Khin Maung Aye, an advisor to the now former President Thein Sein.

But, according to a report from Eleven Media this week, that project was also one of five of the group’s projects approved by the Myanmar Investment Commission (MIC) during a bumper final meeting just five days before the handover.

In total 48 projects—27 involving local companies, 16 foreign and five joint ventures—were approved by the MIC, a body that oversees large scale investments and has been chaired by ministers in Thein Sein’s close circle since 2010.

Other approved projects included a cement plant by Shwe Taung Group, owned by tycoon Aike Htun, Eleven Media said. The Myanmar Times said industrial parks, an airline joint venture and beach resorts were also among the investments approved.

The outgoing government also rushed through approvals for Chinese company CITIC to build a port and industrial part at Kyaukphyu in Arakan State, and handed two inland port concessions to a subsidiary of Hong Kong businessman Robert Kwok’s Kerry Group.

Also on March 25, the Joint Venture Formation and Tender Selection Work Committee announced that Vietnamese military-owned telecommunications company Viettel was the preferred foreign partner for a fourth mobile phone license the government is planning to award.

Viettel, which made a failed bid to win a telecoms license earlier in the previous government’s term, will team up with a local public company named Star High Public Company Limited. This company is “under the supervision of the Ministry of Defence as the Government Shareholder,” according to the announcement.

It goes on to say that this firm—a consortium of little known local public companies—owns “up to 1,000 towers and around 13,000 kilometres of fibre-optic network,” leading many to believe that the existing military phone operator MecTel will be rolled into the fourth license.

22-Year Deal for Mandalay Division Power Plant

The Burmese government has signed a deal to buy power for 22 years from a new gas power plant under development by a Singaporean company.

Sembcorp Utilities announced in December that it had signed an agreement with the Burmese government’s Ministry of Electric Power to develop the 225-megawatt plant in Myingyan, close to the Irrawaddy River in Mandalay Division.

The World Bank’s International Finance Corporation and the Asian Development Bank have both approved financing for the project, which is estimated to be worth a total of about $300 million.

US industrial giant General Electric recently disclosed that it was awarded the contract to supply gas turbines for the project.

Sebmcorp said in a statement on its website Wednesday that it had signed a purchase agreement with the state-run Myanma Electric Power Enterprise to provide 225 megawatts of power to the national grid for 22 years.

“The PPA will come into effect upon the fulfilment of certain conditions precedent, including the execution by Myanmar’s Ministry of Electric Power (MOEP) of the build-own-transfer agreement for the project, pursuant to which MOEP agrees to provide all support for the implementation of the project and guarantees MEPE’s payment obligations under the PPA,” the announcement said.

Former US Diplomat Joins Calls for Sanctions to Be Relaxed

With power transferred to a democratically elected government this week, a former US chief of mission has added her weight to calls for the American government to ease its sanctions against Burma.

Some sanctions were frozen after the previous administration of President Thein Sein initiated reforms after coming to power. But the measures have not been completely removed from US legislation, and sanctions on individuals and companies said to be linked to the former military regime—those on the so-called Specially Designated Nationals list—remain in place.

Priscilla Clapp served in the American Embassy in Rangoon from 1999 to 2002. In a report published last week, she called for a thorough rethink of sanctions against Burma.

“Continuing to rely on a sanctions regime—designed primarily to inhibit US participation in and assistance to Myanmar’s economy and government—no longer makes sense, particularly when Western allies and others observe no restrictions on their activities in Myanmar,” she said in a report for the Washington-based Council on Foreign Relations.

“Washington should therefore restructure the remaining financial sanctions and restrictions to carefully target individuals and entities to promote better behavior, rather than punish bad behavior.”

In order to keep the sanctions in place, the US government must renew the International Emergency Economic Powers Act in May. Advocates of sanctions argue that they enable the US government to incentivize continued reforms, but critics like Clapp say the reality on the ground in Burma has changed.

A collection of five US business groups, including the United States Chamber of Commerce, in February wrote to the US Treasury, Commerce and State departments making a similar argument.

“The remaining US sanctions are a significant reason why US investment in Myanmar remains modest and Myanmar entrepreneurs cannot truly take advantage of their putative access to the American market,” their letter read.

London-Listed Tech Firm Reports on Mobile Money Plans

Burma-facing tech company MySquar says it is moving ahead with plans to set up a service that will allow mobile phone users to transfer cash using a chat application—including across national borders.

The company operates in Burma through apps like MyChat!, which it claims had a combined total of 2 million users—about 600,000 of them active—as of the end of 2015. It listed on the London Stock Exchange’s Alternative Investment Market last year—raising £1.67 million, or about $2.4 million—and therefore submits regular filings.

In its half-yearly report on Wednesday, MySquar said work on a new mobile payments service was “progressing well.”

In October, MySquar and related company MyPay teamed up with Singapore-based Fastacash, which operates mobile money systems elsewhere in Asia, and will provide similar technology to MyPay.

“Once the payment features go live, which is anticipated to commence in Q3 of the calendar year 2016, MyCHAT will offer various additional services to its users,” the filing said.

“Additional services are expected to include cross-border money transfer [millions of Myanmar people who work overseas in Thailand, UAE, Malaysia, Singapore among other countries send millions of dollars every year to their families in Myanmar], domestic money transfer, payment services for digital products and games, payment services for voice calls, points of sales, and coupons for marketing and promotion purposes.”

Several companies have announced mobile money services to capitalize on growing smartphone usage in Burma, although clear regulations have not yet been announced by the government.

Japanese Mall Builder Looks to Burma: Report

Japan’s largest retailer, Aeon, is reportedly considering an expansion into Burma, as it increases its presence in Southeast Asia’s growing consumer market.

Subsidiary Aeon Mall already has 24 stores in Malaysia, one shopping center in Indonesia and one in Cambodia’s capital. It is opening five more new in Indonesia, four in Vietnam, and a second mall in Phnom Penh, The Nation reports.

Citing a company executive, the Bangkok-based newspaper said the company has a “2020 strategy” to become the No. 1 retailer in the 10-nation Association of Southeast Asian Nations (Asean) bloc, where nascent efforts toward economic integration are now underway.

That could include building malls in Burma.

“The company is also studying the feasibility of business development in Thailand, Laos and Myanmar, and hopes to have its first Aeon Mall property in Thailand by 2020,” Mitsugu Tamai, director and executive general manager for Aeon Mall’s Asean division, was paraphrased saying.

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