Irrawaddy Business Roundup (December 21, 2013)

By William Boot 21 December 2013

High Land Prices in Rangoon Deter Foreign Investors, says Hotel Expert

Despite the surge in tourism to Burma “investment in the country’s hospitality sector has fallen well short of forecasted growth,” the regional travel industry publication TTR Weekly said.

A large part of the reason for the shortfall is “unrealistic” land prices in Rangoon deterring foreign investors, said an analysis by C9 Hotelworks, a travel trade consultancy.

“Land prices in [Rangoon] and other parts of the country have continued to push up at an unrealistic pace, and are indicative of a surge in large-scale property speculation,” said C9 managing director Bill Barnett in year-end assessment of Burma’s hotel and tourism market.

“While the hospitality sector has enormous room for growth, [Burma] remains in an early stage of development. Most of the deals being done for hotel assets in the current landscape are from local parties and not overseas groups. Given [that] Yangon has captured investor sentiment as a South East Asia hot spot, it has yet to deliver on its expected promise,” said the analysis by C9, which is based in Thailand.

Arrivals in Rangoon from Thailand, China, Japan, South Korea and amounted to 48 percent of the total.

Despite the hesitancy of foreign potential investors, the hotel industry in Rangoon is flourishing, said Barnett in his Yangon Hotel Market Update for December. But of 9,000 rooms now available to visitors to the commercial capital only just under 20 percent met international standards, he said. “Trading patterns remain volatile between low and peak seasons; and the effects of the annual monsoon make a decided impact on hotel trading.”

The regional travel trade magazine TTR Weekly added: “Foreign direct investment (FDI) into hospitality assets remains side-lined in many cases with concerns over the lack of a debt market and a slow government approval process.”

Burma’s Foreign Trade Up 22% But May Still Miss 2013-14 Target
The value of Burma’s import-export trade for the nine months of the financial year up to the end of November increased about 22% over the same period of the 2012-13 year, figures from the Ministry of Commerce show.

The total trade value for April-November was US$15.92 billion.
However, despite the big rise, it appears to fall short of the government’s target of achieving a trade value of $25 billion for the full financial year ending March 31.

“The government has targeted US$25 billion for the whole total trade in 2013-14, of which 20% is budgeted from border trade and 80% from overseas trade,” said Eleven Media quoting unnamed ministry officials.
Burma’s main exports so far this year have been mostly agricultural crops, teak, gems and natural gas, said the Central Statistical Organization Office.

Aside from cross-border trade, Burma exported to another 19 countries, ranging from Indonesia to Italy and the United States to the United Arab Emirates, said the office.

German Firm Prepares to Produce Medicines in New Rangoon Factory

There is a “pent-up demand” in Burma for high quality, low cost medicines, the chief of a leading German pharmaceutical company said.

“[Burma] fits perfectly into our strategy of continuous internationalization while focusing on high-growth emerging markets,” STADA Arzneimittel chairman HartmutRetzlaff said in a company statement.

Retzlaff announced that STADA will begin producing its medicines from the end of 2015 at a new factory to be built in Rangoon.

The German firm has formed a joint venture with local partners who will build the factory. The venture gives STADA the option to take over the plant completely at a later date, said Reuters.

Until the factory opens, STADA will supply the Burmese market with medicines produced at its plant in Vietnam.

“Now that [Burma] has opened up the supply of medicines in a market with a population of 60 million shows substantial pent-up demand, said Retzlaff.

Thailand Still Denies Rights to Majority of Burmese Migrant Workers

Burmese workers in Thailand continue to suffer from poor wages, dangerous conditions and physical abuse, a Thai NGO said on the United Nations International Migrants’ Day.

“Migrants are crucial for Thailand’s productivity and economic growth. However, these workers are also often poorly treated by officials or employers and denied human rights and decent work conditions,” said the State Enterprises Workers’ Relation Confederation of Thailand (SERC).

“Migrants still face wage deductions and unlawful salaries, dangerous and unhygienic working conditions, detention in slave-like conditions and too frequently fall victim to human trafficking,” SERC said marking the UN’s annual migrants’ day on December 18.

SERC and another NGO, the Migrant Workers Right Network, said there are about 4 million migrant workers in Thailand, from Burma, Laos, Cambodia and also Vietnam. But less than half of them are legally permitted to work in Thailand, making them vulnerable to mistreatment.

In a joint statement the two NGOs said: “Migrants should be treated equally [the same as Thai] national workers. Migrants should be protected by related laws governing labor protection, social security, health coverage and work accident compensation.”

Plans made in October by the Thai government to help legal Burmese workers in the country renew their permits without leaving the country have been postponed, Eleven Media said on December 19, quoting the Mae Sot Border Labor Organization.

The so-called one-stop service centers for migrant workers due to open this month have been shelved “due to Thailand’s current political unrest,” Eleven Media said.

Chinese Firms Urged to Open Factories Not Just Buy Burma’s Resources

Chinese business should build factories in Burma as well as buying raw material such a timber, natural gas and gems to ship back to China, said the Union of Myanmar Federation of Chambers of Commerce and Industries (UMFCCI).

The call was made at a joint meeting between the federation and China Council for the Promotion of International Trade, Eleven Media reported.

“I would like to request [Chinese] business people not just to purchase raw materials from [Burma] but also to establish factories with us and export manufactured products to various destinations around the world,” federation secretary Aye Lwin reportedly said.

The delegation of the Chinese trade council said they were interested in joint ventures in wood manufacturing and shoe making among other possibilities.