The Irrawaddy Business Roundup (Feb. 21, 2015)
By Simon Lewis 21 February 2015
Some Foreign Investment into Burma ‘Remains Blocked’
The limits of the Burmese government’s economic reform program are ruling out foreign investment in some sectors, a new report said this week.
Business consultancy Oxford Business Group released The Report: Myanmar 2015, the second installment of the groups’s lengthy annual reader on the country’s economy and its prospects.
In a section on capital inflows, the group cited figures from the Ministry of National Planning and Development’s directorate of investment and company administration showing that foreign direct investment (FDI) approvals soared from US$1.4 billion in the 2012-13 fiscal year to $4.1 billion in 2013-14. In just the first seven months of the current fiscal year, which began in April, another $4 billion of FDI was approved, according to the data.
The report cautioned, however, that “FDI inflows tend to fall somewhat short of permissions and lag behind by a year or more.”
“While foreign investment is accelerating, there are ways in which it remains blocked,” the report said. “Some sectors such as retail trade were expected to be opened up, while the current government appeared reluctant to open up others such as agriculture, forestry, precious stone mining, retail banking and retail insurance.”
It said almost all foreign investment is in the form of FDI, since cross-border loans are restricted and foreigners are barred from owning shares in most local companies.
The report quoted Lau Sim Yee, director of the consultancy Myanmar Economic Resources International, saying that some government officials appeared to be protecting allies in business.
“Political leaders aren’t afraid of foreign companies,” Lau Sim Yee told the Oxford Business Group. “But they’re still very protective of a small group of business people. They’re afraid that if those people aren’t protected they could be outplayed.”
IMF Predicts Growth to Slow, Inflation to Rise
The International Monetary Fund is predicting that growth in Burma’s economy will have slowed in the current fiscal year.
In a statement on February 11 following an IMF team’s visit to Myanmar, the financial institution said that gross domestic product (GDP) growth was expected to be 7.8 percent in the 2014-15 fiscal year. While an impressive rate of growth, the figure represents a deceleration in economic expansion from the 8.3 percent growth seen in 2013-14, according to the IMF.
“The growth outlook of the Myanmar economy remains favorable over the medium term, but downside risks for the near term have increased,” the statement said. “Fiscal risks stem from spending pressures, including a potential large increase in public sector wages, which will raise inflation expectations.”
Inflation will increase slightly from 5.8 percent in 2013-14 to 6 percent this year, it said.
The statement said progress was being made on modernising Burma’s outmoded financial sector, and the IMF team lauded a recent auction of government bonds. Three- and five-year treasury bonds worth a total of nearly $50 million were put up for sale earlier this month, but less than half were sold.
The IMF said the auction was “a major step forward in establishing a non-inflationary alternative to [Central Bank of Myanmar] deficit financing and helps develop the financial market.”
Troubled Miner Sees Staff Bus Attacked
Chinese-Burmese joint venture Myanmar Wanbao’s problems grew this week as the company announced that a bus carrying Burmese workers was violently attacked.
The firm is facing criticism over the Letpadaung copper-mining project in Sagaing Division after Amnesty International published a damning report this month outlining abuses linked to the mine including forced relocations, suppression of protests and environmental damage.
Locals and activists have staged continuing protests against the project, and opposition has already led to a renegotiation of terms to give the government the largest slice of revenue from the mine. The rest of the revenue is shared between a Burma Army-owned company and a Chinese state-owned defense conglomerate.
According to a statement posted on Myanmar Wanbao’s website, a bus carrying Burmese workers from a worksite to their homes was attacked on Monday evening.
“At around 6:15pm, the bus was stopped by a group of about 30 unknown people on the main road,” it said. “They threatened the passengers and the driver before beginning to attack the bus with stones shattering the windows.”
The statement said four people required medical attention after the attack.
It is unclear whether the attack was related to public opposition to the controversial project, and Wanbao Myanmar insisted in the statement that “the overwhelming majority of our neighbors in this lovely area of Myanmar are peace-loving and they share in our condemnation of this violence against our colleagues.”
Trade Booms at Myawaddy-Mae Sot Checkpoint
Trade through the international checkpoint between Myawaddy and Mae Sot has increased more than two-and-a-half times since 2011, according to Thai government statistics.
The border post linking eastern Burma’s Karen State with Thailand’s Tak Province is the busiest crossing point on the Burmese-Thai border.
Figures provided by Thailand’s Ministry of Foreign Affairs show that in 2014, goods worth more than $1.9 billion passed through Thai customs at Mae So, ip from just $678 million in 2011, the year in which Burma embarked upon economic reforms and reconnected with Western countries.
The vast majority of the trade is made up of goods traveling into Burma, including diesel, food products and construction materials.
The two countries’ governments have announced plans to further expand overland trade through development projects near the border crossing and a second bridge at the border over the Moei River. A new Thai-built road connecting Myawaddy with the rest of Burma across the Dawna mountain range is nearing completion, and is scheduled to be officially opened in July.
More Jetty, More Problems
Rangoon’s Port Autonomy restaurant and TS1 art gallery have been unceremoniously shuttered, not long after they popped up last year in the unlikely location of Lanthit Jetty’s strip of riverside warehouses.
TS1, or Transit Shed No. 1, was inaugurated as Rangoon’s latest upscale art space last April, and Port Autonomy opened in November, selling beer and posh food out of retro enamel crockery. They are part of Pun Projects, a Rangoon-based firm specializing in “luxury retail concepts,” set up by Ivan Pun, son of Sino-Burmese tycoon Serge Pun.
The adjacent gallery and restaurant were part of Pun’s “Yangon Pop-up” project, which “aims to spearhead urban renewal and cultural exchange in a city on the verge of unprecedented change,” according to the TS1 website.
In late January, a sign was posted on the doors of the two establishments near the Rangoon River reading: “Closed until further notice. Thank you. #jettyproblems.” Workers were seen stripping Port Autonomy of its furniture earlier this week.
“The lease for the TS1 project was for one year only,” Ivan Pun told The Irrawaddy on Friday. “We had hoped that we would be able to renew the lease this month to continue the work we have done down there…Unfortunately, the Myanmar Port Authority decided that they did not want this project to continue in that area.”
“We definitely hope to reopen both TS1 art space and Port Autonomy when we find a suitable space,” he added.