The Irrawaddy Business Roundup (Feb. 28, 2015)

By Simon Lewis 28 February 2015

Garment Producers Ask Burma’s Government to Intervene in Strikes

Japanese and South Korean owners of garment factories affected by strikes in northern Rangoon’s Shwepyithar Industrial Zone have asked the Burmese government to use the law to protect their businesses, according to state-run media.

Sit-in strikes involving hundreds of workers continued this week, with laborers demanding that their wages be raised to the equivalent of about US$80 per month.

Burma’s government passed a Minimum Wage Law in 2013, but the details of a basic salary for workers are still being worked out.

On Monday, the Ministry of Labor, Employment and Social Security issued a statement saying it was overseeing negotiations to end the strike, the Global New Light of Myanmar reported. The ministry’s statement also warned that any workers who block factories and prevent them from operating would face legal action.

“The statement released by the ministry Monday also mentioned that employers have demanded the government to provide protection of law to their factories so that they can continue to run their businesses at peace as blocking businessmen, staff and sales agents in the factories and blocking the entrance of the factories by striking workers reached above the existing law,” the newspaper reported.

Production in some factories had been stopped for two weeks, it said, insisting that the majority of workers had agreed to terms with the owners and were being prevented from returning to work by a disruptive minority.

The garment industry has rebounded significantly in recent years after it was hit by sanctions imposed on Burma’s former military government by the West. The sector now employs an estimated 200,000 workers, and exports were valued at about $1.6 billion in 2014, compared with $1.2 billion the previous year, according to the Myanmar Garment Manufacturers Association (MGMA).

China EximBank to Loan $300m in Agriculture-Related Microfinance

Loans worth $300 million from the Export-Import Bank of China will be handed to rural Burmese families in the form of microfinance loans, according to state media.

The Global New Light of Myanmar on Wednesday reported that Thein Sein had sent a message to the Union Parliament about the loan, and quoted Cooperatives Minister Kyaw Hsan explaining how it would be disbursed.

The minister said the cash from the bank, known as EximBank, “will be used for microfinance loans, agricultural items, tools for fishing farms and improvement of cooperative groups,” the report said.

A loan program lending 100,000 kyats, or about $100, to rural families would cover 23,451 of the country’s more than 60,000 villages, it said.

“Cooperatives Union Minister [Kyaw Hsan] said the loans from Exim will be used $220 [million] for members of cooperatives who have not received loans and $50 million for those who have got loans, plus over $30 million for installment sales of agricultural machines,” the report said, adding that it was hoped the cash would help reduce poverty. No details were given on the time period of the loan.

State-owned export-import banks are normally used by governments to aid their own companies wanting to increase their business overseas. Both the United States and India’s EximBanks have also announced plans in Burma.

In February 2014, the US export-import lender announced that it would provide short- and medium-term credit to finance the sale of US exports. India’s counterpart has pledged to disburse $800 million in Burma.

Yetagun Gas Project Reportedly Up for Review

As Burma concludes deals with foreign firms to open up new offshore oil and gas discoveries, a report suggests that the global slump in the price of oil could see one of the country’s existing offshore projects ended.

A report on the Southeast Asia-focused maritime news website SeaShip News this week said the Yetagun project in the Andaman Sea was up for review.

The project is operated by Malaysian state oil company Petronas, and began producing natural gas, most of which is exported to Thailand, in 2000.

“Its production rates over the 15 years it has been producing have slipped to 360m cu ft [million cubic feet] per day, far less than the 400m it is meant to be supplying to Thailand every day,” the report said, linking the review to historically low oil prices on global markets.

“Yetagun currently has 14 wells in operation and its reserves are thought to be around 60% used up.”

Yetagun was the second of four offshore gas projects in Burmese waters to be established.

The government in March last year announced the companies selected to explore 20 offshore blocks following a competitive tender. Exploration and production sharing contracts (PSC) have been signed with a handful of the winners, including Royal Dutch Shell and Mitsui Oil Exploration, who announced earlier this month that they would jointly explore three deep-water blocks.

Eleven Media this week cited information from the Energy Ministry saying Shell would spend $1.2 billion on exploration, and that a signing bonus of $61 million would be paid to the state-run Myanmar Oil and Gas Enterprise (MOGE).

In a response issued through global public relations firm Ogilvy, Shell declined to confirm or deny the report. “The terms of PSCs are confidential. We don’t comment on the economics of individual projects,” the response to The Irrawaddy said.

Investors ‘Silent or Evasive’ on Human Rights Commitments

Fewer than a quarter of companies approached by researchers were able to point to human rights policies relating to investment in Burma, according to a recent announcement by the Business & Human Rights Resource Center.

The London- and New York-based group said it had reached out to 108 companies operating in Burma as part of its ongoing Myanmar Foreign Investment Tracking Project. Most were “silent or evasive when asked about their human rights commitments,” the group said in a statement.

Only 57 bothered to respond at all, and only 24 companies were able to “point to substantive actions” on human rights.

“These findings echo concerns raised by local communities and human rights organizations that human rights issues are not being adequately addressed as foreign companies invest in the resource-rich country,” the statement said.

A handful of companies—oil and gas firm BG Group, Coca-Cola and Telenor—were praised for their responses, which showed they were “leading in the area of human rights due diligence in Myanmar, and have provided useful guidance for other companies,” it said.

The Business & Human Rights Resource Center also said it was “disappointing” that some large firms working in Burma did not respond, singling out hydropower firm Andritz Hydro and Chinese state-owned telecommunications giant Huawei.

Among the foreign companies approached from sectors including the extractive industries, manufacturing and tourism, the group noted that Western firms were more likely to respond than investors in the region. “The response rate of companies with headquarters in Europe [and] the Americas is over 65%, while that of companies headquartered in Asia and the Pacific is 35%,” it said.

Hanthawaddy Airport Won’t Be Ready Until 2020

The project to build a new airport serving Rangoon will not be completed until 2020, a year later than was originally planned, theGlobal New Light of Myanmar reported.

The contract to build Hanthawaddy International Airport in Pegu Division has now been awarded to a Japanese and Singaporean consortium comprising Yongnam, Changi Airport Planners and Engineers and JGC Corporation. The project has faced delays before work has even begun due to uncertainty about how the estimated $1.4 billion in costs would be met.

A report in the state-run newspaper on Thursday quoted Department of Civil Aviation Director-General Win Swe Tun confirming the delayed completion date for the project, and explaining the new financing arrangements.

“Myanmar will borrow ODA [overseas development assistance] loan from Japan for the project in Bago Region [Pegu Division] and the ODA loan with low interest rate from Japan is estimated to be around US$700 million, which is equivalent to about 50 percent of the value of the project,” the director general was paraphrased as saying. “Besides, loans from development banks will also be injected in the project,” he added.

The airport is to be built on the site of an airfield built by the occupying Japanese army in Pegu Division during World War II. The location is some 48 miles from Rangoon, and although a high-speed rail link has been touted, specific plans have not been announced for how passengers traveling through the new hub will reach Burma’s commercial capital.