The Irrawaddy Business Roundup (March 26, 2016)

By Simon Lewis 26 March 2016

Outgoing Government Gives Wharf Concession to Tycoon’s Shipping Firm

Burma’s Port Authority has awarded Kaung Myanmar Aung Shipping Co. Ltd. the right to develop a new area for cargo ships to dock on downtown Rangoon’s riverside, state media reports.

The company is part of the sprawling KMA Group, which is headed by Burmese tycoon Khin Maung Aye, known to be close to outgoing President Thein Sein. The announcement comes less than two weeks before a new government takes over, and follows a series of other awards made during the long “lame duck” period following the Union Solidarity and Development Party’s trouncing at elections in November.

The Global New Light of Myanmar said on Monday that the company would build a “modern wharf and supporting facilities” in Seikkan Township, the administrative area that stretches between Strand Road and the Rangoon River.

“The project which would be implemented with the Build, Operate and Transfer-BOT system is located between the Botahtaung Pagoda and Bo Aung Kyaw jetty,” it said, citing a Myanma Port Authority announcement.

“On completion, the wharf can handle two 15,000-ton vessels, providing wharf services to improve the State’s export and import handling.”

According to its website, Kaung Myanmar Aung Shipping was Burma’s first private shipping company and operates between Rangoon, Malaysia, Singapore and the Indian ports of Chennai, Kolkata and Nhavasheva, close to Mumbai. The firm currently ships out of the Asia World Port Terminal in Ahlone Township.

Presidential advisor Khin Maung Aye’s business empire—which reaches into aviation with Golden Myanmar Airways, private health care with Parami General Hospital and finance with CB Bank—has flourished during Thein Sein’s five-year administration. KMA Group’s website also lists interests in mining, real estate, hotels, forestry and agriculture.

The outgoing administration has also awarded other concessions ahead of the transfer of power, reportedly raising concerns among the leadership of Aung San Suu Kyi’s National League for Democracy (NLD), which is preparing to take power.

In January, Myanmar Railways, the state rail agency, awarded the rights to build two inland ports, in Rangoon and Mandalay, to a subsidiary of Hong Kong tycoon Robert Kwok’s Kerry Group.

Most controversially, the government appeared to rush through the final steps of a tender process for the port and industrial zone parts of the Kyaukphyu Special Economic Zone in Arakan State. In December the government announced that a consortium led by China’s CITIC Construction had won the two contracts.

As the Wall Street Journal noted in January, “Any contracts given out now will bolster foreign direct investment in this fiscal year that ends on March 31, giving the outgoing government maximum credit for their economic initiatives, rather than being recorded under Ms. Suu Kyi’s leadership.”

Inle Hotel Owner to Take on Tourism Reforms

The NLD is set to install Ohn Maung, who runs the Inle Princess Resort in Shan State, as its minister of hotels and tourism, boosting hopes for more reforms in the sector.

A former political prisoner, Ohn Maung, 68, a longtime pro-democracy activist, also has a lifelong interest in tourism, having run the only guesthouse in Nyaungshwe (Yawnghwe), now his constituency, since Burma’s socialist era.

He has already gained a reputation as an advocate of sustainable tourism in Burma, sparking hopes of a new approach to tourism in the country.

Andrea Valentin, founder and director of the Rangoon-based NGO Tourism Transparency, said Ohn Maung was “an excellent choice” for the new head of the Ministry of Hotels and Tourism (MoHT).

“He’s well aware of the many tourism problems in Myanmar and he’s in a position to draw from a good team,” she said.

“Over the past years, MoHT did excellent groundwork in terms of passing responsible tourism policies, but not much action followed these papers. To counter any accusations of window dressing, it’s time to put action into words.”

Ohn Maung will replace Htay Aung, who has been criticized for focusing on tourism that benefits hotel-owning tycoons.

During his tenure, the number of visitors arriving in Burma each year has swelled from less than 1 million in 2011 to 4.68 million last year.

But a lot of that growth can be attributed to changes in visa policies and the wider opening up of the country, rather than a particular government strategy to bring in more tourists. Government restrictions, including those that prevent citizens from opening up their homes to tourists as homestays, continue to keep many from benefiting from the astonishing growth in visitor numbers.

“Towards the end of his tenure, U Htay Aung put a strong focus on community-based tourism but apart from that, strategy often seemed to be concerned primarily with the building of hotel zones and growth for the sake of growth,” said Marcus Allender, business development director at Pegu Travels, a travel agency based in Rangoon.

Allender added that he hoped to see a countrywide strategy for sustainable tourism growth from the new minister.

“Myanmar has a huge amount to offer, but tourism dollars are concentrated in narrow geographic and wealth terms,” he said. “The issues of homestays, easier cross-border movement from neighboring countries, and a broader focus of destinations for tourism growth are some of the issues that need to be addressed.”

MasterCard to Offer ‘Contactless’ Cards in Burma

American financial services company MasterCard is teaming up with Burma’s Cooperative Bank (CB Bank) to offer so-called “contactless” cards to customers, according to a statement.

The cards can be used in other countries to pay for low-value items, or even rides on public transportation systems, simply by passing the card over a sensor. For now, they are unlikely to be much use in Burma itself, where only a limited number of outlets are even accepting card payments of any kind.

But MasterCard says it has conducted research that appears to show that many Burmese are keen to travel, and therefore might find a use for its new prepaid card.

“The latest of MasterCard’s efforts to better serve the people of Myanmar, the CB EasiTravel Prepaid MasterCard Contactless card provides consumers with a more convenient way to pay when traveling abroad without compromising security,” the statement this week said.

While the economy is growing at about eight percent per year, research has found that the vast majority of Burmese people do not have bank accounts. Many remain too poor to imagine traveling overseas for any reason other than to do higher paid work. About a quarter of the population lives below the poverty line, according to the United Nations.

MasterCard says, however, that some 61 percent of people in the country “are seeking to travel abroad” in the next year, up from only 25 percent two years ago. The credit card company did not provide detailed data from the survey.

“More Myanmar citizens are making trips to neighboring countries than ever before, buoyed by recent relaxing of entry Visa restrictions,” CB Bank chief executive and vice chairman Kyaw Lynn said in the statement.

“This trend will continue as the economy grows and gains traction. CB Bank is always looking for ways that will bring convenience to Myanmar travelers. CB Banks’s newly issued MasterCard Contactless card will give added convenience when making payments internationally.”

In 2013, MasterCard and CB Bank launched Burma’s first “prepaid” card that could be used abroad, as the country’s banks began to reengage with international financial systems. After years of sanctions imposed against the country’s military government, there were few ATMs or outlets accepting cards.

In a sign of the progress that’s already been made during the country’s opening, MasterCard says more than 2,800 restaurants, retail outlets and hotels in the country now accept payment by plastic.

Vietnamese Firm Begins Phase 2 of Massive Rangoon Project

With the Myanmar Plaza shopping mall now open, the Vietnamese company behind the project has now begun work on the residential and office space part of its mixed-use development on the eastern shore of Rangoon’s Inya lake.

Vietnam Economic Times reported this week that construction on the second stage of the HAGL Myanmar Center began on March 19, and was expected to be completed by 2018.

Five 28-floor buildings will contain 1,134 apartments, the report said, adding that 674 of the flats would be available on leases of up to 70 years.

HAGL, or Hoang Anh Gia Lai, is a major conglomerate from the south of Vietnam. The company officially opened Myanmar Plaza in December, and it is already home to Australian coffee chain Gloria Jean’s and US chicken restaurant KFC.

HAGL chairman Doan Nguyen Duc reportedly said that occupancy is already above 90 percent at the mall.

“Occupancy in the two 27-floor office blocks is around 60 per cent, with large corporations such as Ooredoo, Huawei, CB Bank, Yoma Bank, Missui, and BIDV having signed leases,” Duc said, according to the Vietnam Economic Times.

Japan’s Konoike to Set Up Shop in Thilawa SEZ

Japanese logistics firm Konoike is investing US$5 million in setting up a subsidiary to offer services in Burma, according to a report from Deal Street Asia.

The website reported that Konoike Myanmar Co Ltd would “offer services such as custom clearance, warehousing, trucking and engineering” and would be based in a Japanese government-backed economic hub close to Rangoon.

The majority of the 60 or so businesses to set up at the Thilawa Special Economic Zone are Japanese.

Last week, leading local bank CB Bank set up an branch in the zone, according to Nikkei Asian Review. The Japanese outlet reported that the CB Bank branch would include a “Japan desk”—staffed by employees of Japan’s Bank Tokyo-Mitsubishi UFJ—to offer services to Japanese businesses operating at Thilawa.

Konoike’s website says it began trading in 1880, starting life as a transportation business, before entering the cargo, port and warehousing sectors. It says the firm, which also has manufacturing and food divisions, first established a representative office in Burma in 2012 as part of an effort to expand across Asia.