The Irrawaddy

The Irrawaddy Business Roundup (May 10, 2014)

Burma Log Export Ban Bites; Smuggling Continues

As Burma’s ban on the export of logs begins to bite, drawing complaints from overseas consumers, the illegal smuggling of logs across the border with China is continuing, according to Eleven Media.

A ban on log exports began last month, but sufficient facilities to process timber in country are not yet set up. Official exports of teak, hardwood and other timber were worth US$947 million in the last financial year, according to Eleven, which ended on March 31.

However, the true amount of wood sent abroad before the ban is likely larger. London-based NGO the Environmental Investigation Agency recently alleged that the majority of timber Burma has exported over the past 15 years has been smuggled.

A report from Eleven Media last week said that following the ban taking affect, a week of seizures by authorities had claimed more than 1,000 tons of timber that was being illegally moved out of the country. And this week, Eleven reported that although the cost of transporting timber from northern Burma had risen, large trucks full of logs were still making the crossing.

“Despite the ban, illegal timber trade continues with smugglers finding new routes through the jungle. Some say that recent fighting between ethnic rebels and the army [has] made it easier to smuggle timber as there are less controls,” the report said.

It cited local truckers who said Chinese traders would pay 9 million kyat, about $9,000, plus a barrel of oil for a truckload of logs, to cover the costs of smugglers carrying timber across the border.

Meanwhile the ban has drawn complaints from those who once bought logs from Burma. Pakistan’s The News reported Thursday that the Karachi Chamber of Commerce and Industry had written to Burmese President Thein Sein and other authorities requesting that the log export ban be delayed.

The letter reportedly said that the ban had resulted in “intensifying the hardships of those in Pakistan who have been importing this essential raw material regularly for the last five decades.” It called for at least a three month delay in the ban, “in order to give some breathing space to Pakistani importers who are unable to cater to local demand,” The News reported.

Allen & Overy the Latest International Law Firm in Rangoon

Leading UK-based law firm Allen & Overy (A&O) has become the latest international law firm to set up an office in Burma, according to thelawyer.com

As the Burmese government undertakes political and economic reforms, and foreign investors are invited in, a number of law firms have moved into the commercial capital, Rangoon, to advise companies doing business in Burma.

According to a May 6 article on thelawyer.com, a British website for legal professionals, A&O has had lawyers based in Burma for some time, but has only recently opened an office in Rangoon.

“A&O’s Yangon office provides international legal services and will not practice Myanmar law,” the report said. “The new office is managed by Bangkok managing partner Simon Makinson and currently has two associates and two support staff.”

It said A&O—which is one of the “magic circle” of top London law firms—has already worked with Telenor, the Norwegian telecommunications firm that was one of two foreign companies granted a license to operate mobile phone services in Burma.

“It has a close relationship with Myanmar Legal Services, an affiliate of Thai firm Chandler & Thong-ek Law Offices,” the report added.

A number of foreign law firms, including Singapore’s Kelvin Chia Partnership, American firm Herzfeld, Rubin, Meyer & Rose, DFDL and VDB-Loi are already operating in Rangoon. US-based Baker & McKenzie opened its Rangoon office in February and Duane Morris, also from the US, announced in September last year it had moved into the city.

Corruption Tops Concerns for Businesses in Burma

Corruption, access to skilled labor and technology are the biggest concerns for businesses operating in Burma, according to the results of a survey reported this week by Reuters.

According to Reuters, the survey—conducted by the United Nations Economic and Social Commission for Asia and the Pacific, the Organization for Economic Co-operation and Development and the Union of Myanmar Federation of Chambers of Commerce and Industry—questioned more than 3,000 firms about the problems associated with doing business in a reforming Burma.

“[T]he survey suggests the reforms have thus far had only a limited impact on corruption,” the report said, explaining that about 20 percent of the companies said corruption was a “very severe obstacle.”

“Access to skilled labor and technology were identified as the second and third biggest obstacles,” it said. “Sixty percent of the firms surveyed said they had to pay bribes for registration, licenses or permits. About half the firms said they paid $500 in extra fees while about a dozen said extra fees exceeded $10,000 (5,892 pounds).”

The Burmese government passed an anticorruption law last year, and a new anti-graft commission was established in February. But the measures, aimed at tackling the endemic corruption that grew over years of secretive military rule, do not appear to have begun taking effect, and the new commission has already faced criticism since it is made up overwhelmingly of former soldiers.

Transparency International’s latest Corruption Perceptions Index, published in December, ranked Burma 157 out of 177 countries, a marked improvement on the ranking of 172 out of 176 in 2012.

Indonesia’s Largest Cement Maker Plans Burma Expansion

Massive cement firm Semen Indonesia has agreed to buy a stake in a Burma-based cement company, according to the Jakarta Globe newspaper.

A news report May 7 said the company was taking the minority share in an unnamed Burmese company. Semen Indonesia has previously said it plans to spend US$200 million in Burma.

“The move is seen as part of the company’s efforts to expand its reach in the region ahead of the Asean Economic Community, which is scheduled to be implemented next year,” the Jakarta Globe said.

The report quoted Semen’s President Director Dwi Soetjipto saying the company would take a 30 percent stake in the Burmese company.

“The deal is valued at roughly $30 million, Dwi added. He declined to name the company involved in the deal, but mentioned it has an annual production capacity of up to 1.5 million metric tons of cement,” the report said.

Dwi was also quoted saying, “We are currently establishing an entry point, but will gradually increase our control there in the future.”

In March, Thailand’s Siam Cement Group said it was investing $400 million in a cement plant in Burma, set to be operation in 2016.