Economy

The Irrawaddy Business Roundup (May 3, 2014)

By William Boot 3 May 2014

Opportunities Aplenty But Foreign Investors Still Face ‘Major Challenges’

Burma offers many business opportunities with annual growth of 7 percent plus predicted over the next five years, but “major challenges” are still faced by would-be foreign investors, a report said.

Despite a new Foreign Investment Law (FIL) and other pro-business regulations, establishing a new business in Burma as a foreigner is “an extremely challenging affair,” said analysts Business Monitor International (BMI).

“Contract enforcement remains a gray area in which little historical precedent is available as a benchmark for resolving disputes. At the same time, despite the broad guidelines laid out in the FIL, the establishment of a business is still contingent upon approval from the opaque Myanmar Investment Committee,” said BMI.

“[Burma’s] extremely underdeveloped banking sector provides yet another hurdle for not only the establishment of a business in the country, but also in terms of trade financing. Banks suffer from both a lack of funding as well as a deficit in operational capacity.”

Even so, BMI forecasts GDP growth at an average of 7.4 percent per year to 2018.

Outdated View of Burma Is Barrier to Investment for Thais, Says Envoy

Many potential investors in Thailand have an out-of-date perception of Burma, the Thai ambassador to the country reportedly said.

The wrong impression is a barrier to investing in Burma, The Nation newspaper of Bangkok quoted Pisanu Suvanajata as saying.

“Thai investors still misunderstand the country, holding on to old memories of drug trafficking, ethnic disputes and extreme poverty,” Pisanu said, according to The Nation.

The ambassador made the comments to a group of 125 Thais visiting Burma to explore business opportunities. Many members of the group were from the Association of Thai Travel Agents (ATTA) who also visited Mandalay and Naypyidaw.

ATTA president Sisdivachr Cheewarattanaporn told The Nation said the visit was part of a “learning process” about neighboring markets in preparation for the start of the Asean Economic Community in 2015, which is intended to make cross-border trade between the 10 member countries easier.

Hong Kong Garment Makers Lured by Low Burma Wages

Hong Kong clothing manufacturers will move their factory production to Burma because Burmese wages are only 20 percent of rates in China, an industry report said.

More than 10 Hong Kong-based firms are planning to relocate to the Thilawa Special Economic Zone because costs have become too high in China.

“Hong Kong clothing firms participating in the apparel park aim to benefit from the low cost of production in [Burma] as the cost of labor is only about 20 percent of the wages in China,” said the website fibre2fashion.

“Hong Kong entrepreneurs also expect to benefit from the duty-free access enjoyed by Myanmar while exporting to the [European Union].”

The Thilawa factories could be operational by the end of 2015 and employ up to 30,000 people, said the Associated Press.

Burma has “immense potential” to regain its former glory as a leading international garment producer and exporter, Business Monitor International (BMI) said in April.

But a revival will be from a low base, it said, because other countries such as Vietnam and Cambodia had attracted investment during Burma’s years of isolation. Burmese garment exports in 2012 were valued at US$909 million but that was only 1.5 percent of GDP, said BMI.

Burma-China Gas Pipeline Pumps 1 Billion Cubic Meters

More than 1 billion cubic meters of natural gas has been delivered to China through the Chinese-built pipeline through Burma, an industry report said.

The pipeline handled 1.076 billion cubic meters over five months from the middle of October to mid April, said Natural Gas Asia, quoting the pipeline’s majority owner China National Petroleum Corporation.

The pipeline, which spans about 900 kilometers in Burma from the coast at Kyaukphyu to the border with China’s Yunnan Province, became fully operation last October, according to China media reports.

However, the $1 billion pipeline, ferrying gas from the Shwe field in Burmese waters of the Bay of Bengal and supposedly elsewhere, has been operating at only a fraction of its capacity, Interfax Natural Gas Daily reported at the end of March.

The pipeline is supposed to have an annual capacity of 12 billion cubic meters, said the Daily, which should have meant 5 billion cubic meters being pumped in the first five months of operation.

Japan in Technical Study on How to Save Bagan From Tourist Onslaught

The Japanese government is funding a study on ways of improving tourism infrastructure in the Bagan area without damaging the unique ancient monuments.

The work will be carried out by the Japan International Cooperation Agency (JICA) with Burma’s Ministry of Hotels and Tourism, official media reported.

The Bagan area, site of hundreds of temples and pagodas dating from the 10th Century, is Burma’s most popular foreign visitor attraction. But there are concerns that the contender for a UN World Heritage site listing could be damaged as tourist numbers mushroom.

JICA is to study the Bagan’s infrastructure such as roads, accommodation development and areas in need of special conservation, said the New Light of Myanmar.

Naypyidaw Establishes ‘MyanTrade’ to Push Burma’s Exports Higher

A new government agency has been created to promote Burma’s exports.

Known as MyanTrade, the body will operate under the wing of the Ministry of Commerce, according to Commerce Minister Win Myint quoted by Eleven Media.

Much of Burma’s export trade has in recent years been raw agricultural produce such as rice, pulses, timber and fish, plus natural gas, but as more investment goes into manufacturing MyanTrade will help guide products into the export market, the report said.

Although exports have grown in the last two years, Burma imports more goods than it sends abroad.

‘Major challenges’ remain for investors, Thais urged to update their view of Burma and a pipeline pumps 1 billion cubic meters of gas to China.

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