Business

The Irrawaddy Business Roundup (May 5)

By The Irrawaddy 6 May 2017

EAC Teams With Unilever in Joint Venture

Burma’s consumer products manufacturer Europe and Asia Commercial Co. Ltd (EAC) has signed a joint venture deal with global giant Unilever, combining their home and personal care businesses, Reuters reported.

The joint entity, with annual sales of more than US$109 million, will provide both companies with a complementary portfolio, better rural reach and economies of scale, said Unilever, which entered the Burma market in 2010.

The venture has a goal of tripling sales to round $330 million by 2020, Pier Luigi Sigismondi, Unilever’s president for Southeast Asia and Australasia, told Reuters.

EAC, whose products include well-known brands of detergent and dishwashing liquid, will also help add to Unilever’s manufacturing capabilities.

“We felt that maintaining organic growth alone will take us far, but not as far as joining forces with EAC,” Sigismondi said.

“We have a factory there that produces shampoos, haircare products, and we believe that with this joint venture, we will be able to produce the rest of our personal care range in the country,” he added.

Global companies have lined up to take advantage of Burma’s under-penetrated market, buoyed by the growing middle class and a rise in spending.

The Asian Development Bank forecast Burma’s economy, which has been opening up after decades of military dictatorship, to grow at 7.7 percent this year—the fastest among Southeast Asian countries.

Sigismondi said Unilever, which sells products such as Clear shampoo, Signal toothpaste and Rexona deodorants in Burma, might explore exporting products from the country.

Daibochi and Myanmar Smart Pack JV Gets Go-Ahead

Malaysia-based Daibochi Plastic and Packaging Industry has received approval from Burma for its joint-venture proposal to set up flexible packaging operations, the Edge Markets reported.

The group’s subsidiary, Daibochi Flexibles, signed a memorandum of understanding with Myanmar Smart Pack Industrial Co Ltd (MSP) last November to form a company called Daibochi Packaging Myanmar (DPM) to manufacture and market flexible packaging within Burma and export the product to other countries.

With the approval by the Myanmar Investment Commission, Daibochi said it will proceed with the completion of the agreement.

“We target to officially commence operations in a month’s time,” Daibochi managing director Thomas Lim said in a statement.

Daibochi said it is investing $6.8 million in DPM for a 60 percent controlling stake. MSP is transferring its entire existing business and production assets, as well as workforce into DPM for the remaining stake.

DPM will invest an additional capital expenditure of $5.5 million over three years, and it expects to start exporting to Asian countries later this year, Lim said.

New product lines are being developed and the group will supply label packaging for a well-known beverage brand in Burma starting later this year, he added.

China Border Trade Up

Trade at Burma’s border posts with China was higher in the first week of April, by more than US$40 million, than in the same period last year, according to the Ministry of Commerce.

Total trade value for the week at China border points was $142.6 million according to the ministry’s figures. The Muse-China border station saw the largest value trade at more than $90 million.

Trade at the Myawaddy-Thailand border was valued at more than $24 million.

Total foreign trade over the first week of the 2016-2017 financial year was $731 million, up by more than 29 percent over the same period last year, the ministry’s figures showed.

Tourist Numbers Travel Upwards

The number of visitors to Burma holding tourist visas increased by 22 percent in the first two months of the year compared to the same period last year, according to the Ministry of Hotels and Tourism.

For a more accurate reflection of tourism arrivals, the immigration ministry now counts tourist arrivals only as those who enter the country with a tourist visa. Previously, all foreign visitors in were counted in the figures.

Better cooperation between tourism-related ministries under the tourism ministry, and the creation of new tourist destinations has contributed to the rise in visitors, an official from the ministry told the Global New Light of Myanmar.

App Launched for Factory Workers

An app for industrial workers called “Shwe Job” has been launched with the support of the European Union and the German international development organization GIZ.

SMART Myanmar, an initiative to promote sustainable practices in the garment industry launched the app in Hlaing Tharyar Township on May 1 in conjunction with civil society organization Thone Pann Hla. Around 120 garment workers joined the event.

The app contains information for factory workers on good practices for occupational safety & health in the workplace, and provides information on factory and labor laws. It also contains a salary calculator which is a tool for workers to understand how their monthly wages are calculated.

The goal is to provide a useful and educational tool in an accessible format, according to SMART Myanmar in a statement.

“When we started working with Myanmar’s garment workers fewer than 1 percent owned smart phones. Now, over 90 percent do. This is an amazing shift in just 4 years. It is this incredible change that prompted us to create a teaching tool which can make full use of the latest and most relevant technologies,” said SMART Myanmar team leader Jacob A. Clere.

Garment Exports Fetch $1.8bn

The cutting, making, and packaging (CMP) garment industry in Burma earned about $1.836 billion in the 2016-17 financial year, according to commerce ministry figures reported by a trade journal.

The garments industry includes the manufacture of shoes, clothes and bags, and contributed 16 percent of total export earnings in Burma over the year.

Burma exports around 33 per cent of its CMP products to Japan, followed by 25 per cent to the EU. It also supplies to the South Korea, US and Chinese markets.

Around 300,000 people are employed in the garment industry. Sweden’s H&M and America’s Gap are among the major foreign companies to invest in manufacturing operations in Burma.

World Bank Loans to Boast Economic Stability

The World Bank will provide loans worth $200 million to Burma under a program to assist the government to promote macroeconomic stability and fiscal resilience.

The loans are aimed to support reforms to modernize economic management and address challenges such as inflation, public debt sustainability, the efficiency of government spending, and tax collection. They will also provide concessional financing for critical public investments.

“The policy actions that we proposed could help sustain confidence in economic policies as well as reduce poverty and help increase access to public services for Myanmar people including electricity, education and health,” said U Kyaw Win, Union Minister for Planning and Finance. “For example, low and stable inflation could help Myanmar to attract high quality investments to create jobs and grow in an inclusive manner.”

The program comes under a plan with two pillars. A macroeconomic stability pillar includes reforms to promote prudent public debt management; an end to Central Bank financing of the fiscal deficit; fiscal discipline of State Economic Enterprises; and policy-based budgeting. The fiscal resilience pillar addresses increasing revenue mobilization; prudent gas revenue management; the financial viability of the power sector; and effective public finance management.

The credit will come from the International Development Association (IDA) and the terms for the IDA credit include a maturity of 38 years, with a grace period of six years and a zero interest rate.

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