The Irrawaddy Business Roundup (October 15)

By Kyaw Hsu Mon 15 October 2016

Burma ‘seeking extra tax payment’ from PetroChina

A Chinese oil refinery in Yunnan Province near the border with Burma is facing delays to starting operations after state-owned PetroChina has hesitated to pay an extra tax demanded by Burma for piping the crude oil through the country, according to Reuters.

Early last year, PetroChina’s parent China National Petroleum Company (CNPC) began trial operations of the 1,490-mile pipeline through Burma’s Arakan State to Yunnan Province.

PetroChina has built a 260,000 barrels per day (bpd) refinery at Anning in Yunnan to process the oil. It was expecting to start test operations on refining this month but is now facing delays, according to the report.

“The Myanmar government is asking for an additional 5-percent tax for the crude oil, which is on top of an agreed transit fee and pipeline tariff,” a Beijing-based industry official told Reuters.

“It (the tax) is quite off the international norm. The refinery will certainly run into losses if this tax applies,” the source added.

A Naypyidaw-based senior official with Burma’s Energy Ministry told Reuters that the two countries had agreed that the pipeline contract was subject to change if the Finance Ministry and other government agencies suggested it needed changing.

“The respective Chinese company still needs to talk with the Ministry of Finance […] They have met twice but they haven’t been able to sort it out,” said the Naypyidaw official, who requested anonymity as he was not authorized to speak to the media.

The pipeline starts at Maday Island in Arakan State and enters China at the Muse-Ruili border in northern Shan State. It is a joint venture by CNPC and Myanmar Oil and Gas Enterprise.

Government to release details on economic policy

The government will reveal more details on its economic policy at a business forum in Naypyidaw on Oct. 22, following the approval last month of the Myanmar Investment Law in the Upper and Lower houses of Parliament, an official said.

The new policies are ready to be unveiled at the Myanmar Business Forum event to be hosted by the Directorate of Investment and Companies Administration (DICA) under the Ministry of National Planning and Finance, according to DICA’s deputy director general U Than Aung Kyaw.

“The policies will be [provided] following the approval of the current investment law, and will provide more details,’’ he said.

The event is slated to be held at the capital city’s Myanmar International Convention Center 2.

Pledged foreign direct investment to Burma from April to September this year was less than half the amount committed in the same period in 2015, as investors waited for clear policy signals from the government.

The new law approved last month contains incentives for investments in various sectors and reduces the number of investments that will require approval by the Myanmar Investment Commission.

Burma ‘worst’ for illicit trade

Burma has scored lowest in a survey commissioned by the European Chamber of Commerce on how 17 countries in Asia tackle illicit trade.

The report conducted by the Economist Intelligence Unit (EIU) evaluated countries on a 100-point index against 14 indicators that included customs, transparency and intellectual property.

Burma received the lowest rank (10.8), below the other two worst offenders: Laos (12.9) and Cambodia (23.9).

China had a score of 61.6 and Singapore scored 69.8, tying with Taiwan. The best performers were Australia (85.2), New Zealand (81.8) and Hong Kong (81.4).

“Illicit trade is more than just counterfeit goods. Illicit trade includes guns, it includes endangered species and endangered wildlife. It includes human trafficking,” report author Chris Clague of the EIU told The Associated Press.

“A lot of these other forms of illicit trade […] follow the same channels that counterfeit goods do,” he said.

Burma has long had a reputation for illicit trade in drugs, timber, jade and wildlife, among other goods. The UK-based Environmental Investigation Agency said in 2015 that hundreds of millions of US dollars’ worth of illegal timber was flowing into China. A report the same year from the UK’s Global Witness estimated that the illicit jade trade amounted to some US$30 billion a year.

Singapore’s Group Lease to partner with Burma’s AMK to provide financial services

Group Lease Plc (GL) of Singapore is partnering with Burma’s AMK Consortium headed by businessman U Aung Moe Kyaw to expand financial services in Burma, GL has announced in a press release.

The joint venture will support the AMK-owned Century Finance Company to provide a range of financial services, focusing especially on rural markets, said Mitsuji Konoshita of GL Holdings in the report.

Century Finance currently provides car leasing services and its offerings under the joint venture will expand to cover the leasing of motorcycles, agricultural machinery and solar panels and other forms of consumer finance credit.

According to a filing by GL to the Stock Exchange of Thailand, AMK Consortium controls about 65 per cent of whisky distribution in Burma. It also manages more than 22,000 grocery shops, including 1,400 wholesale stores, some of which operate pawnshop services.

Business ‘failing to provide transparency’ on environmental impacts

Businesses in Burma are failing to provide the public with information related to the environmental impacts of their activities, according to the Myanmar Centre for Responsible Business.

The center published an updated survey this week that found that very few companies in sectors such as mining, hydropower, power facilities, manufacturing and tourism were disclosing environmental impact assessments (EIA) or initial environmental examinations (IEE).

Several hundred of such surveys are believed to have been undertaken and submitted to the government, the MCRB said.

The MCRB report found that the overall level of disclosure was highest in the oil and gas sectors.

Of 20 oil and gas offshore blocks awarded since 2013, 14 (70 percent) had disclosed their IEE/EIA. This was up from 58 percent in March. For onshore blocks, the figure was 47 percent disclosure (7 out of 15), up from 26 percent in March.

Without transparency on the part of business, communities and other stakeholders could not hold companies to account for their environmental and social performance, said Vicky Bowman, director of the responsible business center.

“Almost none of the hundreds of EIAs and Environmental Management Plans completed over the last two or three years in other sectors have been disclosed on corporate websites,” she added.

Disclosure is now a legal requirement if a company wants to obtain an Environmental Compliance Certificate to allow its business to proceed, the report said.