The Irrawaddy Business Roundup (Apr. 11, 2015)

By Simon Lewis 11 April 2015

Vietnam’s HAGL Looks for New Investor After Rangoon Property Deal Falls Through

Vietnamese conglomerate Hoang Anh Gia Lai (HAGL) is reportedly targeting Hong Kong and Singapore firms as it seeks a new investor for a massive real estate development going up on the eastern shore of Rangoon’s Inya Lake.

A deal for Singapore-based Rowsley Ltd to buy a 50 percent stake in the project fell apart last week, with blame placed on Burma’s high levels of tax.

The companies in February announced the deal, which would have seen the Singapore company invest $275 million in the mixed-use project. But, in an announcement to investors on Apr. 3, Rowsley company secretary Kannan Malini said, “The Company will not enter into the proposed joint venture as the conditions precedent under the Heads of Terms Agreement have not been satisfied,” without going into details.

In an announcement the same day, HAGL claimed that the deal had broken down because Rowsley wanted to invest directly in HAGL’s local subsidiary Hoang Anh Gia Lai Myanmar Company Ltd, rather than investing indirectly by buying shares in the group’s Vietnamese joint stock company.

“Since the current tax rate applied to the profit from capital transfer in Myanmar is so high (40%), Hoang Anh Gia Lai could not accept the suggestion of Rowsley,” said the HAGL statement, signed by HAGL acting general director Vo Truong Son.

According to a report in the state-run Viet Nam News on Wednesday, Son said that the company is now “in talks with a number of foreign real estate companies, including firms in Hong Kong and Singapore.

“As the negotiations are going on, Son refused to disclose more information about potential investors.”

The report said the failure to reach an agreement with Rowsley would not impact upon the project. “The office building and hotel are still slated to open this June,” it said, “while the shopping centre will likely open in September.”

Thai Construction Firm Looks for Burma Infrastructure Projects

Thai construction giant Ch Karnchang may soon enter into infrastructure developments in neighboring Burma, a senior executive at the firm told the Bangkok Post newspaper.

A report published by the English-language daily on Tuesday said that the Stock Exchange of Thailand-listed firm was conducting a feasibility study on possible investments in Burma, citing Vorapote Uchupaiboonvong, Ch Karnchang’s executive vice-president for accounting and finance.

“There are many opportunities in Myanmar, and we’re ready to take the initiative, but the study must be completed before we enter the country,” Vorapote told the Bangkok Post. “We conducted thorough studies in Laos before investing in that country. We’re adopting a similar approach for Myanmar.”

Ch Karnchang is the developer of the controversial Xayaburi hydropower dam on the Mekong River in Laos. According to the Bangkok Post, the director said the company was likely to focus its investment in Burma on the Rangoon area, while most opportunities for hydropower investment are in Burma’s border states.

The company, which has developed mass transit train and highway projects in Bangkok, has repeatedly announced it is interested in investments in Burma. A subsidiary of Ch Karnchang, TTW Public Company, is conducting a study on a tap water project in the Mon State capital, Moulmein, the report said.

Suzuki to Assemble Cars in Thilawa SEZ

Japanese automaker Suzuki will build an assembly plant in the Thilawa Special Economic Zone (SEZ), according to Japanese media.

A report from Japanese media group Nikkei said that the company had secured a 20-hectare plot of land inside the zone, which is situation just outside Rangoon.

The factory would be Suzuki’s second in Burma. In 2013, the company restarted its Rangoon factory, which assembles a small number of light trucks, declaring at the time that it would look to expand its operations in the country.

According to Nikkei, Suzuki’s new plant could begin production in 2017, employing about 300 people.

“Suzuki will assemble imported parts at the plant,” the report said. “Initial output is seen at roughly 10,000 cars a year. It could produce the Ertiga, a seven-seat compact, among other models there.”

The report said Suzuki would invest “several billion yen” in the project. One billion yen is equal to more than $8 million.

Thilawa is the furthest progressed of three SEZs the Burmese government is planning in an attempt to kickstart the manufacturing sector.

Three large Japanese conglomerates are investing in the SEZ project itself. However, with the slated opening of the zone in a matter of months, few other companies have so far announced that they will open factories at Thilawa.

A group of Hong Kong-based garment manufacturers announced interest in setting up at Thilawa, but eventually pulled out. However, Japanese underwear-maker Wacoal announced last month that it would set up a factory in the SEZ.

Toyo-Thai Signs Memorandum for Coal-Fired Power Plant

The Burmese government has signed a memorandum allowing Thai construction company Toyo-Thai Corp PCL to go ahead with a plan to build a coal-fired power plant in Mon State, according to Reuters, despite opposition to the project among local residents.

Reuters said a statement from the firm on Thursday said that the agreement was worth a total of $2.8 billion. The agreement will see Toyo-Thai build a 1,280 megawatt plant in Ye Township and operate the plant, selling power to Burma’s grid.

“Under the 30-year concession, it is expected to import about 4 million tonnes of coal a year to supply the power plant. Construction is expected to take about four to six years,” the report said.

The construction part of the deal was worth $2.3 billion, which the company would fund largely through borrowing, it said.

Toyo-Thai already operates a natural gas-fired power plant in Rangoon.

Last year, the company held a consultation meeting with locals in Inn Din village—the planned site of the project in Ye Township. But local residents have said they will oppose the development, citing concerns over environmental and social impacts.

Rangoon Visitor Numbers Up as New Hotels Open Doors

A report this week said that tourist numbers in Burma’s biggest city continue to grow as two major hotel chains opened new properties in Rangoon.

Travel website TTG Asia this week reported figures from the Myanmar Tourism Federation saying that 193,891 tourists visited the city in January and February this year. The report said the figures represented a rise of 7.2 percent on the same period last year, a record year for tourism in Burma.,

The majority of the visitors to the former capital—63 percent—came from other Asian countries, including Thailand, China, Japan and South Korea, the report said.

Burma has seen a surge of new visitors since the country began political and economic reforms four years ago—when fewer than 1 million people entered the country each year. Last year, the official figure for visitors topped 3 million, and the government is expecting the trend to continue this year.

The influx of visitors caught Rangoon unprepared, with a chronic shortage of hotel rooms pushing up room rates. Now, hotel projects are beginning to come to completion, potentially easing the shortage.

French firm Accor’s tie-up with local tycoon Zaw Zaw’s Max Myanmar—known as Novotel Yangon Max—opened this week. The hotel, Accor’s third in Burma, has 366 rooms, two ballrooms and seven food and beverage outlets, according to regional travel site TTR Weekly.

United States-based hotel chain Best Western also just opened its second Rangoon property. The group’s 91-room hotel is situated in the city’s Chinatown area.