The Irrawaddy Business Roundup (Aug. 29, 2015)

By Simon Lewis 29 August 2015

Scottish Truck Company Supplies Controversial Jade Mines in Burma

A Scottish truck company owned by Swedish motor giant Volvo Group has announced that it is providing equipment to a company operating one of northern Burma’s controversial jade mines.

Kachin State’s Hpakant Township is the source of the vast majority of the world’s jade, the high-value stone that is especially sought after in China.

Large-scale mining resumed last year after a hiatus due to fighting between the Burma Army and the Kachin Independence Army. Local civil society groups argue that the multi-billion dollar jade business is inflaming the conflict, with the armed groups vying for control of valuable mining areas and transportation routes. Fighting has indeed continued with the resumption of mining, and as recently as June, hundreds of local residents were still being displaced by clashes.

The United States retains a ban on imports of jade due to the Burmese military’s close ties to the business. In June, US drinks company Coca-Cola was forced to come clean after due diligence failed to turn up links between one of its key local partners and a jade-mining firm.

Motherwell, Scotland-based Terex Trucks, however, is open about its involvement in the trade—which is not restricted by the US ban. The company issued a statement on Tuesday lauding the first order of its TR60 dump truck by local company Myanmar Thura “to cover expansion at the company’s jade mine in Kachin State.”

Terex Trucks was purchased by Volvo Construction Equipment, part of Sweden’s Volvo Group, in 2013. The company’s trucks are distributed in Burma by Leadway Heavy Machinery Co (LHM).

The statement did not make mentioned of the controversy surrounding Burma’s jade industry, but emphasized the “excellent productivity” that Terex Trucks’ equipment would bring to the mining project.

“The TR60s will be required to work day and night in two shifts, hauling 55 tonne loads of earth, rock and jade from the mine, where the elements will be separated for further processing,” it said.

While the statement said it was the first sale of Terex Trucks to the Myanmar Thura company, in June last year Terex Trucks published photos on its Twitter account of 20 more of its trucks arriving in Burma “to start work in a jade mining project.”

At the time, the firm declined to say which jade-mining company had purchased the trucks, also distributed through LHM. Attempts by The Irrawaddy to garner comment from Terex Tucks this week were unsuccessful.

Australia’s Tap Oil to Explore Off Southern Burma

Australian Securities Exchange-listed firm Tap Oil has signed a deal to explore for oil and gas in one of Burma’s shallow-water offshore blocks.

The company said in an announcement to the Sydney bourse that it had signed a production sharing contract (PSC) with the state-run Myanmar Oil and Gas Enterprise, giving it a 95 percent interest in the M-7 Block off the coast of southern Burma.

“Under the executed PSC, the [joint venture] partners have agreed to undertake an 18 month Environmental and Social Impact Assessment (ESIA) and Study Period, followed by an option to proceed to a three-year commitment exploration work programme,” the announcement said.

“Tap anticipates that it will spend approximately US$2.75 million on the M-7 Block up to and including the Study Period, which has a minimum expenditure requirement of US$2 million. Tap may spend more before and during the Study Period.”

The state-run Global New Light of Myanmar reported that the deal included a signature bonus of $5.2 million and a $3.5 million “data fee,” and also gave estimates about how much would be spent during exploration and, potentially, extraction.

“At least $110.75 million will be spent during the two year observation period in the Gulf of Mottama and another $110.75 million during a six year oil testament period,” the newspaper reported.

The M-7 Block lies off the coast of Burma’s Mon State, according to a map included in Tap Oil’s announcement, and runs right up to the shore, which will likely cause concern for environmental groups. It is situated just north of the planned infrastructure hub at Dawei, where a liquefied natural gas terminal has also been touted.

The firm emphasized the potential of the prospect by pointing out that it lies “in Myanmar’s most prolific offshore hydrocarbon province, the Moattama Basin, which has existing production from a number of multi-tcf [trillion cubic feet] offshore fields.”

While three offshore gas projects are already in progress in Burmese waters, the current government has signed a number of deals with international firms to explore offshore areas, in both deep and shallow water, for more oil and gas.

Krispy Kreme to Open 10 Outlets in Burma

American donut company Krispy Kreme could become the next US chain to enter Burma, until recently an untapped market for international food and drink brands.

The North Carolina-based chain said in a statement Tuesday that it plans to open 10 outlets in Burma in the next five years.

The statement quoted Dan Beem, Krispy Kreme’s senior vice president and president-international, saying that the brand’s entry into Burma was timed to take advantage of “a growing economy and a population eager to welcome local brands.”

US chicken chain KFC, in collaboration with local businessman Serge Pun, opened its first outlet in downtown Rangoon in June, with members of the public queuing out of the doors during its first few days of operation. Pizza Hut is also expected to enter the country soon.

“Myanmar is an up-and-coming market with a large population of people who are eager to start getting a taste of iconic brands like Krispy Kreme,” said Pote Narittakurn, the owner of Singapore-based company Doughnut Group Pte. Limited, who will operate the Krispy Kreme franchise in Burma.

“We’re confident the Krispy Kreme experience will be as meaningful in Myanmar as it is in Memphis or Manila, or anywhere else around the world where our signature sweet treats and coffee are served.”

Little information was given in the statement about the franchisee, Doughnut Group Pte, other than that it is based in Singapore. Online company registration information says that it was only incorporated in February this year, suggesting that the Burmese venture may be its only business.

Ministry Sets Capital Requirement as 17 Local Firms Apply for Telecoms License

Only established Burmese companies with more than $2.4 million in capital will be allowed to become part of a consortium that will be awarded the country’s fourth mobile phone license, according to Reuters.

The newswire reported comments from Chit Wai, a deputy permanent secretary at the Ministry of Communications, saying that 17 local companies had already applied to be involved in the new mobile phone network after the government announced a tender last month.

The report said that “only companies which have operated for at least three months and have at least 3 billion kyat ($2.4 million) in registered capital will be considered.”

Those terms would likely limit the potential winners to Burma’s large conglomerates, most of which are run by tycoons who benefited from working closely with the country’s former military government.

The winning consortium will join Norway’s Telenor, Qatar’s Oordeoo and the state-owned provider MPT in the mobile phone market. The Burmese military’s Myanmar Economic Corporation also operates a mobile phone network under the brand MECTel, but the licensing status of this network is unclear.

According to Reuters, Chit Wai said that the firms involved in the new 15-year license would be announced in September and the license would be awarded before the end of the year.

“The next step after selecting local partners will be appointing an international consulting firm to help select a foreign partner for the joint-venture,” Chit Wai was quoted saying.

Hanthawaddy Airport Delayed Once Again

The Burmese government’s ambitious plan to build a new airport in Pegu Division to serve Rangoon has been set back yet again, with the completion of the project now not expected until the year 2022.

The Global New Light of Myanmar on Friday quoted an official from the Department of Civil Aviation saying that the delay was down to problems with funding.

Proposed on the site of a Japanese World War II airstrip some 80 kilometers (50 miles) from Burma’s biggest city, the new airport has been on and off since the early 2000s. The government revived the idea in 2012 as visitor numbers began to climb along with the opening up of the economy. It was hoped the 12-million passenger capacity airport—named Hanthawaddy after the old Burmese capital in Pegu—could be finished in 2018.

A tender process ended with a South Korean consortium led by Incheon International Airport Corporation being named the preferred bidder for the project, which was at the time estimated to cost $1.1 billion.

However, a deal was never reached with the initial winner, and a new tender in 2014 was won by the Singaporean-Japanese consortium involving Changi Airport Planners and Engineers and JGC Corporation. By that stage, the value of the project had risen to more than $1.4 billion.

The new agreement involved about half of the funding coming from Official Development Assistance (ODA), presumably from the Japanese government.

Friday’s state media report, which puts the cost of the airport now at $1.5 billion, cited DCA deputy director-general Min Lwin saying there had been “hold-ups in obtaining” the ODA funding.

Although visitor arrivals have continues to rise—reaching 4.4 million in 2014 up from just over 1 million in 2012—some have expressed doubts about the feasibility of the new airport.

The existing Rangoon International Airport is undergoing a large expansion project to meet rising demand, with a new international terminal under construction. It has also been pointed out that the no plans have yet been put forward for transportation links to the new airport, which would be at least a 90-minute drive from Rangoon using current infrastructure.