The Irrawaddy Business Roundup (August 15, 2015)

By Simon Lewis 15 August 2015

IFC Denies It Will Fund Dawei Project

The International Finance Corporation has denied claims that it is funding the revived project to build an infrastructure hub at Dawei.

The Bangkok Post reported this week that Italian-Thai Development Plc (ITD), the Thai conglomerate long involved in the proposed development in Dawei, had signed a new agreement with the Burmese government that would see work begin “immediately.”

The report carried quotes from ITD President Premchai Karnasuta, who “said his company received a US$1.7-billion loan from the International Finance Corporation [IFC] and the World Bank to be used as the first tranche of funds for Dawei,” according to the Bangkok Post.

The IFC is a branch of the World Bank Group that finances private-sector projects in developing countries.

Vikram Kumar, the IFC’s resident representative in Burma, told The Irrawaddy on Wednesday that he was “quite surprised” to see the article claiming his organization would stump up the funding for the project.

Kumar said that IFC officials had indeed met with ITD six to nine months ago, but said any commitment of funds by IFC would first require extensive due diligence and clearance at different levels of the Washington-based organization.

“We have met Ital-Thai and we have met the sponsor [Premchai], but we’ve just had one meeting and they’ve shared an interest to have us help them in Dawei,” he said. “They have been updating us with their progress, but we haven’t signed anything.”

He said that in fact the IFC was more likely to provide funding for a LNG terminal planned for Dawei. Kumar said he had also attended meetings about that project, which also involves ITD, but is separate from the development of a port, special economic zone and road link with Thailand.

“For us it’s more about what the government of Myanmar wants us to do,” Kumar added.

Digicel Considers Offloading Burma Towers Company

Digicel Group, the telecommunications company run by Irish billionaire Denis O’Brien, has revealed that it is considering the sale of its majority stake in the Myanmar Tower Company Limited.

The group, which has most of its operations in the Caribbean and the South Pacific, is preparing for an initial public offering in the United States later this year, requiring it to submit filings to the US government’s Securities and Exchange Commission.

The company was a losing bidder in the race to win the first two private telecommunications licenses awarded by the Burmese government in 2013. Later that year, Digicel entered into a joint venture with Serge Pun’s Yoma Strategic Holdings to form the Myanmar Tower Company, which has signed an agreement with one of the winners, Ooredoo of Qatar.

A prospectus filed with the SEC on July 31 said that the Myanmar Tower Company owns about 1,250 towers that are used by Ooredoo for its network.

However, the filing suggested that Digicel might not be in Burma for much longer.

“Digicel has received a number of expressions of interest regarding an acquisition of the business and it is evaluating its options relating to it,” it said.

Also contained in the filing was information about Islamic financing that Digicel’s Burmese venture has received in a tie up with Qatari investment bank QInvest LLC.

It said the company has about $60 million of outstanding debt under a facility known as murabaha, a Sharia-compliant financial instrument that does not bear interest and instead uses a rent-to-own lending arrangement.

Asia World Won Airport Deal Despite Better Bid: Report

The Wall Street Journal has reported that Burmese conglomerate Asia World won the tender to operate Rangoon’s international airport despite a more convincing bid coming from a Japanese firm.

In a report published on Wednesday, the New York-based newspaper gave an in-depth account of how Asia World has managed to grow its activities in Burma in recent years, despite being blacklisted by the US Treasury.

The report included details of the lucrative tender to operate the airport in Burma’s biggest city, which was run in 2013 by the Department of Civil Aviation alongside bidding to run Mandalay’s airport and the tender to build a new air hub in Pegu Division to serve Rangoon.

According to the Wall Street Journal, Japanese consultants Nippon Koei were brought in by the government to rank seven bids that came in for the Rangoon airport tender, which included an American consortium with the involvement of the Boeing Company.

“Asia World subsidiary Pioneer Aerodrome Services Co. Ltd. came in fourth, according to one member of the selection committee,” the report said. It said a Japanese consortium led by Toyota Tsusho Corp. scored “higher marks” in Nippon Koei’s rankings.

But Pioneer Aerodrome Services, which was already the operator of the airport, was named the winner in August 2013.

“Myanmar officials say it made sense to choose Asia World, which manages the existing airport, because it was willing to spend money on the project before a contract was signed, unlike foreign bidders,” the report said.

The Wall Street Journal put the claim to President’s Office Minister Soe Thane, who admitted that the Asia World subsidiary’s was not the highest ranked bid, but “recalled Pioneer coming in second in the rankings.”

“Either way, he said, the final decision was a ‘hot potato’ because of the prominence of the project,” the report continued. “Ultimately the cabinet chose Pioneer over top-ranked Toyota Tsusho because the government decided it would take too much time for the Japanese company to start work.”

Rangoon Government to Invite Tenders for ‘New Town’ Project Next Month

The Rangoon government will in September open a tender to private firms to build an extension to the city on the western bank of the Rangoon River, according to state media.

The tender comes after officials in Naypyidaw nixed the regional government’s plan to develop the area, in which it awarded the project to a little-known company in a process criticized for lacking in transparency.

“The new town plan is one of seven modern housing projects of the Greater Yangon Development Strategic Plan 2014 designed by the region government and the Japan International Cooperation Agency,” the Global New Light of Myanmar reported this week.

It said the city extension would cover 11,716 acres of land between the Pun-Hlaing River and the Twantay-Rangoon Canal.

Indonesia Requests Permission for Bank to Operate in Burma

An Indonesian state-owned bank is seeking approval from the Burmese government to begin offering loans for projects in the country, according to the Jakarta Globe.

The report said that as Burma’s economy is liberalized, “many from Indonesia are racing to tap in to the market.” Those include the state-owned Bank Negara Indonesia, it said, adding that the bank was applying for permission to open a representative office in Burma.

It said that officials at the Indonesian Financial Service Authority had put in a request to their counterparts in Burma in the hope that a memorandum of understanding could be signed in early 2015.

Rico Rizal Budidarmo, the bank’s finance director, was quoted saying a representative office would be used for “marketing activities” in Burma.

“Because [the permit] is for now just for a representative office, we don’t plan to spend much, it will probably just be some operating expenses like leasing an office tower,” he said, according to the Jakarta Globe.