Economy

The Irrawaddy Business Roundup (Feb. 27, 2016)

By Simon Lewis 27 February 2016

Signs of Trouble for Local Airlines as MAI Suspends Taiwan Flight

After operating a Rangoon-Taiwan direct flight for less than a month, Myanmar Airways International (MAI) has withdrawn the route, according to a Taiwanese media report.

Focus Taiwan news channel cited the country’s Civil Aeronautics Administration saying that the airline had applied to cancel its remaining flights due to low passenger numbers. The flight was launched as part of broader efforts to promote tourism in Burma, and was supposed to run until March 25.

“The airline is offering refunds to passengers affected by the cancellations or making flight arrangements for them on other airlines,” the report said.

It’s the latest sign that Burmese airlines’ ambitious efforts to expand overseas could face difficulties. It could act as a warning to the state-run Myanmar National Airlines (MNA), which has recently begun its own international flights. MNA also applied last month to offer flights between Rangoon and Taiwan’s Taoyuan airport, Focus Taiwan reported.

MAI is a spin off from the state carrier, but is majority owned by Kanbawza Bank, which purchased a stake in the airline and initiated a modernization drive around the time that Burma’s transition from military rule began.

But the airline has already had to withdraw its flight between Rangoon and Singapore, a route that has proven highly competitive and has not attracted the number of passengers some airlines had hoped.

Analysts have warned that Burmese airlines will struggle to compete with larger foreign carriers on international routes, since they are not able to offer onward transcontinental connecting flights.

MNA has launched its own flights to Singapore, Hong Kong and Thailand in recent months. The airline is backed by the government, however, and appears willing to take some losses so that the country has a national flag carrier.

Warning over Kyaukphyu Security Risks

The plan to build an industrial hub on the coast of western Burma’s Arakan State could be plagued by security concerns, according to analysts BMI Research.

In a note this week, the company warned that inter-communal tensions in the state, environmental concerns and anti-Chinese sentiment would all pose difficulties to the project. A consortium led by Chinese state-owned company CITIC was awarded the tender to build an industrial park and port in Kyaukphyu in December.

BMI Research said it ranks Burma 32nd out of 35 Asian countries in terms of the risk of conflict.

While Kyaukphyu was not the center of communal conflicts between Arakanese Buddhists and Rohingya and other Muslim communities in recent years, the town’s main Muslim fishing community was razed in 2012 and hundreds of people continue to be confined to a displacement camp just outside of town.

“This ethno-religious conflict has the potential to erupt again in the future, and could disrupt theconstruction process in relation to security risks for personnel and workers, as well as damage to property,” BMI Research said.

Perhaps more likely, however, is the risk of local pushback against the Chinese developers disrupting the project.

CITIC Construction’s vice chairman Yuan Shaobin told Chinese state media in January that the project would be carried out with the concepts of “social development, green development and common prosperity” in mind.

However, locals say that their previous experience with Chinese companies—who have also built duel oil and gas pipelines running from Kyaukphyu to China—has not been wholly positive. Many believe that Chinese companies are less likely to mitigate the environmental impacts of their projects.

“[P]ast Chinese investment projects have shown that Chinese companies prefer to bring their own workers and their projects may not bring significant benefits for local communities,” the note said.

“This therefore has the potential to create resentment and spur protests or anti-Chinese riots which may damage property within the SEZ and contribute to a climate of insecurity in the region which will deter foreign investors.”

Emirates Set to Launch Dubai-Rangoon Flight

United Arab Emirates-based airline Emirates will begin flying between Dubai and Rangoon from August this year, according to a statement Thursday.

The company announced that from Aug. 3, it would run a daily service using a Boeing 777-300ER aircraft from Dubai to Rangoon, which would then fly on to Hanoi.

“[T]his new route will strengthen Emirates’ network of destinations in Southeast Asia, offer a new flight option to passengers travelling between Hanoi and Yangon, and open up new connections for [Burmese] and Vietnamese travellers to access Emirates’ global network,” the statement said.

The flight will mainly cater to travelers flying from Burma and Vietnam to Europe, who can transfer in Dubai.

It will also carry up to 20 tonnes of cargo, the statement said. “Popular exports on this route are expected to be manufactured garments and seafood from Myanmar, and marine products and electronics from Hanoi,” it said.

British Government to Provide Cover for Firms Exporting to Burma

UK Export Finance, the British government’s export credit agency, will provide $300 million of insurance and guarantees to help UK firms export to Burma.

It is hoped that the cover, which was announced during a visit to Rangoon by British Transport Minister Lord Tariq Ahmad, will help UK exporters to compete with others looking to exploit growing markets in Burma for products like consumer goods and construction materials.

UK Export Finance can provide insurance to exporters and guarantees to banks financing exports from the UK. It also makes loans to overseas companies to buy goods from the UK.

Ahmad was in Burma last week for a visit that included talks with Rangoon Mayor Hla Myint about the city’s development, according to a statement.

“He met the local and international business community, and development partners engaged in infrastructure development,” it said, adding that the British official also spoke at an event promoting UK company Rolls Royce Plc and at a seminar involving Burma’s chamber of commerce.

“During the seminar, Lord Ahmad set out the UK’s expertise in the transport infrastructure sector and some of the steps the UK government has made in terms of prioritization and long-term planning.”

UK ‘Fair Trade’ Charity to Carry Burmese Rice

British organization Traidcraft, which aims to fight poverty through trade, is working to begin exporting Burmese rice that will be sold under the label “fair trade.”

Fair trade labeling seeks to reassure consumers that poor farmers are being properly compensated for their labor on the goods imported in the West. The products, which have to meet certain standards, have proven popular, but the scheme’s efficacy in relieving poverty has been questioned.

According to a blogpost on its website last month, Traidcraft said it was working to bring fair trade to two rural communities in Burma.

“Working on the ground, we are helping farmers in these two communities to work as groups, sharing knowledge to realise the best market prices for their paddy,” the blog said.

“In one of the villages, we are assisting with the modernisation of a rice mill that dates back to the colonial days. We’re building a storage facility which will allow them to hold back some of their crop to realise more money when market prices are high.”

Traidcraft said that, in order to be exported, the rice will have to conform to Fairtrade standards that ensure the use of proper fertilizers, the absence of child labor and equal pay for men and women laborers.

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