Economy

The Irrawaddy Business Roundup (Jan. 2, 2016)

By Simon Lewis 2 January 2016

Kyaukphyu SEZ ‘Open Tender’ Goes to Familiar Chinese Firm

The winners of the contract for part of the Kyaukphyu Special Economic Zone project have finally been announced. But those hoping for new faces to be brought into the development—originally touted as a Chinese government-led plan before it was put out to competitive tender—may be disappointed with the result.

The leader of the winning consortium is CITIC, one of China’s largest state-owned enterprises, which appears to have been involved in the project from its inception, raising questions about the “open tender” to award the construction and operation rights to the development on the coast of Arakan State.

Locals in Kyaukphyu have already had significant experience of dealing with large-scale Chinese developments, and have raised concerns about the lack of consultation and local benefits of such projects.

Officials from CITIC met with Burmese government officials as early as July 2009, when the company’s president met with then Industry Minister (2) Soe Thein, according to a report in state media at the time, although it is unclear whether Kyaukphyu was discussed. Soe Thein later became the chief architect of President Thein Sein’s economic reforms and is a minister of the president’s office in the outgoing government.

According to a report by watchdog group Arakan Oil Watch, the Burmese government signed two memorandums of understanding with China in December 2009 and February 2011 relating to the creation of an SEZ in Kyaukphyu. CITIC conducted the initial feasibility study for the project and was initially set to begin development before any tendering had been conducted.

“Under the MoU with Burma’s Ministry of Planning and Economic Development, CITIC Group will construct a Special Economic Zone, including expansion of a deep sea port, railway, airport and industrial areas,” said the 2012 report, which also claimed US-blacklisted businessman Tay Za’s Htoo Group was involved in the project at that stage.

Dual oil and gas pipelines running from Kyaukphyu Township to the Sino-Burmese border have also been constructed following deals signed with Burma’s former military regime.

However, after Thein Sein’s quasi-civilian government suspended the Chinese-backed Myitsone hydropower project in Kachin State, signaling a move away from the former regime’s reliance on China, it also appeared that CITIC could lose control of the Kyaukphyu project.

In early 2014, a consulting tender was awarded that would see international construction firms invited to bid separately to build a deep-sea port, an industrial zone and residential developments that would make up the SEZ at Kyaukphyu.

The winning consortium for that tender was led by Singapore’s CPG Corporation. Although CPG had recently been purchased by a Chinese state-owned engineering and design company, Burmese government officials insisted that the construction tenders would not necessarily go to Chinese firms.

In its bid to win back the project, CITIC hired London-based accountants PricewaterhouseCoopers, which provided, among other services, advice on “bid structuring.” (Another of the “big four” global accountancy firms, EY, or Ernst & Young, was also involved in the deal as part of CPG’s consulting consortium).

Finally, after almost two years of deliberations and numerous missed deadlines, it was finally announced on Wednesday that CITIC would indeed be awarded the contracts for the “construction and operation of the industrial park and deep sea port projects,” China’s state-run newswire Xinhua reported.

The residential part of the project has reportedly not yet been awarded.

“According to the plan, during the whole concession period, Myanmar government will accumulatively receive US$15 billion of tax revenue from the two projects,” the Xinhua report said.

According to the website Deal Street Asia, CITIC and six other firms will hold an 85 percent stake, with the Burmese government taking the rest.

The other firms in the winning consortium, according to Xinhua, are China Harbor Engineering Company, China Merchants Holdings (International), TEDA Investment Holding and Yunnan Construction Engineering Group (YNJG), as well as Thailand’s Charoen Pokphand Group Company Limited, the only non-Chinese company involved.

Better known as CP Group, the Thai company is a sprawling conglomerate that controls much of Thailand’s food industry, and also plays a significant role in Burma, producing livestock and eggs.

CP Group’s subsidiary CP Foods has been under fire for buying fishmeal from suppliers accused of manning their boats with slaves, many of whom are Burmese. A lawsuit has been filed in the United States against CP Foods and American supermarket chain Costco alleging that their supply chains are tainted by slavery.

CP Foods says the case is without merit, and insists that it has taken action “to ensure traceability and humane and sustainable practices throughout our shrimp supply chain.”

Thai Conglomerate to Enter Mobile Money Race

Another CP Group subsidiary is set to enter Burma as the race to provide mobile money services hots up.

Retail News Asia reports that True Money Myanmar is set to pilot a money transfer service this month.

True Corporation, a part of the CP conglomerate, is a major mobile phone service provider in Thailand, but is currently working in Burma’s booming telecoms industry only as a contractor to market leader MPT. True Money Myanmar has been providing top-up services to the former monopoly holder, as well as the military-run MecTel since September, according to Retail News Asia.

“True Money Myanmar Company Limited has already recruited agents around the country to enable easy access to banks,” the report said, adding that True Money Myanmar was a partnership with Asia Green Development Bank, part of Burmese tycoon Tay Za’s Htoo Group.

“The firm is also aiming to expand to other payment services like bill payments and international remittance,” Retail News Asia said. “The money transfer service is looking at the possibility of offering safe and easy remittance facility for the Myanmar population working in southeast Asian countries.”

Another mobile money service, Wave Money, is also readying to launch in Burma. The service is a joint venture between phone company Telenor and Yoma Bank, but is reportedly awaiting the issuance of new rules on mobile money from the Central Bank.

Malaysian Firm to Set up Box Factory in Thilawa SEZ

A Malaysian box maker will set up a factory in the new Thilawa Special Economic Zone close to Rangoon, according to a filing with the stock exchange in Kuala Lumpur.

Box-Pak (Malaysia) has declared its intention to manufacture paper, paper boxes and cartons in Burma, and announced on Tuesday that it would lease land within the zone.

The company said on December 9 that it had incorporated a wholly-owned subsidiary in Burma, with paid-up capital of $7.5 million

Filings with the Bursa Malaysia show that the subsidiary Boxpak (Myanmar) Company Limited, entered into a sublease agreement with Myanmar Japan Thilawa Development for 74,830 square meters of land in the SEZ for a total cost of just over $5.6 million.

“The Lease Transaction is in line with Box-Pak’s strategy to expand into newly opened Myanmar to broaden the Group’s revenue base and source of earnings by setting up a new manufacturing plant to tap on the existing and new markets there,” a filing this week said.

“The land is strategically located near the Myanmar International Terminals Thilawa and Thilawa Railway Terminal. Thilawa also has its own power, water and internet supplies. In addition, companies located in Thilawa are given tax advantages.”

Myanmar National Airlines to Launch Thai Routes

As it begins to spread its wings internationally once again, state-owned airline Myanmar National Airlines is set to begin flights between Rangoon and two cities in Thailand next month.

The airline has already launched flights to Singapore and Hong Kong following a restructuring and corporatization. Formerly known as Myanma Airways, the carrier had developed a poor safety and service record, and was previously only flying domestic routes.

According to schedules published on its website, the airline will fly twice a week, on Mondays and Fridays, between Rangoon and Chiang Mai, beginning on January 8.

MNA will then on January 28 begin flying twice daily from Rangoon to the Thai capital Bangkok’s Suvarnabhumi airport.

According to website airlineroute.net, the airline will operate the flights using Boeing 737-800 aircraft. The airline in June took delivery of the first of 10 new 737-800 aircraft.

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