World Bank Says Burma Reaches ‘Middle Income’ Status
The World Bank has said that Burma is no longer a “low income” country, an announcement that has surprised many watching the country.
The bank said in a statement July 1 that its annual revision of global income brackets saw Burma—alongside Bangladesh, Kenya and Tajikistan—rise out of the lowest grouping of countries. Thirty-one countries, including Cambodia, Nepal and Afghanistan, are left in the low-income bracket—meaning their annual gross national income (GNI) remains at less than US$1,045 per person.
Burma has graduated to a “lower-middle income economy,” the announcement said, a grouping that includes countries where GNI per capita is between $1,046 and $4,125.
World Bank chief economist and senior vice president Kaushik Basu said in the statement that the movement of countries out of low-income status was “heartening.”
“While we need to measure development progress in different ways, income-based measures, such as GNI, remain the central yardstick for assessing economic performance,” he said in the statement.
Burma remains on the lower end of the lower-middle income grouping, however, with the bank’s latest figures, for 2014, suggesting that the size of the economy represents about $1,197 per person in Burma. The figure has received a boost since a census last year revealed that previous government estimates had been overstating the number of people living in the country, actually about 53.7 million.
The country has also seen rapid economic growth since the government of President Thein Sein introduced political and economic reforms beginning in 2012. In the last fiscal year, ending in March, the economy is thought to have grown by 8.5 percent.
A large chunk of that growth is likely down to an increase in offshore natural gas extraction, most of which is sent to Thailand and China under contracts signed by the previous military government. But while revenues from the extractive industries may boost the country’s statistics, many people remain in poverty, especially in the remote regions inhabited mainly by ethnic minorities.
Sean Turnell, an economist at Sydney’s Macquarie University, said he had doubts about the accuracy of figures on Burma’s economy. Even if the country has graduated to the higher bracket, Turnell said in an email, “it would only be the product of meaningless statistical technicalities (made more so when we consider that the reduction in the official population size is a factor here too).”
“Myanmar is a rich country in terms of resources and potential. But it’s people are overwhelmingly desperately poor—no less so today than yesterday, and before the day the World Bank changed its mind,” Turnell added.
“Sometimes statistics cloak reality more than they reveal it.”
Oil Price Slump Likely to Lead to Fall in Burma’s Gas Output
A research firm has predicted that Burma’s natural gas production will begin to fall after 2018 as the global slump in energy prices delays investment in the oil and gas sector.
Financial information service BMI Research said in an industry trend analysis on Monday that it had revised upward its estimate for Burma’s gas production in the next two years. It credited the revision to new investment in the Andaman Sea’s Yadana field, where French company Total is the lead operator.
“We expect additional production from the field to come online from 2015 onwards as engineering, procurement and construction contracts (EPCs) related to the expansion get fulfilled,” it said.
“In October 2014, contracts to develop a wellhead platform for gas production at Badamyar—an adjacent project to Yadana—were signed between Total, Hyundai Heavy Industries and SapuraAcergy.”
More gas from the Yadana field, as well as the ramping up of production from the Shwe and Zawtika offshore gas projects will push up total production to 23.5 billion cubic meters by 2017, compared with 19 billion cubic meters last year, BMI Research predicted.
However, production from existing fields is set to plateau, and the low global oil price means that companies will be less likely to pledge future investment to exploit Burma’s oil and gas reserves.
That could impact plans to expand the Shwe and Zawtika fields, the analysis said, as well as dampening the prospect that any of the exploration deals signed this year—with major companies including Shell and Chevron—will lead to more production any time soon.
“[S]imilar to the low likelihood of further expansion of existing fields, we believe the weak oil price environment will also remain a hurdle for these projects to move into the development phase even if major oil and gas discoveries are made in the coming years,” the analysis said.
Burmese-language App Company Lists in London
Burmese-language mobile chat application developer MySquar has reportedly raised $2.6 million to expand its products in Burma, despite currently lagging behind competitors.
MySquar’s pitch is that its app MyChat was the first product offering a mobile text messaging service in Burmese. However, other similar apps like Viber—which claims to be the market leader with more than 5 million users—can also be used in Burmese, with users simply required to download Burmese-text software to their phones.
In information submitted to the London Stock Exchange—where MySquar has just listed on the Alternative Investment Market (AIM)—the company admits that almost half its total subscribers are not “active.”
“As at 31 May 2015 there were approximately 392,400 monthly active users of MySQUAR products and 774,636 total users,” the information said.
“The Group’s strategy is to drive user acquisition through locally relevant products, acquire relevant consumer data and to monetise its assets through strategies including advertising, digital goods, eCommerce and other methods,” MySquar’s information submitted to the London bourse says.
“The Group intends to secure a firm footprint in the Myanmar youth market and to take advantage of commercial opportunities arising from the increasing internationalization of Myanmar and rising penetration of mobile technologies.”
Website Deal Street Asia reported this week that the float at the start of this month successfully raised its target of $2.6 million, apparently justifying the valuation of the company of $27.8 million.
The company has offices in Burma and Vietnam, but is incorporated in the British Virgin Islands, an overseas territory of the UK that offers companies secrecy and tax benefits.
MySquar’s major shareholders include investment entities Rising Dragon Singapore and Rising Dragon Holdings, as well as companies controlled by Japanese national Shinji Kumazawa and Taiwanese national Chu Chi-Chou—who holds shares personally and through companies Etech investment Holding Group Inc and Rising Dragon Technology Pte Limited.
Also of note is MySquar’s chairman, Piers Pottinger, co-founder of Bell Pottinger, the UK’s biggest public relations firm, which appointed a managing director for Burma earlier this year.
Burma Government Taking ‘Big Gamble’ on Airline Expansion
Burma’s state-owned airline may struggle to compete on international routes, according to an industry report published following the announcement that Myanmar National Airlines plans to venture abroad.
MNA has been flying only domestic routes since Myanmar Airways International was spun off as an international carrier. The government has now completely divested from MAI.
But MNA said last month that following a corporatization effort, the company plans to begin flying international routes, beginning with the Yangon-Singapore link.
A report from CAPA Centre for Aviation this week described the move as a “big gamble” for the company and the Burmese government.
It said Burma-based airlines have so far struggled to dislodge major Singaporean players on the route since those airlines are able to offer flyers connections to countries outside of the region.
Local private airline Golden Myanmar Airways, and MNI, had already come across such difficulties on the Yangon-Singapore route and other international links, it said. GMA has stopped its flights to both Bangkok and Singapore after too many seats were left empty.
“Ultimately MNA will compete mainly against MAI, a predicament Golden Myanmar also faced during its year and a half in the Singapore market,” the report said.
“Unfortunately for Myanmar’s carriers this is virtually a zero sum game as this end of the market has not been growing. MAI and Golden Myanmar combined carried only slightly more passengers to and from Singapore in 2014 than MAI alone carried in 2012.”
Foreign carriers have a major advantage as passengers can connect on to flights to the United States, Europe and elsewhere, while Burma’s airlines only link to a few regional destinations, it said.
“The Myanmar government is taking a big gamble by investing heavily in MNA’s international foray and expansion,” the report said. “Perhaps the government is willing to increase subsidies of the flag carrier, hoping MNA will stimulate tourism and help raise the profile of Myanmar internationally.
“But there is good reason for the private airlines of Myanmar and foreign carriers that have pursued expansion in the Myanmar market to be irritated. MNA’s ambitious expansion could distort the playing field in several markets, starting with the important Myanmar-Singapore route.”
Heineken Looks to Challenge Burma’s Beer Monopoly
Dutch beer producer Heineken is reportedly set to officially open a new factory in Burma on Sunday, as it enters the country’s military-dominated grog sector.
A report in London’s Financial Times this week said the factory, costing Heineken $60 million, would initially turn out 30 million liters of beer per year, with the potential to increase that to 100 million liters.
The report said Heineken would be launching a low-cost beer tailored for the Burmese market labeled “Regal Seven.”
The Dutch brewer’s entry follows Danish company Carlsberg opening a factory just two months ago.
But both companies must compete with the dominance of Myanmar Brewery, part of the military-controlled conglomerate Union of Myanmar Economic Holdings. The Financial Times said the company, which brews Myanmar beer as well as Tiger, currently holds an estimated 80 percent of the local beer market.
“Breaking into a market in which the incumbent is a state-owned monopoly is difficult and can be expensive,” Javier Gonzalez Lastra, an analyst at German financial institution Berenberg told the Financial Times. “Heineken should be prepared to make losses initially, with a view to making money over the long term, because Myanmar has huge growth potential.”
