Business

The Irrawaddy Business Roundup (June 20, 2015)

By Simon Lewis 20 June 2015

Danish Turbine-maker in Wind Farm Plan for Mon State

Burma could soon add more renewable power to its energy mix, as the world’s largest producer of wind turbines signed an agreement with a local company to explore a wind farm project in Mon State.

Myriad plans for new power generation are being touted as Burma looks to meet rising demand for energy, with domestic industries expanding and electricity consumption increasing among the general population.

Some new gas-fired power plants have already come online, and more are in the works, taking advantage of the country’s supply of natural gas from offshore fields. Other plans for hydroelectric dams and coal-fired power plants have garnered considerable resistance from local activists and environmental campaigners, however.

According to a statement from the Danish Embassy in Rangoon on Monday, new renewable energy could be coming to Mon State in the form of wind turbines. The statement said that Danish wind company Vestas signed an agreement with local firm Zeya & Associates on June 11.

“The partnership will initially focus on the development of wind energy in the south eastern region of Myanmar’s Mon State and will establish the foundation for a long-term cooperation between the two partners,” it said.

Few details were given about the project, and Vestas—which Bloomberg has called the largest wind turbine producer in the world—provides turbines for both offshore and onshore wind power projects.

“The country is facing the challenge of a rapidly increasing power demand and wind energy can provide a sustainable solution to energy security and at the same time a sound business case for investors,” the statement added in a quote attributed to Vestas head of marketing for the Asia-Pacific and China.

The project’s local partner, Zeya & Associates, is headed by Zeya Thura Mon, a Burmese businessman who is the local distributor for Thailand’s Gunkul Engineering—which has also been linked to wind-power plans in Burma. Zeya Thura Mon’s firm has branched out into importing consumer electronics and medical devices, and operates the Hlawga Power Plant, providing electricity to Rangoon.

According to UK-based consultancy the Oxford Business Group, the Burmese government is actively promoting wind energy, and has been seeking investment to develop the sector. However, current energy generation from wind is small, according to the group’s The Report: Myanmar 2015.

“Among the small wind farms currently in operation are a 1.2-kW wind turbine in Kyauske Township, a 1.2-kW plant at the Government Technical High School in the Ayeyarwaddy region and a 3-kW wind turbine that belongs to the Ministry of Science and Technology,” the Oxford Business Group said.

“In late 2013 power producers from China and Thailand revealed that they were doing feasibility studies for generating windmill-generated electricity in nine locations across Myanmar. According to MOEP, Thailand’s Gunkul Engineering Public Company will generate 2930 MW in its plants while Three Gorges Corporation of China aims to have a capacity of 1102 MW. The farms are expected to be operational in 2015 and will reach their maximum capacity by 2018.”

Draft Companies Law Published for Consultation

Burma’s Directorate of Investment and Companies Administration (DICA) has invited feedback on a new draft law intended to modernize business registration regulations in the country.

DICA has published a draft of the new Myanmar Companies Law on its website in both Burmese and English.

The Global New Light of Myanmar reported that the new law marked “the modernization of the country’s century-old Companies Act 1914” and said the Asian Development Banks had assisted with the drafting.

“The DICA has sought consultation from businesspeople and members of the public to provide input on modernization of the new legislation by email, post or fax to its offices in Yangon, Nay Pyi Taw and Mandalay, as well as Shan and Mon states,” the state-run newspaper said.

Of interest to overseas investors will be how the law deals with foreign ownership of companies. Currently, foreign companies—defined as any company with a foreign national holding any shares—are blocked from operating in certain sectors, and their ability to own land in Burma is highly restricted.

The draft says that foreign companies are those in which “an overseas corporation or other foreign person (or combination of them)” have a specific amount of ownership, suggesting that some foreign ownership of local companies will be allowed.

However, the current draft does not specify how much of a company may be foreign owned before the company is considered foreign under the law.

Daewoo Sell Off Denied, Despite CEO Walkout

South Korea’s Daewoo International Corp insists it is not selling off its assets in Burma, according to an industry report, despite the company’s CEO leaving the company this week after criticizing the touted sale.

Rumors of a sell-off swirled in the South Korean press amid a restructuring of Daewoo International initiated by its parent company, the massive steelmaker POSCO, also from South Korea.

Daewoo International has stakes in two offshore oil and gas blocks in Burmese waters, including the Shwe field, which began producing gas in 2013 and feeds the Chinese-built Shwe Gas Pipeline linking the Arakan State coast with China’s Yunnan province.

The site Rigzone reported this week that the company is insisting the sale is no longer on the cards. The industry news site quoted an unnamed Daewoo International official saying: “It’s not going to happen. POSCO have decided not to sell the gas fields [in Burma].”

Reports have said the parent company hoped to make some $1.3 billion from the sale. However opponents, including Daewoo International’s CEO, Jeon Byeong Eal, argued that the company was better off holding on to the project, which reportedly earns Daewoo International some $350 million annually.

According to website Business Korea, the company announced that Jeon would be replaced by Vice President Choi Jung-woo following a board meeting Tuesday.

The Korea Herald newspaper reported that Jeon explained that he resigned as he felt his opposition to the plan had led to a loss of confidence among shareholders.

“Having thought about what would be the future-oriented measure for the group, the company and all those concerned, I concluded that resigning is the quickest way to end the situation,” Jeon said, according to the Korea Herald.

Workshop Hopes to Extend Credit to Burma’s SMEs

The growth of Burma’s small- and medium-sized enterprises (SMEs) is being restricted by a lack access to finance, according to the Asian Development Bank, which is running an event to address the issue in Rangoon this week.

“SMEs are the backbone of the private sector in Myanmar—accounting for over 90% of companies and over 70% of employment,” said a statement marking the start of the four-day workshop run by the ADB in collaboration with the Myanmar Banks Association.

“However the sector has been hampered by a lack of access to finance, partly because of restrictive collateral requirements, but also because of a lack of capacity among local banks to assess and manage operational and credit risks for smaller businesses.”

The workshop is intended to encourage Burma’s banks to lend more to SMEs, with staff from 19 local banks, as well as from the Central Bank, expected to attend.

“Participating bank loan officers and risk managers will gain practical insights into formulating credit policy, assessing loan applications, and monitoring loan portfolios more effectively,” the statement said.

US Real Estate Firm Eyes Burma Expansion

United States-based real estate company Re/Max may soon have a presence in Burma, according to a statement.

The company headquartered in Denver, Colorado, says it operates in nearly 100 countries worldwide through a franchise network in which offices using the Re/Max brand act as local real estate agents. A statement June 17 said that the company was offering new franchise opportunities across Asia, including in Burma.

“RE/MAX in Asia currently consists of operations in China, Guam, India, Indonesia, Japan, Mongolia, Northern Mariana Islands, Palau, Philippines, Singapore, South Korea, Sri Lanka and Thailand,” the statement said.

“It is currently seeking franchise candidates for each of these countries, as well as Hong Kong, Macau, Myanmar, Taiwan and the Federated States of Micronesia.”

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