The Irrawaddy Business Roundup (June 25, 2016)

By Simon Lewis 25 June 2016

Burma Makes UN List of Top Investment Destinations

Burma is one of the top 15 prospective destinations for investment among the executives of companies operating globally, a survey by a UN agency has found.

The United Nations Conference on Trade and Development, or UNCTAD, released its annual World Investment Report this week, which included the results of a survey of multinational enterprises (MNEs).

Reflecting increasing interest in Burma’s economy, the country featured among the 15 “top prospective host countries” for investment for the first time. The survey found that 4 percent of MNE executives who responded to the survey selected Burma among their three most promising countries for future foreign direct investment (FDI) for the years 2016-18.

Burma was the eighth ranked developing economy in the list and the 14th ranked out of all countries. The United States was ranked first, followed by China, which was first in last year’s survey.

Burma also featured elsewhere in the UNCTAD report, which refers to the massive growth of in FDI approvals the country has seen. The government reported that approved projects in the last fiscal year, from April 2015 to March 2016, were altogether worth US$9 billion. That included a last-minute rush of deals signed by the outgoing administration, some of which may be reviewed by the new government.

According to UNCTAD, which looks at the foreign exchange records and other sources to analyze FDI, the actual inflow of investment was $3 billion during 2015 (the report looked at calendar years), an increase of almost 200 percent compared with the previous year.

UNCTAD also predicted positive things for investment in Burma in the future.

“In August 2015, the Governments of [Burma] and Thailand signed an agreement to develop the Dawei Special Economic Zone in the former, for a total investment of $8.6 billion, to be implemented in two phases,” the report said. “FDI flows to [Burma] are therefore set to continue performing well, as the construction of such foreign-invested industrial zones will help boost FDI into both infrastructure and manufacturing.”

Reuters reported earlier this month that new FDI approvals had been on hold since the transfer of power to the new government at the end of March.

A fresh Myanmar Investment Commission had now been formed, however, and its secretary, Aung Naing Oo, told the newswire that about 50 foreign investment proposals worth a total of around $2.3 billion had been submitted during the commission’s downtime.

 Hong Kong Trade Body Sees Manufacturing Potential

Improving political conditions in Burma could make the country more attractive to firms in southern China looking to move manufacturing to Southeast Asia, a Hong Kong trade body has said.

The Hong Kong Trade Development Council said in a statement that a delegation of researchers visited the country recently to study the potential for production.

Facing rising wages for Chinese workers, manufacturers in the Pearl River Delta—a sprawling conurbation that includes the cities of Shenzhen and Guangzhou—are “relocating their production lines to Southeast Asia,” it said.

The researchers said the transfer of power to the National League for Democracy-led government in late March should “usher in national policy reforms and lay the groundwork for the development of the country’s manufacturing sector.”

The government’s commitment to reform could make Burma “Asean’s next low-cost manufacturing powerhouse, a hotspot increasingly drawing the attention of international sourcing companies,” the statement said.

On the plus side, Burma has plentiful and cheap labor, the statement said, noting “a ready pool of young workers for manufacturing industries including garment, footwear, timepieces and food processing.”

However, training and skills were lacking, and the water supply, sewerage and power supply they found in Burma were poor, HKTDC’s researchers warned. “In terms of infrastructure, the country is still at a starting point compared with more advanced Asean countries.”

“The market expects that the receding of political risks and the smooth transition of government will attract a new wave of investment from overseas,” Dickson Ho, HKTDC principal economist for Asian and emerging markets, said in the statement.

“During our fact-finding trip, both government departments and private companies that we met were invariably quite optimistic about the economic prospects of the country.”

 Myanmar Brewery to Sell Kirin Ichiban Beer Brand

As competition increases among beer producers to tap the Burmese beer-drinking market, Myanmar Brewery Limited will begin bottling and widely distributing the Japanese beer brand Ichiban in the country, according to a report.

European brewers Heineken and Carlsberg both started making beer in Burma last year, entering a market dominated by the military-linked Myanmar Beer brand.

Also last year, Japanese company Kirin reportedly paid US$560 million for a 55 percent stake in Myanmar Beer’s producer, Myanmar Brewery, after Singapore’s F&N offloaded its share following a legal dispute with the local shareholder, Union Myanmar Economic Holdings Limited (UMEHL). The conglomerate was founded by the Burmese military and recently became a public company—although most shares in UMEHL are expected to remain in the hands of serving or retired military personnel.

Nikkei Asian Review reported that Myanmar Brewery and Kirin will “produce canned and bottled Ichiban”—the Japanese company’s signature beer, whose name means “Number One.”

It said the beer would be a “premium offering” in Burma, selling for prices comparable to Heineken.

“With a target of having 200 retail stores carry Ichiban by the end of the year, Kirin will step up marketing to supermarkets and other businesses in urban areas,” the report said.

 Thai Lion Air Gets Approval for Busy Rangoon Route

Thai-Indonesian low-cost airline Thai Lion Air has now received approval to begin flights on the already competitive route between Bangkok and Rangoon, according to reports.

Trade publication Routes Online said the new flights would begin on July 22. It said there would be two flights daily each way between Bangkok’s Don Mueang airport and Rangoon’s international airport.

The airline had jumped the gun and announced it would begin flying in May, before being censured by the Thai government for advertising tickets for flights on the route before it was approved by Burma’s Department of Civil Aviation.

The Bangkok Post on Wednesday cited insiders who said the delay was the result of attempts by Burmese airlines to oppose the entrance of a foreign competitor.

The route is already well served, with Thai AirAsia, Bangkok Airways, Thai Airways, Thai Smile and Nok Air, as well as Myanmar Airways International and the Burmese flag carrier Myanmar National Airlines currently connecting the two cities.

 JetStar Adds Singapore Flights After Visa Move

Singapore-based budget airline JetStar Asia will increase its number of flights on the Rangoon-Singapore route to 13 per week when a new visa rule comes in, according to The Straits Times.

From Dec. 1, Singaporeans and Burmese will be able to visit each other’s countries for 30 days without a visa.

JetStar Asia CEO Bara Pasupathi reportedly said three new flights between Singapore and Rangoon would be added to the airline’s schedule at that time.

“The announcement of a visa waiver for travel between the two countries is indeed welcome news for boosting further tourism and more convenient business travel,” Pasupathi told The Straits Times.

“We have served a million customers on this route thus far, and our additional services will cater for the expected increase in people flow between Singapore and [Rangoon].”