The Irrawaddy Business Roundup (June 27, 2015)

By Simon Lewis 27 June 2015

Phone Tower Builder Seeks Advice as It Expands into Conflict Zones

A mobile phone tower company is consulting local experts to develop a plan for dealing with security as it moves to expand Norwegian provider Telenor’s reach beyond central parts of Burma, according to a recent filing.

Burma’s government opened up the telecommunications sector to competition with the aim of bringing the benefits of mobile connectivity to all corners of the country. Two private firms, Telenor and Qatar’s Oordeoo, launched mobile phone and internet services last year and have pledged to reach 75 percent of the population in the first five years of their 15-year licenses.

But doing that involves reaching parts of the country where the central government does not have full control, with more than a dozen non-state armed groups (NSAGs) operating in border areas.

Telenor has subcontracted Apollo Towers Myanmar to build its masts. Major shareholders include two US entities, Tillman Global Holdings, and TPG Holdings. The company has already built 1,000 towers for Telenor and in May said it had received an order for 700 more.

In a filing with United States Embassy in Rangoon published by the embassy on June 18, investment firm TPG Holdings reported on its investment in Apollo Towers, under American government rules that state that any company investing more than $500,000 in Burma must lodge reports on the human rights impact of its project.

The filing said Apollo Towers had already enlisted private security firm IDG Myanmar to provide security at “a small number of vulnerable tower sites where passive security measures have yet to be installed.” While these security guards are unarmed, according to the filing, Apollo Towers is seeking further advice as it expands into areas where conflict is more likely to be an issue.

“Moving into the second construction phase, which will take place to a greater extent in conflict-affected regions, Apollo Towers is consulting local experts in developing a security management plan, incorporating an assessment of project security risks in alignment with the International Finance Corporation’s Performance Standard 4 and the Voluntary Principles on Security and Human Rights,” it said.

“Apollo Towers recognizes, in particular, the importance of communication and engagement with local groups prior to entering any region, in order to prevent conflict and ensure that all parties and stakeholders understand and are not adversely affected by activities to be undertaken.”

TPG, which is also investing in microfinance in Burma through a company called Pacific Star, is part of the massive TPG investment firm, formerly known as Texas Pacific Group.

In a draft impact assessment on the information and communications technology sector, published in February, the Myanmar Centre for Responsible Business noted that the dynamics of the race to expand phone networks “may push companies to consider roll out to areas that still have active armed conflicts as they will have dwindling options to choose ‘safe’ (i.e. non-conflict) areas.”

The group warned that extra precautions should be taken if companies deal directly with the Burma Army, which has a record of human rights violations. The assessment also noted difficulties concerning the presence of land mines, hiring security providers, and dealing with the ethnic armed groups who control territory in border regions.

“As the de facto authority in their areas, their agreement is necessary for any activities to take place,” it said. “Companies should be aware of whom they are consulting with (or who those acting on their behalf are consulting with), and understand the risks of not consulting with NSAGs.”
Pizza Hut to Follow KFC Into Burmese Market

With US chicken outlet KFC expected to open it’s first restaurant in Rangoon on Tuesday, the next major international fast-food franchise may be on its way before the end of the year.

Workers were putting the finishing touches on a large KFC outlet on Bogyoke Aung San Road in downtown Rangoon this week. The large signboards displaying Colonel Sanders mark the first big American chain to find its way into Burma, four years after the government began opening up the economy.

But a report posted on Retail News Asia on Monday suggests that another chain of KFC’s parent company, Yum! Brands, is also on its way.

“Hong Kong’s Jardine Restaurant Group has gained the rights for Pizza Hut Myanmar and can open the primary restaurant there in November,” the report said.

The report said Burma’s first Pizza Hut restaurant would be opened on Dhammazedi Road, in Rangoon’s Bahan Township. According to the Myanmar Times newspaper, local supermarket group City Mart, which runs the Market Place shopping center on the same road, is also involved in the deal.

In other Asian markets, Jardine Restaurant Group, part of the Hong Kong-based Jardines conglomerate operates Pizza Hut as well as KFC. However, in Myanmar the franchise for KFC was won by Serge Pun’s Yoma Strategic Holdings.

Already operating in the country are South Korea’s BBQ and Lotteria, Thailand’s Pizza Company and US ice cream company Swensen’s.

Irish Marketing Company to Enter Burma

Irish digital marketing firm Brandtone is planning to expand its operations into Burma, according to a report from Dublin-based newspaper The Independent.

The report said the company, which already operates in other developing nations, had raised more than $20 million in funding for an expansion, including its move into Burma.

According to its website, the company already has offices in Indonesia, India and China and elsewhere outside of Asia. Brandtone’s pitch is that it enables clients to “engage” with potential customers via their phones, and the move to expand into Burma appears timed to coincide with the boom in mobile users in the past year.

“The marketing business, which has 130 staff, is also widening its client base to include financial, agrichemical and healthcare brands. Its current clients are mostly consumer goods companies like Unilever and Kelloggs,” The Independent reported.

“[Brandtone] helps brand[s] to market in areas with low smartphone penetration, running SMS-based reward schemes in some instances and building up a database of shopper profiles in countries like India and China.”

Gap Inc., H&M Back Labor Reform Initiative

Global garment retailers Gap Inc. and H&M have stated their support for a United States-led initiative to improve labor rights in Burma’s growing apparel sector.

Gap and H&M, based in the United States and Sweden, respectively, issued a joint statement this week following a stakeholders forum held by the International Labor Organisation in May. The forum was part of the Initiative on Labour Law Reform and Institutional Capacity Building, first proposed by the United States last year—later backed by Japan, Denmark and the European Union—amid concerns that international buyers returning to the garment sector after years of sanctions would find an environment lacking in guarantees for workers’ rights.

Gap Inc. was the first major American brand to announce that would begin sourcing from Burma following the suspension of sanctions. In June 2014 it began sourcing “Made in Myanmar” clothing for its Old Navy and Banana Republic brands.

H&M placed test orders with factories in Burma in 2013, and is among a raft of major European labels now sourcing from the country.

The companies said they “welcome Myanmar’s commitment to the labor law reform process,” adding that the reforms must be comprehensive, understood by stakeholders, appropriate for the Burmese context and consistent with international standards and conventions.

“We are committed to working with our suppliers and other stakeholders in Myanmar to secure continued progress towards the widespread implementation of global best practices so that the garment sector can play a meaningful and helpful role in Myanmar’s continued economic, social and democratic development,” the statement said.

Burma Opens Trade Office in Taiwan

Media in Taiwan said the Burmese government has opened a new trade office in Tapei as it seeks to draw more investment from the country.

The office, which opened on Monday, is headed by Burmese Commerce Ministry official Thet Lwin Oo, the Taipei-based China Post reported, citing a statement from the Taiwan Ministry of Foreign Affairs (MOFA).

The report noted that trade between the two countries had risen since Burma lifted some restrictions on trade with Taiwan in January 2013. It said trade had risen by 20 percent year on year to reach $328 million in 2014.

“The office will be responsible for promoting bilateral exchanges in trade, investment, business, transportation, tourism, culture, agriculture and animal husbandry,” the report said.

“MOFA welcomed the opening of the trade office, saying that the move is expected to enhance ties that will be beneficial for both sides. The ministry said it is looking forward to working closely with the office.”