The Irrawaddy Business Roundup (June 4, 2016)

By Simon Lewis 4 June 2016

World Bank Suggests Incentives to Boost Burma’s Power Supply

With residents of Burma’s major cities suffering regular blackouts and brownouts during the hot season, and with two-thirds of the population not connected to the electricity grid, the World Bank has offered advice on how the new government could boost supply.

In its regular Myanmar Economic Monitor report, published May 31, the Bank predicted that overall economic growth would rebound—after flooding and political uncertainty during the 2015-16 fiscal year—to a healthy 8.2 percent per year over the medium term.

But the lengthy report highlighted that, among other lingering problems holding back the economy, access to electricity is a major priority if the government is to increase productivity and competitiveness.

In a “policy watch” section of the report, the authors noted the positive signs from recent oil and gas explorations tenders. And alongside the billions of dollars being poured into locating new energy sources, they expect about $2 billion of investment per year in power generation.

However, there could be a shortfall in investment, especially on the generation side, with a total of $30 billion needed over the next 15 years to realize the National Electrification Plan and to meet rising demand for electricity.

The previous government signed deals with private companies to provide power to the national grid, including a number of agreements that see some of Burma’s share of production from offshore natural gas fields supplied to private power producers, who then produce power and sell it back to the grid.

In one of the biggest such deals, Singapore’s Sembcorp signed an agreement with the outgoing government in March that means the state will buy power from a power plant in Myingyan, Irrawaddy Division, which will be fueled by gas from the Shwe field in the Bay of Bengal.

The World Bank warned, however, that the current arrangements may not be attractive enough to draw the total amount of investment needed in power generation in the long run. Specifically, it said, gas destined for export and gas sold domestically are currently priced the same. That situation does not encourage the domestic use of gas supplies to meet the country’s power shortfall, the Bank said.

“When the domestic gas price is set too high, this can encourage energy and electricity suppliers/users to switch to other energy sources, including higher carbon sources such as diesel and coal,” it said, suggesting the government consider revising the pricing scheme so that domestically sold gas would be cheaper than that which is exported.

“An updated domestic gas pricing framework could allow the Myanmar authorities to enhance the electricity tariff structure, which is a crucial factor toward achieving universal access to electricity by 2030.”

The report also recommended changes to the electricity tariffs to “better reflect the cost of supply and support new investment.” Moves in this direction are likely to be controversial, however, since announcements under the previous government that electricity prices would rise were met with street demonstrations.

Burmese Firm Wants to Raise $100M in Singapore

A Burmese company is looking to raise as much as $100 million to fund projects in the country by listing its shares on Singapore’s stock exchange.

According to its website, Golden Glory Group Pte is a Singapore-incorporated property developer headed by Khin Maung Aye, the owner of the Lat War Garment Factory.

The company’s CEO, Christopher Wu, told Bloomberg that the company will launch an initial public offering before the end of 2016.

Wu reportedly said the IPO plan—which would seek to raise between $80 million and $100 million—was tied to the new optimism around Burma following the political transition, which has seen the United States further ease sanctions.

“The door has opened,” Wu said. “More foreign companies are setting up offices.”

Golden Glory Group’s website lists two projects currently under development. First is the Polo Club (Asia) Residence, a flashy mixed-use development to include “residential condominiums, hotel, service apartments, commercial and retail space.” The development in Rangoon’s Tamwe Township was scheduled to begin in the first quarter of 2015.

Then there’s a “future industrial park” planned for Pegu Division, to cater to light industrial production—i.e. factories making garments and other textiles.

The company’s website also gives some details about Khin Maung Aye, who has the same name as the head of KMA Group and CB Bank, a different person.

According to the account, Golden Glory Group’s Khin Maung Aye qualified as a medical doctor (graduating from Rangoon’s University of Medicine 1) in 2001, after working for the family owned Union Rubber Factory from 1990 onward.

The budding tycoon also acted as a real estate agent and investor in the 1990s before establishing the Lat War garment company. He took over a Ministry of Industry-run paper factory in 2013, and has also expanded his property interests in more recent years, the website says.

Competition Brewing in the Instant Coffee Market

Singapore’s Super Group, which operates in Burma through the joint venture Super Coffeemix Limited and produces some of the country’s most popular instant hot drinks, is now facing stern competition, according to analysts.

An analysis of Super Group’s Burmese venture by financial information service RHB Invest this week estimated that the firm’s share of the instant coffee market in Burma is between 40 and 50 percent. But the company will have to work harder as competition increases, the analysis said.

“Given the predominantly traditional trade channels in Myanmar, we think [Super Group’s] biggest strength in this market lies in its partner’s nationwide distribution network and the JV company’s ability to sell—even in rural villages,” it said.

“However, we believe that the in modern trade channels, it is facing increasing competition from rivals [especially Nestle].”

The company was already working to rebrand its products in Burma, it said, highlighting the launch of a new product named Essenso Microground Coffee.

Thai Construction Firm to Produce Concrete in Burma

Narawat Patanakarn, one of Thailand’s largest construction companies, is reportedly planning to set up a factory in Burma to make the pre-cast concrete that is used for flooring, fencing and foundations.

The company’s president, Polpat Karnasuta, was quoted in the Nation newspaper saying the Bangkok-listed company had reached an agreement with an unnamed local company to open the factory before the end of the year.

With imports of construction materials currently high in Burma, the factory would make pre-cast concrete products in country. Such products are used for the construction of homes, small buildings and other infrastructure like electricity poles, the Nation said.

“In addition, the listed company is conducting a feasibility study on whether to invest in the hotel business in Myanmar, for which it expects to complete a joint-venture deal with a local firm there by the end of this year,” the report cited Polpat saying.

“Nawarat Patanakarn is also eyeing participation in infrastructure projects in the neighbouring country,” it added.

Former ILO Liaison Appointed Kiwi Ambassador

Steve Marshall, the former International Labor Organization’s (ILO) liaison officer in Rangoon, has been appointed as New Zealand’s new ambassador to Burma.

According to the New Zealand government’s official website, Foreign Minister Murray McCullay announced the appointment on June 1.

The nation upgraded its diplomatic presence in Burma to a full embassy in 2014, the minister said, reflecting the country’s support for Burma’s transition.

“Mr Marshall brings a unique mix of skills and experience to the role and in addition to being charged with further developing the relationship between our two countries, he will also be responsible for our growing aid programme in Myanmar, which is focused on agriculture and skills development,” McCully was quoted saying.

Marshall, a former policeman, was the CEO of the New Zealand Employers Federation during a turbulent time for the country’s industrial relations, according a profile on the New Zealand Listener website.

He joined the ILO in Geneva in 2001 before moving to Rangoon in 2007, and reportedly counts State Counselor Aung San Suu Kyi as a friend.

During eight years on the job in Burma, he also dealt closely with the former military junta, leading efforts to convince the generals to address the massive forced labor issues in the country at the time.

A 2007 U.S. Embassy cable released by WikiLeaks characterized Marshall as “a straight talker.” He believed his background as “not a career diplomat” had meant that he was an acceptable interlocutor for the Burmese government at the time, the cable said.