Business

The Irrawaddy Business Roundup (March 12, 2016)

By Simon Lewis 12 March 2016

Dramatic Redevelopment of Rangoon Railway Station Moves Forward

The state agency Myanma Railways wants to push rapidly ahead with an ambitious plan to redevelop Rangoon’s Central Railway Station, state media reports.

The Global New Light of Myanmar on Wednesday reported an announcement from Myanma Railways saying it had received expressions of interest from more than a dozen companies, including two joint ventures with American investors, in a tender to develop the station.

The agency’s general manager for Lower Burma, Tun Aung Thin, was cited saying that the winners of the tender would be selected in May this year. The project will “launch” in May 2017, the report said.

“Fifteen companies including five from Myanmar, two from Singapore, two joint-venture companies with the US, two from Korea and three from China sent Expression of Interest [EoI] for the project when MR invited the tender for the second time in July last year,” the report said.

Myanma Railways wants total investment in the railway station in the city’s downtown, to reach more than $2 billion, presumably coming from the tender winner.

An illustration published with the report showed two tall towers, and five shorter blocks, sticking out of a new station in the spot where the existing rail yard sits. Perhaps ominously for defenders of Rangoon’s skyline and architectural heritage, the state newspaper also cited “sources” saying that the area of the station set to be developed does not fall within areas authorities have set aside for building height restrictions.

It also suggested that locals might be moved from their homes to make way for the development. “So far, the Resettlement Action Plan and the Conceptual Plan for the project have already been drawn, according to MR sources,” the report said.

Environmental Campaign Group Reports Break in Logging Trade

The trade of logs across northern Burma’s border with China has fallen dramatically, according to a group that exposed military and ethnic armed groups’ involvement in the timber business. But the London-based Environmental Investigation Agency (EIA) warned that previous lulls in the unauthorized exports of timber had proven temporary.

The government has long banned the export of logs across the border, and timber could only be taken out of Burma legitimately through Rangoon’s port. But the trade went on illegally, and at an unsustainable pace, with the vast profits escaping state taxation. A total ban on the export of unprocessed logs was imposed in April 2014, but still wood worth an estimated almost half a billion dollars was exported in that year, according to the EIA’s September 2015 report, Organized Chaos.

In an update this week, EIA said it had recorded “a sharp downturn in the volume of illegal timber being smuggled between the two countries during the past six months.” That came after the publication of the previous report, and the high-profile case of 155 Chinese nationals arrested by the Burma Army for logging, who were ultimately released in an amnesty after pressure from the Chinese government.

“Field observations by EIA since the report launch indicate that the flow of timber across the border has fallen dramatically,” the update said. “One year ago, EIA documented long lines of trucks queuing to carry valuable logs across the border. This year only small amounts of precious woods are being smuggled via backroads on motorbikes or passenger vehicles.”

The group said a Chinese government crackdown could have caused the hiatus. But it may simply be due to an oversupply in luxury timber like rosewood, the price of which has dropped recently. The demand side may also have been impacted by a recent downturn in the Chinese economy and a broad government crackdown there on official corruption, the proceeds of which are often spent on high-value items like hardwood furniture.

However, EIA warned, “previous reductions in timber flows have proved temporary.”

“Without formal measures to permanently halt timber trade across the border it could quickly resume once the log piles on the Chinese side of the border dwindle and timber prices rise again due to scarcity,” the group said. “One Chinese timber businessman, based in Pianma, has told the media he expected the local government to lift controls on timber imports in March.”

Thai Lion Air Plans to Add to Rangoon-Bangkok Flights

Thai-Indonesian airline Thai Lion Air is planning to add flights between Rangoon International Airport and Bangkok’s Don Mueang next month, according to a report from the CAPA Centre for Aviation.

In an analysis of the low-cost carrier’s plans around the region, citing Thai Lion managing director Capt.Darsito Hendroseputro, the aviation intelligence service said flights would begin in April.

Competition on the route is already intense, with budget airlines Nok Air, Bangkok Airways and Thai AirAsia all connecting Rangoon with the Thai capital city. Burmese domestic carriers Myanmar National Airlines and Myanmar Airways International also both offer flights from Rangoon to Bangkok.

CAPA Centre for Aviation analysis of Burmese government data shows that Thai AirAsia’s flights are on average only 73 percent full.

“However Bangkok-Yangon is a large and growing route, particularly at the budget end,” the report said. “Thai Lion may be strategically compelled to serve Myanmar as it strives to become a significant player in Thailand’s international market.”

Thai Lion Air is an associate company of Indonesia’s Lion Air, but has Thai ownership.

German Retail Giant Weighing Burma Move: Report

German company Metro, which runs large-scale cash and carry stores, is considering expanding into Burma, according to comments from the company’s CEO picked up by Agence France-Presse (AFP).

The newswire said Metro chief executive Olaf Koch was interviewed by German weekly magazine Wirtschafts Woche about the firm’s plans, which include looking at Burma as well as Iran.

AFP said Metro was preparing to expand its international cash and carry business, which already operates in 30 countries in Europe and Asia.

“Myanmar is benefitting from opening up politically and has high growth potential,” Koch was quoted saying. “We’ll decide by the end of the year which way our journey is headed.”

MSG-Maker Ajinomoto Plans to Relaunch Burma Production

Japanese seasoning producer Ajinomoto is reportedly set to invest $10.6 million in Burma and open a new factory in the country, after previously ceasing its operations in the country in 2000.

The Tokyo-based company was the first to sell the compound aji no moto (“essence of taste,” in Japanese), which is better known as MSG, or monosodium glutamate.

According to a report from Japanese media outlet Nikkei, Ajinomoto wants to relaunch in the country next year in hopes of tapping into rising consumer demand. The firm has already set up a new local company, and plans to open a 5,000-square-meter factory in the Japanese-backed Thilawa Special Economic Zone (SEZ) just outside of Rangoon.

“The plant will import monosodium glutamate, or MSG, from Thailand and package it for the Myanmar market,” the report said.

“The operation is expected to start with 100 or so personnel, including salespeople. The Aji-no-moto seasoning will be sold in just Yangon and Mandalay initially. After expanding sales nationwide, the company aims to generate 3 billion yen ($26 million) in annual sales by fiscal 2020.”

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