The Irrawaddy Business Roundup (March 19, 2016)

By Simon Lewis 19 March 2016

Yoma Bank, Telenor to Invest in Mobile Payments Joint Venture

Yoma Bank and Telenor are set to invest more than $8 million each over the next year in their new mobile payments joint venture, according to a company filing.

Mobile money is expected to be a growth sector as the expansion of access to mobile phone and internet services coincides with efforts to give more people access to financial services. Burma’s large rural population and the large number of both internal and external migrant workers mean an affordable and convenient way to transfer funds could prove highly popular.

One of the country’s largest banks and the leading private mobile phone operator, at least, seem to think it’s worth a punt.

Yoma Bank’s majority shareholder First Myanmar Investment is set to be the first company to list its shares on the Yangon Stock Exchange when trading opens on March 25. Alongside an announcement March 14 that it had received listing approval, FMI published a lengthy disclosure document for listing.

Among the disclosures is a section on the “strategies” of Yoma Bank going forward. While the bank’s “primary focus” would be on growing loans to small- and medium-sized enterprises, the filing said, the bank would attempt to “establish internet banking.”

The first digital financial product on offer is Wave Money, a service from Digital Money Myanmar, a company in which Yoma Bank holds a 49 percent stake. The remaining 51 percent is owned by three subsidiaries of Telenor Group, the Norwegian company that has raced to more than 14 million subscribers in less than two years of operations in Burma.

Testing of the Wave Money service—which promises low-cost cash transfers on your mobile phone—was announced in November, but a formal launch has not yet been held. The FMI prospectus said Wave Money should be online by the end of the current fiscal year, or March 31.

Yoma Bank will be putting money into the company over the next year, as and when it is called for, the filing said.

“Yoma Bank expects to invest all of the US$8.33 million before the end of FY 2016-2017. The other shareholders have also agreed to invest additional money in proportion to their current shareholding,” it said, implying that a total of about $17 million will be pumped into Wave Money over the next year.

In a separate section that listed comprehensively the risks faced by FMI’s businesses, the disclosure document noted that Wave Money faces competition from existing mobile payment services Myanmar Mobile Money, 663 Mobile Money and MyKyat, as well as other planned mobile payment services.

New regulations on the sector could also be a risk, it said.

“Digital Money Myanmar may be subject to increasing regulatory constraints, particularly with respect to money transfers,” the filing said.

“There is not yet a robust regulatory framework covering mobile payments in Myanmar, and any changes to existing regulations could adversely affect Digital Money Myanmar’s business, financial condition and results of operations.”

Insurance Giant AIA ‘Committed’ to Expansion in Burma—at Some Point

Hong Kong-based insurance company AIA Group wants to enter Burma, but will wait for the country to “open up” more, the firm’s chief executive told Nikkei Asian Review.

The Japan-based media outlet this week published an interview with Mark Turner, the CEO of AIA, a company that already has a significant business in Burma’s neighbor, Thailand, and also plans to expand into Cambodia.

It has been estimated that Burma’s insurance sector could be worth $2.8 billion by 2030. The government has begun to allow foreign insurers to operate in the country. But tight regulations on the industry, which was until recently monopolized by the state insurer, have largely kept out private insurers.

Asia’s largest insurance company, AIA has had a presence in Rangoon since 2013, but at present it can only operate a representative office.

In his interview with Nikkei Asian Review on Wednesday, Tucker indicated that the firm would like to expand its operation in Burma. But he suggested that would only happen if the new National League for Democracy-led government makes the right changes.

“At the right time, when they open up, we are committed to building a business in Myanmar,” Tucker was quoted as saying.

France’s Accor Plans Six More Hotels in Burma

French hotel chain AccorHotels plans to open an additional six properties in Burma by 2019, the company’s chief operating officer told Reuters.

The newswire reported that AccorHotels, which operates hotels globally under brands including Pullman, Novotel and ibis, was expecting strong growth in Burma because of “a low base, even as hotel numbers tripled over the past three years and revenue per available room fell 20 percent last year.”

AccorHotels currently runs The Lake Garden hotel in Burma’s capital, Naypyidaw, as part of its MGallery boutique brand. It also has the Novotel Inle Lake Myat Min in Shan State and the Novotel Yangon Max. The latter hotel Accor operates in a partnership with Max Myanmar, the local conglomerate owned by US-blacklisted tycoon Zaw Zaw.

Plans for a five-start Pullman hotel in Rangoon, also involving local firm Myat Min, have previously been announced.

Multimillion-Dollar Investment Planned in Thilawa Fertilizer Plant

Japan’s Mitsui & Co. and Singapore-based chemicals firm Behn Meyer are set to invest $10.8 million to set up a fertilizer plant in the Thilawa Special Economic Zone (SEZ) close to Rangoon.

According to a statement, the two firms have just formed a joint Singapore-based investment company, BMM Venture. That company and Myanmar Agribusiness Public Corporation Limited (Mapco) had in turn established Agri First Co. Ltd, a Burma-based company that will manufacture and distribute fertilizer in Burma.

The company would invest about 1.2 billion Japanese yen ($10.8 million) on a plant at the Japanese government-backed trade hub Thilawa, with the capacity to produce 100,000 tons of fertilizer each year, it said.

Mapco has been touted as one of the first local firms that may list on the Yangon Stock Exchange. The statement, posted on Mitsui’s website last week, said Mapco was a valuable partner for its “network with agribusiness operators” in Burma.

The companies said in the statement that they expect “rapid growth in the agricultural sector” in Burma, pointing to the country’s vast area of farmland (some 2.8-times more than Japan has, the statement claims), and its suitability for double cropping.

“Fertilizer demand in Myanmar is currently just over one million tons,” the statement said. “This is equivalent to only one-fifth of the level in countries with similar farmland areas and crop types, such as Vietnam and Thailand, and demand is therefore expected to grow rapidly.”

State Media Says One Unlikely Export Is Booming

With total exports said to have already topped $10 billion in the current fiscal year, a tiny proportion of that may be coming from an unlikely source—human hair.

If a report carried by Burmese state media is to be believed, demand for hair in China is creating a booming cottage industry in some parts of Central Burma. The report, from Myitmakha News Agency, said employment from the hair trade was booming in villages in Pyawbwe Township, Mandalay Division.

The report did not go into detail about how donors for hair are found, or whether or not they are compensated. “The wholesalers buy the hair they sell to China from human hair traders around the country,” it said.

The hair is reportedly useful for productions of “historical movies and soap operas” in China, and Burmese workers are employed to sort “bundles” of hair in their own homes.

“Human hair enterprises have provided a form of employment for local women who work to untangle and straighten 160 grams of hair between 7 am and 5 pm daily, for which they are paid a daily wage,” the report said

“The business of buying and selling human hair started in Mandalay Region in 2015,” it added. “There were initially just four hair wholesalers in Yindaw village, but now there are over 20 wholesalers.”