The Irrawaddy Business Roundup (May 16, 2015)
By Simon Lewis 16 May 2015
International Names in Race to Develop Southern Burma Islands
International investors are among 13 tourism developments in southern Burma’s Mergui Archipelago to receive government approval and a Singapore-based firm may be close to getting the green light for a “mega project” on one of the islands, according to an industry news site.
TTG Asia said in a report on Thursday that 13 out of 27 proposals for hotel projects on islands off Mergui, also known as Myeik, were given the green light by the Myanmar Investment Commission (MIC).
Investors are clamoring for approvals to develop the largely untouched collection of 800 or so islands. The government has singled out the area as a priority for tourism projects, while concerns have been raised that development could ruin an area of natural beauty and biodiversity.
Little is known about most of the companies trying to move into the islands, but the Myeik Public Corporation, a consortium of local businessmen, has announced plans to invest US$4 million in a resort development.
“One of [the approved developments] is UAE-based investment company Gecko Holdings which, together with local Kyaw Win Phyo Company, formed a joint venture called Mokan to build a hotel on a 2,060 [hectare] site on Kyunphelar island,” the TTG Asia report said.
Gecko Holdings Group, also known as Andawar, did not respond to a request for comment. According to its website, the company has a presence in Dubai, Denmark, Sweden and Rangoon. The island project is the first venture for the company, which claims to be “developer of world-class eco-tourism destinations in Myanmar.”
Another company reportedly trying to invest on the islands is Zochwell Group, a Singapore-incorporated entity that also appears wholly geared toward investing in Burma. TTG Asia reported that the group is “expecting to sign a contract to develop a US$1.2 billion project, including a casino, on Salon Island” in the archipelago.
“TTG Asia e-Daily understands that the group has attained approval from the Thanintharyi [Tenasserim] regional government, but is awaiting consent from the Ministry of Hotels and Tourism and MIC,” the report said.
Zochwell has been touting the “Luxdream Mega Project” since at least 2013, when a video was posted online showing plans to turn the rugged jungle-covered island adjacent to the Thai town of Ranong with hotels, golfing fairways and a theme park.
According to its website, Zochwell has “a wide array of development portfolio [sic] in Myanmar including hotels & island developments, and condominium & apartment developments” as well as a cement plant.
A former Burmese military official, retired Major Kyaw Kyaw, is listed as director of Zochwell Myanmar Co. Ltd. “His last held position in the army prior to his retirement was with the Military Intelligence Headquarters where he developed a skill for interrogations,” the firm’s website said.
Since retirement, the firm said, Kyaw Kyaw has taken to the construction materials business with “a burning entrepreneurial spirit” and also pushed a “strong passion for mining.”
The firm said that Kyaw Kyaw “is currently in a Joint Venture partnership with a China based company in developing an 800 acre mine in Kawthaung,” the closest Burmese town to Salon island.
Delayed Mining Law May Be Holding Back Investment
The wait for a new law to regulate Burma’s mining sector may extend beyond elections this year, a report from the Wall Street Journal this week suggested, amid concerns that the slow pace of legislative change is holding back potential investors in the extractive industry.
A story on the Frontiers section of the New York-based newspaper’s website cited Ministry of Mines Director General Win Htein saying that lawmakers could not agree on how revenues would be shared from the vast mineral wealth thought to be sitting beneath Burma.
The new law has been in the works since 2012, but amid ongoing conflict in Burma’s ethnic states, the issue of resource sharing is highly controversial.
“Analysts have warned foreign investors against hoping for any major legislative change before Myanmar’s upcoming general elections, scheduled for this November,” the Wall Street Journal report said.
Business groups have been lobbying hard to get the law passed, and it is thought the existing rules on mining may be a stumbling block for Western firms wanting to enter an industry currently dominated by opaque Chinese investments.
“Myanmar’s current mining law dates back to 1994,” the report said. “It includes no protections for foreign investors and shuts them out of important sectors such as coal and gold, forcing foreigners to partner with local companies if they are interested in these materials.”
In an analysis of Burma’s mining sector published late last year, lawyers Norton Rose Fulbright also highlighted the difficulties posed by a burdensome permitting regime requiring companies to repeatedly seek authorization at different stages of a project.
“The lack of a new mining law is undoubtedly a contributing factor to the sector’s inability to attract significant foreign investment,” the analysis said, adding that problems around land acquisition were also a concern.
“Foreign investors are particularly sensitive to land acquisition and permitting issues, given that these are a prerequisite for any company seeking bank finance with a security package that will satisfy potential lenders.”
Mekong Bridge Opens Connecting Burma and Laos
Cross-border trade between Burma and Laos could benefit from the inauguration this month of the first bridge spanning the Mekong River between the two countries.
The Global New Light of Myanmar reported that Burmese President Thein Sein officially opened the bridge on May 9 with the unveiling of a stone plaque on the Burmese side of the “Myanmar-Lao Friendship Bridge” in Tachilek township.
Both governments hope that the new link will help development in the Golden Triangle region, an area historically dominated by smuggling and the opium trade. The Burmese side of bridge is in eastern Shan State, where a number of ethnic armed groups still control large swaths of territory.
The state-run newspaper cited Burmese Foreign Minister Wunna Maung Lwin saying that the bridge will form part of the regional Northern Economic Corridor, which will link Kyaukphyu on the coast of Arakan State with Haiphong in Vietnam and the South China Sea.
According to Chinese state news agency Xinhua, the bridge is almost 700 meters long, and cost $26 million to build. The agency said the bridge can withstand vehicles weighing 75 tons, and cited Lao Foreign Minister Thongloun Sisoulith calling the inauguration a “significant historic milestone between the two nations.”
“The move will also help create cross-border trade and ease transportation between the two nations and their neighbors, including China, Thailand, Vietnam, Bangladesh and India,” the agency paraphrased the Lao minister saying.
CB Bank Joins Indian Firm in Agricultural Finance Venture
Indian company SLCM Ltd. has joined up with Cooperative Bank (CB Bank) to offer finance to Burma’s farmers, according to a report in the Mumbai-based Economic Times newspaper.
The report said that SLCM, a subsidiary of Sohan Lal Commodity Management, would allow Burmese farmers to get credit using their produce as collateral.
“The step is aimed to provide agri-financing solutions to farmers, processors, traders, exporters and importers across Myanmar,” the report said, adding that CB Bank will allow farmers to pledge up to 60 percent of their crop in order to secure loans at an annual interest rate of 13 percent.
The commodities would be stored at SLCM warehouses in Burma, it said. SLCM also tied up with Yoma Bank earlier this year.
“This is the second tie-up that we have formalized in 2015 in Myanmar after the MoU with Yoma Bank earlier this year,” the Economic Times quoted SLCM chief executive officer Sandeep Sabharwal as saying.
“Our output has been very encouraging from the earlier association and the way in which we are seeing a paradigm shift in Myanmar’s economy and policies, especially relating to agriculture and collateral financing, we are determined to further explore the region and fourfold our presence there.”
Thailand’s SPCG Looks to Expand Solar Presence in Burma
Thai company SPCG Public is expected to set up solar power “mini grids” in Burma before the end of the year, according to a recent report.
Japanese news agency Nikkei reported an interview with the Bangkok-listed company’s CEO, Wandee Khunchornyakong, highlighting Burma as a growth market for SPCG. The report described the company as “Thailand’s largest solar power company,” adding that the firm has 36 solar farms generating a total of 260,000 kilowatts of power in Burma’s neighbor.
“Mini grid capable of generating up to 1,000kW will supply electricity to plants and homes in Yangon, Mandalay and other cities in Myanmar,” Wandee was cited as saying.
“Demand for electricity is set to grow in Myanmar as the country pushes forward with industrialization, according to Wandee,” the report added.
The CEO estimated that the so-called mini grids would cost about $2 million each to build, and said that funding would come from World Bank Group and Japanese electronics company Kyocera, according to Nikkei.