Business

The Irrawaddy Business Roundup (May 28, 2016)

By Simon Lewis 28 May 2016

PwC Warns Investors Over Increased Scrutiny

Investors in Burma may find themselves under increased scrutiny if they have entered into business agreements with local companies tied to the previous administration, a major accounting and consulting firm has warned.

In an article published in the Bangkok Post newspaper this week, a manager at PricewaterhouseCoopers Consulting (Thailand), the Bangkok branch of the global firm known as PwC, wrote that political change in Burma could bring uncertainty.

A National League for Democracy-led government took power in late March, and while the military retains control of key security-related ministries, the party of Aung San Suu Kyi can be expected to take a degree of control of the country’s economy.

“Myanmar’s NLD has not publicized a comprehensive economic plan, but the authorities have verbally committed to increasing transparency, fighting corruption and challenging many of the ‘crony capitalist’ characteristics of the old system,” wrote manager George McLeod.

That could mean reviewing government contracts, land deals and tax arrangements, the article said, adding that the new circumstances “may force [existing foreign investors] to examine their relationships and the possibility that their local partner could have their public works projects, tax records and other past conduct revisited.”

New investors, meanwhile, should look at how their local partners attained their wealth, especially if they may have benefited from relationships with officials in previous administrations.

“Local companies engaged in sensitive or highly regulated sectors with significant ‘government touchpoints’ such as natural resources, arms or rice exports [pre-2010] could be especially prone,” it said.

Myanma Railways to Tender $2.2b Upgrade

Burma’s newly formed Ministry of Transport and Communication will call for private companies to bid to take part in an upgrade of the railway line connecting the country’s two largest cities, state media said.

The Global New Light of Myanmar said the work on the Rangoon to Mandalay line was valued at US$2.2 billion. It did not say who would fund the project, but noted that the government’s rail operator, Myanma Railways, was working with Japan’s aid agency, JICA, which has injected large sums into infrastructure projects in the country in recent years.

Citing Myanma Railways General Manager Ba Myint, the report said a transparent tendering process would begin before the end of this year, and the upgrades themselves would go on for 10 years.

“The first phase of the upgrading project will kick off on the Yangon-Taungoo railroad section next year following the tender process. …” it said. “Upon completion, entire journey from Yangon and Mandalay will take only eight hours.”

Industry Group Says the Tin Industry in Burma’s Borderlands Is ‘Still Booming’

The special administrative region of the Sino-Burmese border area controlled by an ethnic Wa armed group continues to turn out large quantities of tin ore and stockpiles remain “sizable,” a tin industry organization has said.

ITRI, a UK-based company that represents and provides data on the tin industry, this week published a news article headed with the words “Myanmar tin ore trade still booming.”

It cited Chinese customs data that show China’s imports of tin ore and concentrates from Burma totaled more than 46,000 tons in April. That makes total output from Burma for the first four months of the year 174,868 tons, of which about 21,000 tons is pure tin, ITRI said.

While detailed information on where the tin comes from is not available, analysts say the vast majority of tin mined in Burma comes from the Wa Special Region 2. The region is controlled by the United Wa State Army (UWSA), Burma’s biggest non-state armed group. The army was formed by former cadres of the Communist Party of Burma (CPB) after the party disintegrated following a 1989 mutiny. It is believed to have been provided with advanced weaponry from China.

Tin concentrates mined in huge quantities in the region’s Man Maw area are refined inside China. Huge increases in the exports over the past few years have fueled a slide in global tin prices.

ITRI said that while production would decline during the next few months due to seasonal rains, production would rise again after October. However, this forecast “is based on some widely divergent underlying trends,” the body said.

“Mining activity at some 200 sites in the Man Maw area is reported by informed sources to have declined considerably this year, with the number of workers having [been] more than halved from peak levels,” it said.

“However there are sizeable stockpiles of ore above ground and available for processing and there is always a possibility of new sites being discovered and exploited.”

Thai State Energy Firm Wants to Buy Chevron’s Burmese Asset

PTT Exploration and Production (PTTEP) is hoping to buy at least one of US firm Chevron’s oil and gas assets in Burma, a company official reportedly said.

Reuters said Pannalin Mahawongtikul, executive vice president for finance, discussed the explorer’s plans with reporters. The company is part of the larger PTT, a public company spun off from Thailand’s state energy firm. The government retains a majority stake in the group.

“We focus on projects which are operating, so that we can book revenue immediately after the purchase,” Pannalin said, according to Reuters, signaling that Chevron’s stake in the Yadana gas field was the major investment target outside of Thailand.

The newswire reported last month that Chevron was looking to offload its 28.3 percent stake in the Yadana and Sein gas fields in the Andaman Sea. France’s Total is leading the consortium that produces gas from the fields and sends most of it to Thailand via pipelines.

Chevron is also selling an offshore oil and gas exploration block it won in a tender and on which it has signed a production sharing contract with the government, Reuters said, as part of efforts to preserve cash amid low global energy prices.

Burma Gives Tiny Bhutan New Aviation Rights: Report

The Burmese government has revised an agreement with Bhutan to allow airlines from the tiny Himalayan country to fly in and out of Burmese airports, according to Bhutan’s publicly owned newspaper.

The newspaper, Kuensel, said in a report that a delegation from Burma’s Department of Civil Aviation had visited Bhutan and signed a new version of a 2002 agreement on aviation services between the two countries.

Since that agreement, Bhutan’s first private airline, Bhutan Airlines, has commenced operations and currently flies from the Bhutanese cities of Jakar and Trashigang to airports in India and Thailand.

The new agreement means the airline, as well as national carrier Druk Air, “have the right to operate passenger and cargo services with unrestricted capacity, frequency and aircraft type to and from all points in Myanmar other than Yangon and up to a total of five services each way per week to and from Yangon,” the report said.

It also predicted that many of the people of Bhutan—who number only about 750,000—would be keen to visit their fellow Buddhist-majority country.

“With many holy Buddhist sites in Myanmar, Bhutanese pilgrims are expected to explore Myanmar as a destination,” it said. “The agreement is also expected to promote trade between the two countries.”

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