The Irrawaddy Business Roundup (Oct. 17)

By Simon Lewis 17 October 2015

Taiwanese Footwear Manufacturer Says It Will Make Adidas in Rangoon

Major Taiwanese footwear producer Pou Chen Corporation has said that it will make Adidas football boots at a factory in Rangoon, according to a report.

Pou Chen is one of the largest footwear manufacturers in the world, producing for major global sportswear and shoe brands from the United States and Europe, according to its website, which says the company has expanded overseas to set up production in countries including Cambodia, Indonesia and Vietnam.

According to the website Deal Street Asia, Pou Chen is now set to open its first factory in Burma. The site quoted Pou Chen human resources official Henry Chien as saying that a new factory in Rangoon’s Shwepyithar Township would open by the end of this year.

The factory could employ as many as 10,000 workers, the report said.

“We are scheduled to be operational at the end of 2015, with monthly output of 300,000 pairs of shoes initially which can go up to 800,000 pairs in 2019,” Chien was quoted as saying.

The report said the company had been trying to recruit workers for its factory using a range of methods, including through social media and even by visiting remote villages. “We also try to use broadcasting around the village by bicycles in Yangon, Taunggyi, Lashio and Mandalay,” said Chien, according to Deal Street Asia.

Sourcing from Burma is seen as problematic for international apparel brands, which have only in recently begun re-entering the country after US and EU sanctions saw the country’s garment export industry collapse. Those companies that have entered have been cautious, aware of the risks to their reputations posed by sourcing from places, like Burma, where labor rights, working conditions and safety standards may not be properly regulated.

German sportswear brand Adidas announced in February that it had begun sourcing from Burma.

Adidas placed orders in Burma only “after two years of extensive stakeholder engagement before we allowed any of our business partners (suppliers) to start sourcing in Myanmar,” the company’s head of social and environmental affairs for the Asia Pacific region, Bill Anderson, wrote in a blog post in February.

“We are currently working closely with the [International Labor Organization’s] office in Yangon and the Myanmar Garment Manufacturing Association on ways to lift the overall standards in the garment sector,” Anderson wrote.

According to an Adidas supplier list published online, the brand sources from one factory in Rangoon, owned by Shyang Jhuo Yue Co. Ltd.

The brand already sources from Pou Chen factories in mainland China and Indonesia, according to the list, which has not been updated since February and does not mention a Pou Chen factory in Burma.

Digicel to Gain $60M From Tower Company Sale

Telecoms company Digicel has reported that it will make a gain of about $60 million from the sale of its majority stake in its Myanmar Tower Company.

Malaysian group Axiata announced early this month that it would be buying the 75 percent stake in the parent company of the firm, which builds and owns cellphone towers in Burma. The other 25 percent is held by Burmese tycoon Serge Pun’s YSH Finance Limited.

Axiata said in a statement that its tower subsidiary Edotco would take over the controlling stake in Digicel Asian Holdings, the Singapore-registered holding company that owns Digicel Myanmar Tower Company Ltd. Malaysian company Axiata, which was spun off from the formerly state-owned Telekom Malaysia Group in 2008, said the deal valued the Burmese company at US$221 million.

Irish-owned Digicel, which is set to list on the New York Stock Exchange, reported the sale of its Burmese assets to the US Securities and Exchange Commission. In a filing, it said the sale of its 75 stake in the Myanmar Tower Company would likely go through on Nov. 30, after a share purchase agreement was signed on Oct. 2.

The filing said Digicel would see proceeds of $120 million from the headline sale price of $165.75 million, after capital and debt adjustments, and transactions costs. “The sale is expected to result in a gain on disposal of approximately $60.0 million,” the filing said.

The Myanmar Tower Company was set up after Digicel failed to win one of the two private telecoms licenses awarded by the Burmese government in 2013. The joint venture was soon contracted by one of the winners, Qatari mobile phone operator Ooredoo, to build its network of cellphone towers. Previous filings said the company owns about 1,250 towers in the country.

Digicel announced in August that it was considering offers for its shares in the Burmese venture, but has not given a reason for offloading the stake.

In its latest filing on the matter, the company reported the Myanmar Tower Company’s quarterly revenue as $5.9 million for the three months up to the end of June, and said it turned a profit of $0.4 million during that period.

Thailand’s Bumrungrad to Open Clinic in Burma

Thai private healthcare firm Bumrungrad Hospital Pcl has announced that it has permission to open a clinic in Burma, according to Reuters.

The newswire reported that Bumrungrad—which it the second largest healthcare provider in Thailand and draws medical tourists from around the world—had received a business permit from the Myanmar Investment Commission that allows it to run diagnostic services, as well as its own clinic, in Burma.

The entry into Burma will come through a new subsidiary, Bumrungrad Myanmar Co Ltd, 20 percent of which will be owned by local company Yangon International Medical Services Co Ltd, Reuters cited a company statement saying.

“Bumrungrad aims to spend about 11.4 billion baht (US$320 million) during 2015-2018 to expand business at home and develop the UB Songdo unit in Mongolia into a regional hospital,” the report said.

IFC Considering Funding Gas Power Plant in Mandalay

The World Bank’s International Finance Corporation is considering putting US$45 million of financing into a gas-powered energy generation project in Mandalay Division.

Singaporean company Sembcorp Utilities is leading the proposed project to build, own and operate a 225-megawatt facility close to an existing steel mill in Myingyan, which would take gas from the Sino-Burmese natural gas pipeline transporting gas from the Bay of Bengal toward China, according to details of the funding proposal published on the IFC’s website.

Parent company Sembcorp Industries announced in April that it had been granted permission by the Burmese government to develop and operate the $300 million plant, which will supply power to the national grid operated by the state-run Myanmar Electric Power Enterprise.

The IFC said it could put as much as $45 million of debt financing into the project, which is expected to begin in the first quarter of 2016 and be completed in 22 months. The proposal will go before an IFC board on Nov. 19, it said.

“The gas supply pipeline will connect the power plant to an existing gas receiving station located approximately 1.6 km away,” the proposal said.

“A 230kV overhead transmission line, approximately 3 km in length, will connect the power plant to the upgraded Myingyan Steel Mill sub-station located within an existing adjacent steel mill complex. “

Japanese Firm Begins Building ‘Waste-to-Energy’ Plant

Work on a plant that will convert waste into energy has begun in Rangoon’s Shwepyithar Township, according to state media.

The Global New Light of Myanmar reported this week that City Hall officials had held a ceremony to lay the foundations for the plant, which is estimated to cost $16.2 million.

It is being developed by Japan’s JFE Engineering, and it is hoped the plant will be ready to being operations in March 2017, the report said. The company is also set to build similar plants elsewhere in Burma, it said, including in the capital, Naypyidaw, and Mandalay.

Rangoon Mayor Hla Myint was cited touting the Rangoon project, which is situated close to Hlawga Lake in the north of the city, as an eco-friendly energy solution.

“It will convert 60 tonnes of rubbish every day to generate 1,000 megawatts of electricity,” the state-run newspaper reported.

“Yangon produces 170 tonnes of rubbish every day, so the plant will reduce emissions of methane and carbon-dioxide into the atmosphere.”