Business

The Irrawaddy Business Roundup (Sept 23)

By Kyaw Hsu Mon 24 September 2016

State Counselor to Meet Business People

State Counselor Daw Aung San Suu Kyi will meet members of the business community in Naypyidaw’s MICC-2 building on September 28, according to Myo Myint Maung, deputy permanent secretary of the Ministry of Information.

The meeting follows the State Counselor’s return from her recent visit to the United States, during which US President Barack Obama announced that American economic sanctions against Burma would soon be removed.

It is expected that Daw Aung San Suu Kyi will share her experiences in the US and convey messages and information from US business representatives at the Naypyidaw gathering.

Meanwhile, the new Myanmar Investment Law is also expected to be released in the coming week after it is discussed in Parliament.

Five Sectors Highlighted for Thai Investors

The most attractive sectors for Thai investors in Burma include infrastructure, information technology, agriculture and related processing, manufacturing and tourism, according to Thai business leaders quoted in a report in the Bangkok-based Nation newspaper this week.

A large number of infrastructure projects including roads, ports and postal services are being planned in Burma with the aid of foreign assistance, according to Nattawin Pongpetrarat of the Thai Business Association of Myanmar, speaking at a seminar hosted by the Bangkok Bank.

Due to poor road infrastructure and a shortage of skilled labor, many companies are investing hugely in information and communications technology (ICT), promising potential for e-commerce and online services, Nattawin said.

Agriculture is one of the top ten contributors to Burma’s economy and there was demand for expertise from Thai companies in this sector, he added.

With more than 20 daily flights connecting Yangon International Airport and Thailand, tourism companies in the neighboring country should consider increasing excursion services for Myanmar-bound tourists, he said.

“Thai companies should capitalize on their expertise. If they combine this with local experience [local partners], they will prosper,” said Nattawin, who has operated a furniture and garment business in Burma for more than 10 years.

“The Myanmar economy is very dynamic. Conditions change rapidly and it is necessary to have someone on the ground to point you in the right direction,” he told the Thai audience.

Sanan Angubonkul, head of the Thai government’s private-sector team tasked with boosting exports and overseas investment projects, advocated setting up manufacturing operations in Burma to supply the local market, as well export markets.

“The reinstatement of the United States’ Generalized System of Preferences (GSP) tariff system for Myanmar will benefit exports,” he said.

Sanan warned that losses were largely unavoidable for the first three years of a typical new business, but future prospects were bright, as “Myanmar is the darling of the world.”

Structural Reforms Required to Unleash Banking Sector

A major shake-up of the banking sector is predicted in a new study released this week.

Burma’s banking sector will expand eightfold in almost a decade, to around US$247 billion by 2025, according to an analysis titled Myanmar Banking Sector 2025: The Way Forward, by the Roland Berger consulting group. Around 120,000 jobs are also likely to be created, it says.

However, important obstacles remain to achieving these numbers, and local banks and smaller banks will face many challenges in the coming period, according to the study.

It identifies five vital structural reforms necessary for the banking sector.

First, an active interbank market that enables banks to lend to one another instead of going to the Central Bank for funds needs to be urgently developed.

“A vibrant interbank market with standard instruments will provide comfort to the banks in their ability to refinance their credit and facilitate the transmission of the Central Bank monetary policy. In short, it is the bedrock of any modern banking system,” according to the report.

Second, banks and the regulator must foster access to credit through a range of regulatory adjustments and a change in lending practices, it says.

Third, the regulator should take many steps to improve current low trust in the overall banking system. Public disclosure obligations on banks should be strengthened, the report advocates.

Fourth, reform of state-owned banks must be expedited. The largest state-owned banks currently operate as commercial banks “without the required capabilities” and do not abide by the same sets of rules and regulations, the report says.

Lastly, shoring up the independence of the Central Bank and building its capacities will be critical to steer reforms, the report states.

Given the “massive” changes ahead, local banks will have to work hard to seize opportunities and overcome problems. Smaller banks will struggle even more.

“Size matters when it comes to banks, smaller ones may not survive what’s to come,” the report warns.

South Korea’s Shinhan Bank Opens Branch

South Korea’s Shinhan Bank opened an office in Rangoon’s Myanmar Plaza building this week, mainly to provide services to South Korean companies in Burma.

The bank opened a representative office in the former capital in 2013 and won a preliminary license to operate six months ago.

Shinhan Bank is the only South Korean bank to receive a license to operate in Burma.

IFC to Double Burma Investment Portfolio

The International Finance Corporation (IFC), the investment arm of the World Bank, will nearly double its investment portfolio in Burma between now and the end of this year, according to a report in DealStreet Asia.

The current accumulated investment figure of $386 million will increase to around $600 million by the end of 2016, according to Vikram Kumar, the IFC’s country manager in Burma.

Investments on the horizon include a $40 million loan for the combined-cycle gas turbine plant Myingyan by Sembcorp Utilities and MMID Utilities. The IFC is also set to invest in agriculture-related ventures as well as in a variety of other sectors, according to the report.

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