Rangoon Govt’s Rock Bottom Rent Rates Lose Billions to Companies
By Moe Myint 10 April 2017
RANGOON – The previous government agreed to lease commercial space to three construction companies in deals that have lost Rangoon’s divisional government 13.153 billion kyats since 2015, according to a report from the auditor general’s office.
The report for the 2015-2016 fiscal year reveals space from three construction projects began as joint ventures between private companies and the Yangon City Development Committee (YCDC) has been leased to the companies at rates well below standard commercial rents for the area.
The projects, including a shopping mall, offices, and a block of apartments situated near Daw Aung San Suu Kyi’s residence in Bahan Township, are not the only major losses recorded in the report. The divisional government also suffered a 57.923 billion kyat loss from long-term reduced rent leasing agreements for land within public parks, signed by the previous government and private companies.
Out of the joint ventures, Kanthayar Consortium Tower in the compound of Thein Byu Sport Ground inflicts the biggest cost, draining the regional government of 729.77 million kyats each month and 8.757 billion kyats annually.
YCDC and Asia Myanmar Construction Development Company Ltd began the development situated near Kandawgyi Park in Mingalar Taung Nyunt Township in mid-2013. Comprising four high-rise buildings housing offices, a hotel, apartments and a car park, the venture—estimated to be worth 125 billion kyats—was split equally between YCDC and the firm.
YCDC agreed to rent its share to the company for 500 million kyats per year in a long term lease after the construction was completed, according to the report, meaning the company pays 57 kyats per square foot every month. The report stated residents in the area pay at least 1,000 to 1,200 kyats for the same space.
Mingalar Taung Nyunt Township’s MP U Yan Aung told The Irrawaddy he would urge the regional government in the next parliamentary session to raise rental rates to private companies. He added that Burma’s independence hero General Aung San made speeches at Thein Byu Sport Ground and the place was “invaluable.”
“The state gets a small income while companies earn a lot of money,” he said. “I would definitely say that is down to corruption among high-ranking bureaucrats.”
Construction of the Hanthawaddy Complex in Kamayut Township—a collaboration of YCDC and the Crown Advanced Construction Company Ltd—began three years ago but is yet to be completed. It will include apartments, shopping malls, car parks, and a car showroom.
Signed in 2013, the contract stipulates YCDC will lease its equal share of 26 floors back to the company for 70 years for 665 million kyats annually starting this month. It would result in a yearly loss of 3.755 billion, according to current market rates.
The average commercial rate in that area is 750 kyats per square foot, said the report, however the rental price for the company in the nearly nine-acre project is 637 kyats cheaper.
‘‘YCDC is favoring the private company rather than transparently selling its own share to the public,” stated the report.
The third project, situated nearby the Rangoon residence of Burma’s State Counselor Daw Aung San Suu Kyi, is a joint venture between the YCDC and Myanmar Growth Winner (MGW) Company.
They agreed to construct an eight-story building, and in October 2015, YCDC leased its 50 percent share of the space back to the firm on a 50-year contract set at 5 million kyats per month. Compared to the current market prices for renting on University Avenue, the regional government loses 53.603 million kyats per month and 643.24 million kyats each year.
The Irrawaddy contacted three YCDC committee members but all declined to comment. YCDC’s building department head U Than Htay said he was being transferred to YCDC’S financial assessment departure but declined to explain the transfer or comment on the construction projects.