Business and Investment

Nation (Bangkok) and Eleven Media - 16 April 2015
Myanmar has set a modest target of attracting US$6 billion in foreign direct investment (FDI) in the current fiscal year, with strong optimism that the target would be surpassed as in the previous year.

Aung Naing Oo said that the FDI target was set in line with the government's 20- year FDI Promotion Plan. According to the DICA chief, the manufacturing sector may lead this year's FDI inflows into Myanmar followed by the oil and gas and services sectors. He expects a sharp increase in Japanese investments, thanks to the development of the Thilawa Special Economic Zone, while Singapore, Hong Kong and China are likely to maintain their high rankings in the list of top investors.

Aung Naing Oo said that investments from European countries would likely surge next year if the EU-Myanmar Investment Protection Agreement could be signed later this year.

On the ASEAN side, he expected to receive more investments from Malaysia and Thailand. The newly opened economy may welcome more Thai investors, as the neighbouring country's outbound investment strategy focuses mainly on Myanmar and the Philippines. Read on for detailed analysis.....

Derek Tonkin writes: The strength of Asian business interest in Myanmar is likely to overshadow any concerns at the political level which Western leaders might harbour in the wake of an apparent slow-down in political refoms. It is now highly unlikely that any resumption of "restrictive measures" would be undertaken, though reactions in the US Congress tend to be unpredictable and continuing US restrictions on financial movements are a disincentive to some European investors.

Customs Today - 9 April 2015

Myanmar’s rice exports rose more than 40 percent in the 2014-15 fiscal year, with shipments to regional heavyweight China dominating the trade despite Beijing’s official ban on imports of the product from Burma, according to data provided by Soe Tun, the chairman of the Myanmar Farmers Association and joint secretary of the Myanmar Rice Federation.

Figures from the Ministry of Commerce put total rice exports at more than 1.7 million tons in the fiscal year ending March 31, bringing in nearly US$645 million. Exports were shipped to 64 countries including China and Japan, as well as other nations of Asean, Europe and Africa.

Among them, China purchased more than 1.1 million rice tons this year via border trade. Even though they [Beijing] banned rice exports to China, the volume still increased,” Soe Tun told The Irrawaddy on Wednesday.

In 2014, China officially banned rice imports from Burma, demanding that a trade agreement be signed guaranteeing that most rice is milled and meets certain quality standards. China had long been, and continues to be, one of Burma’s biggest customers for rice, much of which is harvested in the Irrawaddy Delta and shipped over land borders in Shan and Kachin states.

The Irrawaddy - 9 April 2015
Foreign direct investment in Burma grew sharply during the 2014-2015 fiscal year and reached a record $8 billion, a more than doubling of FDI compared to the year before, according to the Myanmar Investment Commission, which said the oil and gas sector was the main driver of growth.

Figures released this week indicate the oil and gas sector attracted $3.2 billion in FDI, the transport and telecommunication sector saw investments rise to $1.6 billion, closely followed by manufacturing with $1.5 billion. Real estate and hotels and tourism were the fourth and fifth sectors receiving most FDI, with $780 million and $357 million, respectively.

In the 2013-2014 fiscal year, which ends on March 31, Burma attracted about $3.5 billion in FDI, half of which flowed into its labour-intensive manufacturing sector.

Singapore-listed companies comprised more than half of the investment volume in 2014-2015 with a combined total of $4.2 billion, reflecting an apparent trend of managing local projects remotely from the investment haven, particularly for oil and gas projects. Hong Kong-based firms were the second-largest investors with $850 million, followed by China-registered companies with $516 million, according to DICA.

Many US-listed firms looking to invest in Burma are reportedly resorting to opening offices in Singapore in order to avoid potential risks involved in doing business with US-blacklisted "crony" businessmen who had ties to the former military regime.  
 
Derek Tonkin writes: The figures are for approved, not realised investments.
Straits Times - 3 April 2013
OCBC Bank (Overseas Chinese Banking Corporation - Singapore) has been given the green light to open a branch in Myanmar, and it will be one of the first three foreign banks to enter the fast-emerging market. The other two are Bank of Tokyo-Mitsubishi and Sumitomo Mitsui Banking Corporation.

OCBC said in a release that it received the final regulatory approval from the Central Bank of Myanmar on Thursday, and will commence operations from a branch in Yangon on April 23. It will offer a full range of banking services to foreign companies and joint ventures, as well as domestic banks in Myanmar. Customers will be able to open current and savings accounts in three denominations - the Myanmar kyat, the United States dollar and the Singapore dollar - and take out loans and apply for trade and foreign exchange facilities.

A total of nine banks from Singapore - including United Overseas Bank (UOB) - Malaysia, Thailand, China, Japan and Australia had been awarded provisional banking licences earlier in October last year.

Derek Tonkin writes: The absence of US and European banks from Myanmar at this stage primarily reflects concerns about US regulatory activity in the context of continuing US sanctions against Myanmar, which are still seriously inhibiting. Asian banks are better placed to operate directly into Myanmar without the need to transit New York electronically in the receipt and payment of currencies, especially US Dollars. Asian banks will also take full advantage of the scope offered by their licences, which, although they do not yet include retail banking, permit almost everything else related to inward investment.

DICA - March 2015
[Note: DICA has not provided unique URLs to the draft law or existing laws, but these are available by working through the website.]
 
The Myanmar Government has begun the process of drafting a new foreign investment law (2015 FIL) which will consolidate the existing 2012 Foreign Investment Law (2012 FIL) and the 2013 Myanmar Citizens Investment Law. The Directorate of Investment and Company Administration (DICA) is drafting the 2015 FIL with the assistance of the International Finance Corporation. The DICA has invited submissions from interested parties in relation to the 2015 FIL and has on its website. The closing date for comments and feedback is 26 March 2015. 

Latest Economic and Financial News


UK Government promotes oil and gas opportunities
Mizzima - 13 January 2015
The British government has just released a report championing the good opportunities for British companies interested in investing in Myanmar’s oil and gas sector. “Opportunities for British companies in Burma’s oil and gas sector” is a 16-page report published January 9 by the UK Trade and Investment department. The report claims Myanmar is “one of the world’s hotspots for oil and gas exploration” with estimated gas reserves of 10 trillion cubic feet and proven oil reserves of 50 million barrels.

The report aims to help British businesses identify opportunities in the oil and gas sector by describing recent developments, including the efforts by the President U Thein Sein government to open up the country, and looking at the legal framework and examining responsible business practices. The report includes a review of recent license awards, how offshore Production Sharing Contracts work in Myanmar, and looks at the opportunities in the sector. Continue reading.....
 

Derek Tonkin writes: This is an informative and up-to-date report about prospects in the Myanmar oil and gas industry. It contains commendable recommendations on a responsible business approach for both investors and companies of any nationality and includes historical and current data on the industry.


US$3.8 billion FDI in first 8 months of Fiscal 2014-5
Mizzima - 14 December 2014
Foreign direct investment in Myanmar stands at US$3.8 billion for the first eight months of the 2014-15 fiscal year provided by 108 companies from 19 countries, according to the Directorate of Investment and Companies Administration. Singapore topped the list of countries, followed by companies from Hong Kong, according to a recent announcement by DICA.  Twenty-eight Singaporean companies invested a total of more than $2.148 billion in the first eight months of the 2014-2015 fiscal year. Myanmar’s fiscal year runs April to March. Singapore investments in Myanmar account for about one-third of the total foreign investments in Myanmar.

China stands as the third largest investor in Myanmar, with 18 firms investing US$228 million. South Korea is fourth with firms investing US$128 million. The list of the countries includes Singapore, Hong Kong, China, South Korea, Thailand, UK, Malaysia, Netherlands, India, Japan, Canada, Malaysia, Philippines, UAE, Luxembourg, Brunei, Germany, Norway, Samoa and Sri Lanka.  

Derek Tonkin writes: The dominance of Asian countries (China, Hong Kong, Singapore and South Korea) is only to be expected. Western investment is likely to be selective in hi-tech industries where they are internationally dominant. Financial services offer scope for Western engagement at a later stage. The elections due late next year represent an inhibiting factor.


Myanmar: What is next for business engagement?
Erin Murphy and James Clad: National Bureau of Asian Research - 24 November 2014
U.S. companies should be cognizant of the deeply embedded downside of not entering this emerging tiger’s markets, while accepting that a widening arena of market entrants is here to stay in an increasingly important regional country that craves growth and development. Myanmar wants U.S. engagement, from the top levels of government to the samosa hawkers on the street. Many U.S. companies appear to be waiting for a quicker resolution to the many obstacles or for a clear-cut sign, whether it is a free and fair 2015 election or directive and support from the U.S. government. But waiting too long will result in lost opportunities. 


(Myanmar (partially) opens the door to foreign banks
Sean Turnell: East Asia Forum - 13 October 2014
On 30 September the Central Bank of Myanmar (CBM) announced the names of the nine foreign banks that are to be awarded licences to operate in the country. It was a keenly awaited decision that, as with the telecommunications licences last year, was conducted via a generally well-regarded selection process presided over by a German consultancy firm, Roland Berger.....

"Overall, the entry of foreign banks into Myanmar is a good thing. The ideological lens through which foreign finance in Myanmar has been historically viewed remains a factor to be aware of, but it should not preclude the opening of the country to the one set of institutions that offer a chance for ‘unconnected’ Burmese firms beyond the usual crony cohort to access finance. Advocating for foreign banks will never be an especially popular thing but, for Myanmar’s future, it might just be a necessary one."


1st half natural gas exports rise by US$ 400 million
Natural Gas Asia - 13 October 2014
Myanmar's natural gas exports has crossed US$2.1 billion in the first half of the current fiscal year, up more than US$400 million over same period last year. Exports of natural gas totaled US$2.183 billion between April and September, compared with US$1.737 billion in the year-ago period, according to the ministry. About US$1.5 billion worth of gas was exported by sea while exports via pipeline was worth US$609 million. Exports of natural gas totaled US$3 billion last fiscal year, according to the Commerce Ministry. Natural gas exports are likely to rise as more offshore and onshore exploration blocks have been awarded to foreign and domestic companies.


Nine foreign banks picked for licences
Myanmar Times - 1 October 014
The Central Bank of Myanmar has announced nine banks that have won preliminary approval to operate in Myanmar.

The nine banks are Australia’s ANZ Bank, Thailand’s Bangkok Bank, Japan’s Bank of Tokyo-Mitsubisihi, Mizuho Bank and Sumitomo Mitsui Banking Corporation, China’s Industrial and Commercial Bank of China, Malaysia’s Maybank and Singapore’s OCBC and UOB.

The preliminary approvals are valid for 12 months, during which the banks must fulfill their commitments made during the tender process, ensure functional banking operations and follow Central Bank of Myanmar guidelines. “Upon fulfillment of [these conditions], the Central Bank of Myanmar will grant the final Licence to operate in Myanmar."

Derek Tonkin writes: The nine banks are all from the Asia-Pacific region and do not include any European or US banks. Standard Chartered Bank expressed initial interest, but later withdrew. It is possible that continuing US financial sanctions were a disincentive.


Investment message undermined by politics, sanctions
Reuters - 24 September 2014
The rapid economic transformation of Myanmar, less than two years after transitioning from military control and opening itself to the world, is not without its rough patches, the nation's top economic minister Soe Thane said on Wednesday.

At the same time, George Soros, one of the earliest investors in Myanmar's economy and even more so its social reform, said he was troubled by the slowdown in reforms ahead of next year's elections. Still, he believes multinational companies must be involved in one of Southeast Asia's last untapped areas. 

"Things have come to a standstill because the elections are now casting a shadow on activities. I hope it will restart after the elections, because it does need to be restarted." There is still a land grab under say, added the billionaire investor, and American companies need to be careful about the provenance of titles on properties in order not to fall afoul of OFAC. He also expressed concern about the racial tensions that have flared up, with anti-Muslim violence leaving hundreds dead since 2012.

However, Soros said he believes multinational corporations cannot ignore Myanmar, where the government expects foreign direct investment will grow to more than $5 billion in the fiscal year starting in April.

Soros has invested several million dollars through businesses run by Serge Pun, chairman of the SPA Group, he said, but not directly. "We would be eager to do it in the areas of banking, finance and agriculture. This is where we feel the country, the people, need this investment most." Continue reading.....

Myanmar sees foreign investment topping US$5 billion in 2014-2015
Reuters - 16 September 2014
Myanmar has revised its forecast for foreign direct investment (FDI) to more than $5 billion for the fiscal year that began in April, a senior official said on Tuesday, surpassing earlier expectations and led by new ventures in energy and telecoms.

The figure exceeds an earlier estimate of $4 billion, with investments in the first five months of this fiscal year worth $3.32 billion, said Aung Naing Oo, secretary of the government-run Myanmar Investment Commission (MIC).
 31 percent of the investment received by the end of August was in the telecoms sector, with 23.8 percent in oil and gas and 18.4 percent in real estate. Hotels accounted for 13.3 percent and 8.1 percent went into manufacturing, primarily garments.

Total FDI stood at $4.11 billion during the fiscal year to March 2014, up sharply from $1.42 billion a year earlier. That compares with $329.6 million in 2009-2010, a year before the new government took office and embarked on reforms.

Despite its business potential, Myanmar still trails neighbouring markets in terms of foreign investment this year. Thailand received $6.8 billion in the period from January to June, according to the central bank, while Vietnam recorded $7.9 billion of investment for the first eight months of 2014.


Uproar forces Myanmar U-turn on US$ 8 billion contract
Financial Times - 2 September 2014
Public opposition has forced Myanmar’s authorities into a rare U-turn over a contentious plan to hand an unknown company a US$ 8billion deal to build a massive new township in the country’s largest city. Yangon’s regional government said it would now offer the contract in an open tender, after lawmakers, activists and media condemned the decision to make the award without competition or even disclosure of the winning company’s ownership or experience. Continue reading..... 

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