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Business and Investment

The Irrawaddy - 9 February 2016

The Central Bank of Myanmar announced on Tuesday that 13 foreign banks have applied to operate in Burma in a second round of licensing. In the announcement, which came a day after the Feb. 8 application deadline, the Central Bank said that the final decision would be made by March 31, the final day of President Thein Sein’s administration.

Contenders in the second licensing round include the Bank for Investment and Development of Vietnam; Taiwan’s Cathay United Bank, CTBC Bank, E.SUN Commercial Bank, First Commercial Bank and Mega International Commercial Bank; South Korea’s KB Kookmin Bank and Shinhan Bank; the State Bank of India; the State Bank of Mauritius; Taiwan Business Bank; Taiwan Cooperative Bank; and Taiwan Shin Kong Commercial Bank.

All nine winners that competed for licenses in 2014 - the Industrial and Commercial Bank of China, Australia’s ANZ Bank, the Bangkok Bank, Malaysia’s Maybank, the United Overseas Bank and Oversea-Chinese Banking Corporation of Singapore and Japanese lenders Bank of Tokyo Mitsubishi, Sumitomo Bank and Mizuho Bank - are based in the Asia-Pacific.

These banks operate in Burma under rigid conditions. They are barred from competing against local lenders in the retail banking sector and are only allowed to run one branch.

Derek Tonkin writes: The absence of US and European banks from the bidding process most likely reflects ongoing concerns about the restrictive nature of continuing US financial sanctions. This was a major reason for the withdrawal of the Standard Chartered Bank from the first licensing round.

UK Government Website - February 2016
Information on key security and political risks which UK businesses may face when operating in Burma. The guide provides useful information on developing your overseas trade in Burma. 
Derek Tonkin: Nikkei Asian Review - 18 November 2015

The writer takes a hard look at investment prospects in Myanmar in the wake of the elections and concludes:

"In the coming months, the U.S. administration will be paying very close attention to Myanmar's transition. It might be hoped that, by way of encouragement and even before the end of 2015, the administration could give an earnest indication of its intention to soften restrictions.

"In the past, the U.S. faithfully heeded the tough line that Aung San Suu Kyi took on sanctions, but this has already long ceased to be NLD policy. If her new administration is to succeed, the U.S. will need to provide practical support over business finance and investment flows. President Barack Obama has the power to issue executive orders waiving congressional legislation, but whether he is willing to use it with U.S. elections next November remains to be seen.

"The U.S. would surely not wish to be seen to be primarily responsible for any stagnation in business and investment in the nascent democracy that Myanmar now represents."

Myanmar's first Special Economic Zone - New Chapter of Investment
Xin Hua - 24 September 2015

The first phase of Zone-A of Myanmar's Thilawa Special Economic Zone (SEZ) in southeastern Yangon was put into operation on Wednesday, signifying the opening of a new chapter of investment in the country. 

Located 25 kilometers southeast of Yangon, the 400-hectare Zone- A, which becomes Myanmar's first operational SEZ, is being implemented in two phases. The Phase-1 takes up 211 hectares, while the Phase-2 184 hectares which is expected to be completed by mid-2016. The Zone-A employs 1,936 workers, mostly Myanmar citizens. 

A memorandum of understanding on the development of the Zone-B project which covers an area of 500 to 700 hectares has been signed. Currently, The SEZ has investors from 47 companies of 13 countries including the United States, Sweden, Japan, China, South Korea, Australia and other Southeast Asian countries. 

The Thilawa SEZ, covering an overall area of 2,400 hectares, is expected to create some 40,000 job opportunities when it is completed by 2017.

Shibani Mahtani: The Wall Street Journal - 28 August 2015

Many people thought this would become one of the hottest new markets for American capital a few years ago, when the country began opening to the West after decades of military rule. 

Instead, Myanmar has been a letdown for many investors - especially Americans. Many have already pulled out after opportunities failed to materialize. 

Numerous construction projects for new hotels, offices and condominium buildings in Yangon have stalled, as investors wait for clearer investment rules and to see how the dust settles after the November election. Washington, meanwhile, has in many ways made it hard for U.S. firms to do business in Myanmar, even as it encouraged U.S. companies to go there. The Obama administration added requirements that forced U.S. firms to make extensive public disclosures if they invested more than $500,000. It also kept some sanctions in place in case the government backtracked on its promised overhauls.

Eric Rose, a U.S. lawyer who opened a branch of his firm, Herzfeld & Rubin, in Yangon, says about half of Myanmar’s economy is controlled by the military and another 20% is dominated by blacklisted cronies, effectively making 70% of Myanmar off-limits. ooo

Wary of Washington’s mixed signals, American banks kept blocking some transactions involving the country. Citibank Inc. and others made exploratory trips but decided not to do more there. Six foreign banks have branches in Myanmar and dozens more have representative offices, but none are American.

The U.S. has declined to lift import duties, meaning companies like Gap have to pay as much as 17% in tax when bringing goods home. The European Union in 2013 granted Myanmar products duty-free and quota-free access to Europe. Officially, U.S. firms have invested just $2 million in Myanmar since 2011, according to Myanmar government statistics, though that doesn’t include an undetermined amount spent through regional offices in Singapore. China has invested $5.2 billion since 2011. The U.K. has spent $1.3 billion and the Netherlands $312 million.

Feature Report: Total in Myanmar - Total S.A.

Since expanding into Myanmar in 1992, Total has become the country's biggest international energy exploration and production company, mainly thanks to its operation of the Yadana gas field. Total is also a key player in local development. From the start of operations, it introduced an extensive social policy for its employees as well as a far-reaching CSR program targeting education, public health, local job creation, micro-finance and access to energy.

Myanmar sets US$2.80 minimum daily rate in bid to boost investment - Reuters

Myanmar has set a minimum wage of 3,600 kyat (US$2.80) for an eight-hour work day, a move likely to boost investment in the fast-growing country's garment industry. Under the newly-established level, Myanmar's minimum monthly pay would be around US$67 a month, based on a six-day work week, giving it a competitive advantage over thriving garment makers such as Vietnam and Cambodia where the monthly minimum wage ranges from US$90 to US$128, according to the International Labor Organization.

Turmoil at the top prompts business uncertainty
The Irrawaddy - 24 August 2015
Current economic anxieties in Burma come on the back of a weak kyat that has been in steady decline against the US dollar since May. Consequently, demand for the dollar has increased and the Myanmar Central Bank has been forced to lessen reliance on black market currency trading by selling US dollars to private exchange counters.

Senior researcher Tin Maung Than of the Myanmar Development Resource Institute said Burma’s economy was particularly vulnerable when shifts in the political landscape occurred. Good business conduct had yet to be established, he said.

“There is no rule of law if there are no established [modes of] conduct and institutions. If there is no institutional governance… the economy will be impacted whenever political turmoil arises,” he added. Read more..... 

Derek Tonkin writes: It is reasonable to assume that in the run-up to the elections foreign investors will take no decisions of substance, but will await not only the outcome of the elections themselves but also the nature of the Administration which will be established by the new President. This is most likely to be a military nominee, either the incumbent President, at least for a time, or another senior figure who is persona grata with the military.   

In any case, the looming global financial crisis stemming from the collapse of share prices in China will give investors cause to be particularly cautious about new investments anywhere in Asia in the short to medium term.

The likelihood that the National League for Democracy will replace the Union Solidarity and Development Party as the majority elected party in the legislature will significantly boost the NLD's influence in the Union Parliament, but there is little or no prospect of an NLD sponsored or supported president emerging, now that the Speaker Shwe Mann has fallen from grace. The immediate future, though, is opaque and we should expect the unexpected.
Myanmar Times - 19 June 2015
American banks continue to hesitate on money transfers to and from Myanmar, despite the removal of most sanctions on finance in 2012 and 2013.
Businesspeople say that while there are now few explicit rules preventing transfers, a fear of sanctions and a shallow understanding of the local market prevents the movement of money between Myanmar and the world’s largest economy. Some say the continued existence of the Specially Designated Nationals (SDN) blacklist may also be dissuading American banks and companies from doing business with Myanmar. “US banks, by-and-large, are steadfastly refusing to undertake any transactions with Myanmar, with few exceptions,” said Eric Rose, lead director at Herzfeld Rubin Meyer & Rose Law firm in Yangon.
The result has been that businesses and even non-governmental organisations (NGOs) are having trouble getting bank transfers to their Myanmar bank accounts, even to non-blacklisted banks. Read more
Derek Tonkin writes: British banks, notably HSBC and Standard Chartered, continue to exhibit traces of paranoia over transfers to Myanmar. This is partly due to the strong action taken against these and other British banks in the recent past by US regulators in connection with serious regulatory infringements relating to other jurisdictions like Mexico and Iran. The main reason for the decision by Standard Chartered to withdraw their application for a corporate banking licence a few months ago is believed to centre on the psychological residue of US financial sanctions.
Major European banks generally are reluctant to use other legal channels like direct electronic transfers between Singapore and Myanmar which do not transit New York and which might attract the unwelcome attention of US regulators. Myanmar business is seen as simply too much of a hassle.
Aviation News - 12 June 2015
Boeing and Myanmar National Airlines have celebrated the delivery of the airline’s first Next-Generation 737-800 leased from GE Capital Aviation Services, the commercial aircraft leasing arm of GE. 

The celebration also marked the first all-new Boeing airplane to be delivered to any Myanmar-based airline.

The airplane is the first to feature Myanmar National Airlines’ new livery and interior, and the airline plans to expand its network outside Myanmar with the introduction of its 737.

FDI target set at US$6 billion for FY 2015-2016
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.

Myanmar rice exports up 40% in FY2014-15
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.

Foreign investment soars to record $8 bn in FY2104-15
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.

Three banks get green light to open branches
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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