Snippets
Aung San Suu Kyi will chair the government peace negotiation body, the National Reconciliation and Peace Center (NRPC)
Emirates to fly to Yangon daily from August
Bank for Investment and Development of Vietnam (BIDV) has received its banking licence
Politics
High Rise Issues - A Yangon Division parliamentary committee has recommended that the divisional government rescind modification orders delivered earlier this month to eight high-rise construction projects, after the developers petitioned the committee for a review. A high-rise review committee has reviewed more than 200 high-rise building projects in the city since June, to assess their adherence to newly enforced urban planning and safety regulations. Following their recommendations, the Yangon government ordered 12 buildings now under construction to reduce their heights, upgrade their parking facilities and improve their safety standards. Developers from eight out of the 12 affected projects complained, claiming that the modification order stood to cause them grave financial harm, and that they had followed all the official procedures. “We have carried out ground-inspections for every project linked to the complaint, and found them to be in line with Yangon City Development Council regulations established under the previous government,” said Kyaw Zeya, the secretary of the parliamentary committee. “So, we submitted our report to the divisional government last week recommending that action should not be taken against them,” he added. Kyaw Zeya said he understood that the Yangon Division government is trying to tame unruly urban development in the city, but “the new policy for high-rise buildings should be directed at new projects and not at old ones that have already received permission.” The Yangon Division Parliament is currently in recess and will recommence next month. Ye Min Oo, the spokesperson for the high-rise review committee that suggested the initial modification orders, said he had no comment to offer on the new recommendation, stating that it was a matter to be resolved between the divisional government and the parliamentary committee. “Because our committee was formed by the divisional government, we are only accountable to it. If the government orders us to review their recommendation, we can do so.”
NLD Policy Document - The launch of the National League for Democracy (NLD) government’s five-year, 12-part economic policy in Naypyidaw recently contained only broad outlines, leaving some industry leaders frustrated at the lack of detail. Speaking at the launch event, State Counselor Aung San Suu Kyi said that, although the information released was “general,” “detailed policy” would be unveiled later, including for local and international investors. Several of Myanmar’s well-known tycoons were present alongside foreign diplomats, government officials, and members of the Union of Myanmar Federation of Chambers of Commerce and Industry. Suu Kyi acknowledged that “many foreign investors and diplomats” had asked the NLD government about their economic policy, which has yet to be spelled out in any detail in the four months since they assumed office. Minister of National Planning and Finance Kyaw Win said that the 12-part policy would be “people-centered” and would involve a “fair” distribution of natural resources between the states and divisions of Myanmar, in support of “national reconciliation” and the building of a “federal democratic country.” The latter points suggest a tentative link to the peace process with ethnic armed groups. A Union Peace Conference scheduled for late August is hoped to achieve a deal on a federal restructuring of the state, in order to resolve half a century of civil conflict. Other outlines delivered at the launch included better opportunities for youth, support for small and medium businesses, jobs for Burmese returning from residence abroad, support for both agricultural and industrial exports, environmental protection, a stronger tax system, and expanding economic relations with countries both within and beyond ASEAN. Suu Kyi also stressed infrastructural investment as a means of increasing investment in Myanmar and speeding up development. Zaw Zaw, a prominent tycoon and chairman of the Max Group of Companies, spoke at the event about the need for better statistics in Myanmar, including for job, unemployment, birth and morality rates, as an aid to engineering economic growth. Other industry leaders present stressed a more urgent need for policy detail, given the high expectations held by many towards the NLD government. Fifty journalists from both Burmese and international news agencies had turned up to cover the event at the Myanmar International Convention Center 2 in Naypyidaw, but were held up at the security gate. Security guards said they had been told that members of the media were not to be allowed in without “access cards” provided by the Ministry of Information. Only two journalists, bearing these cards, were allowed in, and later shared their coverage with others. Several of the barred journalists expressed their frustration at what they felt was poor event management on behalf of the Ministry of National Planning and Finance.
More Detail - The 12-point document puts national reconciliation as the top priority, based on a “just balancing of sustainable resource mobilisation and allocation across states and regions”.
Business
Noticeable by its Absence - American companies are conspicuously absent from the 106 local and foreign direct investment proposals made during the first quarter of the 2016-17 fiscal year, which started in April. Myanmar’s Investment Commission, reconstituted in early June after a period of dormancy brought about by the installation of a new government in April, has so far processed only eight of the 106 proposals. Minister of National Planning and Finance Kyaw Win chairs the commission, with Minister of Commerce Than Myint appointed as vice chairman. Than Aung Kyaw, deputy director general of the Directorate of Investment and Companies Administration (DICA), said that the commission was now making “dramatic” progress through the backlog. According to Investment Commission data, more than US$2 billion worth of investments have been pledged during the first quarter of this fiscal year from April to June. In the first quarter of the 2015-16 fiscal year, 71 projects were approved at a valuation of $2.65 billion. The first quarter of the 2014-2015 fiscal year saw 39 projects approved valued collectively at US$810 million. Out of the 98 proposals awaiting approval, 47 are for foreign direct investment, according to DICA director Min Zaw Oo, who is a member of the proposal assessment team in the Investment Commission. “Most of the proposals are from manufacturing businesses from various different countries,” he said. However, US businesses are not among the foreign investment proposals Myanmar has received under the new government, according to the DICA. The top foreign investors for this opening period are Singapore, followed by China, the Netherlands, Malaysia, Thailand, Hong Kong and India. Maung Maung Lay, vice-chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry, said that most of the foreign investment proposals received were for labour-intensive businesses. “But the US does not engage much in labour-intensive business now,” he said. “Their businesses are somewhat hi-tech, and can’t operate in the absence of well-developed infrastructure, for example, a stable electricity supply. And skilled labour is needed to operate hi-tech businesses,” he added. In May, the US government reduced sanctions targeting Myanmar’s financial sector and certain state-owned enterprises involved in mining and timber extraction. The aim was to boost trade between the two countries and enable American investment—even though key economic players with close links to Myanmar’s military remained blacklisted. It appears, however, that American companies and investors continue to approach Myanmar with trepidation—although this could change after the National League for Democracy (NLD) government’s economic policy, currently vague, is properly clarified. “Many US and EU companies investors come here via Singapore, where they are already established,” explained Than Aung Kyaw, deputy director general of the DICA. “Singapore is positioned close to Myanmar and has a reliable banking system. That’s why US investors are not coming here directly.” In 2015, US exports to Myanmar were valued at $227 million and imports at $144 million, according to DICA figures. Since 1988, total approved US investment in Myanmar has been $248 million.
Hitachi Expands Operations - Hitachi is planning to dramatically increase its operations in Myanmar according to Hitachi’s president and chief executive officer, Hiroaki Nakanishi, who visited the capital, Naypyidaw recently. The CEO is meeting with government officials to propose new projects as the company looks to expand its operation to 300 billion yen by 2020. Hitachi, along with fellow Japanese company Mitsubishi Corporation, won a Myanma Railways contract in May last year for upgrades on Myanmar’s dilapidated rail network. The $24 million project, due for completion in June 2017, includes installing systems to coordinate signals along a 140-kilometer stretch of track between Yangon and Pyuntaza, Pegu Division. “On top of the electrification of the rail system, we will present proposals to the government, including a comprehensive plan to develop the transportation infrastructure,” Hiroaki said. Hitachi wants to help improve the government’s database of maps using GPS, which would “provide a launching pad for resource exploration, disaster prevention, flood control and other related operations across a wide spectrum”. Hitachi will also work with Japan Post to help Myanmar Post offer “e-money” services, the Global New Light of Myanmar reported. A recent press release said a unit of the group, Hitachi Solutions, had also won a tender last year to “implement an electronic data interchange system” for Myanmar’s Port Authority. The company also said it would host a Social Innovation Forum in Naypyidaw to boost its sales in the country. “Last year, Hitachi announced plans to expand our business in Myanmar and increase the number of local employees five times—from 200 to 1,000—by 2020,” Hiroaki said. “We are very much on track and I am pleased to share that our employee numbers have more than doubled to over 500 in just one year.”
Interbank Blues - The global interbank market in foreign exchange is worth trillions in US dollar terms. Myanmar has had its own local interbank market since 2013, which the Central Bank set up in the hope that lenders would rely less on daily Central Bank dollar auctions and more on each other for foreign currency needs. US dollar auctions typically meet only a small fraction of the commercial banks’ demand for US dollars, because the Central Bank itself has a limited store of foreign reserves. A World Bank report from May estimated the Central Bank’s foreign exchange reserves were equal to 2.9 months of import cover as of November 2015. Daily auctions in dollar volumes have also declined this year, potentially due to a drop in the Central Bank reserves, and the nascent interbank market has not been able to pick up the slack, the report said.
Myanmar’s interbank market has faced a variety of hurdles since its inception, and the latest – according to private banks – is that the state-owned lenders are not pulling their weight. These public sector banks were allowed to handle foreign currency for years before their privately owned peers, and until recently they held a monopoly on providing foreign currency accounts to state-owned companies or joint ventures. This special treatment has left them with larger dollar holdings than the private banks, who say their state counterparts should sell more of their foreign exchange in the interbank market. The daily volume of dollars exchanged at the interbank market rarely passes US$25 million, according to Central Bank data from the start of October 2015 to April 2016.
Private-sector bankers, say that state-owned banks are overly cautious in holding on to dollars to cover liquidity needs, while officials at state-owned lenders say they do participate in the forex market, but that managing their liquidity and profits are bigger priorities. An official at Myanma Foreign Trade Bank (MFTB) said that his bank’s participation in the interbank market comes second to its focus on making timely payments to its correspondent banks. Domestic banks in Myanmar use correspondent banks to act as intermediaries or conduct business on their behalf in other countries, which avoids having to open a branch abroad. MFTB has agreements with more than 200 correspondent banks, and state-owned lenders are hoping to expand their correspondent networks following an exemption from US sanctions in May. U Khin Pe Oo, deputy general manager of state-owned Myanma Investment and Commercial Bank (MICB), said his bank does sometimes sell currency on the interbank market, depending on how much foreign currency the bank holds. “As a state-owned bank we need to follow monetary policy,” he said. “But we also need to focus on profits, because we receive funds from the government budget based on those profits.” MICB, like other state-owned banks, has to present its balance sheet to the Ministry of Planning and Finance each year, and request funds for the coming year based on profits.
Banks are required to sell foreign currency if their exposure rises above 30pc of paid-up capital. A private bank bugbear is that state-owned banks are informally exempt from this rule, although U Khin Pe Oo said MICB does observe the requirement. But U Mya Tha, Myanmar Oriental Bank’s chair, said the Central Bank should still scrutinise state-owned banks’ foreign currency exposure and their reluctance to part with dollar holdings. “There are many things that need to be reformed and that the Central Bank needs to discuss with the state banks,” he said. But while the Central Bank allows foreign lenders to participate in the forex market, foreign banks can only lend in dollars, and have no real reason to participate in the interbank market, he added. Although private banks accuse the Central Bank of inaction, the regulator is trying to address the problem, an official said. He said that starting in January 2017 the Central Bank will impose penalties for all banks with foreign currency reserves above the 30pc level, and has plans to deal with banks that are overly long or short a particular currency. The penalties and policy of equal treatment for private and publicly owned banks are enshrined in the new Financial Institutions Law, which was passed in January this year. “All institutions will be treated equally under the new law,” the official said. “We are going to discuss this matter with state banks and other related institutions.” But the official was also frank about the potential difficulties in penalising state-owned banks, which – although regulated by the Central Bank – are also ultimately under the control of the Ministry of Planning and Finance. “All we can do is issue rules, regulations and warnings,” he said. “But we will probably have some difficulties penalising state institutions.”
Some progress has already been made this year in altering state-owned banks’ behaviour. In the first quarter, MFTB and MICB agreed to return large volumes of US dollars back to private banks, following discussions between the then-Ministry of Finance, the Central Bank, and public and private banks. Almost all private banks have foreign currency accounts at MFTB and MICB, because until 2012 only state-owned lenders were allowed to handle foreign currency, and those banks still provide settlement services for private lenders. But over the years the net balance private banks held at MFTB had built up and up, and they demanded the money back. The net balance between private banks and MFTB is now settled weekly through Nostro accounts, which U Mya Than said had been very helpful for private bank liquidity. The Central Bank also now allows private banks to offer a wider range of foreign banking services, to compete better with state-owned lenders, with the specific aim of helping private banks to access foreign currency and, in turn, the interbank forex market. As of March 22 private banks are able to offer state-owned enterprises foreign currency accounts, ending the state banks’ monopoly on SOE clients, although U Mya Than said he was not aware of any SOE opening an account with a private bank. He said state enterprises are far more familiar with the state-owned banks, and the interest rates available at private banks are not much more attractive. “The most we can expect is for government joint ventures to bank with the private sector, because the foreign partners prefer privately owned banks,” he said.
Farmers’ Woes - Myanma Agriculture Development Bank will stick to the government’s loan ceiling for 2016-17 and will not make any additional funds available for farmers, despite earlier suggestions that this might be a possibility. The bank will not issue new loans to cover losses at farms destroyed by flooding. Heavy rain has already caused floods in Ayeyarwady and Sagaing regions and Rakhine and Chin states. MADB, which is one of the only affordable sources of funding for around 2 million farmer households, is struggling to make a profit, despite raising interest rates from 5 percent to 8pc this year. This is partly because thousands of farmers whose crops were destroyed by floods last year were unable to repay their loans on time. The Central Bank of Myanmar approved a K500 billion one-year loan for MADB in May, to help the bank finance as many farmers as possible. This financial year, the bank has lent more than K730 billion in loans for the monsoon paddy. The bank aimed to lend K900 billion in the first 100 days of the new government, but some of the funds have been held back for farmers who are still struggling to repay last year’s loan. A ministry official denied rumours that entire villages have not yet received loans because some farmers in Ayeyarwady defaulted on last year’s debt. “It is not like that. We do not issue new loans to farmers who have not paid back their outstanding loans. Farmers who have repaid their loans can take out new ones,” he said. This year the bank has changed its lending rules, to make it easier for farmers, said Ko Myo Lin Aung, a farmer from Pyinmana township in Nay Pyi Taw. In the past, 10 farmers had to group together to apply for loans – if one failed to repay, the other nine would cover the costs, he said, while this year farmers can apply in groups of three. The bank has raised the size of its loans this year to K150,000 per acre from K100,000 last year, but has maintained its policy of only offering loans to cover the first 10 acres (4 hectares) owned by any one farmer, said U Thein Aung, chair of the Free Farmers Association. “If the farmers who own more than 10 acres could receive loans for their entire acreage, they would be fine. But they have to take out private loans for anything over 10 acres at a very high interest rate. Actually, K150,000 per acre only covers cultivation,” he said. Ayeyarwady, Sagaing, Bago and Magwe regions and Rakhine State are the main rice-growing areas of the country. They are also among the areas at highest risk of further flooding, particularly over the next few weeks as more heavy rain is forecast. U Thein Aung said the main problem for farmers is financing a second crop when the first had been destroyed by floods. Farmers who have to resort to private lenders can be charged up to 30pc interest rates on short-term loans. Last July and August, 12 of Myanmar’s 14 states and regions experienced heavy flooding, damaging and destroying 1.5 million acres of monsoon paddy out of 16 million acres grown nationwide. The government and the Myanmar Rice Federation provided loans for second cultivation costs, stabilised local rice prices and provided food supplies on an emergency basis.
In The Black - Qatar-based telecommunications firm Ooredoo has begun making profits on its operation in Myanmar, it announced, after more than doubling its subscriber base in a year. In half-year results announced this week, the company said it now had more than 8 million customers in the country, and said its data network was already available in locations where more than 85 percent of the population lives. The results say Ooredoo Myanmar made a profit almost $22 million in the first half of 2016, compared to losses of about $83 million in the first half of 2015. Despite the growth in subscribers, Ooredoo is still behind rival Telenor of Norway, which has raced to 16.9 million subscribers, according to quarterly results published this month. Telenor made $72.3 million in the second quarter of 2016, between April and June. But Ooredoo last year vowed to turn its fortunes around with a more mass market approach. Revenues grew by 41 percent year to year, according to the latest results. The company also said it had become the first operator to launch 4G mobile services in May, “confirming its data leadership in Myanmar.”
Fund Raises Money - Singapore-registered private equity fund Golden Rock Capital says it has raised $20 million and has begun investing in business in Myanmar. The fund is targeting $100 million in total funding to make individual investments of ideally between $7 million and $10 million in the country. It has already put money into Myanmar Personal Care, a Singapore-registered entity trading in perfumes. Marvin Yeo, founder of the fund, which has offices in Yangon and Singapore, said that $20 million had been raised so far. Originating partner Thura Soe Paing said that investments would mean firms get management help from the fund. “We are more than a provision of capital, we would like to help the businesses grow through the contacts and connections that we have,” he was quoted saying. “The most important thing is when we come as investors and advisors, we believe in the long term potential of the country we are not here just to make a quick buck.”
Public Hospital Upgrade - Myanmar’s new five-year plan for the health sector includes upgrading all 25-bed hospitals across the country into 50-bed ones, according to Dr. Myint Htwe, minister of health. “We plan to upgrade all 25-bed hospitals into 50-bed facilities and employ 2,000 new doctors within two months,” he told Parliament. However, the minister did not specify a timeline for the upgrades. Lawmakers stated that even the 25-bed hospitals currently lack sufficient beds and staff. “In my township, the ‘25-bed’ hospital is supposed to have four doctors according to the standard organizational structure. But, it only has 16 beds and two doctors. Employees are overstretched. Most locals are ‘grassroots people’ and can’t afford to go to special clinics,” said Aye Naing, a Lower House lawmaker. According to the health minister, the previous government had monitored the rate of hospitalization at government-run hospitals and found it to have gradually increased between 2011 and 2015. The proposed bed upgrades will also mean a workforce increase from 55 to 156 employees at each facility. Myint Htwe explained that the ministry will not go further and upgrade the 25-bed hospitals into 100-bed ones because the smaller hospitals receive only about 13 inpatients and 49 outpatients each day on average. He added that the public does not often complain about the lack of beds, but more often about a shortage of doctors. The minister said the 50-bed hospitals will include pathology, surgery, obstetrics, gynecology, pediatric, osteoporosis, emergency, dental and anesthetic units and his ministry will ensure they are accessible to all. According to the Ministry of Health, there are a total of 1,190 hospitals in Myanmar as of February 2016.
Infrastructure
ADB Report on Transportation - As much as US$60 billion of investment is required by 2030 if Myanmar is to address shortfalls in transportation infrastructure that risk holding the country back from economic growth and reducing poverty, according to the Asian Development Bank (ADB). It has just published a lengthy “policy note” on the transport sector, comprising nine separate reports that include one on “how to reform transport institutions,” others looking at Myanmar’s river transport, urban transport and truck roads, and a guide on “how to improve road user charges”—the latter dealing with the troublesome issue of tolls. The reports derive from reviews on which the ADB assisted the Myanmar government in 2014-15. A press release accompanying the publication cited Bambang Susantono, ADB’s vice-president for knowledge management and sustainable development, saying the country’s “future is full of great potential.” “The new government is ready to make use of its abundant and innate resources to eradicate poverty and ensure growth for everyone,” he said. “This includes providing access to a modern and safe transport system for all.” Detailing some of the findings, it said that some 20 million people in Myanmar currently live in villages without road access during all seasons. The report notes that $45 to $60 billion is required in transport investments by 2030, and these should be coupled with streamlining institutions and strengthening cross-ministerial collabouration.
Culture and Tourism
New Routes From Thailand - Bangkok Airways is hoping to fly directly from Thailand airports to Bagan and the archipelago gateway of Myeik, according to an industry publication. The carrier is applying to Myanmar’s Department of Civil Aviation for permission for two new flights. One would connect the northern Thai city of Chiang Mai with Nyaung U, close to Bagan, in Mandalay Division, and the other would link Bangkok and Myeik in Tenasserim. Myanmar’s smaller airports are generally only served by domestic airlines, but both destinations are expected to grow as the number of tourists visiting Myanmar increases. Some of the hundreds of islands off Myeik, most of which remain untouched, are currently undergoing development as tourist sites. Bangkok Airways already flies between Bangkok and airports in Yangon, Mandalay and Naypyidaw, and connects Chiang Mai to Yangon and Mandalay.
Aung San Suu Kyi will chair the government peace negotiation body, the National Reconciliation and Peace Center (NRPC)
Emirates to fly to Yangon daily from August
Bank for Investment and Development of Vietnam (BIDV) has received its banking licence
Politics
High Rise Issues - A Yangon Division parliamentary committee has recommended that the divisional government rescind modification orders delivered earlier this month to eight high-rise construction projects, after the developers petitioned the committee for a review. A high-rise review committee has reviewed more than 200 high-rise building projects in the city since June, to assess their adherence to newly enforced urban planning and safety regulations. Following their recommendations, the Yangon government ordered 12 buildings now under construction to reduce their heights, upgrade their parking facilities and improve their safety standards. Developers from eight out of the 12 affected projects complained, claiming that the modification order stood to cause them grave financial harm, and that they had followed all the official procedures. “We have carried out ground-inspections for every project linked to the complaint, and found them to be in line with Yangon City Development Council regulations established under the previous government,” said Kyaw Zeya, the secretary of the parliamentary committee. “So, we submitted our report to the divisional government last week recommending that action should not be taken against them,” he added. Kyaw Zeya said he understood that the Yangon Division government is trying to tame unruly urban development in the city, but “the new policy for high-rise buildings should be directed at new projects and not at old ones that have already received permission.” The Yangon Division Parliament is currently in recess and will recommence next month. Ye Min Oo, the spokesperson for the high-rise review committee that suggested the initial modification orders, said he had no comment to offer on the new recommendation, stating that it was a matter to be resolved between the divisional government and the parliamentary committee. “Because our committee was formed by the divisional government, we are only accountable to it. If the government orders us to review their recommendation, we can do so.”
NLD Policy Document - The launch of the National League for Democracy (NLD) government’s five-year, 12-part economic policy in Naypyidaw recently contained only broad outlines, leaving some industry leaders frustrated at the lack of detail. Speaking at the launch event, State Counselor Aung San Suu Kyi said that, although the information released was “general,” “detailed policy” would be unveiled later, including for local and international investors. Several of Myanmar’s well-known tycoons were present alongside foreign diplomats, government officials, and members of the Union of Myanmar Federation of Chambers of Commerce and Industry. Suu Kyi acknowledged that “many foreign investors and diplomats” had asked the NLD government about their economic policy, which has yet to be spelled out in any detail in the four months since they assumed office. Minister of National Planning and Finance Kyaw Win said that the 12-part policy would be “people-centered” and would involve a “fair” distribution of natural resources between the states and divisions of Myanmar, in support of “national reconciliation” and the building of a “federal democratic country.” The latter points suggest a tentative link to the peace process with ethnic armed groups. A Union Peace Conference scheduled for late August is hoped to achieve a deal on a federal restructuring of the state, in order to resolve half a century of civil conflict. Other outlines delivered at the launch included better opportunities for youth, support for small and medium businesses, jobs for Burmese returning from residence abroad, support for both agricultural and industrial exports, environmental protection, a stronger tax system, and expanding economic relations with countries both within and beyond ASEAN. Suu Kyi also stressed infrastructural investment as a means of increasing investment in Myanmar and speeding up development. Zaw Zaw, a prominent tycoon and chairman of the Max Group of Companies, spoke at the event about the need for better statistics in Myanmar, including for job, unemployment, birth and morality rates, as an aid to engineering economic growth. Other industry leaders present stressed a more urgent need for policy detail, given the high expectations held by many towards the NLD government. Fifty journalists from both Burmese and international news agencies had turned up to cover the event at the Myanmar International Convention Center 2 in Naypyidaw, but were held up at the security gate. Security guards said they had been told that members of the media were not to be allowed in without “access cards” provided by the Ministry of Information. Only two journalists, bearing these cards, were allowed in, and later shared their coverage with others. Several of the barred journalists expressed their frustration at what they felt was poor event management on behalf of the Ministry of National Planning and Finance.
More Detail - The 12-point document puts national reconciliation as the top priority, based on a “just balancing of sustainable resource mobilisation and allocation across states and regions”.
- The government will work to ensure that natural resource extraction is transparent and sustainable and will extend the Extractive Industries Transparency Initiative remit to include the mining industry and will also weigh up the costs and benefits of economic policies for their impact across the entire country. The government has demonstrated its intention to shake up the troubled mining industry, by announcing that jade and gems mining permits will not be renewed until new laws are in place.
- In the policy’s second point, the government said it would support competition and a vibrant private sector. It aims to practice a market-oriented system in every sector, cut unnecessary red tape, dilute the power of monopolies and expand access to credit.
- The third point develops the National League for Democracy’s promise in its economic manifesto to strengthen public financial management and work on fiscal prudence and macroeconomic stability. This includes making public spending more efficient, improving budget transparency and privatising “appropriate” state-owned enterprises, which are an enormous burden on the budget, though an open and transparent process. The government also plans to tackle smuggling, or “fully account for Myanmar’s foreign exchange earnings”, especially from the sale of natural resources, streamline the tax system to boost public revenues and develop capital and money markets to help finance the growing budget deficit, which is expected to reach K3.76 trillion by the end of this financial year.
- The fourth point refers to infrastructure development, noting that the government is preparing an infrastructure policy, which will focus on producing and distributing power; building and maintaining rural roads and developing better port facilities. Journalists awaited the announcement outside after they were barred from entering without new media passes from the Ministry of Information.Journalists awaited the announcement outside after they were barred from entering without new media passes from the Ministry of Information.
- Fifth, the government will support the agriculture and livestock sectors to promote inclusive growth, enhance food security, increase exports, and boost living standards. Farmers will be given full production freedoms, while the state will support high value-added crops and livestock breeding. Farmers will have more access to credit, land tenure will be strengthened and production chain sectors improved, it said.
- Sixth, the government says it will focus on job creation to reduce domestic poverty and inequality and encourage migrant workers and the displaced to return from overseas. It sees most jobs being created in special economic zones, and by infrastructure development projects, particularly in rural areas.
- In its seventh point the government said it welcomes foreign direct investment. It is preparing a more detailed policy note this but in brief, it will promote responsible business by creating a stable environment where companies feel secure to invest, and improving property rights and the rule of law.
- The eighth point address human capital and commits to developing a skilled workforce to fill jobs created in the manufacturing and services sectors. To support this goal, the state will improve healthcare and academic and vocational education, while enforcing international standards on labour rights.
- The ninth point covers monetary and fiscal stability and the creation of a financial system that can sustainably provide capital to businesses, farmers and households. The underdeveloped financial sector currently excludes large sectors of the economy, but will soon be liberalized to encourage growth, the government said. It will review limitations on bank lending, enable mobile banking, allow foreign insurance companies into Myanmar and aim to get a sovereign credit rating.
- Tenth, the government will reform state-owned enterprises, making them more accountable and responsive to the public, and privatising them where necessary. They will be audited as a prerequisite for their reform or transformation.
- In the eleventh point the government says it will help small and medium enterprises by improving the ease of doing business in Myanmar, increasing access to financial services and developing a more skilled workforce. Myanmar was ranked 167 out of 189 countries in the World Bank’s ease of doing business ranking last year.
- Finally, the government pledged to promote inclusive economic growth and development, “to enable our country to escape poverty and achieve the prosperity our people deserve.” “Democracy, the rule of law, the promotion of human rights, are ends in themselves, and need no economic or other justification,” the policy proposal concludes.
Business
Noticeable by its Absence - American companies are conspicuously absent from the 106 local and foreign direct investment proposals made during the first quarter of the 2016-17 fiscal year, which started in April. Myanmar’s Investment Commission, reconstituted in early June after a period of dormancy brought about by the installation of a new government in April, has so far processed only eight of the 106 proposals. Minister of National Planning and Finance Kyaw Win chairs the commission, with Minister of Commerce Than Myint appointed as vice chairman. Than Aung Kyaw, deputy director general of the Directorate of Investment and Companies Administration (DICA), said that the commission was now making “dramatic” progress through the backlog. According to Investment Commission data, more than US$2 billion worth of investments have been pledged during the first quarter of this fiscal year from April to June. In the first quarter of the 2015-16 fiscal year, 71 projects were approved at a valuation of $2.65 billion. The first quarter of the 2014-2015 fiscal year saw 39 projects approved valued collectively at US$810 million. Out of the 98 proposals awaiting approval, 47 are for foreign direct investment, according to DICA director Min Zaw Oo, who is a member of the proposal assessment team in the Investment Commission. “Most of the proposals are from manufacturing businesses from various different countries,” he said. However, US businesses are not among the foreign investment proposals Myanmar has received under the new government, according to the DICA. The top foreign investors for this opening period are Singapore, followed by China, the Netherlands, Malaysia, Thailand, Hong Kong and India. Maung Maung Lay, vice-chairman of the Union of Myanmar Federation of Chambers of Commerce and Industry, said that most of the foreign investment proposals received were for labour-intensive businesses. “But the US does not engage much in labour-intensive business now,” he said. “Their businesses are somewhat hi-tech, and can’t operate in the absence of well-developed infrastructure, for example, a stable electricity supply. And skilled labour is needed to operate hi-tech businesses,” he added. In May, the US government reduced sanctions targeting Myanmar’s financial sector and certain state-owned enterprises involved in mining and timber extraction. The aim was to boost trade between the two countries and enable American investment—even though key economic players with close links to Myanmar’s military remained blacklisted. It appears, however, that American companies and investors continue to approach Myanmar with trepidation—although this could change after the National League for Democracy (NLD) government’s economic policy, currently vague, is properly clarified. “Many US and EU companies investors come here via Singapore, where they are already established,” explained Than Aung Kyaw, deputy director general of the DICA. “Singapore is positioned close to Myanmar and has a reliable banking system. That’s why US investors are not coming here directly.” In 2015, US exports to Myanmar were valued at $227 million and imports at $144 million, according to DICA figures. Since 1988, total approved US investment in Myanmar has been $248 million.
Hitachi Expands Operations - Hitachi is planning to dramatically increase its operations in Myanmar according to Hitachi’s president and chief executive officer, Hiroaki Nakanishi, who visited the capital, Naypyidaw recently. The CEO is meeting with government officials to propose new projects as the company looks to expand its operation to 300 billion yen by 2020. Hitachi, along with fellow Japanese company Mitsubishi Corporation, won a Myanma Railways contract in May last year for upgrades on Myanmar’s dilapidated rail network. The $24 million project, due for completion in June 2017, includes installing systems to coordinate signals along a 140-kilometer stretch of track between Yangon and Pyuntaza, Pegu Division. “On top of the electrification of the rail system, we will present proposals to the government, including a comprehensive plan to develop the transportation infrastructure,” Hiroaki said. Hitachi wants to help improve the government’s database of maps using GPS, which would “provide a launching pad for resource exploration, disaster prevention, flood control and other related operations across a wide spectrum”. Hitachi will also work with Japan Post to help Myanmar Post offer “e-money” services, the Global New Light of Myanmar reported. A recent press release said a unit of the group, Hitachi Solutions, had also won a tender last year to “implement an electronic data interchange system” for Myanmar’s Port Authority. The company also said it would host a Social Innovation Forum in Naypyidaw to boost its sales in the country. “Last year, Hitachi announced plans to expand our business in Myanmar and increase the number of local employees five times—from 200 to 1,000—by 2020,” Hiroaki said. “We are very much on track and I am pleased to share that our employee numbers have more than doubled to over 500 in just one year.”
Interbank Blues - The global interbank market in foreign exchange is worth trillions in US dollar terms. Myanmar has had its own local interbank market since 2013, which the Central Bank set up in the hope that lenders would rely less on daily Central Bank dollar auctions and more on each other for foreign currency needs. US dollar auctions typically meet only a small fraction of the commercial banks’ demand for US dollars, because the Central Bank itself has a limited store of foreign reserves. A World Bank report from May estimated the Central Bank’s foreign exchange reserves were equal to 2.9 months of import cover as of November 2015. Daily auctions in dollar volumes have also declined this year, potentially due to a drop in the Central Bank reserves, and the nascent interbank market has not been able to pick up the slack, the report said.
Myanmar’s interbank market has faced a variety of hurdles since its inception, and the latest – according to private banks – is that the state-owned lenders are not pulling their weight. These public sector banks were allowed to handle foreign currency for years before their privately owned peers, and until recently they held a monopoly on providing foreign currency accounts to state-owned companies or joint ventures. This special treatment has left them with larger dollar holdings than the private banks, who say their state counterparts should sell more of their foreign exchange in the interbank market. The daily volume of dollars exchanged at the interbank market rarely passes US$25 million, according to Central Bank data from the start of October 2015 to April 2016.
Private-sector bankers, say that state-owned banks are overly cautious in holding on to dollars to cover liquidity needs, while officials at state-owned lenders say they do participate in the forex market, but that managing their liquidity and profits are bigger priorities. An official at Myanma Foreign Trade Bank (MFTB) said that his bank’s participation in the interbank market comes second to its focus on making timely payments to its correspondent banks. Domestic banks in Myanmar use correspondent banks to act as intermediaries or conduct business on their behalf in other countries, which avoids having to open a branch abroad. MFTB has agreements with more than 200 correspondent banks, and state-owned lenders are hoping to expand their correspondent networks following an exemption from US sanctions in May. U Khin Pe Oo, deputy general manager of state-owned Myanma Investment and Commercial Bank (MICB), said his bank does sometimes sell currency on the interbank market, depending on how much foreign currency the bank holds. “As a state-owned bank we need to follow monetary policy,” he said. “But we also need to focus on profits, because we receive funds from the government budget based on those profits.” MICB, like other state-owned banks, has to present its balance sheet to the Ministry of Planning and Finance each year, and request funds for the coming year based on profits.
Banks are required to sell foreign currency if their exposure rises above 30pc of paid-up capital. A private bank bugbear is that state-owned banks are informally exempt from this rule, although U Khin Pe Oo said MICB does observe the requirement. But U Mya Tha, Myanmar Oriental Bank’s chair, said the Central Bank should still scrutinise state-owned banks’ foreign currency exposure and their reluctance to part with dollar holdings. “There are many things that need to be reformed and that the Central Bank needs to discuss with the state banks,” he said. But while the Central Bank allows foreign lenders to participate in the forex market, foreign banks can only lend in dollars, and have no real reason to participate in the interbank market, he added. Although private banks accuse the Central Bank of inaction, the regulator is trying to address the problem, an official said. He said that starting in January 2017 the Central Bank will impose penalties for all banks with foreign currency reserves above the 30pc level, and has plans to deal with banks that are overly long or short a particular currency. The penalties and policy of equal treatment for private and publicly owned banks are enshrined in the new Financial Institutions Law, which was passed in January this year. “All institutions will be treated equally under the new law,” the official said. “We are going to discuss this matter with state banks and other related institutions.” But the official was also frank about the potential difficulties in penalising state-owned banks, which – although regulated by the Central Bank – are also ultimately under the control of the Ministry of Planning and Finance. “All we can do is issue rules, regulations and warnings,” he said. “But we will probably have some difficulties penalising state institutions.”
Some progress has already been made this year in altering state-owned banks’ behaviour. In the first quarter, MFTB and MICB agreed to return large volumes of US dollars back to private banks, following discussions between the then-Ministry of Finance, the Central Bank, and public and private banks. Almost all private banks have foreign currency accounts at MFTB and MICB, because until 2012 only state-owned lenders were allowed to handle foreign currency, and those banks still provide settlement services for private lenders. But over the years the net balance private banks held at MFTB had built up and up, and they demanded the money back. The net balance between private banks and MFTB is now settled weekly through Nostro accounts, which U Mya Than said had been very helpful for private bank liquidity. The Central Bank also now allows private banks to offer a wider range of foreign banking services, to compete better with state-owned lenders, with the specific aim of helping private banks to access foreign currency and, in turn, the interbank forex market. As of March 22 private banks are able to offer state-owned enterprises foreign currency accounts, ending the state banks’ monopoly on SOE clients, although U Mya Than said he was not aware of any SOE opening an account with a private bank. He said state enterprises are far more familiar with the state-owned banks, and the interest rates available at private banks are not much more attractive. “The most we can expect is for government joint ventures to bank with the private sector, because the foreign partners prefer privately owned banks,” he said.
Farmers’ Woes - Myanma Agriculture Development Bank will stick to the government’s loan ceiling for 2016-17 and will not make any additional funds available for farmers, despite earlier suggestions that this might be a possibility. The bank will not issue new loans to cover losses at farms destroyed by flooding. Heavy rain has already caused floods in Ayeyarwady and Sagaing regions and Rakhine and Chin states. MADB, which is one of the only affordable sources of funding for around 2 million farmer households, is struggling to make a profit, despite raising interest rates from 5 percent to 8pc this year. This is partly because thousands of farmers whose crops were destroyed by floods last year were unable to repay their loans on time. The Central Bank of Myanmar approved a K500 billion one-year loan for MADB in May, to help the bank finance as many farmers as possible. This financial year, the bank has lent more than K730 billion in loans for the monsoon paddy. The bank aimed to lend K900 billion in the first 100 days of the new government, but some of the funds have been held back for farmers who are still struggling to repay last year’s loan. A ministry official denied rumours that entire villages have not yet received loans because some farmers in Ayeyarwady defaulted on last year’s debt. “It is not like that. We do not issue new loans to farmers who have not paid back their outstanding loans. Farmers who have repaid their loans can take out new ones,” he said. This year the bank has changed its lending rules, to make it easier for farmers, said Ko Myo Lin Aung, a farmer from Pyinmana township in Nay Pyi Taw. In the past, 10 farmers had to group together to apply for loans – if one failed to repay, the other nine would cover the costs, he said, while this year farmers can apply in groups of three. The bank has raised the size of its loans this year to K150,000 per acre from K100,000 last year, but has maintained its policy of only offering loans to cover the first 10 acres (4 hectares) owned by any one farmer, said U Thein Aung, chair of the Free Farmers Association. “If the farmers who own more than 10 acres could receive loans for their entire acreage, they would be fine. But they have to take out private loans for anything over 10 acres at a very high interest rate. Actually, K150,000 per acre only covers cultivation,” he said. Ayeyarwady, Sagaing, Bago and Magwe regions and Rakhine State are the main rice-growing areas of the country. They are also among the areas at highest risk of further flooding, particularly over the next few weeks as more heavy rain is forecast. U Thein Aung said the main problem for farmers is financing a second crop when the first had been destroyed by floods. Farmers who have to resort to private lenders can be charged up to 30pc interest rates on short-term loans. Last July and August, 12 of Myanmar’s 14 states and regions experienced heavy flooding, damaging and destroying 1.5 million acres of monsoon paddy out of 16 million acres grown nationwide. The government and the Myanmar Rice Federation provided loans for second cultivation costs, stabilised local rice prices and provided food supplies on an emergency basis.
In The Black - Qatar-based telecommunications firm Ooredoo has begun making profits on its operation in Myanmar, it announced, after more than doubling its subscriber base in a year. In half-year results announced this week, the company said it now had more than 8 million customers in the country, and said its data network was already available in locations where more than 85 percent of the population lives. The results say Ooredoo Myanmar made a profit almost $22 million in the first half of 2016, compared to losses of about $83 million in the first half of 2015. Despite the growth in subscribers, Ooredoo is still behind rival Telenor of Norway, which has raced to 16.9 million subscribers, according to quarterly results published this month. Telenor made $72.3 million in the second quarter of 2016, between April and June. But Ooredoo last year vowed to turn its fortunes around with a more mass market approach. Revenues grew by 41 percent year to year, according to the latest results. The company also said it had become the first operator to launch 4G mobile services in May, “confirming its data leadership in Myanmar.”
Fund Raises Money - Singapore-registered private equity fund Golden Rock Capital says it has raised $20 million and has begun investing in business in Myanmar. The fund is targeting $100 million in total funding to make individual investments of ideally between $7 million and $10 million in the country. It has already put money into Myanmar Personal Care, a Singapore-registered entity trading in perfumes. Marvin Yeo, founder of the fund, which has offices in Yangon and Singapore, said that $20 million had been raised so far. Originating partner Thura Soe Paing said that investments would mean firms get management help from the fund. “We are more than a provision of capital, we would like to help the businesses grow through the contacts and connections that we have,” he was quoted saying. “The most important thing is when we come as investors and advisors, we believe in the long term potential of the country we are not here just to make a quick buck.”
Public Hospital Upgrade - Myanmar’s new five-year plan for the health sector includes upgrading all 25-bed hospitals across the country into 50-bed ones, according to Dr. Myint Htwe, minister of health. “We plan to upgrade all 25-bed hospitals into 50-bed facilities and employ 2,000 new doctors within two months,” he told Parliament. However, the minister did not specify a timeline for the upgrades. Lawmakers stated that even the 25-bed hospitals currently lack sufficient beds and staff. “In my township, the ‘25-bed’ hospital is supposed to have four doctors according to the standard organizational structure. But, it only has 16 beds and two doctors. Employees are overstretched. Most locals are ‘grassroots people’ and can’t afford to go to special clinics,” said Aye Naing, a Lower House lawmaker. According to the health minister, the previous government had monitored the rate of hospitalization at government-run hospitals and found it to have gradually increased between 2011 and 2015. The proposed bed upgrades will also mean a workforce increase from 55 to 156 employees at each facility. Myint Htwe explained that the ministry will not go further and upgrade the 25-bed hospitals into 100-bed ones because the smaller hospitals receive only about 13 inpatients and 49 outpatients each day on average. He added that the public does not often complain about the lack of beds, but more often about a shortage of doctors. The minister said the 50-bed hospitals will include pathology, surgery, obstetrics, gynecology, pediatric, osteoporosis, emergency, dental and anesthetic units and his ministry will ensure they are accessible to all. According to the Ministry of Health, there are a total of 1,190 hospitals in Myanmar as of February 2016.
Infrastructure
ADB Report on Transportation - As much as US$60 billion of investment is required by 2030 if Myanmar is to address shortfalls in transportation infrastructure that risk holding the country back from economic growth and reducing poverty, according to the Asian Development Bank (ADB). It has just published a lengthy “policy note” on the transport sector, comprising nine separate reports that include one on “how to reform transport institutions,” others looking at Myanmar’s river transport, urban transport and truck roads, and a guide on “how to improve road user charges”—the latter dealing with the troublesome issue of tolls. The reports derive from reviews on which the ADB assisted the Myanmar government in 2014-15. A press release accompanying the publication cited Bambang Susantono, ADB’s vice-president for knowledge management and sustainable development, saying the country’s “future is full of great potential.” “The new government is ready to make use of its abundant and innate resources to eradicate poverty and ensure growth for everyone,” he said. “This includes providing access to a modern and safe transport system for all.” Detailing some of the findings, it said that some 20 million people in Myanmar currently live in villages without road access during all seasons. The report notes that $45 to $60 billion is required in transport investments by 2030, and these should be coupled with streamlining institutions and strengthening cross-ministerial collabouration.
Culture and Tourism
New Routes From Thailand - Bangkok Airways is hoping to fly directly from Thailand airports to Bagan and the archipelago gateway of Myeik, according to an industry publication. The carrier is applying to Myanmar’s Department of Civil Aviation for permission for two new flights. One would connect the northern Thai city of Chiang Mai with Nyaung U, close to Bagan, in Mandalay Division, and the other would link Bangkok and Myeik in Tenasserim. Myanmar’s smaller airports are generally only served by domestic airlines, but both destinations are expected to grow as the number of tourists visiting Myanmar increases. Some of the hundreds of islands off Myeik, most of which remain untouched, are currently undergoing development as tourist sites. Bangkok Airways already flies between Bangkok and airports in Yangon, Mandalay and Naypyidaw, and connects Chiang Mai to Yangon and Mandalay.
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