ASSK pays 5 day visit to Japan but cancels Indonesia visit
SMU in conjunction with Deloitte produce report on KBZ Group
Burmese army fighting in both Rakhine and Shan states
Taiwan’s E-Sun bank opens branch
Serge Pun to buy 50th Street pub?
The Myanmar government has faced many ups and downs in recent months and is now at a low. There is growing criticism toward Aung San Suu Kyi’s leadership, her cabinet and her administration’s management of the conflicts in northern Myanmar and in Arakan State.
The renewed conflict in the North needs immediate attention as ethnic leaders want to discuss political issues, but have been confronted with several military offensives in recent months, particularly after the Panglong peace conference at the end of August.
The recent offensive by the “Northern Alliance” in northeastern Shan State—including ethnic armed groups belonging to the Kachin, Kokang, Palaung and Arakanese—is most troubling and could derail ongoing peace meetings being initiated by the government. The strategy is to build up pressure on the government and to raise the issue as one that extends beyond Myanmar, as the target is not just security forces but cross-border trade with China. Three of the armed groups—the Kokang, Palaung and Arakanese—were not invited to the last peace conference.
Last month, Burmese Army Head, Snr-Gen Min Aung Hlaing was in Beijing, where he met President Xi Jinping and agreed to military-to-military engagement and increased cooperation between the two armed forces. The two also discussed the non-state armed groups based in Myanmar’s north. Subsequently, ethnic armed organizations launched the current offensive. A number of ethnic armed forces in the North are under the influence of China and it will undoubtedly play a key role in restoring stability.
China’s strategic interest in Myanmar, as well as its recent decline of influence in the country, is well known. China worries that several of its projects have faced strong opposition, including the controversial Myitsone dam in northern Myanmar, which has been suspended. Any decision on the multibillion dollar hydropower project is on hold.
Meanwhile, several governments and the UN remain focused on issues surrounding the Rohingya Muslims in Arakan State and, with recent militant attacks in Northern Arakan suggesting growing radicalization among the Rohingya population, they have asked the Burmese government to allow an independent investigation into recent reported abuses by security forces in the region. So far there has been limited access to the conflict zone. The government denied the alleged human rights abuses and sceptics insist that the serious allegations require strong verification.
Some fear that the situation in Arakan State will soon be out of control and the army’s presence is needed. Arakanese politicians have a strained relationship with the current government and Aung San Suu Kyi, but are much closer to the army and are in favour of taking strong action against Rohingya Muslims. The official line of both the Burmese Army chief and Aung San Suu Kyi is that the Rohingya Muslims are not one of Myanmar’s ethnic minorities. Much of the country’s Buddhist population feel the same way. The more the issue of the Rohingya is raised to the level of international intervention, the more that the local Arakanese and several nationalist groups will feel a need to call the Burmese Army to step in to the situation directly.
The relationship between Aung San Suu Kyi and Snr-Gen Min Aung Hlaing is not a healthy one, either. According to sources close to the leaders, the trust and confidence between them is weak, and they are said to particularly disagree on how to approach both ethnic conflict in the North and the conflict in Arakan State. Smiles for the media have been soothing to watch, but in reality there is rising tension between the two figures.
One theory is that Aung San Suu Kyi’s leadership is effectively undermined and that she is losing her popularity particularly among some ethnic groups and Burmese intellectuals. Some critics feel that the government is losing control of the country. The other harsh reality is that Aung San Suu Kyi and her cabinet have limited capacity with which to manage the country and to win the trust and confidence of the ethnic groups and the general population. Rising commodity prices and slow economic growth are also of major concern among urban-based residents.
A recent spate of minor bombings in the former capital, Yangon, is a growing sign of instability and has invoked fear and insecurity, as well. There were no casualties in the blasts, but questions have been raised about whether the acts were politically motivated. The last one occurred at the immigration department of the Yangon divisional government office.
Myanmar once again is heading in the wrong direction.
Financial Reform A Priority - President Htin Kyaw has addressed challenges to Myanmar’s financial sector and announced preparations for reform at a financial commission meeting in Naypyidaw. When the NLD government assumed power in April, budget estimates for the 2016-2017 financial year and the Union Budget Law were amended and Union ministries were reformed, causing financial difficulties. “The nation is preparing to accelerate reforms in the monetary sector,” the President said. President Htin Kyaw addressed the need to revise budget estimates submitted by states and regions for the 2016-2017 fiscal year. Government expenditures have changed and the President urged ministers to postpone spending their budgets, as it would affect other areas of the country. The President added that the government is seeking additional grants and subsidies for the country’s small and medium industries and called for frugal and systematic spending during a time of slow economic growth. Dr. Maung Maung Lay, vice chairman of the UMFCCI, said that the government should address financial sector reform as soon as possible, as economic growth has been sluggish since April. He said a major problem in the country is the growth of informal trading and that if the government cannot prevent increased informal trade, the trade deficit will grow, inflation will increase and economic growth will stagnate.
The Plight Of The Rohingyas - Hundreds of Rohingya Muslims from Arakan State have crossed the border to Bangladesh according to aid workers, seeking shelter from escalating violence in the northwest that has killed at least 86 people and displaced some 30,000. Aid workers in the International Organization for Migration (IOM) camps also reported seeing Rohingyas who said they had recently fled the fighting in Myanmar. The bloodshed is the most serious since hundreds were killed in communal clashes in 2012, and is posing the biggest test yet for the administration of Aung San Suu Kyi. Soldiers have poured into the area along Myanmar’s frontier with Bangladesh, responding to coordinated attacks on three border posts on Oct. 9 that killed nine police officers. Myanmar’s military and the government have rejected allegations by residents and rights groups that soldiers have raped Rohingya women, burnt houses and killed civilians during the military operation in Arakan State. Human Rights Watch said satellite images taken on Nov. 10, 17, and 18 showed 820 destroyed buildings in five villages in northern Arakan State, bringing the total number it says it has documented to 1,250. Myanmar’s government has also rejected previous reports of Rohingya civilians trying to escape to Bangladesh. The Burmese Army has declared an “operations zone” in mainly Muslim northern Arakan State, where it says it is battling Islamist-inspired Rohingya insurgents, and it is not possible for international reporters to enter the area to verify claims. Myanmar’s 1.1 million Rohingya, viewed as illegal immigrants from Bangladesh by many of the country’s majority Buddhists, are denied citizenship and face severe restrictions on their travel. Up to 30,000 people are now estimated to be displaced and thousands more affected by the recent fighting, the UN has said. Humanitarian operations that had been providing food, cash, and nutrition to more than 150,000 people have been suspended for more than 40 days. The UN refugee agency called on the Myanmar government for access to allow it to distribute aid.
Meanwhile in Shan State - China is giving shelter to more than 3,000 people who have fled Myanmar after fighting between the government and rebels, and stray shells have fallen inside Chinese territory causing minor damage but no deaths. Four ethnic armed groups have attacked security forces in the north, dealing a major blow to leader Aung San Suu Kyi’s goal of reaching peace with ethnic minorities. China, alarmed by previous fighting along the border, has put its armed forces on high alert and called for all sides to exercise restraint. Injured people among the 3,000 Burmese citizens have been taken to hospital in the southwestern province of Yunnan, which shares a long border with Myanmar. “The Chinese authority has responded swiftly and handled the situation appropriately,” Pan Xuesong, a spokesman for the Chinese Embassy in Myanmar, said. Stray shells have also fallen in Wanding, an important border crossing, causing some minor damage and a Chinese government building in Wanding had been lightly damaged. Previous fighting along the border pushed thousands of people into China. China was infuriated last year when five Chinese people were killed when the fighting spilled over into Chinese territory.
Tumbling Kyat - Local business leaders have requested the government take action in the currency market to slow down the rising US dollar. The exchange rate has risen continuously since early November, and has reached over 1,300 kyats per dollar. The gap between official and black market rates also widened, with the black market trading at 1,353 kyats per dollar. “We’re afraid to start work these days, because the dollar exchange rate is rising incredibly. If we purchase goods from warehouses, we must pay high prices. We think it’s better to wait and see what will happen,” said Myo Min Aung, vice chairman of the Myanmar Retailer Association. Importers in Myanmar are suffering over the rising dollar, and they’re especially concerned about daily commodity prices. “We can’t sell our products at low prices after we buy them at the higher exchange rate,” said Myo Min Aung. “So commodity prices will stay high even after the dollar rate starts to go down.” Since September, when the dollar rate was 1,215 kyats, it has trended slightly higher. But starting in early November, the rate has risen more dramatically, sometimes by as much as 20 kyats per day. “If foreign currency reserves are too low to inject into the market, then the government should consider issuing USD bonds, and attracting more foreign institutional investors,” said Zaw Lin Htut, chief executive officer of Myanmar Payment Union. Several factors, including an import/export imbalance, internal conflicts, and a drop in gas export earnings, are hurting the Burmese economy right now, he added. “The price of rice is dropping. And due to the oil price drop, our export income is affected. The FDI side also is not growing much, due to internal conflicts,” he said. “Other countries also feel an impact, but they are not as badly affected, because they have more production, and their exports are bigger than imports,” said Zaw Lin Htut.
Criticism From USDP - Union Solidarity and Development Party (USDP) chairman Than Htay has criticized Myanmar’s economic development as “slow” during the last seven months of the NLD party’s administration. The statement came at a meeting at the party’s headquarters in Naypyidaw to discuss the country’s economy. It was attended by USDP leaders, and ministers and deputy ministers from the previous USDP-led government, as well as academics. “How businesses are operating, the commodity prices and the situation regarding the livelihoods of the people indicate how the country’s economy is performing at present,” said Than Htay in his opening address at the meeting. He argued that there has been a significant increase in crime recently due to economic hardship, highlighting it as a serious concern for the country. The party chairman also warned against dependence on outside help. “We should be aware of historical lessons that the tendency to rely on external assistance does not always work in state building,” he said. A total of six papers were submitted and discussed in the meeting. They focused on financial and monetary issues, national project implementation, trade and commodity prices, comparatives studies of foreign investment and citizens’ investment, and statistics and development. The USDP said that the forum aimed to adopt a clear economic policy to address existing challenges and social and economic problems that people are facing. “It is true that businesses are slow under the new government. Some have blamed the legacy of the previous government for it. But it is also partly because of the mismanagement of the new government. And we should welcome a major opposition party trying to address economic problems on its own,” said former Lower House lawmaker Ye Htun.
YSX Blues - Since the Yangon Stock Exchange, a joint venture between Myanmar, Daiwa Institute of Research and the Japan Exchange Group, began trading in March, only 20,000 investors have ventured into the market. Regulators complain that those who do take the plunge rely largely on rumours, herd psychology and even the stars. An account executive with KBZ Stirling Coleman Securities, said one client offered him an astrological chart to help guide his investment decisions. A half-century of harsh military rule in this Southeast Asian country of 55 million brought economic ruin and isolation from the international community. But Myanmar remains a cornucopia of natural resources, and it is welcoming foreign investment as one of Asia’s last economic frontiers. The economic growth is forecast at 8 percent this year, among the fastest in the region. Just a week after trading began on the Yangon exchange, a democratically elected government headed by Aung San Suu Kyi took power. Since then, the United States has lifted nearly all of the economic sanctions it had imposed on the former military regime, freeing up remittances from abroad which experts say may help fuel the market. With the three listed companies mostly trading below their initial price levels, many investors have fared poorly. The first stock to be traded, First Myanmar Investment, is one of the country’s biggest public companies. It made its debut at 40,000 kyats a share but languishes now at about half that price despite having seen its profit soar in the past year. Many investors blindly follow friends and neighbours into the market and when it tumbles they “all go over the cliff together”! KBZ and four other brokerage firms handle trading electronically. That could be one reason for the lack of activity on the trading floor. Traditionally, Burmese have kept their wealth in gold and jewelry. The country’s two-digit lottery is wildly popular with speculators but most people in Yangon’s streets look puzzled when asked about the stock market. Myanmar is drafting legislation to allow foreign investors into the market and to permit continuous trading, rather than the current two daily auctions. A fourth listing, the First Private Bank, is scheduled before the year’s end, and it anticipates possibly five newcomers on the board during each of the next five years. As the market grows, institutional investors, who so far have kept away, are expected to step in. The hope is that Yangon’s bourse will emulate Vietnam’s highly successful stock markets, rather than the lackluster exchanges of Laos and Cambodia. Myanmar’s exchange has the latest technology. Soon, investors will be able to trade on their mobile telephones. “We could grow very fast but we need government regulators to render proper support and understand the value of capital markets to the country,” said Rudi Rolles, managing director of KBZ in Yangon.
Thilawa Attracts New Investments - Two Thai companies received a green light from the government to invest in the manufacture of fertilizers in the economic zone south of Yangon. The Thai Central Chemical Public Co. will invest US$12.5 million in manufacturing, importing and trading in fertilizers, while the CPP Fertiliser Co. Ltd will invest $10.5 million in the same sector. Japan’s Taiyo Nippon Sanso has secured approval to invest $11.29 million in the manufacturing and wholesale supply of oxygen, nitrogen and argon in the economic zone, and Buhler Myanmar will invest $5.2 m to import and assemble milling machinery for the rice, flour, bean and pulses and feed sectors.
Maybank Loan For MFIL - Malaysia’s Maybank has provided a US$1 million loan to the microfinance operator Myanmar Finance International Limited (MFIL), a joint venture with AIM-listed Myanmar Investments International (MIL). Myanmar Finance Company Limited and MIL own a 37.5 per cent stake each in MFIL. The Norwegian Investment Fund for Developing Countries (Norfund) holds the remainder. As of September, MFIL had six branches in Myanmar and was planning to open another four. It was managing a loan portfolio of $5.1 million for 38,000 borrowers. Norfund’s regional director said, “The loan from Maybank will be an important contribution to MFIL growth and will thereby support the promotion of more financial inclusion in Myanmar.” Maybank began operating in Myanmar in October 2015. It has financed the Yangon International airport, gas pipelines and highway projects, among others.
Japanese Developers For Yangon project - A Japanese consortium is due to start construction of a large commercial complex in Yangon in partnership with local developers. Mitsubishi Estate and Mitsubishi Corp are among the partners in the project that will include condominiums, two office buildings, a hotel and services unit on a 4-hectare site across from Yangon’s Central Railway Station. Set to start by March 2017, the developers are expecting challenges ahead due to the size of the project. ‘‘Just getting the construction materials into the country smoothly is a lot of trouble,’’ said a manager for the project. Rents for the buildings will be set at competitive rates to compete with rival buildings of similar size, Mitsubishi Estate said.
Malaysian Packaging Company Plans Investment
Malaysia-based Daibochi Plastic and Packaging is set to invest $6.8 million in a joint venture with a local company, to cater to a rising market for packaging for consumer goods. An agreement signed with Myanmar Smart Pack Industrial Company Ltd (MSP) will see the new joint venture titled Daibochi Packaging (Myanmar) operate a manufacturing facility with more capacity and increased efficiency. Daibochi will also spend an additional $5.5million on various plant and other improvements, according to managing director Thomas Lim. “We believe that Myanmar is poised to witness a high growth trajectory, propelled by the increasing economic development and anticipated influx of global brands of fast moving consumer goods and food and beverage as the country opens up,’’ he said.
Myanmar PE Funds - Myanmar focused private equity firm Delta Capital Myanmar, has achieved the first close of $30 million for its second fund that is targeting to raise $100 million by mid-2017. Delta Capital’s second vehicle – Myanmar Opportunities Fund II – has seen investment from four leading European family offices, two Asian families as well as its sponsors. Delta Capital Myanmar was formerly known as Pun Murray Myanmar Partners (PMM Partners). Delta Capital Myanmar is hoping to complete the total $100 million fund by May 2017. In addition to Delta Capital, several other Myanmar-centric private equity firms are now raising their funds. Credera Group from Singapore that is aiming to raise $100 million by 2017, plans to make investments in two green field projects in the manufacturing sector, and is also looking at the financial service sectors. Another Myanmar focused firm, Myanmar Investment Group, does not have a specific fund raising but they have already decided a 40 percent stake for a venture investment in building cinemas around Myanmar. The $20 million project is to be handled together with Maze, their local partner.
Power Projects - US energy development company Quasar Resources is planning to invest up to US$400 million in Myanmar’s power sector over the next five years. The Texas-based company is currently in talks with the government over a 100MW solar power station it hopes to develop in Sagaing Division, with an investment of around $150 million. It also hopes to develop a 64MW hydroelectric power plant in the Upper Saedawgyi region. The project would involve building a new dam, with an investment of up to $150 million. Quasar Resources is also looking to develop at 33MW dual fuel power plant at the Thilawa Special Economic Zone.
Culture and Tourism
UNESCO Bid - The Burmese government plans to submit an entry for the country’s highest mountain area, northern Kachin State’s Hkakabo Razi, to be listed as a UNESCO natural world heritage site in 2018. As a result of collaboration since 2013 between UNESCO and the Ministry of Natural Resources and Environmental Preservation’s department of forestry, seven natural forest sanctuaries are being submitted on the tentative list for inclusion as heritage sites, according to ministry spokesperson Myo Min. The seven locations include the northern mountain forest complex of Hkakabo Razi, the Hukawng Valley Wildlife Sanctuary and the Indawgyi Lake Wildlife Sanctuary in Kachin State. In Chin State, the Natma Taung National Park is being submitted, and in Tenasserim Division, the Tenasserim forest corridor, the Irrawaddy River corridor, and the Myeik Archipelago are also up for consideration. Among these, the government set Hkakabo Razi, at 5,881 meters of elevation, as the first priority and in 2015 began carrying out the necessary assessments and field research for the location to be considered for the honour by UNESCO. A team of both international and domestic experts conducted field visits to the areas to see whether it is in accordance with the UN criteria. To be considered as a natural world heritage site, the respective country has to pledge to protect the natural and cultural legacy of the area in question. The area itself must be determined, standardized and well preserved. Although Myanmar has a number of cultural and religious buildings across the country, the ancient Pyu cities of Halin, Beikthano, and Sri Ksetra currently are the only World Heritage sites in the country. Seven of Myanmar’s natural parks, including three of those to be considered by UNESCO for their heritage value, are on the list of ASEAN heritage parks, which aim to collaborate in protecting ecosystems, preserving the region’s biodiversity and promoting sustainability.
Motorcycles Still A No No - The local government will continue its ban on motorcycles in Yangon for road safety reasons, deputy minister of the Ministry of Transportation and Communication Kyaw Myo told the Lower House of Parliament. Lawmaker Nyan Lin, who represents Yangon’s Shwepyitha Township in the Lower House, asked during the parliamentary session if the government would allow motorcycles in new satellite townships such as Shwepyitha and Hlaingthaya and other areas with less traffic congestion. The deputy minister said the government would not grant motorcycle licenses or allow motorcycle riding in populous suburban townships in Yangon according to the ban introduced in April 1991. In early October, however, Yangon regional government’s minister of electricity, industry, roads, and transportation Nilar Kyaw responded to a question concerning official permission for motorcycle licenses and dealers in the outskirts of Yangon that it was “completing reviews on rules and regulations related to setting territories for motorcycle riding.” Myanmar has an estimated four million registered motorcycles in the country, based on official figures, and many more are imported illegally.
Strand Hotel Reopens - The Strand Hotel in downtown Yangon has reopened after an extensive six-month renovation. Every original detail of the exterior and interior of the heritage hotel has been transformed, including everything from antique bedsteads to teak paneling and the marble flooring. The hotel’s furniture was restored by local craftsmen and its rooms and suites now feature vintage-inspired textiles and original art together with new technology. Italian chef Christian Martena who ran the Sensi restaurant in Bangkok, Thailand, is the new executive chef overseeing The Strand Restaurant and The Strand Cafe. “The Strand Yangon was one of the first luxury colonial outposts in southeast Asia, founded in 1901 by famous hoteliers, the Sarkies brothers. It remains one of the most architecturally beautiful landmarks in the region and this latest project has preserved the heritage at the heart of the hotel,” said Olivier Trinquant, vice president, The Strand Hotel & Cruise. The Strand Cruise is due to launch a series of cruises next year that will feature music, culinary, and photography themes.