Hydropower, mining, oil and gas sectors cover 85 per cent of total investment

Investment sectors in hydropower, mining, oil and gas covered 85 per cent of total investment in Myanmar, said Aung Naing Oo, Director General of Directorate of Investment and Companies Administration in a conference held at Myanmar Investment Commission Office in July 25. (ELEVEN MEDIA)

“The main foreign investment in Myanmar is hydropower. The investment in hydropower sector has over 40 per cent of overall investment. Exploring oil and natural gas came second and has over 30 per cent of total investment. The third is the mining sector and has 7 per cent of total investment,” he said.

Myanmar has now over US$42 billion from foreign investment and China is top among foreign investors. China’s investment accounts for 34 per cent of total foreign investment. Although foreign investment in above sectors is up, investment in production and agricultural sectors has a little investment.

“Although foreign investment those three sectors are high, investment in agricultural which is the important sector for 70 per cent of total population and labour intensive industries which can create many job opportunities are low. We are trying to make investment increase in those sectors,” the director general said.

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UK to invest in Myanmar’s oil, gas and travel sectors

The United Kingdom has pledged to invest over US$385 million in Myanmar in two years time, according to statistics of the Directorate of Investment and Company Registration. (ELEVEN MEDIA)

The UK invested over US$2659.954 million in March 2011, and the investment is increased to over US$3045.434 million in June 2013. China is still the biggest investor in Myanmar with more than US$14 billion. The UK is standing in 5th place behind China, Thailand, Hong Kong and South Korea.

The UK is making investment in nine sectors in 2013. On June 12 the Myanmar Investment Commission (MIC) gave permission to UK-based Leisure Holdings Asia Ltd. to organise river cruises between Yangon, Mandalay, Began, Banmaw, Mawlite and Homemalin. On May 10 the MIC is also allowed the joint venture of UK based HC (Asia) Holding Co. Ltd. and a Myanmar company to establish a production plant of plastic bottles in Mingalardon Industrial Zone.

During his trip to the UK, Myanmar President Thein Sein invited UK companies to invest more. Myanmar has plenty of natural resources and needs foreign investment to develop into an industrialised country like UK.

Myanmar set for stock exchange

Deputy Minister for Finance and Revenue, Maung Maung Thein confirmed on 15 July that Myanmar will begin implementing a stock exchange market this year. (MIZZIMA)

Earlier announcements state the stock exchange market will be established by 2015, but preparations are already under way.

“Earlier we planned to begin in 2015, but it would be too late. So, we are beginning this year,” says Maung Maung Thein.

The Central Bank of Myanmar is cooperating with the Daiwa Research Institute and Japan’s Tokyo Stock Exchange to establish Myanmar’s stock exchange. Later this month, Maung Maung Thein says there will be a demonstration on the operation of the stock exchange with the help of a Myanmar IT company.

According to Maung Maung Thein, the “Security Exchange Law” has been put forward to the Lower House in the current ongoing parliamentary sessions. Shortly after the bill has been approved, the stock exchange will be established.

Maung Maung Thein says a relevant committee has been formed in order to ensure a smooth launch for the stock exchange.

“Myanmar needs a huge market to attract financial investments,” says Maung Maung Thein. “Myanmar did not have that market. To establish that market [stock exchange], we have prepared for many years.”

Hla Maung, an economist, says, “It’ll be surprising if the stock exchange can be established in late this year. The sooner the better. But it is a financial market, so we need to have public companies and corporations that can sell shares. If not, the market will be weak and unsuccessful.”

Public companies that will sell shares in the stock exchange have to submit the company’s real status to the supervising committee. However, experts say this will pose a big challenge to existing Myanmar companies as they deal with problems about tax affairs.

Dr. Aung Thura, chief executive officer at Thura Swiss Company, who provides economic research services for public companies in Myanmar, recently told Mizzima, “According to Daiwa, new emerging companies such as KBZ and AGD will enter into the stock market rather than the current public companies when the stock exchange is established in Myanmar.”

Currently, only two public companies have registered at the Myanmar Security Exchange Center [MSEC]. An international economic researcher told Mizzima that if experts spread knowledge about the stock market among Myanmar citizens beforehand, it is likely that the early stage of the stock market will run smoothly.

The stock exchange will be located near Bandoola Garden, where Myawaddy Bank currently stands. The building formerly owned by the Finance and Revenue Ministry is due to be returned to them later this year.

KBZ Bank insurance subsidiary to go public

Myanmar’s leading bank, Kanbawza Group of Companies (KBZ Group) has decided to make its recently launched subsidiary, IKBZ Insurance Company into a public firm within coming three months, according to the managing director of IKBZ Insurance.

Myanmar has just permitted private firms to offer insurance services for the first time in more than 50 years. Five private companies including IKBZ Insurance Co Ltd were approved on May 25. In the past, the state-owned Myanmar Insurance was the only insurance service provider in Myanmar.

“Since the very beginning, we intended to form a public company for the business. However, we started as a private firm due to legal constraints and other difficulties. We aim for our insurance business to reach the international standards,” said Nyo Myint, Managing Director of IKBZ Insurance.

Myanmar is planning to launch a first ever stock exchange in 2015 allowing KBZ Group’s subsidiaries, including IKBZ Insurance, to be listed locally. Other major subsidiaries of KBZ Group include Myanmar Airways International, Air KBZ and Kanbawza Bank.

“Turning our subsidiaries into public companies will contribute to the successful operation of the upcoming stock exchange, as it will offer viable shares attracting people to invest their money in the stock market,” Nyo Myint said.

GE aims to double business in Myanmar this year

American conglomerate General Electric expects its business in Myanmar to double this year, a senior executive told The Myanmar Times last week.

Stuart Dean, the company’s chief executive officer for Southeast Asia, said GE earned US$50 million in 2012, its first year of operations in Myanmar, and he expects this to double this year.

“We see huge potential and are currently in discussions to deepen our local partnerships,” Mr Dean said on May 23.

The comments followed the establishment of a regional office and the signing of two potential distribution deals with local partners.

GE opened its Yangon office on May 23. At a ceremony in Nay Pyi Taw the day before, it announced that it had signed a memorandum of understanding with Lighting Co Specialists and a letter of intention with technology company Partners Associates. The announcements came just days after GE Energy’s president of global sales and marketing, James Suciu, met President U Thein Sein in Washington.

GE and Lighting Co Specialist aim to distribute a wide range of GE lighting products in Myanmar. Through Partners Associates, GE aims to sell its batteries to telecom companies, which are overly-reliant on diesel powered generators for energy.

GE became the first US company to re-enter Myanmar following the easing of US sanctions in July last year. Its first deal was to provide medical equipment to two Yangon Region hospitals through local partner Sea Lion.

Last September its aviation branch leased two aircraft to state-owned Myanma Airways.

Two months later GE made a foray into Myanmar’s energy sector through a project for a natural gas-fired power plant project with TOYO Thai Power Corp in Yangon’s Alhone Township.

Despite GE’s bullish outlook for Myanmar, the company has quickly learned of some of the troubles that come with being one of the first US firms on the ground in a country that is still under targetted sanctions imposed by the US government.

GE had planned to open its office earlier this year, but was delayed after it submitted a list of guests to the US Embassy to be checked against the Treasury Department’s Specially Designated Nationals (SDN) list.

The process of clearing around 400 names, according to Mr Dean, took far longer than expected.

US companies are barred from engaging in business with individuals and companies from Myanmar that appear on the SDN list.

By Tim MclaughLin   |   Monday, 27 May 2013

Global titan WPP aims to ‘shake up’ the market

The holding company that manages more than US$70 billion of advertising globally a year for its clients, including Coca Cola and Unilever, has accelerated its drive to establish itself here over past two months, through four of its global agencies.

Its recent licensing, joint venture and affiliate deals will allow WPP to offer clients interested in Myanmar the same template of integrated research, advertising, marketing and public relations services that it provides in more than 100 countries, executives from different units of the holding company said.

WPP CEO Sir Martin Sorrell said the deals give it a “first mover” advantage that could see it duplicating its success in other high-growth markets. “We’ve been in China since way before it became fashionable,” he said during an interview in Yangon on June 5, prior to attending the World Economic Forum on East Asia in the capital. WPP’s revenues in China, about $1.5 billion last year, are five times those of its nearest rivals, Mr Sorrell said while handling a fist-sized jade stone given to him by the owner of a PR firm here.

He had been told the jade stone would make him “healthier and calmer”. It could also come in handy as a weapon if he was asked an offensive question, quipped the frequently quoted CEO.

Mr Sorrell pioneered the global consolidation of public relations, advertising and market research in the 1980s and 1990s through a series of often hostile takeovers and rapid expansion into high-growth markets from East Asia to South America and the former Soviet Union.

WPP now encompasses a roster of global ad and PR agencies, most with local affiliates worldwide, and has stakes in a diverse range of online and digital pioneers, from Vice Media to 24/7.

“I like the idea that we’ve been very aggressive in terms of building our business here,” Mr Sorrell said, pointing to the lifting of sanctions by the EU as the trigger. The shift in attitude towards Myanmar in the West has created a massive opportunity for his clients and his company, he added.

WPP established a toehold in Myanmar last year by buying a stake in Today Advertising through its unit Ogilvy & Mather, a global PR agency. Last month it formed a joint venture, Y&R Yangon, with K-Noke Advertising through its unit Y&R, a global advertising agency.

In April its unit JWT, another global ad agency, signed an affiliate agreement with Yangon upstart Mango Marketing. In March its unit TNS became the first foreign firm to receive a licence to conduct market research in Myanmar. Another unit, Millward Brown – which says its works with 90 percent of the globe’s top brands – has also applied for a licence to do market research here, Mr Sorrell said, expressing optimism that it will receive one.

WPP has moved quickly into Myanmar because its clients expressed “a phenomenal degree of interest” in the market, particularly those in the “fast-moving consumer goods” sector, Mr Sorrell said, adding that he was surprised “competitors are not being more aggressive”.

Myanmar’s market interests WPP’s clients because of its large consumer base and its growth potential, with three sectors – natural resources, infrastructure and tourism – among the most attractive. Mr Sorrell said there are also significant opportunities in soft infrastructure, such as telecom and ICT devices, saying there would likely be “a very fast take-up of the Internet” and that people in Myanmar – like those in other developing countries – were likely to “leapfrog the PC and go straight to the Internet via a phone”.

Research conducted by local firms shows that the leap-frog effect is old news: About 22 percent of households in Mandalay and Yangon already has access to the Internet, most often through a smart phone, according to research by Myanmar Survey Research.

Mr Sorrell said WPP decided to start market research from scratch in Myanmar – rather than partner with a local firm – because its market research is the best. It also accounts for 25pc of the holding company’s revenues, he added.

Myanmar firms, however, are moving swiftly to differentiate their research from that conducted by WPP’s units, arguing that their local knowledge gives them the upper hand. When TNS launched its debut report on the consumer market in Myanmar on May 9 at the Park Royal Hotel, they held a rival conference to tout their research at the Sedona Hotel on the same day.

They also announced the formation of the Myanmar Market Research Association.

One local researcher said association members already provide research to 90pc of the brands WPP works with, and that WPP units – including TNS – have been hiring local firms to dosurveys and analysis for them.

“There’s a lot of spin going on,” another researcher said. “Nobody has been ‘waiting’ for WPP.” A WPP executive said such talk is common when WPP “shakes up” new markets.

By Vincent MacIsaac   |   Monday, 10 June 2013

Forex market to debut this year

Myanmar’s first foreign currency trading market is set to be launched this fiscal year, the Central Bank of Myanmar announced.

“We plan to launch forex trading this fiscal year after domestic banks learn how to operate such a market,” an official from the bank’s foreign exchange management department said last week.

Currently, exchange rates are set on weekday mornings according to the reference rate and daily auction of the central bank. Once inter-bank trading begins, banks will be able to negotiate the rate with each other, which could see it changing in minutes or seconds.

“When the market is no longer regulated … it becomes competitive and tends to stabilise,” the central bank spokesman said. The new system will also give foreign businesspeople “more confidence in the Myanmar currency market” because the central bank will only intervene “gently” to maintain a stable and strong market, he added.

Executives at Myanmar banks began receiving training in foreign exchange trading last month from Japan’s Sumitomo Mitsui bank, with about 90 participating in the first training session in the last week of May. The ongoing training sessions are organised by the Japan International Cooperation Agency.

A code of conduct for currency trading was also drafted last November by the central bank when the Yangon Foreign Exchange Market Committee was established. The committee represents the 16 domestic banks authorised to deal in foreign currencies.

U Pe Myint, managing director of Cooperative Bank, said large domestic banks – such as Kanbawza, Ayeyarwady, Asia Green Development and his own – will be the first to trade in a forex market, with smaller banks following later.

Kanbawza Bank general manager U Kyaw Lin Htut said staff will be sent to other countries for training and monetary experts will be brought to Myanmar to provide training. He expressed optimism about the impact of a liberalised foreign-exchange market. “We won’t need to go to the central bank for the daily auction anymore. We can define the market ourselves and I believe it will become more energetic.”

U Kyaw Lin Htut added that some rules and regulation for a forex market are still being drafted. For example, it is still unclear whether the market will operate electronically, as in international practice, or over phone lines.

In the week to June 4, the daily reference rate of the Central Bank was K945 to the US dollar, down slightly from K949 to the dollar for the week to May 24. On the black market the kyat had been trading at 1000 to the dollar late last month in anticipation of further declines, but has shifted closer to the central bank’s rate since then.

The central bank spokesperson said the kyat had stabilised after its swift decline last month because demand for US dollars had cooled.

He declined to respond to speculation that the central bank had intervened to support the kyat, saying only that it was “following the market”.

He declined as well to say whether further declines were possible.

“We cannot forecast the future exchange rate – that depends on many factors – but our duty is to maintain a rate that does not have too much impact on the market.”

y Aye Thida Kyaw   |   Monday, 10 June 2013