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.


Deposits and loans increase

Deposit and loans at major commercial banks have continued to climb over the first half of this year, industry officials say. Grant Knuckey, chief executive officer of ANZ Royal Bank, said yesterday that ANZ continues to see strong growth in trade finance led by the agricultural sector. He added that from January until the end of June, loans and deposits at ANZ Royal were up 13 per cent compared with the same period a year ago. “The commercial banking sector has had continued strong volume growth in the first half of 2013, but there has certainly been margin compression.” Knuckey said, referring to the fact that while the volume is up, profit margins have been smaller due to competition and the need to lower rates. Knuckey said he expects “a pick-up in activity towards the last quarter of 2013 based on both seasonality and post-election expenditure and re-stocking.” Acleda, the leading bank in Cambodia, disbursed $1.39 billion in loans at the end of June this year, up 22.6 per cent from the first half of last year. Deposits at the bank grew 20 per cent year-on-year to reach $1.59 billion at the end of June. So Phonnary, executive vice president of Acleda Bank, said that loans to micro, small and medium enterprises (MSME) are major contributors to the growth, followed by loans in agricultural activities, which increased 34.6 per cent at the first half of this year compared with the same period in 2011. “Acleda Bank loans and deposits are growing and the market trend is still good for the second semester,” Phonnary said. Union Commercial Bank (UCB), is also seeing increases in the first six months of 2013. According to Yum Sui Sang, general manger of UCB, at the end of June, loans $200 million and deposits stood at $271 million, representing a 44 per cent bump and a 24 per cent bump, respectively, from the first six months of 2012. “We see more and more people are coming to invest in Cambodia. We have not only Cambodian clients but also foreign investors,” Yum said yesterday. The most recent data from the National Bank of Cambodia (NBC) revealed that loans provided by all Cambodian commercial banks reached about $6.14 billion, and deposits made at all commercial banks reached about $6.39 billion at the end of March this year versus the same period in 2012.

Tue, 16 July 2013 – Hor Kimsay

JPMorgan lends $175 mil to Vietnam food maker Masan

The US’s largest bank, JP Morgan, has lent a subsidiary of food maker Masan Consumer US$175 million for three years to invest in its consumer business, news website VnExpress reported.

Masan Industrial earlier borrowed from the bank two years ago and is set to repay its matured debt of $108 million. The new loan carries a lower interest rate than the previous one, the company said without disclosing numbers. Of the loan, $150 million is guaranteed by the Multilateral Investment Guarantee Agency, a World Bank affiliate, making Masan the first Vietnamese private business to be backed by it.

To get the guarantee, a business has to go through risk assessment by MIGA based on project viability, the sector and its importance to the host country, financial viability, potential for earning export proceeds in freely usable currency, and environmental impacts.

Masan Consumer is the market leader in fish, soya, and chili sauces and the second largest producer of branded instant noodles in the country. It shares were up 1.7 percent to VND90,000 at the close on July 12. But the stock is down 11 percent for the year. This year the company targets 35-50 percent growth in after-tax revenues from VND2.781 trillion ($131.1 million) last year.

Vietnam should study Temasek model to boost state firms

Vietnam should consider following the model of Singapore’s Temasek Holdings Pte and Malaysia’s Khazanah Nasional Bhd. as it seeks ways to boost productivity at state-owned enterprises, McKinsey & Co.’s country head said. “It could be very interesting to look at successful stories that Malaysia and Singapore had,” Marco Breu, McKinsey’s chief executive officer in Vietnam, said in an interview. “They created this arms-length view between the government and the SOEs, this entity which then started managing them professionally with only business incentives in mind.”

Singapore created Temasek in 1974 to nurture the development of state corporations including the national phone company and airline. Khazanah was set up in 1993 with a similar mandate. Temasek managed S$215 billion ($169 billion) in investments as of March 31, while Khazanah’s net asset value reached 86.9 billion ringgit ($27 billion) at the end of 2012.

Vietnam is trying to raise competitiveness and efficiency at state companies as economic growth slows after the Communist Party said in 2011 that unprofitable government-controlled firms had become a burden. Prime Minister Nguyen Tan Dung approved a master plan in February to spur its companies to focus on core businesses and accelerate public share sales.

The Singapore and Malaysia models allowed the state investment firms to introduce common corporate governance practices and impose higher management standards. They have successively sold shares in former state companies and then reinvested the proceeds outside their home countries.

Role models

Temasek’s biggest holdings now include shares in Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company; DBS Group Holdings Ltd., the region’s biggest bank; U.K. lender Standard Chartered Plc; and Industrial & Commercial Bank of China Ltd., the nation’s largest bank.

Khazanah owns stakes in some of Malaysia’s biggest listed companies, including electricity producer Tenaga Nasional Bhd., mobile-phone company Axiata Group Bhd., lender CIMB Group Holdings Bhd. and hospital operator IHH Healthcare Bhd. The investment firm sold Proton Holdings Bhd., the national carmaker and owner of luxury sports-car maker Lotus, last year.

Breu also mentioned Kazakhstan’s Samruk-Kazyna, the sovereign wealth fund that controls assets accounting for about half of the country’s economic output, as a model.

Hidden inefficiencies

Vietnam’s sovereign credit rating was cut one step to B1 in December 2010 by Moody’s Investors Service, which cited concerns including “debt distress at Vietnam Shipbuilding Industry Group,” or Vinashin. Standard & Poor’s followed the same month, placing Vietnam three levels below investment grade.

The country targets 5.5 percent economic growth this year, which would be its first period of three straight years of growth below 6 percent since 1988, according to International Monetary Fund data. The government is trying to fix a banking sector weighed down by bad debt, which the central bank said was 7.8 percent of outstanding loans at the end of 2012.

Governments have difficulty giving state-owned companies more independence because they often serve as vehicles for state policies, Breu said.

“In SOEs, you will find a lot of hidden inefficiencies because they might not have been managed according to business principles,” Breu said in the July 2 interview. “Many times they function as a way to keep unemployment down.”

Without mechanisms to retrain workers, “it is very hard to all of a sudden say cut it 30, 40 percent,” he said. Breu declined to say whether McKinsey is advising Vietnam’s government, saying the company has a policy not to comment on its clients.

Small steps

Vietnam has taken small steps to replicate entities like Temasek with its State Capital Investment Corp., which was formed in 2006 to manage government shareholdings and operates under the Ministry of Finance, said Alan Pham, chief economist at VinaCapital Group. SCIC’s role should be expanded, he said.

A Temasek-like organization would have difficulty functioning within the fragmented power structure in Vietnam, said Jonathan Pincus, an economist with the Harvard Kennedy School’s Vietnam Program in Ho Chi Minh City.

“The problem is every level of government controls entities that are commercial in nature.” he said in a phone interview. “You have SCIC and the Ministry of Finance trying to be Temasek, but nobody wants to give them any assets.”

Vinashin, the state-run firm that had planned to build and export $1 billion of ships in 2009, almost collapsed in 2010 because it over-diversified and failed to manage its cash flow and debt properly, according to the Ministry of Transport.

Prime Minister Dung faced a call for a confidence vote in the National Assembly in late 2010 for his handling of Vinashin. Dung, who apologized for the shortcomings in a televised broadcast in October 2012, eventually faced the vote last month and passed with 67 percent support from lawmakers.

Market volatility

A stock market slump has slowed down Vietnam’s equitization process, Dominic Scriven, the CEO of Ho Chi Minh City-based fund manager Dragon Capital, said on behalf of the Capital Market Working Group at a conference last month.

The Ho Chi Minh City Stock Exchange’s benchmark VN-Index (VNINDEX) has lost 7.7 percent from this year’s June 7 high. The gauge has rallied 18 percent this year, at least 7 percentage points more than any other Southeast Asian benchmark tracked by Bloomberg.

Vietnam Airlines Co., the national carrier, has selected banks to manage an initial public offering, CEO Pham Ngoc Minh said April 9. He didn’t give a time frame for the sale.

One in five publicly traded companies may post losses this year, State Securities Commission Chairman Vu Bang said last month. Investors are awaiting the results of the government’s plans to resolve non-performing loans and restructure banks and state-owned enterprises, he said.

Productivity improvements

Productivity in manufacturing and services must improve by 50 percent for Vietnam’s economic growth to return to more than 6 percent, Breu said, citing a McKinsey report published last year. Vietnam can’t rely on the two other drivers of economic expansion – the labor force and urbanization – for growth, he said. South Korea achieved such productivity improvements during the 1970s, as did China more recently, he said.

“Unless you fundamentally change SOEs, reform these things, you will end up more at 4.5 percent to 5 percent growth,” Breu said.

Thanh Nien

Foreign investment rises 73 pct

A mid global economic fragility, foreign direct investment (FDI) in Cambodia grew a whopping 73 per cent in 2012 from the year before, a huge increase helping to fuel a record-setting amount of money pouring into least developed countries, according to the United Nations Conference on Trade and Development.

Released at the end of last week, the UN group’s World Investment Report says that FDI in Cambodia reached almost $1.6 billion in 2012, compared with $902 million in 2011, an increase largely credited to businesses looking to invest in the inexpensive, labour-intensive garment and manufacturing industries, as well as rising production costs outside of Cambodia.

Regionally, Southeast Asia saw a two per cent rise in FDI inflows, reaching $111 billion. And for the first time, the report noted that developing economies absorbed more FDI – accounting for 52 per cent globally – than developed nations.

Cambodia, the Democratic Republic of the Congo, Liberia, Mauritania, Mozambique and Uganda drove much of the growth that amounted to a global FDI in least developed nations of $26 billion, according to the UN tally.

“[Countries such as Cambodia, Myanmar and Vietnam] are the emerging bright spots of the subregion, particularly for labour-intensive FDI and value chain activities,” the report said.

According to the UN, foreign direct investment in Myanmar totaled $2,2 billion in 2012, a 1.96 per cent increase compared to 2011. Vietnam FDI reached $8,4 billion last year, a 12.6 per cent increase compared to the previous year.

The UN refers to FDI as “an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor”.

Chan Sophal, president of the Cambodian Economic Association, said yesterday that FDI sources, other than the garment industry and manufacturing, include  agriculture and tourism.

“If the increase is true . . . I think it’s due to the good potential for investment in Cambodia,” he said. “In manufacturing, electronics, agriculture, tourism, in every sector, there are many opportunities for investment.”

It doesn’t take long to find the projects. Last December saw the ground-breaking ceremony of the Aeon Mall in Phnom Penh. The 68,000 square metre building worth $205 million is being built by Japan-based AEON Group.

Japan, alongside China and South Korea, is one of the top investors in Cambodia.

The UN report, subtitled Global Value Chains: Investment and Trade for Development, also said countries are increasingly considering “how to position and promote themselves” as locations for global value chain activities, “either in a segment or part of the chain or the entire chain”.

Against the background of Delta Electronics (Thailand)’s plans to expand to Cambodia, Asian Development Bank Deputy Country Director Peter Brimble told the Post in May that firms expanding operations in Cambodia are the same firms that moved to Thailand some 20 to 25 years ago and are producing the same products.

He said this was contributing “to the increasing diversification of the Cambodian economy, and reflects the rapidly improving business climate here”.

Attracting labour-intensive FDI is driven by “continued intraregional restructuring”, the report said, adding that companies who relocated primarily produced clothes and footwear in China and Taiwan, where labour costs are about three times as high compared with Cambodia.

Many economists agree, however, that a lack of skilled labour and high electricity costs, especially in the manufacturing sector, are still challenges investors face in Cambodia.

The glowing picture also stands in stark contrast to a Cambodia Country Risk Report released in April by UK-based global risk and strategic consulting firm Maplecroft, which compared Cambodia negatively with Vietnam and Thailand in most risk indices. Poor business practices, heavy bureaucracy and corruption were listed as stumbling blocks undermining a government otherwise sympathetic to foreign investors.

By Anne Renzenbrink  │1 July 2013│The Phnom Penh Post


Aeon Mall’s vision explained

Costing more than $200 million, the four-storey Aeon Mall in Phnom Penh, set to open  in July 2014, is being hailed as Cambodia’s biggest shopping complex. Makoto Yajima, managing director of Aeon Mall Cambodia, talked to Mak Lawrence Li about the project.

What makes this project stand out among similar ventures in  in Phnom Penh?

The shape of our mall is in a “Two Anchors with one Mall” format, which consist of two or more large-scale anchor stores connected with a mall area occupied by specialty stores. While other facilities in Cambodia are mainly in tall buildings, ours is long on the site which is quite different. Our mall includes a huge cinema complex and a brand new bowling centre, which is comfortable and exciting for customers to visit.

Why come to Cambodia now?

The economic growth is rapid here in Phnom Penh, and it is also a dynamic market with such a huge younger generation. There is no special reason for the timing. Time is now for us, and from now on we will do our best for Cambodia.

What does Aeon Mall bring to Cambodia?

A new style of shopping is coming here. Citizens, especially for the younger generations, always seek new fashion, services and amusement facilities. What we want them to realise is that shopping can indeed combine with entertainment, all together as a whole in one place. We would also like to offer three things: high quality products, excellent services and adequate parking space. Many malls in the city do not consist of enough parking spaces, but we do and there will be 1,400 for cars and 1,800 for motorbikes.

What are your marketing strategies? Any targeted customers or income groups?

We call it the ‘one-stop solution’. Four aspects: shopping, community, entertainment and ecology. Customers can fulfill all their needs here. And the location we choose is located very near to the city centre so people can get here easily, which is already another strategy. We are very confident we will be competitive because of our services provided. Every citizen in Phnom Penh will be our target; we offer high quality products and services with affordable prices.

What do you want to accomplish in the long term?

Our primary aim is to introduce our brand to citizens, letting them know about the unique styles of Aeon. The second thing is training up local staff with Aeon Mall standards, which is ‘serving with hospitality’. We have looked at some of the shopping situations here and staff used to eat or sleep inside the stores, they don’t pay much care to the customers. We want all our customers to enjoy proper services and staff will also be confident in serving clients.

How about volume and spending? Any estimates or predictions?

Regarding sales or revenue, it is hard for us to disclose at the moment but we hope for up to 10 million visitors at the mall in the first year.

What are your future plans in Cambodia?

We will consider opening two or three malls in Phnom Penh, if the first one is successful enough. We want to stick as the closest retailing company in every place for serving our customers, and the Aeon Mall Cambodia Company would want to
become a local enterprise eventually.

How would you foresee malls developing in Cambodia?

There will be more and more competitors and I think it is good news for us. Keen competition means fast growth and the customers will have more choices too.

By Mak Lawrence Li│14 June 2013│The Phnom Penh Post

Labor shortage, rising wages top concerns in GMS development

Bangkok ( The Nation/ ANN) — Participants at a seminar in Bangkok yesterday raised concerns over labor shortages and how to share resources in the growing economy of the Greater Mekong Sub-region.

The labor market in the GMS was one of the topics at “GMS and the Asean Economic Community: Convergence, Opportunity and Challenges”, a seminar arranged by Euromoney Conferences.

The GMS consists of Cambodia, Laos, Myanmar, Thailand, Vietnam, and China’s Yunnan province.

The participants agreed that the sub-region was an attractive market for trade and investment ahead of the AEC, and the economies of the riparian countries were improving as a result.

However, labor shortages might become a barrier to business competitiveness, said Virasak Sutanthavibul, senior executive vice president of Bangkok Bank.

Virasak said the GMS was the place for businesses that want low costs, citing Cambodia as an example.

The shortage of labor, however, is a more serious issue for Thailand than other countries in the GMS because it is no longer considered a low-wage market, so many labor-intensive businesses have shifted to Cambodia.

Thai businesses should seriously think about mechanizing their production because they cannot rely on workers from neighboring countries, he said.

“Laos is not a source of labor because of the low population, while workers in Cambodia often strike. Therefore, Myanmar is the choice for Thai business, but Myanmar is developing, and once it has become a developed country, Thailand might be unable to rely on workers from Myanmar.”

He said the bank had attempted to encourage small and medium-sized enterprises to use more machines in the production process.

“Many SMEs are injecting capital into mechanization, which will fuel loan growth of financial institutions as well,” he said.

Neav Chanthana, deputy governor of the National Bank of Cambodia, noted that the free movement of labor might be a barrier for businesses’ competitiveness as companies might not be able to secure workers. Further, the slow growth of the younger population in some countries in the GMS was another challenge to the growth of the sub-region.

“Cross-border trade in the GMS means businesses have connectivity, but we have to monitor closely the conflict [for river resources] between the lower and upper Mekong countries,” she said.

Narongchai Akrasanee, former minister of commerce and member of the Bank of Thailand’s Monetary Policy Committee, said 40 per cent of the water in the Mekong River came from China and the rest from rainfall in Laos and Thailand.

“It could be a big challenge for the GMS on how to share the resources, and it might take time to reach a conclusion,” he said. – See more at: