China is showing interest in reviving long-standing proposals for a deep-water canal through the narrowest part of Thailand’s long peninsula to link the Indian Ocean with the South China Sea.

It’s a move that, if implemented, could pose a threat to the viability of ambitious plans for a special economic zone at Dawei on Myanmar’s Andaman Sea coast. It also puts a question mark over the recently opened 800-kilometre pipeline that delivers crude oil from a terminal at Kyaukphyu in Rakhine State to China’s Yunnan Province.

The Isthmus of Kra narrows to about 27 miles (44 kilometres) wide south of the Thai coastal city of Chumphon, opposite the southernmost tip of Myanmar. A canal across the isthmus has been talked about for hundreds of years and has more recently been the subject of several feasibility studies. It has never gone beyond the drawing board, mainly because of cost and lack of international backers.

However, a Thai government-linked group, the National Committee for the Kra Canal Project, has dusted off the idea and together with a Thai-Chinese business association has been working on a feasibility study with researchers at the University of International Business and Economics in Beijing.

The canal idea was on the agenda at the 21st Century Maritime Silk Road Initiative, a two-day conference at Quanzhou in China’s southern Fujian Province in February.

China’s central government is busily promoting the establishment of two modern-day “silk roads” to emulate the ancient trans-Asia land trade route. A canal across Thailand would be of interest to China as an alternative, and safer, route for its growing volumes of crude oil imported from Africa and the Middle East.

At present about 60 percent of China’s crude imports have to pass through the narrow Strait of Malacca. Beijing has long had strategic concerns about having to rely on energy supplies shipped through the Strait, which is one of the main reasons why it built parallel crude oil and gas pipelines across Myanmar to Yunnan Province.

China’s concerns are underlined in a new study by the Maritime Institute of Malaysia that predicts the Strait will become heavily congested in the next ten years, with annual shipping traffic of up to 1400,000 vessels. That’s 18,000 vessels more than its capacity, said the institute, and would lead to costly shipping delays.

A pre-feasibility study by Thailand’s National Committee for the Kra Canal Project has estimated that it would cost about US$20 billion to build a canal. It would stimulate regional trade by reducing shipping times between the South China Sea and the Indian Ocean by at least two days, the deputy director of the economic section at Thai-Chinese Cultural and Economic Association, Pakdee Tanapura, told Bangkok newspapers.

There are several possible locations for a canal across Thailand, but it would have to be deep and wide enough to take the monster oil tankers known as very large crude carriers (VLCCs).

The pipeline across Myanmar has eased China’s energy security concerns but it still needs to rely heavily on crude shipped via the Malacca Strait.

The pipeline, built by the China National Petroleum Corporation, has a capacity of 440,000 barrels a day, which is small compared to the volumes being shipped through the Strait.

One VLCC can carry 2 million barrels.

The Quanchou conference at which a Kra canal was discussed was sponsored by China’s supreme State Council and the Chinese Academy of Social Sciences and attracted representatives from 30 countries, said state-run Xinhua news agency. It appears, though, that no conclusions on a canal were reached at the meeting.

The Thai-Chinese Cultural and Economic Association has proposed that ports at each end of a canal could become economic zones linked with import and export businesses. A large port and transhipment terminal for oil, gas, chemicals and other raw industrial commodities would compete with the much-delayed plans by Thailand for a port and industrial complex at Dawei.

Two new factors are now at play that could bring to reality the proposals to revive a canal project.

The first is that the military government that seized power in Thailand last May is making bold steps for big infrastructure projects to stimulate the economy. Bangkok has already commissioned China to build a high-speed railway system in Thailand.

The other factor is China’s interest in greater economic connectivity in Asia, which is a rationale behind its Maritime Silk Road concept. To support its development plans for the region Beijing recently established the Asian Infrastructure Investment Bank, which aims to imitate the Asian Development Bank but without Western constraints.

One of China’s proposals for a socalled Silk Road trade route would weave across central Asia to Europe and the other would seek to create a maritime trade route linking major ports in East Asia with other parts of the world.

The AIIB was established with 21 signatory countries in Shanghai last October and will have an initial capital of US$100 billion, half of which China has pledged. The signatories include India and the ten members of the Association of Southeast Asian Nations.

As China’s economy changes, Beijing is seeking major overseas projects for its state-owned enterprises.

PriceWaterhouseCoopers recently forecast that Asia will spend $5.3 trillion on infrastructure by 2025.

In addition to the AIIB, China recently launched a $40 billion infrastructure fund to promote regional development, focusing on the so-called Maritime Silk Road, reported the South China Morning Post.

“The Kra Canal across an isthmus in southern Thailand, whose construction, funded by Chinese, may begin soon, will draw the Maritime Silk Road closer …reducing the significance of the Malacca Strait,” said Artyom Lukin a professor at the School of Regional and International Studies in Vladivostok, writing in The Diplomat about China’s growing regional influence.

Mr Pakdee has said there would no security concerns over the canal because it would be within one country. However, there is a simmering Muslim separatist insurgency in the far south of Thailand, where a canal has been proposed on the edge of the four provinces bordering Malaysia. This predominantly Thai Muslim region has suffered from a hit-and-run insurgency that has claimed more than 5,000 lives since 2004. Any decision by the Beijing-led AIIB must take this problem into account in deciding whether – and where – to back a canal development.

Previous surges of interest in a canal across the Isthmus of Kra suggest the proposal would be unlikely to proceed further than a feasibility study, except that this time Beijing’s new objectives of pulling East Asia together through major infrastructure developments could make a difference.

As long as China needs to continue importing vast quantities of crude oil from the Middle East and Africa, the Malacca Strait will continue to provide Beijing with a headache. The Kra canal might just be the panacea.

The government needs to adopt sound and appropriate policies to generate more tax revenue for the national budget, experts said at a workshop in Yangon on March 6.

The workshop was organised by the Union of Myanmar Federation of Chambers of Commerce and Industry and Action Aid Myanmar to enable lawmakers, economists, civic groups and other stakeholders to share ideas about the 2015-2016 budget, that will soon be debated in the Union parliament.

The use of a budget for national development relied on revenue earned from government enterprises and taxes on businesses, commercial transactions and individuals, participants were told at the workshop.

The workshop, the third such event held to promote transparency and public awareness about the budget process, heard that business policies needed to be improved for the country to create more tax revenue.

“Tax revenue plays a key role in budget allocations,” economist U Saw Naing told the workshop.

“The businesses of local entrepreneurs are fundamental for increasing revenue and polices on business play an important role in this issue,” he said.

U Saw Naing also said it was important that taxes be collected in border areas as well as big cities but acknowledged that cost issues were involved.

“For example, they may need to spend K1.2 million to go to border areas and collect taxes of K1 million,” he said.

“Moreover, only if the businesses of the national ethnic people are good will they be able to pay taxes,” he said.

The pre-budget consultation in session. Photo: Hong Sar

Myanmar Fisheries Federation vice president U Hnin Oo said that although the government had made political reforms, the production sector had declined.

The country had not managed to promote the domestic production sector that was essential to generate more tax revenue, he said.

A systematic approach was needed to earn more revenue from the agricultural, livestock and industrial sectors, said U Hnin Oo, adding that policies were needed to improve the business environment for domestic companies so they could contribute more tax revenue.

He expressed concern about the “many difficulties” involved in establishing small and medium-sized enterprises.

An Independent member of the Yangon Region Assembly, Dr Nyo Nyo Thin (Bahan, constituency 2), said that although most government enterprises were running at a loss, some ministries continued to seek budget allocations for their projects.

The workshop was told that for the period from the start of the current fiscal year last April 1 to February 27, Myanmar’s total trade volume was US$25,172 million but a weak export sector – except for natural resources – had resulted in a trade deficit of nearly $5,000 million.

A senior consultant to Kanbawza Bank, U Than Lwin, outlined possible direct and indirect affects on citizens of government measures to deal with a big budget deficit.

“If a budget deficit is huge, the government needs to increase taxes and that will affect citizens,” said U Than Lwin, a former deputy chairman of the Central Bank.

“If the government does not get enough tax revenue, it can borrow from foreign countries but the money that the government will use to repay the loans will be taxes paid by citizens,” he said.

“If the government prints more currency to solve the problem, inflation will increase resulting in higher commodity prices that will affect the citizens,” U Than Lwin said.

This Article first appeared in the March 12, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

An export strategy aimed at integrating Myanmar more broadly into the world economy has been launched by the government with the support of an international trade organisation and the German government.

The nation’s first National Export Strategy was launched by Vice President U Nyan Tun, Commerce Minister U Win Myint and International Trade Centre executive director Ms Arancha González at a ceremony in Nay Pyi Taw on March 25.

The five-year strategy was developed by the Commerce Ministry, with technical support from the ITC, a joint agency of the World Trade Organization and the United Nations, financial assistance from the German Ministry for Economic Cooperation and Development and implementation support from the German Agency for International Cooperation (GIZ).

The ITC has been working at three levels – with government and policy makers, trade and investment support institutions and small and medium enterprises – to help develop the strategy.

Discussions during the last 18 months among the ITC and the public and private sectors resulted in the selection of seven priority product categories with strong export trade potential. The NES will focus on increasing production and value-adding in the seven categories: beans, pulses and oilseeds; fisheries; forestry products; textiles and garments; rice; rubber; and tourism.

The process “obviously [is] going to have bumps along the road,” said Ms González, who added that Myanmar’s trade potential was challenged by what she called the three lows: low value adding, low productivity and low quality.

Ms González said low quality was a big issue for a country with high foreign trade potential in processed fisheries and forestry products. Market access was also limited by the lack of a quality verification process.

A further challenge was Myanmar’s need to develop greater diversity in its trading partners. Thailand accounted for 43 percent of exports, while China and India share another 30 percent but there were good opportunities in the wider global market.

As well as the European Union and the United States opening to Myanmar exports, China and India also provided duty free and quota free policies for least-developed nations such as Myanmar. But these opportunities were unknown to most of the small and medium enterprises that account for 98 percent of the economy.

There are 4,300 enterprises registered with the Union of Myanmar Federation of Chamber of Commerce and Industry, of which 90 percent operate in and around Yangon, and the NES is also aiming for a more inclusive national trade network to improve the socio-economic situation throughout the country.

Another challenge was that most exports were unprocessed natural resources such as gas (that accounts for 42 percent of exports) and wood (11 percent), an issue linked to job creation because adding value to products created more employment opportunities.

“This country has relied too long on exports of commodities,” said Ms González said. “If you increase the export of commodity goods by about a third, you don’t increase your labour by the same proportion,” she said. “You increase your labour if you add value.”

One of the projects implemented by ITC has focussed on tourism sector development in Kayah State. The region’s potential for attracting travellers from throughout the world has been demonstrated by the flourishing tourism economy on the Thai side of the border. Yet Kayah State faces fundamental problems to develop tourism, including travel restrictions, a huge military presence and areas with landmines. Ms González said discussion had focussed attention on the problems and they could be addressed.

She said the tourism sector nationally is in desperate need of training programs for hotel and hospitality industry employees to raise their skills to international standards.

“The recipe that the public and private sector thinks is the winning one for Myanmar mixes intelligently university education with technical education,” said Ms González, adding that there would be increased emphasis on technical education and vocational training to overcome shortages.

Ms González said one of the main benefits of an increase in exports would be more opportunities for the poor to acquire jobs and raise their living standards.

“There is no way you can move up the value chain, there is no way you diversify, there is no way you move up your productivity, without increasing levels of salaries and reducing the labour cost differential,” she said.

This Article first appeared in the April 23, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

The laying of twin oil and gas pipelines cutting through northern Myanmar to China, sparked complaints of poor compensation to villagers and raised environmental concerns during their construction phase from 2010 to mid-2013.

Now, after the first full year of operations, the feasibility of the controversial project has been questioned with the disclosure that Chinese state oil company PetroChina is struggling to sell gas from the Shwe field in the Bay of Bengal, to Chinese clients.

The Shwe field, which supplies PetroChina’s parent company China National Petroleum Corporation (CNPC) exclusively, supplies the natural gas for the 900-kilometer pipeline built from the central coastal town of Kyaukphyu, Rakhine State, to the border town of Ruili, in China’s Yunnan Province.

The pipeline’s capacity is 12 billion cubic metres per year but in 2014 it pumped only 25 percent of this volume into China, according to industry reports.

A key market for the Myanmar gas was meant to be China’s southern Guangxi Province, but sales have been so disappointing that PetroChina is reportedly seeking to sell off its gas distribution system there, raising questions about the future ownership of its Myanmar operations.

“The [Guangxi] region is a market for gas imported via pipeline from Myanmar, but PetroChina has struggled to secure more clients to take those imports,” Interfax Natural Gas Asia said on April 16. “Myanmar piped 2.2 tonnes, or around 3 billion cubic metres, to China in 2014, far below the transmission pipeline’s capacity.”

“PetroChina incurs a loss from selling this gas domestically and would like to see higher prices in Guangxi to narrow the loss, but that would risk collapsing demand. The company lost RMB 1.07 [17 US cents] on average for every cubic metre of Burmese gas sold last year.”

As a result, PetroChina “is quietly divesting gas pipeline assets in south China,” Interfax said.

“PetroChina …will transfer its entire 51 percent shareholding in Guangxi PetroChina Kunlun Natural Gas to a regional government investment vehicle.”

It’s not clear whether a similar divestiture is planned for the ownership of the Myanmar pipeline, which is currently held by a CNPC joint venture with Myanmar Oil & Gas Enterprise. Nor is it clear if the consortium holding the Shwe field gas, will be looking for new markets. Currently, Myanmar is buying 200 million cubic metres of gas for local consumption, although its quota gives the country the chance to by 2 billion cubic metres, according to a recent local media report.

The Shwe Gas project is a joint venture between Daewoo International (51%), ONGC Videsh Ltd of India (17%), Myanmar Oil and Gas Enterprise (15 %), GAIL Ltd of India (8.5%) and Korea Gas Corp (8.5%).

Daewoo did not answer emailed questions from Mizzima Weekly.

Construction of the two pipelines project, at an estimated cost of $2.5 billion, was dogged by complaints of poor land compensation, insufficient environmental impact studies and for hiring more Chinese labourers than Myanmar nationals.

Although China has been importing more crude oil since the collapse of oil prices in the middle of last year, the oil pipeline running alongside the gas line through Myanmar is also underused, primarily because of delays in the construction of a new refinery in Kunming, Yunnan Province, which it was meant to feed.

The refinery was originally scheduled to be completed last year but developer CNPC now says it will be the end of 2016 at the earliest before the 200,000 barrels per day plant is operational. By comparison, Myanmar’s entire refining capacity is only about 50,000 barrels per day.

The slowdown in developing the Kunming refinery reflects massive refining overcapacity in the country, the China Oil & Gas Monitor said.

“China has over capacity in refining and has moved from being a significant net importer of products to an exporter,” Simon Powell, head of Asian oil and gas research at CLSA Asia-Pacific Markets in Hong Kong was quoted in the Monitor on April 16. “We think that China could have 1 to 2 million barrels per day of excess refining capacity.”

This overcapacity is pushing China’s national oil companies into exporting more fuel oils such as diesel and gasoline.

“Sinopec’s big 184,000 barrels per day refinery in southern Hainan island province used up more than 50 percent of its first quarter export quota despite facing losses shipping to foreign markets,” the Monitor said.

Sinopec’s Hainan refinery will export 160,000 tonnes of fuel oil this month, up 10,000 tonnes on March. The exports will be a combination of gasoline, jet fuel and gasoil, the Monitor said. The Hainan refinery managers planned to export a total of 1.78 million tonnes this year, it said, quoting an unnamed company source.

Hainan is one of 11 of China’s biggest state refineries permitted to have export quota licences, reflecting the downstream sector’s overcapacity and sluggish domestic demand. Between them, they have an annual capacity of 152 million tonnes of crude oil.

“The increased fuel oil exports trend will likely continue as China’s industrial growth continues to slow,” the head of research at Nomura Markets in Hong Kong Gordon Kwan was quoted by the Monitor.

“The weak domestic economy has led to disappointing demand for industrial fuels like diesel and fuel oil, prompting the government to introduce more favourable measures such as financial stimulus and expedited export licenses to ensure profitability in the refining sector. Meanwhile, domestic refinery overcapacity remains a structural issue in China. Refineries are fine tuning their product slate to churn out more gasoline and jet fuel, while trimming diesel and fuel oil output to try to restore demand-supply fundamentals,” Kwan said.

China’s runaway refining seems to be driven in part by a national desire to buy more crude from abroad while prices remain so low – even when domestic storage bunkers are full and refinery stocks brimming.

China imported 26.8 million tonnes of crude in March which was almost 5 percent, or 1.26 million tonnes, more than in February, latest data from the General Administration of Customs shows.

However, the slow construction of bunkers for the second phase expansion of China’s strategic petroleum reserve will start to restrict crude oil imports, industry analysts ICIS said on April 12.

The storage capacity built by CNPC at Kyaukphyu to temporarily hold oil imported from the Middle East and Africa is also limited. The transhipment terminal has 12 tanks each with a capacity of 100,000 cubic metres. That would provide storage for up to 7.5 million barrels – equal to about 17 days operation of the pipeline at full capacity.

It looks like China’s expensive trans-Myanmar pipelines, which bore a considerable social cost for the government in terms of disgruntlement among villagers affected by the project, are going to remain underused for some time to come.

This Article first appeared in the April 30, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

The Myanmar government’s approval of a Thai-Japanese consortium’s plan to build a large US$2.8 billion coal-fired power station in Myanmar’s southeast Mon State underlines a trend across the region to opt for the polluting fossil fuels to generate electricity.

Coal is being increasingly chosen instead of cleaner-burning natural gas or non-polluting renewable energy resources such as wind and solar because it is cheaper.

“Although there is increasing interest in renewable energy projects, coal will replace natural gas as the main fuel to power a doubling of electricity generating capacity over the next 20 years in the ten member countries of the Association of Southeast Asian Nations (ASEAN),” Asia Power Monitor reported on April 14 quoting the International Energy Agency (IEA).

Coal will fuel 49% of ASEAN countries’ power generation by 2035 compared with 31% today, the IEA said.

Thailand in early April announced a new power development plan for the next 20 years which will see dependency on gas for electricity production drop from 70% to 40% while coal will fuel 25% of electricity generation, up from 7% today.

Coal will fuel about 50% of an additional 35,000 megawatts of new power capacity planned in Indonesia between now and 2020, mostly supplied by domestic mines.

In Malaysia, a 1,000 MW coal power plant is under construction at Tanjung Bin in southern Johor State and due for completion next March, the Asia Power Monitor said.

International coal prices are at rock bottom due to global oversupply, in part because other regions such as North America are reducing consumption. But growing demand in ASEAN and India could boost demand and prices in the future. The only ASEAN country with any significant coal reserves is Indonesia. At present, Indonesia is one of the world’s biggest coal exporters but it is expected to increasingly divert more of its production to meet domestic demand, the Monitor said.

And with India importing more coal than ever before to fuel its rapidly growing electricity demand, it’s not clear where smaller-scale buyers such as Myanmar will obtain coal. Myanmar has little coal reserves of its own.

In the case of the large power station now planned at Ye in Mon State by Bangkok-based Toyo-Thai Corporation, the fuel might have to be imported from South Africa on the other side of the Indian Ocean, or Australia or even China.

Toyo-Thai, a partnership between Japan’s Toyo Engineering Corporation and the Thai construction company Italian-Thai Development plans a 1,280 megawatts plant at Ye.

“Under the 30-year concession, [Toyo-Thai] is expected to import about 4 million tonnes of coal a year to supply the power plant. Construction is expected to take about four to six years,” Reuters said on April 9 quoting the firm.

The Ye plant, which faces opposition from local communities concerned about pollution, replaces an earlier failed proposal by Toyo-Thai for a similar-sized coal power plant in the Thilawa Special Economic Zone next to Yangon.

The choice of Ye on the Andaman Sea coast distant from Myanmar’s current industrial developments and infrastructure is questioned by some analysts.

“A power station of this size in the Thilawa-Yangon area made sense because of location and rising industrial needs there,” energy industry writer Sam Imphet told Mizzima on April 24.

“A station located at Ye is not so logical because the local infrastructure there is inadequate.

“The closest electricity grid link is at Mawlamyine which I think is more than 100 kilometers north of Ye. Also, has Ye got sufficient port facilities to handle 4 million tonnes of coal in a year?” said Imphet, who writes for Asia Power Monitor.

Ye is also about 150 kilometers north of Dawei, where another Thai-Japanese industrial consortium including Italian-Thai Development is reportedly preparing to sign an agreement with the Nay Pyi Taw government for a large port and industrial zone.

With coal increasingly the fuel of choice for solving electricity shortages across South and East Asia from Pakistan to Japan, the rapidly expanding economy of India has been forecast to overtake China as the world’s biggest importer of power station coal by 2017 or sooner, Bloomberg Intelligence said in a study published April 15.

Higher Indian imports will be spurred by the expectation that thermal coal demand there is likely to increase by 42% between now and 2020 to 1 billion tonnes per year, the study said.

“India will have the largest impact on seaborne thermal coal markets as lofty domestic production targets battle with likely swelling imports due to a wave of new demand from new generation plants,” Bloomberg said.

India along with Indonesia, Vietnam, Japan and South Korea will increase their combined coal-fired generating capacity by a colossal 204,000 megawatts, or 60%, up to 2020, the study estimated.

Myanmar’s current overall generating capacity is no more than 5,000 megawatts, and the electricity reaches only 25% of the country’s population.

Ironically as demand for coal looks set to increase across the region despite international concerns about global warming and climate change, the world’s biggest coal burner and polluter China is planning to reduce its use.

China is closing scores of small and medium sized mines and banning the construction of new coal power plants in the heavily populated eastern coastal provinces. Beijing has also imposed controls on imported coal which many Chinese commodity traders preferred, especially higher quality Australian stocks.

The reason is simple: 16 of the world’s most 20 polluted cities are in China.

Coal consumption in China will remain significant though, probably fuelling 60% of electricity generation still by 2025, said the IEA. But it’s not beyond possibility that Myanmar and other Southeast Asian countries could end up importing surplus Chinese coal – while Myanmar’s natural gas in the Bay of Bengal is sold to China.

This Article first appeared in the May 7, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

Daw Mi Mi Khin, owner of the Yadanapon Dynasty Hotel, paid US$100,000 for a Mercedes-Benz C200 she snapped up at the opening ceremony of the luxury car display centre at the Sedona Hotel, Mandalay, on January 8.

“They invited me to participate in the opening ceremony. I went, found the Mercedes C200 and bought it,” she said. “I have wanted to own a Mercedes a very long time and my son likes the car, so we bought it.”

“Before, we only rode in Japanese cars like the Toyota Alphard, which were not brand-new. However, the C200 is brand new,” Daw Mi Mi Khin said.

Brand new cars are something brand new for the people of Myanmar, who for decades were restricted to buying over-priced second-hand cars, usually from Japan.

Under the old system, to buy an imported car one needed a special permit, which was only granted if you could prove you had earned your dollars legitimately.

All this changed in November 2011, when the Ministry of Commerce eased restrictions on imported cars and lowered taxes on them.

With the shift in policy, better quality second-hand cars and brand-new models have started to replace the antiquated, rusted heaps that once dominated Myanmar’s pot-holed roads.

To handle the importation of newer automobiles, the Ministry of Commerce introduced two new types of car import licenses, namely ‘used-car sales centre licenses’ and ‘brand-new car showroom licenses.’

Cycle & Carriage Automobile Myanmar (CCAM) Company Ltd., a joint venture between the Automobile Alliance from Myanmar Company Ltd. and Singapore’s Jardine Cycle & Carriage Group, is one of the companies that have received a “brand-new car showroom license.”

Jardine Cycle & Carriage Group, listed on the Singapore stock market, has secured the distribution rights to Mercedes-Benz passenger cars, Fuso commercial vehicles, EvoBus buses and Mazda passenger cars for Myanmar.

“If you want to ride in luxury, we can provide it,” said Ko Phyo Maung Maung, CCAM manager of the Mercedes-Benz dealership in Yangon and Mandalay.

“If you are young and sporty, we have sports cars. We can offer various cars to fulfill the needs of the young, the old and the middle-aged,” he said, easing into a sales spiel.

CCAM has two showrooms in Mandalay, including a Mercedes-Benz display centre at the posh Sedona Hotel and a Mazda multi-branded car showroom on 35th street.

“There are six classes of Mercedes that we display in Sedona Mandalay, including S500L, E class, A 45 AMG, C 200, GL 500 and E 63 AMG,” Ko Phyo Maung Maung said.

“We don’t call the facility in Sedona [Hotel, Mandalay] a showroom,” he explained. “We call it a display as we take up only a small part of the Sedona Hotel. We can call the Yangon facility a Mercedes Benz showroom as it stands alone in the compound. It also depends on the number of cars we can display. In the Yangon showroom, we can display up to 10 Mercedes. In Mandalay, we can only display at most up to 6 Mercedes.”

The Mercedes-Benz “display” at the Sedona Hotel in Mandalay. Photo: Mark Yang

A bright future

After the decades of tightly controlled automobile imports, there is a lot of built up demand for new cars in Myanmar.

And people with money are now more inclined to spend, thanks to the much brighter prospects for the Myanmar economy in the aftermath of political and economic reforms pushed through in 2012, so car salesmen are understandably bullish about their prospects, especially in the urban centres of Yangon and Mandalay.

“As buyers can buy brand-new cars manufactured in 2014 and 2015 at the same prices they used to pay for second-hand cars before, they are very delighted,” Ko Phyo Maung Maung said. “I think the car market in Mandalay and the whole of Myanmar will be booming in the future.”

But not everyone is convinced that the Myanmar market is ripe for luxury models such as Mercedes Benz.

“There is a regular demand in the Mandalay car market,” said U Ko Ko Aung, managing director of Century International Auto Service Co. Ltd., a second-hand car dealership.

“We find a strong demand for cars that meet the lifestyle requirements of city dwellers. The demand of urban people has changed nowadays. Before, people used to buy cars that were powerful. Now, we find a trend shift. People tend to buy smaller-powered cars these days,” he said.

CCAM’s Ko Phyo Maung Maung acknowledged that Mercedes-Benz are not for everyone, in a country where one in four people live below the national poverty line and a new class of nouveau riche are just beginning to emerge in the urban centres. Myanmar is still ranked as a least developed country, although some places such as Yangon and Mandalay are developing a lot faster than others.

“In Mandalay, people prefer regular cars. They don’t really understand the value of AMG (the high performance division of Mercedes-Benz,) and the prices of Mercedes AMG cars are more expensive than normal Mercedes, almost twice as much. AMG cars cannot capture the Mandalay city market because of such expensive prices,” Ko Phyo Maung Maung said.

“AMG cars are performance cars. Most of the Mercedes buyers in Mandalay do not know them very well,” he said.

“However, there is a small group of Mandalay car buyers that value AMG cars, and the performance of AMG engines. AMG engine power differs from ordinary Mercedes. The torque power of an AMG engine make a significant difference, therefore, the speed of the cars is faster,” Ko Phyo Maung Maung said.

Daw Mi Mi Khin stands with her C200 model. Photo: Mark Yang

Brand-new car showrooms

U Ko Ko Aung said he was pleased with the advent of ‘new car’ showrooms in Mandalay, to satisfy the more affluent segment of the market.

“We welcome new car showrooms,” he said. “Later, we will also open a new car showroom. We will leave our used cars sales centre also open. Used cars have their own market while new cars have theirs.”

“There are rich people in Mandalay who can afford high-quality and international level cars. For those people, there should be new car showrooms. For example, instead of buying a 1998 model Toyota Land Cruiser for US$60,000, such people can now to choose brand-new cars from a wide range of available brands worth US$60,000,” U Ko Ko Aung said.

Prices of Mercedes

Although lower taxes have made imported “brand new” vehicles cheaper than before, Mercedes Benz are far from cheap.

“Mercedes cars start from US$78,000 and go up to over US$500,000,” Ko Phyo Maung Maung said. “S500L would cost US$370,000. SL 63 AMG would have a price of US$520,000. The S600 Maybach, the new exclusive first class model in 2015, would be US$610,000. Prices already include all taxes.”

The different Mercedes-Benz classes aim at different classes of businessmen.

“E class is for middle-aged businessmen,” Ko Phyo Maung Maung explained. “S class is for top businessmen. S class provides more rear seat features. There would be holding tables. You could use your computer on the table and work. . . businessmen could use the S class rear room as his small office and work while he travels or he is away from his office.”

While Mercedes-Benz cars are obviously not for everybody, the healthy sales they have been enjoying at Mandalay’s two showrooms over the past four months indicates that some people in the central city have plenty of cash and are willing to spend it on a prestige product, Ko Phyo Maung Maung noted.

This Article first appeared in the May 21, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

Earlier this year, the US-ASEAN Business Council published a report that detailed 12 “Practical, Quick and Effective” recommendations for improving the business environment for foreign investors. The recommendations varied from the practical (“make licensing processes clear” and guidelines “for the fair use of” religious symbols and “temple imagery”) to the quaintly non-laissez-faire (a request for state regulation of the advertising industry in order to eliminate the “discriminatory rates” charged to foreigners).

One investment banker who works regularly in Myanmar and has met some of the cabinet ministers (who responded on condition that he wouldn’t be quoted by name) said that while he agreed with many of the recommendations, in the prevailing environment they were variously “not going to happen”, “wishful thinking” and “fantastical”. The recommendation to “fully empower local banks to approve transactions” provoked this reaction from a corporate investigator: “Are you kidding me? The banks can barely function and they’re all money laundering houses.”

The US-ASEAN Business Council’s effort is perhaps symptomatic of a willful effort on the part of foreigners in Myanmar (businessmen, UN agency staff and diplomats) to recognize the genuine but modest reforms of the last four years as much more substantial than they actually are and to assume much greater capacity for further improvement than any evidence on the ground would suggest—a condition that veteran Swedish Myanmar-watcher Bertil Linter describes as “soft-glove Stockholm Syndrome.”

Stockholm Syndrome is a psychological phenomenon in which hostages come to identify with their captors. It is named after an abortive bank robbery in Stockholm in 1973 that metastasized into a six-day hostage crisis.

“Burma’s luckier than most countries in Africa,” a western commercial attaché told me way back in 2004. “Instead of having the Central African Republic and Congo as neighbours, it has China, Thailand and India” (he didn’t regard proximity to Bangladesh as quite such a great advantage). Yet Myanmar’s geographical advantage obscures the fact that in many other respects, the country more closely resembles a messily emergent state in Africa than Asia’s next economic tiger.

Similarly to many African nations, government hard currency revenues are dominated by royalties from foreign-managed extractive industries, chiefly natural gas exports to Thailand and China. In this respect, Myanmar is much luckier than it would have been if its neighbours were the Central African Republic or Congo, neither of which would have offered a viable market for gas. Also similarly to many African countries, the primary beneficiary of state spending is the military. Furthermore, the black economy may be bigger than the reported economy.

Power and the stars are also factors. The electricity supply remains intermittent and limited mostly to cities. As such, commerce is restricted to businesses that don’t require much power and that can run diesel generators during blackouts. Meanwhile, the public education system has long-since collapsed, replaced to some extent by privately-run vocational schools attended by the children of relatively prosperous families. It’s also an open secret that many members of the military elite have a fascination with the supernatural, and engage in occult rituals and consult astrologers.

“When we had visitors come through the embassy, I’d tell them that the SPDC took advice from fortune tellers,” another former Yangon diplomat said, talking about the old days. “My colleagues would complain that I was belittling the government and oversimplifying the situation. But when they arrested Khin Nyunt [in the 18 October 2004 palace coup], they also locked up his personal fortune teller.” (The fortune teller’s name was Bodaw Teinkyar Than Hla. At the time he was arrested, the diplomat commented: “When you raid the cathouse, you take the piano player too.”)

“They’re basically the same people running the country now as then,” the former diplomat noted. “Don’t expect them to behave too differently.”

The diplomat claimed that sources had told him that the decision to move the capital from Yangon to Pyinmana was also due to the advice of fortune tellers. “In late 2003 we heard that half the War Office was moving there, then following Khin Nyunt’s downfall that the whole government was shifting,” he said. In November 2005 the official move started. The new capital didn’t even have an official name till Army Day on 27 March 2006, when it was christened Nay Pyi Taw. “The numerologists had determined that it was the most auspicious date for the announcement,” the former diplomat said.

The relocation of the entire government, including all the significant civil servants, to a wasteland 320 kilometres north of Yangon, presented yet a further barrier between the regime and everyone else, including all the local and foreign businessmen and diplomats. But despite the distance, there has been some progress.

Belatedly recognizing that there wasn’t the financial, technical or management capacity among domestic companies to build out nationwide telecoms networks, the government opened telecoms to foreign operators (not so many years ago, handset SIM cards cost US$5000 apiece on the locally-owned networks). Nay Pyi Taw deserves some praise for recognizing this fact (albeit 15-20 years after all but the most obtuse and war-ravaged jurisdictions in Africa). And the buildout of nationwide cellular networks made viable the “new new thing” in the banking industry—mobile phone banking applications.

At first glance, that might seem a technological leap in line with the sophisticated wireless internet-platformed banking apps available in much of Asia, but the business model being introduced to Myanmar was actually pioneered in Africa 15 years ago for places lacking functional banking environments. Like many countries in Africa, Myanmar’s banking industry doesn’t offer basic services, such as a functional home mortgage market. But then the sector has been something of an enigma since the first private banks started operating in 1992.

The banks grew and apparently prospered despite the fact that both deposit and borrowing rates were capped far below the rate of inflation, which in any normal environment would have made the industry unviable. In Myanmar, a big proportion of banking business involved money laundering, much of it tied to border trade. In February 2003 there was a bank sector collapse, but almost all the existing institutions survived it, most of them retaining their pre-crash managements and shareholders. Where was the regulator?

The Central Bank of Myanmar (CBM) oversees the banking sector. In September 2003 the governor of the CBM at the time, Major-General Hla Tun, told the at the annual IMF-World Bank meeting in Dubai that “NPLs of the banks are at a very manageable level of 2.09 percent.” That’s a level that central bankers in properly regulated markets would be very pleased with. Moreover, CBM statistics put Myanmar’s 2003 GDP growth rate at a healthy 5.1 percent. His statistics indicated the most successful recovery from a banking industry collapse in history—almost too good to be true! But then statistics in Myanmar have long been used to support ideological or public relations arguments rather than to provide a map for understanding and managing the country.

According to an economist who worked in Myanmar before the palace coup against Khin Nyunt, the Office of the Chief of Military Intelligence (OCMI) had a permanent detachment at the CBM. He alleged that one of the detachment’s responsibilities was to massage the national accounts in order to obscure the scale of foreign currency receipts that originated in the black economy. Hence the curiously large position that services receipts played—and continue to play—in the current account balance (statistics for exports of physical goods can be compared against UNCTAD figures for imports declared by the trading partners of Myanmar; unrequited transfers, tourism receipts and other non-physical items can’t).

It’s likely that the genuine reform of the banking industry and the loosening up of the import regime that have taken place over the last five years were enabled in large part by sharply higher gas revenues. Gas exports to Thailand have increased somewhat in volume and risen sharply in price since early 2005 (including the pipeline transportation fee, Thailand paid almost US$12/mmbtu for gas from the Yadana and Yetagun fields in 4Q14 against about half that price in 1Q05). That enabled a previously cash-strapped government to stop printing kyat bank notes in order to cover expenses, causing the currency to stabilize and inflation to ease. Furthermore, detente with the West freed up the IMF and the World Bank to provide technical and financial assistance.

Since Myanmar’s detente with the West, numerous development agencies and even foreign banks have found budgets to hold a series of seminars teaching central bankers and the staff of financial institutions how to identify and deal with money-laundering. One suspects that many of the seminar attendees have much more experience with money laundering than the expert speakers.

Soft-glove Stockholm Syndrome manifests in some unusual manners. When I was in Yangon in April, an expat working for a local bank criticized Aung San Suu Kyi intensely for apparently encouraging garment workers at foreign-owned garment factories to seek higher wages. She went on to claim that garment workers at foreign-owned factories were already paid US400-600/month with overtime included (garment factory wages rarely exceed US$100/month for machinists, even including overtime).

Other foreigners point to the spectacularly high cost of real estate in Yangon (despite the near impossibility of getting a home mortgage) as proof of the strength of the wider economy rather than being indicative of the paucity of viable options for investment in productive industry. It’s easy to forget that before the relaxation of car import rules in 2011, a 1984 Toyota Corolla typically sold for more than US$30,000 (the flood of imports that started in 2011 caused prices to crash and considerable wealth destruction among people who had purchased vehicles as a store of value).

The flood of foreign firms opening offices in Yangon in recent years has caused demand to dramatically exceed supply of another resource—suitably qualified English-fluent clerical and technical staff (the last time this phenomenon manifested was when the country opened up to the outside world for the first time in 1990s). Myanmar trails far behind emerging countries such as Vietnam in the training of human resources and it’s difficult to see how it can correct this failing without a seachange in the government’s attitude toward managing education.

In the absence of a change in attitude, the economy will remain dominated by resource extraction, low-wage industries and (helped by its geographical advantage) tourism.

This Article first appeared in the June 11, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

Myanmar’s real heroes and villains are well-known amongst the international community. Some stand out and others are largely forgotten and never credited. Heroes like Bogyoke Aung San, the father of an independent Burma and his daughter the international democratic icon, Daw Aung San Suu Kyi. And villains such as General Ne Win, who in 1962 plunged Burma into a socialist programme which saw it slip off the international world map into decades of military dictatorship. And finally, dictator Senior General Than Shwe, who some suspect to be the puppeteer of Myanmar’s current political state.

Less well known is economist U Hla Myint who came from modest beginnings. U Hla Myint who was born in 1920 in Pathein, Burma into a family with little financial means during the period of British Colonial rule. He was noted through his school life as a bright child and was allowed to undergo a test at the age of 14 to begin university studies. He officially enrolled in Rangoon University at the age of 15.

The entire time that U Hla Myint was in university, he achieved top grades despite only being in his midteens. He finished his degree early and continued at university associating with other brilliant minds of the time, the most well-recognised being economist Joseph Schumpeter, a noted Harvard professor. Eventually, in the late 1930s, he went off to study at the London School of Economics.

World War II broke out leaving U Hla Myint stuck in England. All of LSE’s top economists had left to serve under British leader Winston Churchill’s war cabinet creating a brain drain at the school. As London buttoned down under war-time austerity and occasional Luftwaffe bombing raids, U Hla Myint began researching his Ph.D. under Austrian economist, Friedrich Hayek, the well-known defender of classical liberalism who won a Nobel Memorial Prize in Economics in 1974.

After the end of the war and finishing his Ph.D., U Hla Myint returned to Rangoon where he helped to reestablish what was then Rangoon University’s economics department as it had been destroyed during the war. The buildings were reconstructed from the ground up and during the rebuilding, classes usually took place in bamboo huts. Despite the hurdles, the department became known as one of the leading economics departments in the world, living in a golden age economic theoretical development.

U Hla Myint had his eyes on Myanmar’s agriculture sector, stressing the need for an export-orientated mindset, calling for open borders and a cut in international tariffs.

As noted Australian economist Sean Turnell said during a recent lecture on U Hla Myint’s economic achievements, the noted Myanmar economist stressed the importance of export-led growth at a time – 1940s-50s – when conventional economic models stressed industrialization, import substitution, and state-led and protected economic growth. In retrospect, it can be seen he was a visionary.

U Hla Myint was preaching the importance of property rights, incentive-based economics, and economic freedoms well before the ideas were thrown around in the international community. Others would go on to achieve prizes with ideas similar to his own.

After leaving Myanmar in 1962 amidst the turmoil of General Ne Win’s coup d’état which saw his foreign friends deported, U Hla Myint begun his best economic work while serving as Emeritus Professor of Economics at the London School of Economics from 1966 to 1985.

He expressed the importance of an export-oriented development strategy for Myanmar and the Southeast Asia, noting that if you export to the world the market you could enjoy would allow economies of scale production and efficiency. 

Trade was not about earning money, but lifting the economy and productivity, avoiding leaving industrial resources idle. He sought institutional change. He stressed the importance of exporting agricultural products, a process that would lead to other developments that would help transform the broader economy.

“The expansion of peasant exports leading to the development of the market system by drawing the peasant households into the exchange economy, this would be a powerful factor in reducing the marketing and organizational costs of the traditional sector, this will pave the way for further economic development through a greater degree of specialisation and divisional labour,” wrote U Hla Myint at the time.

U Hla Myint returned to Yangon in 2012 to attend an economics event headlined by Joseph Stiglitz, 20012 Nobel Prize winner, entitled, “An Agenda for Equitable and Sustainable Development for Myanmar.” Mr Stiglitz received all the attention.

Even on U Hla Myint’s return, he was to focus on the growth of Myanmar’s agricultural sector and was against centralization saying: “Look it never worked 50 years ago when I was arguing against it 50 years ago. It isn’t going to work now.”

U Hla Myint’s main argument was that there was not the storage capacity and infrastructure for a centralised agricultural system in Myanmar. He stressed that a free market system would allow an expansion of capacity and growth in the economy, as seen in many other countries around the world. 

All information was provided by Sean Turnell during a recent speech in Yangon

This Article first appeared in the July 16, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

Tak, a western province bordering Myanmar, has been tipped to host the first special economic zone (SEZ) with a well-managed industrial estate and plenty of investment privileges to attract investors.

But after a year of government efforts, the SEZ remains a far-fetched idea and is unlikely to start up within a few years as planned, according to the business sector.

Several hurdles and risks lie ahead, making investors wary of investing in the zone.

Officials are expected to spend several years settling problems and disruptions before securing appropriate land to be developed into the industrial estate. That means more delays in SEZ investment.

The government has set aside 2,000 rai of denuded forest land near the second Thai-Myanmar Friendship Bridge in Mae Sot district for the estate, invoking Section 44 to allow the use of military force to transfer ownership more quickly and easily.

Things have not gone smoothly, though, as hundreds of families, mostly poor farmers who earn their living from the land, have refused to move out and are asking for fairer compensation before doing so.

"It will not be easy, as the issue has reached the National Human Rights Commission of Thailand (NHRC) and they are sending a senior official to investigate," says Paradorn Kanda, a vice-chairman of the Tak Chamber of Commerce.

The case could take years to resolve, potentially scaring off would-be investors.

Niran Pitakwatchara, who heads the NHRC subcommittee overseeing the case, says the commission has found strong evidence of land-grabbing by the government via Section 44.

"We have sent the complaint to the government and are asking it to reconsider the plan, as there are hundreds of families affected by the policy," Mr Niran says. "However, it depends on the government for how long it will take to settle the case. It will be indefinitely long."

Local authorities have played down the case, saying the 2,000 rai for the industrial zone is a minimal portion of the more than 800,000 rai in Tak set to be developed as part of a bigger scheme of trade and import-export zones in the province.

"The industrial zone is just a small part of the project," says Tak governor Somchai Hatayatanti.

The overall plan is for the government and the Board of Investment (BoI) to grant special privileges to new investors in the 800,000-rai area. Existing investors, however, have voiced their own concerns about the privileges.

"They say it is not fair that the government is giving privileges to new investors and doesn't care about the existing businesses at all," says Somsak Kaveerat, chairman of the Tak Chamber of Commerce.

More than 300 existing businesses and investors, some with decades of involvement in Tak, have lobbied for better privileges after driving the economy on their own for so long.

"They are asking for privileges from the government and the authority is mulling over the privileges to be given to them," Mr Somsak says. "However, the privileges will not be as substantial as what the government plans to give to new investors to promote the SEZ."

Local businesses say privileges for existing investors would calm them down and improve the atmosphere, while some observers worry that the bid could backfire by making privileges for new investors seem less attractive.

"The government will try to compromise with existing businesses, but we don't know for sure that unbalanced privileges won't deter new investors from the SEZ," says Banpot Kokiatcharoen, an adviser to the Tak Chamber of Commerce.

His remarks are in line with those of a senior government official who acknowledges that the SEZ project was not initiated by the government, but rather by the National Council for Peace and Order.

"Once the cabinet was formed, not all members of the economic team agreed with the projects," the official said. "In the case of the SEZ in Tak, those who disagreed felt that there was no real advantage for certain businesses to set up operations there."

Even so, the government should continue to develop infrastructure in Tak to promote border trade, the official added.

FOSTERING TRADE PROMOTION: GOING BACK TO BASICS

At a time of no clear blueprint or schedule for Tak's SEZ, existing businesses want the government to get back to basics in fostering border trade and boosting the fragile economy.

"Border trade is the strongest point of Mae Sot and has supported the economy here for decades, which the government may have missed," says Mr Somsak, the Tak chamber chairman. "We are welcoming the basic plan to support infrastructure that could improve the economy more easily and quickly, without relying too much on the SEZ."

With Myanmar newly opening up to foreign investment and tourism, and demand for Thai goods spiralling, the time is right to tap a golden opportunity, he says.

Mae Sot sits just 45 kilometres from Myanmar's economic district of Myawaddy, with its 60,000-plus population and strong purchasing power. Moreover, Mae Sot is a transit point on the way to Yangon, where demand for Thai goods is surging.

"Goods items, of which about 90% are Thai goods, can be transported to Yangon within five or six hours, compared with more than two days before we had the new road," Mr Somsak says, referring to a 1.14-billion-baht project that enhanced logistics from Mae Sot to Myawaddy.

Infrastructure improvements in Tak, including the expansion of Mae Sot airport and better highways to Bangkok, should help boost border trade value from the current 60 billion baht to more than 100 billion in a few years.

"That would be a realistic plan to help support the economy at this time," says Mr Banpot, the Tak chamber adviser. "But it will take a few years to achieve the goal, since the budgets have just come out and it will take a few years for construction."

Charnvit Amatamatucharti, deputy secretary-general of the National Economic and Social Development Board, says the government has done its best to promote SEZs in response to Prime Minister Prayut Chan-o-cha's policy prescriptions.

"The private sector should thus reflect clearly and directly on what its real problems are," he says, noting that SEZs have been proposed by the private sector itself.

"The Thai Chamber of Commerce and the Federation of Thai Industries have backed them in the SEZ committee. Opponents should use the two private organisations to vent their opinions on the plan."

Mr Charnvit says the government has shown flexibility in assigning state land plots after the private sector complained that the plots designated for SEZs were too expensive.

The government has also offered the highest privileges to 13 industrial categories in five provinces, as well as cutting capital requirements for small and medium-sized enterprises in SEZs from 1 million baht to 500,000 baht, he says.

http://www.bangkokpost.com/business/news/658364/industrial-inaction

A husband and wife moving team launched their company in Myanmar this year with the aim of offering a stress-free transfer from old homes to new.

Jackie and Brian Ackerman spent seven years working as electrical engineers in Washington DC before deciding it was time for a radical sea change. 

“It seemed like everything in America was so predictable – we were doing the same thing day in, day out. We came to Southeast Asia on a holiday in 2012 to see if we could lead a different lifestyle. But when we flew to Singapore it was evident from the moment we landed that we weren’t needed there. We also struck out in Ho Chi Minh, Siem Riep and Bangkok,” said Jackie Ackerman, Director of Pathway Moving Services.

While in Cambodia, their local guide mentioned in passing that Myanmar had just opened up and that it might prove an interesting destination to visit. 

“Myanmar wasn’t on our to-do list: we hopped on a flight on the spur of the moment and spent a couple of night at Park Royal Hotel. When we came here, we felt that we could make a difference.”

Neither Jackie or her husband Brian had any experience in the moving industry, but that didn’t deter them from starting up their own venture.

Most expat business owners in Myanmar open bars and restaurants – so why did the inherently stressful moving industry appeal? 

“Brian and I are total introverts. It wouldn’t be in our nature to open a restaurant or bar, or something that required us to mingle – it’s just not in our DNA,” Jackie said. 

The seeds of the idea of a moving business were sown in 2011, when Jackie’s office relocated and she had a chance encounter with a company that stood out from the rest. 

“Mover after mover came into our office and they were really stereotypical – these guys parked their trucks out the front and rolled in like they’d just finished a job.”

But when a man in a suit strode in, sat down and calmly explained the logistics of moving in detail, Jackie was pleasantly surprised.

“He was so professional. It was like an ‘a-ha moment’,” she said.

Her boss opted for a company that gave the cheapest quote and a discount to boot – but it became less of a bargain when an insurance claim had to be lodged for damaged office desks.

“I knew it would be horrible – but the experience keyed me into the industry. And it culminated with the idea of looking for something to do outside the US. You could say the two thought patterns converged.” 

Jackie and Brian, the latter of whom is Pathway’s managing director, met a couple in Washington with decades of experience in the relocations industry and spent the next couple of years gleaning insights from them. 

Jackie and Brian’s first move in Yangon was in March this year. Both admit it’s a tough industry. Fortunately though, Jackie said that expats in Yangon are ready to roll with the punches – such as sudden refusals to allow movers to use the elevators in condos or tricky architectural designs.

“For the most part, people living in Yangon are willing to deal with all sorts of strange things,” Jackie said.

Jackie and Brian’s Myanmar language teacher has equipped them with a moving-related vocabulary, and their director Min Thu Aung, offers limitless supplies of invaluable advice, Jackie said with a grin. 

“We spend a lot of time on the job saying ‘phyay, phyay’ [‘slow, slow’]. We also often ask a single worker to team up with another to carry heavy objects – sometimes they get a little crazy and want to carry heavy things upstairs, which could result in damaging floors or walls – and themselves.” 

Jackie said they convey the importance of protecting owner’s buildings to their team and make sure that belongings are covered in cushioning wrap whenever necessary. 

“Wherever possible, we use dollies to exert less energy: it’s about working smarter and working slower,” Jackie said.

Pathway is marketed as a premium moving service. While cheaper options are certainly available in Yangon, in the long run it can be worth spending more to avoid having to replace the irreplaceable. 

“We really pride ourselves on protecting people’s goods and internalising what matters most to our clients.”

The task can be daunting in Yangon, as elevators aren’t yet par for the course in apartment buildings. 

“We’ve done stairwells with no lighting source – when our guys are in total darkness and we’re speaking two different languages it can be challenging,” she said.

For the most part, Pathway finds its customers by “trolling Yangon Expat Connection” and Brian Ackerman’s SEO skills help to recruit others online via its website. 

“Our strike rate is about 50:50. When people say no [to an inquiry on YEC], it’s usually because of the price. If someone really wants the rock bottom price, where a bunch of guys turn up and move your stuff without caring, it’s hard for us to match that price-wise because we provide a premium service.”

That said, Pathway “says yes to everything. We want to see if we sink or swim and we won’t know unless we try.” 

The heaviest item Pathway has moved was a 200 kilogramme piano, which had to be delicately lifted out of a fourth floor apartment. 

A definite advantage for expats who choose Pathway is having at least one person on the job who speaks English and Myanmar to explain what goes where. Pathway also has an add-on service for packing and unpacking belongings by a team of ginger-fingered ladies.

Moving offices as opposed to homes takes up a quarter of Pathway’s business, while moving locals comprises but a fraction of their overall jobs.

“It’s hard for us to get local business – we haven’t quite figured it out, but perhaps it’s a price point thing,” Jackie said.

As for direct rivals, there’s Asian Tiger and Crown Relocations, although Jackie said they haven’t gone head-to-head with either yet when bidding for jobs.

What makes Pathway unique is that it’s a wholly foreign owned, family-run business.

“I think maybe we’re the one-off that doesn’t necessarily fit under the corporate umbrella,” Jackie said.

For more information about 

Pathway Moving Services – or to get a free quote – visit http://pathwaymoving.com

Hotels, harbours or mines, Myanmar's big-ticket industries are still in the grip of military-linked tycoons, who will remain gatekeepers to the country's opening market whoever wins Sunday's crunch polls.

The globe's fourth fastest-growing economy, according to the World Bank, is a tantalising prospect to international investors but sections of it are firmly off-limits.

These are the realms of the nation's infamous "cronies" -- a business elite who gobbled up state contracts and carved out monopolies under the corrupt former junta, which rewarded loyalists.

"Cronies are the main winners," says Sean Turnell, an expert on Myanmar's economy who has advised Aung San Suu Kyi's National League for Democracy (NLD).

"They dominate in industries in which the government gives them special concessions, and protects them from competition."

One such tycoon is Aye Ne Win, grandson of Myanmar's notorious dictator Ne Win, who like many of the financial elite has risen through entrenched networks of privilege.

Sporting a crisp monogrammed shirt at his villa in Yangon, the magnate insists his family have always operated within the law.

"I have connections so it's easy to make business," he told AFP.

Unlike others, however, his family fell out of favour with the former military regime -- Aye Ne Win and his two brothers were jailed for a decade in 2002 as part of a purge by Than Shwe, Myanmar's last serving general.

But in the years since he and his siblings have staged a comeback, steadily building a vast empire that spans construction, hotels and banking.

"None of our family has ever been restricted from travelling or prohibited from entering anywhere in the world," he said. 

"That's why most of our family's old friends have been willing and offering to support us in doing business (with us)," he added. 

- Detoxifying reputations - 

Yet many of the country's biggest tycoons do remain on a Washington blacklist, forbidding American companies from doing business with them even though most western sanctions have been dropped.

Steven Law is one such businessman. A leaked US diplomatic cable from 2007 described him as a "top crony" to the former regime's generals and the son of a drug lord.  

He owns Asia World, a sprawling conglomerate with stakes in sectors including tourism, shipping and construction. 

The company also benefits from the generals' successors -- in 2013 it won a multi-million dollar government contract to upgrade Yangon's international airport.

The military itself retains a significant hold over business through its Union of Myanmar Economic Holdings, a vast conglomerate that remains under US sanctions with major stakes in gems, brewing, real estate and transport.

But in a sign of the changing times, some tycoons have begun cosying up to Suu Kyi's NLD, which is expected to make sweeping gains if the November 8 elections are free and fair.

ZawZaw -- a US-sanctioned tycoon who owns the Max Myanmar conglomerate and has interests in gems, real estate and tourism -- has made large donations to the party, as has TayZa, the flashy owner of the formerly US-sanctioned Asia Green Development Bank.

The family of another crony, Kyaw Win, head of media giant Skynet, paid nearly $50,000 for a jumper knitted by Suu Kyi at a 2013 fundraiser. 

- Growing competition - 

Whether the tycoons can make an ally of the NLD is yet to be seen.

The party has vowed to double-down on the economy, promising jobs and higher taxes to benefit the poor, while Suu Kyi has made clean government the centrepiece of her campaign.

Aware of the country's evolution, many moguls are trying to detoxify their reputations.

"A few have begun to manage their public image and speak of their support for a new democratic Myanmar," says HtweHtwe Thein, a Myanmar expert at Australia's Curtin University.

Although the cronies still enjoy primacy, business figures say a more competitive environment is slowly emerging. 

"Under the military regime, it was impossible to win against the cronies," KyawKyawHlaing, chairman of the Smart Group told AFP, praising comparatively greater transparency in tender processes now.

But while some "60 percent" of government contracts still lack transparency over how they are awarded, he said, this has not deterred foreign investors.

Since the lifting of outright army rule in 2011, Myanmar has seen a flood of investment and a consumer boom, hitting 8.5 percent growth in the last financial year.

The World Bank says $8 billion of overseas cash poured into Myanmar over this period, more than twice as much as the previous year.

© AFP

Developing countries such as Myanmar will face increasing difficulty expanding their electricity supply using conventional fossil fuels oil, gas and coal, it emerged last week during the global climate change conference in France.

An agreement on curbing global warming could undermine the potential national wealth from hoped for natural gas beneath Myanmar’s territorial waters of the Bay of Bengal, where 20 blocks have been leased to international oil companies for exploration.

If the UN-led conference agrees on tough measures to hold global warming below a 2C increase the commercial viability of hundreds of billions of dollars’ worth of planned investments in fossil fuels in Asia would be undermined, some experts asserted.

It would also undermine bank and institutional investor support for coal-fuelled power plants – the favoured quick fix being sought by countries from the Philippines to India to overcome acute electricity shortages, a special report in the Asia Power Monitor said.

A study by the London-based Carbon Tracker Initiative (CTI) warned that more than US$300 billion worth of fossil fuel investments in Asia is at risk of being wasted if the UN conference agrees on global CO2 limits.

The independent research think tank suggests that plans by numerous companies and countries for oil, gas and coal developments would be rendered obsolete.

Business history is littered with investors who failed to see a transition coming, CTI chief executive Anthony Hobley said in a forward to the study timed to coincide with Paris.

“China, the US, Australia, India and Indonesia have the greatest exposure, accounting for over 90% of unneeded investment. Export markets are in structural decline as China seeks to peak its coal demand and India aims to become more self-sufficient in energy, threatening big exporters like Australia and Indonesia, CTI said.

Australia, Indonesia and Malaysia have the greatest exposure to investment “folly” in natural gas production. Two-thirds of planned new coal bed methane projects and half of the supply in new LNG projects will be unneeded, according to CTI.

“This sounds like bad news for South Asia and Southeast Asia,” the weekly Monitor said. “Coal or gas are the natural resources most favoured to fuel economic growth and to bring basic grid electricity to hundreds of millions of people still living with wood fires and paraffin for cooking and light.”

The CTI disagrees. Technical developments in clean energy, bigger and more efficient storage battery science and a trend to electric cars are the future, according to CTI.

However, this seems to miss the point that all those people from India to the Philippines sat round the wood fire cooking pot are a long, long way from worrying about whether they should buy a petrol-driven car or an electric battery model. It overlooks the fact that although India is making big strides in encouraging the development of renewable power plants – aiming for 40% of total power demand by 2030 – more coal and or gas will still also be necessary.

Myanmar has made small inroads into tapping non-fossil resources to generate electricity, but solar energy-trapping projects are costly, land consuming and probably too sophisticated for the country’s existing underdeveloped infrastructure.

Meanwhile, opposition to hydroelectric projects that involved damming rivers is strong in Myanmar.

Singapore’s state-linked Sembcorp Industries this week signed a US$300 million agreement to build one of the biggest power projects in the country, a 225 megawatt plant to be fuelled by natural gas. Sembcorp will own 80% of the plant, which is not expected to be operational before 2018.

In the near term, Myanmar’s domestically produced gas supply will suffice for such projects, but the CTI believes finding the plant construction finance will become increasingly difficult.

Major international finance institutions and banks are already turning their backs on some fossil fuel projects. One of the world’s biggest planned coal mines, in Australia, has been refused loans by a number of banks which previously supported such developments.

The 60 million tonnes a year mine is planned by India’s Adani Group industrial conglomerate, primarily to fuel new power plants in Myanmar’s neighbour India.

India’s plans for coal fuel growth have met a lot of criticism at the UN conference over the last 10 days, causing anger in New Delhi.

“Why is India in the crosshairs and not, for example, the US, which has one-quarter of the South Asian nation’s population, but more than twice the level of harmful carbon emissions?” asked two leading Indian scientists commenting in Time magazine this week.

Why is China, a slightly more populous country than India which accounts for about 28% of annual global emissions versus India’s 6% not the subject of more criticism in Paris, said Navroz Dubash and Radhika Khosla of the Centre for Policy Research in New Delhi.

“Our review of multiple research studies suggests a virtual consensus that to meet India’s energy needs, coal use will have to increase …[but] significantly, even with added coal, India’s emissions per person in 2030, at about 4 to 5 tonnes per capita, are likely to be less than the current global average of 6.6 tonnes per capita,” Dubash and Khosla said.

“Importantly, the projected increase in India’s emissions is far less than the corresponding figure of 12 tonnes per capita in 2030 for the US and China,” they said.

The devastating floods that have in the past two weeks engulfed India’s southern city of Chennai, formerly called Madras, and Tamil Nadu State have been like manna from heaven for the anti-fossil fuel lobby. The rain storms were caused by climate change, they insist.

That’s as maybe. Chennai sits on the Bay of Bengal, notorious for extreme monsoon season weather. There is little proof that the flooding was actually the result of global warming, natural or man-made, but if it was indeed the latter then it follows that this was most likely caused by the 19^th Century industrialisation of countries now wagging fingers at India and other developing countries for wanting to burn coal, the Monitor suggested.

“Surely compromise is needed on a global compact on fossil fuels consumption to enable developing countries to improve their lot,” the Monitor said. “This might then allow them to bring their electricity supply somewhere closer to that enjoyed in homes in the US, Britain, Germany and Japan full of energy consuming convenience gadgetry. Households in those countries long ago abandoned cooking the evening meal on a wood fire or reading by fume-leaking paraffin lamp.”

This Article first appeared in the December 17, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

There is a small hut with a thatched roof overlooking the Andaman Sea in Dawei, Tanintharyi Region. Near the hut, there is a milestone engraved with the letters KM 0+000 denoting the beginning of the road.

At present, there is only a wide road and vast fields but the area will soon be a flourishing major economic hub for neighbouring countries including Thailand and Myanmar. It is the site of the Dawei deep-sea port, the largest in the country, with a project area spanning thousands of square kilometres.

Currently, only a few people come to the area and it is just a seaside village. These people take photos to remember their trip and they return to where they came from. It is hard to say how much this area will change over the next five years. But local people and businessmen have high hopes for the mega deep-sea port project which initially took shape as a plan by the Thai and Myanmar governments in 2008.

Local people have experienced both pros and cons of the project since then. They frequently heard rumours of a probable and often imminent relocation of their villages. And they also knew that for its construction their farmlands, plantations and plots would be confiscated.

Compensation for land confiscation

The Dawei Special Economic Zone Management Committee Secretary Khin Maung Cho told Mizzima that they had already paid 29,038 billion kyat as compensation for 7,349.48 acres seized for the construction of the project.

The main agricultural businesses in Dawei are cashew nut and rubber plantations. Compensation was paid based on the size of the crop and location. A local villager, Kyaw Naing, explained that they were paid compensation by dividing each of the plants into three categories, small, medium and large and then compensation was paid at a rate of 100,000 kyats for large, 70,000 kyats for medium and 30,000 kyat for small. Kyaw Naing lived in Pugawzun village, one of the nearest villages to the Dawei SEZ, and he was paid compensation based on this criteria.

But allegations and problems still exist as villagers have alleged unfairness and nepotism in calculating the compensation paid to them after land confiscation.

Another Pugawzun villager, Kyaw Aye, told Mizzima: “Some have accepted the compensation in this village but some have not accepted it yet because there is unfairness in calculating our compensation. We just want fair compensation, we cannot accept compensation a lot less than expected.” He has not yet accepted the compensation paid to him.

Some local villagers who have accepted and received compensation reinvested their money in buying plots in other nearby areas to grow cashew nut plants. But some do not know what to do and their money has been spent on daily needs.

Local villager Ko Moe from Hteingyi village said laughing, “I got 17 million kyats for my 9-acre plot. And then I moved to another village after selling my cashew nut estate. Now my money has been totally spent and none is left.”

New satellite town project

Those whose estates and plantations were seized for the SEZ project received compensation while those whose houses were seized for the project were given new houses in a new satellite town called Bawa.

In Bawa town, the houses for the relocated villagers were divided into three categories large, medium and small all with the same design. Houses there will be provided to the villagers from six villages relocated for the construction of the project.

Khin Maung Cho said, “In the current initial phase of our project, we avoided building in areas near these houses so no one has been relocated at the moment. But these villagers have already agreed to be relocated to their new houses as and when needed.”

Is the project welcome?

Thai-Italian consortium and the Myanmar government signed an agreement on August 5 last year to resume their initial phase of the project. Under this agreement, the initial phase of the project must be 65% complete within three years over a seven-square-kilometre area.

Currently, Thai-Italian consortium is building infrastructure including roads, bridges, the water supply, electricity and housing. The local people are sceptical and have concerns about the success of the project. But despite their scepticism and concerns, they welcome the project being built in their region.

Ko Moe from Hteingyi village said, “We want to see the success of the SEZ project because those whose farmlands and plantations have been lost can work in this SEZ for their livelihood.”

Kyaw Aye who is still refusing the amount of compensation said, “I will not do [anything] to delay this project. I really thank them for building this SEZ project in our area and we are happy and proud of it. Our people have to go to other countries such as Thailand for work as they don’t have a job opportunity here. We wish this mega-project success but we want the compensation and damages we deserve. So I’m still insisting on non-acceptance of compensation they paid.”

Job opportunities

The local people have high hopes for sufficient job opportunities from the project and local development. It is expected, there will be 65,000 job vacancies even in the initial phase. The Dawei SEZ project provides hope for unskilled workers in the local area and high expectations for local businessmen.

Manager Soe Thein of AK Construction Company said, “The entrepreneurs and businessmen in Dawei will benefit much from the Dawei SEZ project when it is successful. If the deep-sea port project is successful, we will get many business contracts from it. Our Dawei city will flourish a lot when the deep-sea port project is completed and running successfully.”

AK Construction is currently building houses on contract and they are watching the progress of the SEZ project and have a business expansion plan.

Thant Zin from Dawei based NGO ‘Dawei Development Association’ (DDA) said that in his opinion this SEZ project would not be beneficial for local workers in the long term.

“We have concerns over this project because industries here are not suitable for local workers. For instance, canning factories, local workers who worked in Thailand illegally have experience in such an industry. They will not have much difficulty when they come back home.  But other industries in this SEZ will be high-tech industries such as petrochemical so workers will need more skills to get employment there,” Thant Zin said.

Labour problems

The local people hope for future employment in the SEZ, but right now they are experiencing labour problems.

One year after the signing of the agreement in 2012 work on the project started. In the initial phase, unskilled workers got jobs but then they were made unemployed when the project was suspended. And then, when the project was restarted, these workers were reappointed in their jobs but they had to refund the compensation paid to them by their employers when they were dismissed. Some had to pay the equivalent of three-month wages. Additionally, some did not have to pay back compensation but they received lower wages than previously.

Concrete mixing worker Kyaw Lin said, “We were told to pay back the compensation we received when the project was suspended. We had no choice but to pay it back as we needed jobs.”

Lei Lei Win who works for Italian-Thai in Myeik complained, “Our Myanmar workers are poorly paid.”

7-year mega project

Dawei SEZ is a 7-year project lasting from 2015 to 2022. The project has two phases, initial and main. The initial phase must be completed by 2018 and it will cost US$350 million or about 450 billion kyat.

The initial phase will have nine projects.

According to the project blueprint, there will be industrial zones, a deep-sea port, small port, schools, markets and hospitals with water and electricity, and a small city with essential infrastructure.

This mega project will help Myanmar trade with Thailand, India and Vietnam.

Along with positive points, there are some questionable issues of environmental and social impacts on the region and the people.

Dawei SEZ management committee secretary Khin Maung Cho said, “We have done an Environmental Impact Assessment (EIA) and a Social Impact Assessment (SIA) and we have already given these reports to the local people. We will conduct these studies again if we need more in future.”

Local resident Thant Zin from Dawei Development Association said, “As an ordinary citizen we are proud of having such a mega SEZ in our local area which will be the largest in Southeast Asia. It has become famous and popular among the people over the last 3-4 years. People came to see the project working with heavy machinery and equipment and a lot of workers. But as time passes, the progress of the execution of this mega project is unsatisfactory. One year you could see a small hut and a flag post in front of it but it would not have changed when you visited it a year later. The situation is unchanged. So the people are losing interest in this project.”

For 16 years, Sharky’s has satisfied Yangonite’s cravings for delectable cheeses, breads, gelato and cured meats, to name but a few of its luxurious offerings. During the decades Myanmar spent as an isolated, pariah state under international sanctions, such items would have been virtually unobtainable. However few would have complained: Myanmar’s population happily consumes more rice than anywhere else in the world and expats and repats were thin on the ground until the country’s reform process began in 2011. Yet the namesake of this foodie institution wasn’t deterred by starting out with a small client base; if anything it was a plus, as mass production has never been part of his game plan.

U Ye Htut Win (aka Sharky) views the world in terms of an 80:20 split – the 80 percent being “the big boys playing the industrialised game and then there’s us, the artisans, who look beyond short-term profits.”

‘Everyone wins’

However Sharky’s is no social enterprise and Sharky makes no apologies for the fact that his wholly organic goods don’t come cheap.

“From the beginning Sharky’s has always been labelled as expensive. That’s how it is – and I take it. But what I say is that at least I know why it’s expensive. I take care of my staff, I treat my animals well – everyone wins. Our profit margins aren’t gigantic. They are healthy – and that’s how it should be because this is a business and we have to pay our bills. Producing food on my terms is costly, but there is a reason why we do things the way we do. ”

Sharky told Mizzima Weekly that when he returned to Myanmar in 1996 after a life lived in many different parts of the world as the son of a diplomat, he was driven by a desire to “prove what can be done in a third world country with a first world vision and concept.”

Focus on local supply

Eighty-five percent of Sharky’s products are locally sourced and the entire supply chain is controlled by Sharky’s to ensure the high quality standards it prides itself on.

Take Sharky’s roast chicken, which differs substantially from its mass produced counterparts.

“People tend to only talk about how a chicken is bred. The slaughter part is gruesome, but you have to think about it,” he said.

Sharky explained that his chickens stop being fed two days prior to being killed: they consume a liquid diet of probiotics to clean out the gut. Even if an intestine is ruptured by mistake, the risk of salmonella is slim. This practice is in stark contrast with mainstream poultry production in Myanmar.

“Because chickens are sold by weight, they are usually stuffed with feed and their stomachs are full of shit,” Sharky said.

That’s not be good for the consumer: nor are the incorrect bleeding techniques that often lead to contamination. Sharky’s drains the animal’s blood by slitting the throat as per halal and kosher methods. Most others don’t bother: a chicken may be struck from behind, causing its lungs to explode. Others die prematurely due to cramped conditions or illness, after which they are sold to market buyers. Sharky explained that any of these factors can result in chicken – a white meat – taking on a pinkish appearance even after it’s been cooked.

“It’s a warning sign that consumers should be aware of,” he said.

Sharky’s takes the extra precaution of dry plucking, as the more common method of a ‘hot water bath’ can lead to skin contamination via dirty water.

“Our methods are time and labour intensive, but in return the risk factors are eliminated,” he said.

Focus on staff and suppliers

The other component in Sharky’s quality control is heavily investing in its 230-strong team of staff, whether it be a pig farmer or a cashier. The average retention rate is 10 years, which is rather extraordinary in the hospitality industry – and in Yangon to boot.

“The reason why [my staff] stay is because I look after them as family members. We provide maternity leave, support for their children’s education and a catering food service from breakfast to dinner. We spend years investing in artisan training. The problems begin with constant turnover: your skill force gets diluted, which means that standard operating procedures aren’t followed. And if you comprise on that, your days are numbered,” he said.

Unsurprisingly, Sharky’s labour costs are double the norm of anyone in the business, he added.

Sharky’s also spends a great deal on top-notch cooking equipment: the most expensive of which is a rotisserie that cost 25,000 Euros and was imported from France. Sharky’s European hand-slicing cutters cost 15,000 Euros apiece.

Preserving Yangon’s architecture

Sharky’s latest investment is a downtown outlet that has delighted many fans – though perhaps no one more than Sharky himself. He discovered the space after being invited by his good friend, the owner of Rangoon Tea House, to provide comments on his newly opened restaurant’s cuisine, which is adjacent to Sharky’s Pansodan Street premises.

The 120-year-old building was originally a high-end department store and boasts high ceilings supported by Scottish beams and Lancashire steel. However during the aggressive nationalisation that occurred during the 1960s, the venue became a Chinese restaurant. Sharky first saw it as dirty and dark, with the Manchester bricks plastered over and a mezzanine design. Yet he immediately realised its potential.

“It was love at first sight,” he said.

He signed a long-term lease two weeks later to prevent the building’s impending demolition. However it took over a year to restore the premises to its former glory and save it from demolition from money-hungry construction companies.

“There was a sign out the front saying it was designated for destruction – the owners wanted to get rid of it and build something new.”

He pointed to a brash bank building opposite the street that was once a beautiful building as an example of the consequences of a collective failure to recognize Yangon’s ‘X-factor’.

Sharky enlisted support from Thant Myint-U of Yangon Heritage Trust and YCDC’s elected township official, who collectively convinced the owners that the building should be preserved.

“We proved that the building was sound and shouldn’t be demolished – and not only that, it should be value-added,” he told Mizzima Weekly.

Companies with vision

He expressed solidarity with Gekko, Union Bar and River Gallery, who “are showing how private enterprises are entering the market with a vision.”

“I believe that for Yangon to compete with other regional cities as a tourist destination, it has to preserve the value it already has.”

His vision is a downtown Yangon that tourists happily linger in – as opposed to what he sees as the current pattern of spending a day in the commercial capital to visit Shwedagon Pagoda before heading off to the more popular destinations of Mandalay, Bagan and Inle Lake.

When asked whether the year-long renovation process spilled into millions of dollars, Sharky declined to comment, saying only that “we spent a lot and it will take years to see the returns.”

‘Living food museum’

Sharky’s is also in the process of setting up a two-acre artisan factory in the outskirts of Yangon, which will cost an estimated US$2-3 million. On a practical level, the factory will improve cost efficiency by centralising the company’s logistics – and at the same time it will serve as a school for future Sharky’s employees.

“McDonalds has its university – Sharky’s will have its own to train and mould our workers. It will be another showpiece of what can be done in a third world country. The factory won’t just be a factory – it will be an atelier, an artisan workshop.”

Sharky plans to sustain the million-dollar factory by making it a destination unto itself – he describes the concept as a “living food museum”. The first phase will feature bread-making and it is scheduled to open to visitors in October.

Sharky has three investment partners: his elder brother Kyaw Htut Win, his sister-in-law Nant Shwe Zin and British expat Jane Brook, who he said was chosen because she was a long-term Sharky’s follower and “understood how we grew and sustained ourselves.”

Investors regularly rock up

While Sharky acknowledges that new investment partners will be necessary down the track – which include future plans to list on the Yangon Stock Exchange – for the moment he is more than content with the current set-up.

“We get offers from investment firms on a monthly basis and I turn most down,” he said with a light-hearted laugh.

“For the moment we don’t want more investors. I want to retain my creative freedom. Once you have new investors it changes the dynamics – they’ll want a profit ratio and to do that they will cut out certain departments that aren’t producing enough revenue.”

‘Fail again and fail better’

Sharky prides himself on being a self-taught butcher, baker and farmer – the only mentor he ever had was a Swiss cheese-maker.

He attributes his success to being curious, obsessed and willing to fail. His advice to the next generation of entrepreneurs is to embrace failure.

“Fail again and fail better. It’s the best teacher. Every entrepreneur has failed in one way or another before achieving something. You have to be a fighter. You have to be a shark.”

Why sharks win

When asked whether he still considers himself a shark, the 56-year-old paused and said: “I am not quite a shark. I am an alpha male; a dominant male – sharks are dominant predators in the sea.”

But really – a predator?

“Yes in one way I am, because you have to be. But nowadays I’m a friendly shark. When I was young I was so ambitious and was competing against all the odds to progress from being a worker to the owner [a feat he achieved and the company he named Sharky’s]. I was a foreigner in Geneva and didn’t master the language like most people. So I used everything I had: attitude, hard work, a little bit of luck and the right mentors. You have to have that fire – without it you won’t succeed.” 

Myanmar has experienced dramatic changes economically and politically over the past few years. As foreign investors rush to set up shop in the newly open market, office space in the country's commercial capital is among the most expensive in the world.

In a country where most people earn about two dollars a day, annual rents in Yangon climbed to as much as US$100 per square metre per month in 2013 -- more expensive than downtown Manhattan and about four times the going rate for the best business addresses in Bangkok.

But last year the property boom came to a halt, office rents slid and residential sales paused. Businesses and consumers alike adopted a wait-and-see approach in the run-up to the Nov 8 elections, and many are still waiting for a clear picture of what a government led by Aung San Suu Kyi will look like.

Antony Picon, managing director of Colliers International in Myanmar, told Asia Focus from Yangon that the slowdown was expected given the election and political restructuring that has followed.

"It wasn't a surprise for us," he said, adding that he was seeing the return of positive upward trend for the market this year.

"People who are already here, both local and foreign investors, are still very active and confident," he said. "They are very bullish and the market is very upbeat. We are very busy with existing investors expanding their projects."

However, those who are not yet in the market are cautious and are still waiting for the post-election dust to settle, he added. "If one is not yet on the ground, he or she tends to be more concerned and that is natural."

Andrew Tan, managing director of Yangon-based Consult-Myanmar Co Ltd, said some sectors were approaching equilibrium after a lot of speculative investments over the past three years.

"The real estate market will see a consolidation this year, especially in the condominium sector and high-quality retail space rents," he said, adding that some properties would be sold at a loss in the short term. Many of these are apartments priced above $500,000 each -- way above the ability of the local market to absorb.

In the office market, supply has started to catch up with demand with the completion of new developments, resulting in a doubling in the amount of available space in the past two years. As a result, the market is now reaching equilibrium.

"We will see greater demand for prime quality offices and tenants will have higher bargaining power," said Mr Tan. "Prices are expected to remain stable, if not lower, but the competition in the high-quality office segment will rise."

BUSINESS HURDLES

The outlook is not as sunny for many completed residential projects in Yangon, a lot of them luxury developments targeting cash-rich local residents and foreign expats, a relatively small market. However, the combination of a weak legal structure, expensive land, lack of liquidity and an undercapitalised banking system has discouraged purchase and ownership.

"At present, the skyrocketing land prices, royalties on ownership title, and high rental rates and room prices inhibit the growth of the real estate market in Myanmar," said Yangon-based NweOo, senior attorney-at-law with Tilleke& Gibbins Myanmar.

"Land prices and ownership are biggest factors driving prices sky-high," said an analyst with one of Myanmar's leading real estate developers who asked not to be identified.

"[Developers] have to acquire the land from private owners which makes the price very high. There is no central registry system that can keep track of owners and transactions are done privately," he explained.

In addition, there is now an oversupply in the market, especially in the residential sector given that high-end buyers represent only 1-2% of the total population.

A recent Colliers International report found that take-up rates during the first half of 2015 were at an all-time low of 49%. Total unsold inventory at the end of last year stood at 6,654 units -- double the figure for all of 2014.

Rules and regulations in the Myanmar real estate market are another big hurdle that confuses both locals and foreigners alike.

However, a ray of hope emerged when the Union parliament, after years of debate, finally passed a new Condominium Law, which took effect on Jan 29 this year. It grants foreigners property ownership in Myanmar for the first time, though it is limited to a maximum of 40% of the space available on the sixth floor and above in a building.

"Observers have predicted that sales of condominium units may increase in the near future. But there will be some issues related to projects under construction and whether they will meet the requirements under the new law," said NweOo.

In any case, said Mr Tan, the passage of the Condominium Law is a good start in bringing clarity to the market.

"The condominium market will pick up in the coming year as [the law] will spur the development of condominium projects outside Yangon, especially along the Chinese and Thai borders that can legally be sold to foreigners and will qualify to be treated as condominiums under the new law," he said.

His hope is that buyers of condominiums will be able to arrange for bank financing, which is also allowed under the new law. Currently most apartment purchases by local people are paid for in cash.

"The law is important as it gives legal status to the property and allows the buyer to arrange for bank financing using the property as collateral," he said.

In addition to providing clarity in terms of ownership, the law is a big step toward more transparency in the market and a stronger legal footing, said Andrew Gulbrandson, head of research and consulting with JLL Thailand, who coordinates the firm's consultancy work in Myanmar.

However, it is not going to change the dynamic of the market overnight.

"There aren't a lot of foreigners who would want to buy a condo in Yangon now. There would be limited foreign demand even with the law being introduced," said Mr Gulbrandson.

Unlike Bangkok, Yangon is not a big, vibrant metropolis like and it faces persistent problems including congestion, poor internet connections and unstable electricity supply. It's not really a desirable place to live unless one has to be there for work, he said.

"It's not a second or third home for wealthy people, like Bangkok," he added

In addition, some high-rise projects in Yangon have been suspended as part of a campaign by elected city officials to ensure compliance with building and zoning regulations.

The 68 Residence, for example, breached the rules for floor-area ratio (FAR) and other regulations for high-rise buildings. The high-rise project located in the heart of Yangon is being developed by a local privately owned company.

The Yangon City Development Committee (YCDC) took office in early 2015 after the first elections in the city in 50 years. It is now trying to suspend most of the high-rise projects in the city of 5 million people because they do not comply with the Zoning Plan.

"Many of these high-rise projects are constructed in the compounds of ministerial and military premises, and in accordance with the approval of relevant authorities other than the approval of the YCDC," explained NweOo.

In the past, officials were reluctant to speak up about egregious violations by developers with military or political connections. But since the election of the YCDC, the public is more aware of the need for issues to be raised, he said.

"A more explicit and transparent zoning law in Yangon and for most cities would also help in the development of the real estate market in Myanmar," added Mr Tan.

In addition, better infrastructure including roads, public transport, car parking, power and water supply will help as Yangon is still operating on infrastructure that was built 50 years ago, he added.

The banking system in Myanmar is another big hurdle. It remains underdeveloped and there is very little in the way of an established mortgage system. The maximum loan term in Myanmar is 12 months with interest rates around 12-13%, so unless you have cash, you are highly unlikely to be able to buy a property.

A top-end condominium in Yangon currently costs around US$4,000 or 140,000 baht per square metre (sq m), comparable to Bangkok prices, while mid-market units cost about half that amount.

Public attitudes toward banks in Myanmar are similar to the lack of trust that prevailed in other Southeast Asian countries half a century ago.

"They have the money stashed in their houses," said Mr Gulbrandson. "This is part of the reason why the banking system is so undercapitalised."

Project finance is another big problem. As was seen in Thailand in the late 1980s and early 1990s, many developers in Myanmar open sales and use the cash from early buyers to fund construction. In some cases they aren't able to sell enough units upfront to finance their projects and they cannot go to the banks for loans, so developments either stall or never get off the ground.

Based on the number of completed projects, the residential market in Yangon may be approaching equilibrium. An oversupply is possible if all of the projects announced by developers actually get built, but that is difficult to predict.

"What will determine how the market will look like over the next year or two, other than the laws and the banking system, is how many developers will actually build the projects that they have announced," said Mr Gulbrandson

RETAIL OPPORTUNITY

One area that continues to show promise is retail space. The retail market in Myanmar for decades had been very sheltered and inefficient with no real competition before 2013. Over the last three years, however, the shopping scene in Yangon has been transformed by the entry of international investors and brands, according to Mr Tan.

For example, the new Myanmar Plaza by HAGL was almost fully rented out before its opening despite having five floors. International brands such as Nike, Skecher, Chopard, Zegna and many more can be found there, he said.

"Although most people in Myanmar still do not have high spending power, they are saving up to enjoy international products and services that offer better quality," he added.

Mr Tan said there had never been a better time to come and do business in Myanmar as the influx of foreign investment and tourists has helped to spur the growth of a middle class in Yangon that aspires to own international brands and seeks international standards of quality and service.

However, Mr Gulbrandson cautioned that the purchasing power of local residents was still limited and foreign brands needed to be aware of what will work in the country.

Looking at the bigger picture, he said that if developers and investors choose the right segments of real estate, there are great opportunities ahead. In his view, the industrial and hospitality sectors are the winners.

"Investors that have made quality investments in the hospitality sector such as hotels and serviced apartments are doing quite well. Big mixed-use projects and industrial developments are seeing a great deal of interest from Thailand, Japan and Korea," he said.

He added that in Myanmar, the standard government lease is usually 50 years, followed by another two 10-year renewals. "The lease length is much more attractive than in Thailand, which has only 30-year leases, even though the [Myanmar] market is more risky," he said.

In his view, residential and retail spaces are not as attractive.

A tenant can only obtain a 12-month lease and that is a risk that retailers or occupiers have to take compared with Thailand, where a 3+3+3 structure -- three consecutive leases of three years each -- is common.

Mr Tan added that mixed-use developments that offer retail space, offices and serviced apartments offer a good opportunity for investors. Given the poor infrastructure in Myanmar, mixed-use developments that bring together complementary, quality services will create a strong attraction for local people and for international businesses.

"This would also mean that many of these developments will have to be pushed out of Yangon City itself as there are not many big plots of empty land left for such a big developments, and even if you can find one the price per square foot may be prohibitive," he said.

http://www.bangkokpost.com/news/asean/888416/yangon-real-estate-challenge

Optimism is abundant as Myanmar’s virtual and physical connectivity burgeons, especially for trailblazer MYPAY. The mobile app will be the first Social Media Payment service provider in Myanmar come August, when it plans to roll-out.

“We don’t want to do the same thing. We want to do something different. Something new. That is, we will use the social media area for payments. Sending money should be as easy as sending a message on Facebook, Viber, or Watsapp,” Tim Scheffmann, CEO of MYPAY, told Mizzima Weekly.

The environment in which MYPAY launches is unprecedented in its pace of change. In 2012, Myanmar’s international bandwidth – indicator of connectivity – was below 15 gigabits per seconds, or 0.3 kbps per capita, placing it on the bottom rung in South Asia. Connection skyrocketed since then, rising from around 10% in 2014 to over 50% by June 2015, according to the Ministry of Communications and Information Technology.

Ericsson’s report of 2015 Quarter 3 placed Myanmar as having the fourth largest net addition of mobile subscribers at 5 million, trailing after population giants USA, China, and India. Since mid-November 2014, 45 Internet Service Providers have applied for licenses, with more than 12 already being issued. There is no limit on the number of licenses being issued. Myanmar expects to launch its own Satellite within five years.

MYPAY is a social media remittance and payments provider for consumers and businesses to make mobile payments. Cash can be deposited from bank accounts or directly by cash to agents at service stations, or “cash points” into mobile wallets, secured by SIM card ID. The money deposited into the mobile wallet then can be sent to and received from friends, family and merchants.

“We are connecting the social media world with the existing financial world,” Scheffmann said, while acknowledging the challenges of the task. The existing financial world in Myanmar is still grappling with the aftermath of its decades of military misrule and economic incompetence.

People have little faith in the country’s financial sector. Many still prefer to store their wealth physically and in close proximity by purchasing gold and other valuables. A mere 4.8 percent of Myanmar people have bank accounts, while its neighbor Thailand has 75 percent with accounts. Some 62 percent of adults in Myanmar have no savings.

To have trust in mobile payments, “people need to experience it and try it out,” said Scheffmann, explaining the interpersonal, low-risk aspect of social media payments. “A transaction between people who know each other takes the hesitation away. People are being introduced to our product by acquaintances, which makes the barrier lower. The amount of transaction can be small when you are just trying it out so it’s not as big of a deal.”

While the paucity of banked population is partly due to people’s skepticism, it also reflects lack of accessibility to financial services for those who need it. The majority of the Myanmar population lives in rural areas, generating livelihood through farming: “People are being financially excluded because for a farmer to travel to the next bank branch it will cost him almost a day. And then he has to line up there and travel back the next day. We can cut this time down to seconds.”

The ease of mobile banking is a win-win game, according to Scheffmann, who said, “Everyone wins. For the customers, it’s very convenient, and the banks get to keep their business.” He believes mobile financial technology (fintech) will foster an enhanced, more equal access to financial resources for all, ultimately creating a more stable economy.

“We are not only enabling financial capital to flow into different areas, where money is needed, we are also helping people not to get into poverty. If a farmer has a problem and he needs to borrow money, he probably needs to borrow from a loan shark. But with this technology he can ask friends and other people who can provide money quickly and this will also help stabilize the economy.”

Neither does the technology need to be confined to peer-to-peer level. It can also be utilized on a multinational level once international financial transaction regulations in Myanmar come into place. On a national level, fintech can contribute to social welfare. He cited an example, “When a farmer is sick, for instance, he cannot ask someone else to do his work for him. Or when natural disaster hits, like last year, people are left with unstable income. Via technology, distribution of funds becomes easier.”

The stage is set for stellar rise of electronic money. However, there is a void to be filled: consumer protection, the law on liability for loss and damage, regulations on transactions, and anti-money laundering measures.

When regulations ensure ethical practice and sensible investment, the potential for growth is immense. Together with Boston Consulting Group, Telenor conducted a study on the correlation between development and mobile penetration, which noted that every 10% of mobile penetration can drive up the GDP by 1.2%. In emerging economies such as Myanmar, the report says, internet availability could lead to a 3 to 5% boost in GDP.

The CEO of MYPAY anticipates the worthwhile outcomes from venturing into uncharted territory. “If I can help not just a family of farmers but stabilize the economy and help 51 million people of Myanmar, that is something worth taking a big risk for,” he said.

The government needs to adopt sound and appropriate policies to generate more tax revenue for the national budget, experts said at a workshop in Yangon on March 6.

The workshop was organised by the Union of Myanmar Federation of Chambers of Commerce and Industry and Action Aid Myanmar to enable lawmakers, economists, civic groups and other stakeholders to share ideas about the 2015-2016 budget, that will soon be debated in the Union parliament.

The use of a budget for national development relied on revenue earned from government enterprises and taxes on businesses, commercial transactions and individuals, participants were told at the workshop.

The workshop, the third such event held to promote transparency and public awareness about the budget process, heard that business policies needed to be improved for the country to create more tax revenue.

“Tax revenue plays a key role in budget allocations,” economist U Saw Naing told the workshop.

“The businesses of local entrepreneurs are fundamental for increasing revenue and polices on business play an important role in this issue,” he said.

U Saw Naing also said it was important that taxes be collected in border areas as well as big cities but acknowledged that cost issues were involved.

“For example, they may need to spend K1.2 million to go to border areas and collect taxes of K1 million,” he said.

“Moreover, only if the businesses of the national ethnic people are good will they be able to pay taxes,” he said.

The pre-budget consultation in session. Photo: Hong Sar

Myanmar Fisheries Federation vice president U Hnin Oo said that although the government had made political reforms, the production sector had declined.

The country had not managed to promote the domestic production sector that was essential to generate more tax revenue, he said.

A systematic approach was needed to earn more revenue from the agricultural, livestock and industrial sectors, said U Hnin Oo, adding that policies were needed to improve the business environment for domestic companies so they could contribute more tax revenue.

He expressed concern about the “many difficulties” involved in establishing small and medium-sized enterprises.

An Independent member of the Yangon Region Assembly, Dr Nyo Nyo Thin (Bahan, constituency 2), said that although most government enterprises were running at a loss, some ministries continued to seek budget allocations for their projects.

The workshop was told that for the period from the start of the current fiscal year last April 1 to February 27, Myanmar’s total trade volume was US$25,172 million but a weak export sector – except for natural resources – had resulted in a trade deficit of nearly $5,000 million.

A senior consultant to Kanbawza Bank, U Than Lwin, outlined possible direct and indirect affects on citizens of government measures to deal with a big budget deficit.

“If a budget deficit is huge, the government needs to increase taxes and that will affect citizens,” said U Than Lwin, a former deputy chairman of the Central Bank.

“If the government does not get enough tax revenue, it can borrow from foreign countries but the money that the government will use to repay the loans will be taxes paid by citizens,” he said.

“If the government prints more currency to solve the problem, inflation will increase resulting in higher commodity prices that will affect the citizens,” U Than Lwin said.

This Article first appeared in the March 12, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

An export strategy aimed at integrating Myanmar more broadly into the world economy has been launched by the government with the support of an international trade organisation and the German government.

The nation’s first National Export Strategy was launched by Vice President U Nyan Tun, Commerce Minister U Win Myint and International Trade Centre executive director Ms Arancha González at a ceremony in Nay Pyi Taw on March 25.

The five-year strategy was developed by the Commerce Ministry, with technical support from the ITC, a joint agency of the World Trade Organization and the United Nations, financial assistance from the German Ministry for Economic Cooperation and Development and implementation support from the German Agency for International Cooperation (GIZ).

The ITC has been working at three levels – with government and policy makers, trade and investment support institutions and small and medium enterprises – to help develop the strategy.

Discussions during the last 18 months among the ITC and the public and private sectors resulted in the selection of seven priority product categories with strong export trade potential. The NES will focus on increasing production and value-adding in the seven categories: beans, pulses and oilseeds; fisheries; forestry products; textiles and garments; rice; rubber; and tourism.

The process “obviously [is] going to have bumps along the road,” said Ms González, who added that Myanmar’s trade potential was challenged by what she called the three lows: low value adding, low productivity and low quality.

Ms González said low quality was a big issue for a country with high foreign trade potential in processed fisheries and forestry products. Market access was also limited by the lack of a quality verification process.

A further challenge was Myanmar’s need to develop greater diversity in its trading partners. Thailand accounted for 43 percent of exports, while China and India share another 30 percent but there were good opportunities in the wider global market.

As well as the European Union and the United States opening to Myanmar exports, China and India also provided duty free and quota free policies for least-developed nations such as Myanmar. But these opportunities were unknown to most of the small and medium enterprises that account for 98 percent of the economy.

There are 4,300 enterprises registered with the Union of Myanmar Federation of Chamber of Commerce and Industry, of which 90 percent operate in and around Yangon, and the NES is also aiming for a more inclusive national trade network to improve the socio-economic situation throughout the country.

Another challenge was that most exports were unprocessed natural resources such as gas (that accounts for 42 percent of exports) and wood (11 percent), an issue linked to job creation because adding value to products created more employment opportunities.

“This country has relied too long on exports of commodities,” said Ms González said. “If you increase the export of commodity goods by about a third, you don’t increase your labour by the same proportion,” she said. “You increase your labour if you add value.”

One of the projects implemented by ITC has focussed on tourism sector development in Kayah State. The region’s potential for attracting travellers from throughout the world has been demonstrated by the flourishing tourism economy on the Thai side of the border. Yet Kayah State faces fundamental problems to develop tourism, including travel restrictions, a huge military presence and areas with landmines. Ms González said discussion had focussed attention on the problems and they could be addressed.

She said the tourism sector nationally is in desperate need of training programs for hotel and hospitality industry employees to raise their skills to international standards.

“The recipe that the public and private sector thinks is the winning one for Myanmar mixes intelligently university education with technical education,” said Ms González, adding that there would be increased emphasis on technical education and vocational training to overcome shortages.

Ms González said one of the main benefits of an increase in exports would be more opportunities for the poor to acquire jobs and raise their living standards.

“There is no way you can move up the value chain, there is no way you diversify, there is no way you move up your productivity, without increasing levels of salaries and reducing the labour cost differential,” she said.

This Article first appeared in the April 23, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

The laying of twin oil and gas pipelines cutting through northern Myanmar to China, sparked complaints of poor compensation to villagers and raised environmental concerns during their construction phase from 2010 to mid-2013.

Now, after the first full year of operations, the feasibility of the controversial project has been questioned with the disclosure that Chinese state oil company PetroChina is struggling to sell gas from the Shwe field in the Bay of Bengal, to Chinese clients.

The Shwe field, which supplies PetroChina’s parent company China National Petroleum Corporation (CNPC) exclusively, supplies the natural gas for the 900-kilometer pipeline built from the central coastal town of Kyaukphyu, Rakhine State, to the border town of Ruili, in China’s Yunnan Province.

The pipeline’s capacity is 12 billion cubic metres per year but in 2014 it pumped only 25 percent of this volume into China, according to industry reports.

A key market for the Myanmar gas was meant to be China’s southern Guangxi Province, but sales have been so disappointing that PetroChina is reportedly seeking to sell off its gas distribution system there, raising questions about the future ownership of its Myanmar operations.

“The [Guangxi] region is a market for gas imported via pipeline from Myanmar, but PetroChina has struggled to secure more clients to take those imports,” Interfax Natural Gas Asia said on April 16. “Myanmar piped 2.2 tonnes, or around 3 billion cubic metres, to China in 2014, far below the transmission pipeline’s capacity.”

“PetroChina incurs a loss from selling this gas domestically and would like to see higher prices in Guangxi to narrow the loss, but that would risk collapsing demand. The company lost RMB 1.07 [17 US cents] on average for every cubic metre of Burmese gas sold last year.”

As a result, PetroChina “is quietly divesting gas pipeline assets in south China,” Interfax said.

“PetroChina …will transfer its entire 51 percent shareholding in Guangxi PetroChina Kunlun Natural Gas to a regional government investment vehicle.”

It’s not clear whether a similar divestiture is planned for the ownership of the Myanmar pipeline, which is currently held by a CNPC joint venture with Myanmar Oil & Gas Enterprise. Nor is it clear if the consortium holding the Shwe field gas, will be looking for new markets. Currently, Myanmar is buying 200 million cubic metres of gas for local consumption, although its quota gives the country the chance to by 2 billion cubic metres, according to a recent local media report.

The Shwe Gas project is a joint venture between Daewoo International (51%), ONGC Videsh Ltd of India (17%), Myanmar Oil and Gas Enterprise (15 %), GAIL Ltd of India (8.5%) and Korea Gas Corp (8.5%).

Daewoo did not answer emailed questions from Mizzima Weekly.

Construction of the two pipelines project, at an estimated cost of $2.5 billion, was dogged by complaints of poor land compensation, insufficient environmental impact studies and for hiring more Chinese labourers than Myanmar nationals.

Although China has been importing more crude oil since the collapse of oil prices in the middle of last year, the oil pipeline running alongside the gas line through Myanmar is also underused, primarily because of delays in the construction of a new refinery in Kunming, Yunnan Province, which it was meant to feed.

The refinery was originally scheduled to be completed last year but developer CNPC now says it will be the end of 2016 at the earliest before the 200,000 barrels per day plant is operational. By comparison, Myanmar’s entire refining capacity is only about 50,000 barrels per day.

The slowdown in developing the Kunming refinery reflects massive refining overcapacity in the country, the China Oil & Gas Monitor said.

“China has over capacity in refining and has moved from being a significant net importer of products to an exporter,” Simon Powell, head of Asian oil and gas research at CLSA Asia-Pacific Markets in Hong Kong was quoted in the Monitor on April 16. “We think that China could have 1 to 2 million barrels per day of excess refining capacity.”

This overcapacity is pushing China’s national oil companies into exporting more fuel oils such as diesel and gasoline.

“Sinopec’s big 184,000 barrels per day refinery in southern Hainan island province used up more than 50 percent of its first quarter export quota despite facing losses shipping to foreign markets,” the Monitor said.

Sinopec’s Hainan refinery will export 160,000 tonnes of fuel oil this month, up 10,000 tonnes on March. The exports will be a combination of gasoline, jet fuel and gasoil, the Monitor said. The Hainan refinery managers planned to export a total of 1.78 million tonnes this year, it said, quoting an unnamed company source.

Hainan is one of 11 of China’s biggest state refineries permitted to have export quota licences, reflecting the downstream sector’s overcapacity and sluggish domestic demand. Between them, they have an annual capacity of 152 million tonnes of crude oil.

“The increased fuel oil exports trend will likely continue as China’s industrial growth continues to slow,” the head of research at Nomura Markets in Hong Kong Gordon Kwan was quoted by the Monitor.

“The weak domestic economy has led to disappointing demand for industrial fuels like diesel and fuel oil, prompting the government to introduce more favourable measures such as financial stimulus and expedited export licenses to ensure profitability in the refining sector. Meanwhile, domestic refinery overcapacity remains a structural issue in China. Refineries are fine tuning their product slate to churn out more gasoline and jet fuel, while trimming diesel and fuel oil output to try to restore demand-supply fundamentals,” Kwan said.

China’s runaway refining seems to be driven in part by a national desire to buy more crude from abroad while prices remain so low – even when domestic storage bunkers are full and refinery stocks brimming.

China imported 26.8 million tonnes of crude in March which was almost 5 percent, or 1.26 million tonnes, more than in February, latest data from the General Administration of Customs shows.

However, the slow construction of bunkers for the second phase expansion of China’s strategic petroleum reserve will start to restrict crude oil imports, industry analysts ICIS said on April 12.

The storage capacity built by CNPC at Kyaukphyu to temporarily hold oil imported from the Middle East and Africa is also limited. The transhipment terminal has 12 tanks each with a capacity of 100,000 cubic metres. That would provide storage for up to 7.5 million barrels – equal to about 17 days operation of the pipeline at full capacity.

It looks like China’s expensive trans-Myanmar pipelines, which bore a considerable social cost for the government in terms of disgruntlement among villagers affected by the project, are going to remain underused for some time to come.

This Article first appeared in the April 30, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com 

The Myanmar government’s approval of a Thai-Japanese consortium’s plan to build a large US$2.8 billion coal-fired power station in Myanmar’s southeast Mon State underlines a trend across the region to opt for the polluting fossil fuels to generate electricity.

Coal is being increasingly chosen instead of cleaner-burning natural gas or non-polluting renewable energy resources such as wind and solar because it is cheaper.

“Although there is increasing interest in renewable energy projects, coal will replace natural gas as the main fuel to power a doubling of electricity generating capacity over the next 20 years in the ten member countries of the Association of Southeast Asian Nations (ASEAN),” Asia Power Monitor reported on April 14 quoting the International Energy Agency (IEA).

Coal will fuel 49% of ASEAN countries’ power generation by 2035 compared with 31% today, the IEA said.

Thailand in early April announced a new power development plan for the next 20 years which will see dependency on gas for electricity production drop from 70% to 40% while coal will fuel 25% of electricity generation, up from 7% today.

Coal will fuel about 50% of an additional 35,000 megawatts of new power capacity planned in Indonesia between now and 2020, mostly supplied by domestic mines.

In Malaysia, a 1,000 MW coal power plant is under construction at Tanjung Bin in southern Johor State and due for completion next March, the Asia Power Monitor said.

International coal prices are at rock bottom due to global oversupply, in part because other regions such as North America are reducing consumption. But growing demand in ASEAN and India could boost demand and prices in the future. The only ASEAN country with any significant coal reserves is Indonesia. At present, Indonesia is one of the world’s biggest coal exporters but it is expected to increasingly divert more of its production to meet domestic demand, the Monitor said.

And with India importing more coal than ever before to fuel its rapidly growing electricity demand, it’s not clear where smaller-scale buyers such as Myanmar will obtain coal. Myanmar has little coal reserves of its own.

In the case of the large power station now planned at Ye in Mon State by Bangkok-based Toyo-Thai Corporation, the fuel might have to be imported from South Africa on the other side of the Indian Ocean, or Australia or even China.

Toyo-Thai, a partnership between Japan’s Toyo Engineering Corporation and the Thai construction company Italian-Thai Development plans a 1,280 megawatts plant at Ye.

“Under the 30-year concession, [Toyo-Thai] is expected to import about 4 million tonnes of coal a year to supply the power plant. Construction is expected to take about four to six years,” Reuters said on April 9 quoting the firm.

The Ye plant, which faces opposition from local communities concerned about pollution, replaces an earlier failed proposal by Toyo-Thai for a similar-sized coal power plant in the Thilawa Special Economic Zone next to Yangon.

The choice of Ye on the Andaman Sea coast distant from Myanmar’s current industrial developments and infrastructure is questioned by some analysts.

“A power station of this size in the Thilawa-Yangon area made sense because of location and rising industrial needs there,” energy industry writer Sam Imphet told Mizzima on April 24.

“A station located at Ye is not so logical because the local infrastructure there is inadequate.

“The closest electricity grid link is at Mawlamyine which I think is more than 100 kilometers north of Ye. Also, has Ye got sufficient port facilities to handle 4 million tonnes of coal in a year?” said Imphet, who writes for Asia Power Monitor.

Ye is also about 150 kilometers north of Dawei, where another Thai-Japanese industrial consortium including Italian-Thai Development is reportedly preparing to sign an agreement with the Nay Pyi Taw government for a large port and industrial zone.

With coal increasingly the fuel of choice for solving electricity shortages across South and East Asia from Pakistan to Japan, the rapidly expanding economy of India has been forecast to overtake China as the world’s biggest importer of power station coal by 2017 or sooner, Bloomberg Intelligence said in a study published April 15.

Higher Indian imports will be spurred by the expectation that thermal coal demand there is likely to increase by 42% between now and 2020 to 1 billion tonnes per year, the study said.

“India will have the largest impact on seaborne thermal coal markets as lofty domestic production targets battle with likely swelling imports due to a wave of new demand from new generation plants,” Bloomberg said.

India along with Indonesia, Vietnam, Japan and South Korea will increase their combined coal-fired generating capacity by a colossal 204,000 megawatts, or 60%, up to 2020, the study estimated.

Myanmar’s current overall generating capacity is no more than 5,000 megawatts, and the electricity reaches only 25% of the country’s population.

Ironically as demand for coal looks set to increase across the region despite international concerns about global warming and climate change, the world’s biggest coal burner and polluter China is planning to reduce its use.

China is closing scores of small and medium sized mines and banning the construction of new coal power plants in the heavily populated eastern coastal provinces. Beijing has also imposed controls on imported coal which many Chinese commodity traders preferred, especially higher quality Australian stocks.

The reason is simple: 16 of the world’s most 20 polluted cities are in China.

Coal consumption in China will remain significant though, probably fuelling 60% of electricity generation still by 2025, said the IEA. But it’s not beyond possibility that Myanmar and other Southeast Asian countries could end up importing surplus Chinese coal – while Myanmar’s natural gas in the Bay of Bengal is sold to China.

This Article first appeared in the May 7, 2015 edition of Mizzima Weekly.

Mizzima Weekly is available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com