April 5th | 2014

ECONOMY

Developing Myanmar’s Stock Market : Sate the Dire Need for Capital

Source : Myanmar Business Today (3rd April)

Stock market capitalization is the total monetary value of stock companies sold through stock market. The more liquid the stock market,

the higher the stock market capitalization to GDP ratio. For example, Singapore stock market ratio of stock market capitalization to

GDP is 150 and for Thailand it’s around 100, while Vietnam’s is around 20 even after more than a decade of existence. For Zambia’s

stock market the ratio is only 14 after more than 15 years of operation, according to World Bank data.

Vietnam’s stock market capitalization to GDP was very minimal after they started operation in 2000 and till 2005 the ratio was less

than 1 percent of GDP. The development of a new stock market involves several factors and parties such as government, business

organizations and the public.

Myanmar business organization definitively needs education, training and accountability for raising capital through Myanmar’s stock

market. In short, Myanmar business organizations need practices of good corporate governance in order to avoid similar pitfalls as the

Chinese stock market. We all should be mindful of the old saying “Rome was not built in a day”. It will take some time for Myanmar’s

stock market to become a liquid market like Vietnam’s. Less liquid market means less trading (buying and selling stock), less trading

causes low stock market value (price).

Therefore, even for the same company listed in Yangon Stock Exchange and Singapore Stock Exchange, valuation of the listed

company in Singapore will be higher than the company listed in the newly-opened Yangon Stock Exchange. The company listed in

Singapore will then be able to raise more capital to invest and expand their business because of the higher valuation. Since new

Myanmar stock market is not liquid, Myanmar companies’ value will be less, so the equity capital they can raise from the stock market

will be limited. Consequently, Myanmar companies with less capital will face hard time competing with international businesses.

GDP Growth Prospects Strong In The Short Term

Source: Myanmar Times (2nd April)

Surging credit growth in the banking sector, rising investments and continued economic reform last year resulted in economic growth

to the tune of 7.5 percent gross domestic product (GDP) for the 2013 fiscal year, according to the Asian Development Bank (ADB). In

its annual “Asian Development Outlook” report, the ADB highlighted a 59.5pc increase in capital goods imports to US$5.8 billion last

year, as well as resurgence for the agriculture sector, after being hit by flooding the year before. “Business confidence has markedly

improved in recent years, as reflected in a rapid increase in new business registrations, which exceeded 5,000 in the 10 months to

January 2013, more than in the whole of the previous fiscal year,” the report states, adding that private sector credit maintained a rapid

growth at 46pc for the last fiscal year.

In the oil and gas sectors, the ADB also pointed to a 68.8pc increase in natural gas exports to 7.7 trillion cubic feet in the 12 months

to September 2013, with the Shwe and Zawtika gas fields starting production. Last year’s economic growth exceeds prior outlooks by

the World Bank and ADB, both of whom revised growth up to 6.8 percent in October. As a result of high GDP growth last year and the

prospect of continued reforms and investment from abroad, growth is expected to increase a further 7.8 percent for the 2014 fiscal

year, the ADB stated.

Myanmar Developer Yoma Sees Long Road To ASEAN Integration

Source : Myanmar Business Today (1st April)

Myanmar-focused conglomerate Yoma Strategic Holdings Ltd said Southeast Asia needs to work exceptionally hard to realize a

balanced, European Union-style integration of such disparate economies. Yoma is listed in Association of Southeast Asian Nations

(ASEAN) member Singapore whose advanced island-state economy contrasts with that of fellow member Myanmar, rich in gems and

natural gas but paralyzed by decades of military rule and isolating sanctions. Elsewhere in ASEAN, communist Laos has an economy

that is less than 3 percent the size of that of monarchist neighbor Thailand, according to The World Bank. The population difference

would suggest a size of 10 percent. “That we will all share the benefits of integration is beyond dispute,” Yoma Chairman Serge Pun

said at the Reuters ASEAN Summit. But a “lopsided” result where some members benefit more than others “is not sustainable.” “I think

we will make it happen,” Pun said. But “I feel that there has been ... over expectation of what ASEAN integration will do for all of us.”

INVESTMENT

Joint Venture Deals No Easy Task In Myanmar, Say Experts

Source : Myanmar Times (31st March)

The process of collecting monthly accounting data, creating clear business units and traceable asset ownership are lengthy and

complex – and a must for joint venture deals with international partnerships, experts said at a KPMG business forum on March 25. The

forum, titled “Creating Positive Business Partnerships”, focused on how local Myanmar companies can look at restructuring accounts,

company business units and operating systems to pave the way for joint ventures with international investors. U Win Aung, chair of

the UMFCCI, said in his opening remarks that Myanmar was entering a “new era of economic development” and that the rapid progress

in the country is “new Myanmar blooming into its full potential”. “But,” U Win Aung said, “there is a recognition that Myanmar can

become more competitive through international joint ventures with locally-based companies.”

Bangkok-based KPMG executive director Ian Thornhill addressed the forum on common international investor concerns they had

managed in Myanmar joint ventures. These concerns pertained to accounting practices, asset management and legal obligations. One

of the challenges was the desire of international investors to review monthly accounting reports of a potential local joint venture partner,

Mr Thornhill said. “Statutory requirements are to submit an audited balance sheet of profit and loss every year, but even if those sets

of accounts are 100-percent accurate and perfect, what happens if the joint venture partner wants to do a deal in November or

December. That information is already six months out of date,” he said.

Japan Agrees To Invest In Dawei SEZ

Source : Myanmar Business Today (31st March)

Japan has agreed to invest in the Dawei Special Economic Zone (SEZ) in southern Myanmar, said an official accompanying Japanese

Foreign Minister Fumio Koshida who is on a visit to Myanmar, according to local media reports. The official said Koshida agreed to

invest in Dawei SEZ during his meeting with his Myanmar counterpart Wunna Maung Lwin in Nay Pyi Taw. Japan initially agreed to

construct the road linking Dawei SEZ and Thailand and feasibility studies would be conducted soon for this.

HOTEL & LEISURE

IFC To Lend Shangri-La Asia $80m For Myanmar Projects

Source : Myanmar Business Today (31st March)

International Financial Corp (IFC) will lend $80 million to Shangri-La Asia Ltd for the expansion of the Traders Hotel and the construction

of the Shangri-La Residences in Yangon, local media reported, citing Vikram Kumar, resident representative of the IFC in Myanmar.

Shangri-La Asia has been facing acute shortage of hotel rooms due to a steep rise in tourist arrivals in Myanmar. The 270-roomed

Traders will have 485 rooms on completion of the expansion project, while the Shangri-La Residences will have 240 rooms.

RESIDENTIAL

Bids For Yangon Low-Cost Apartments Reach 14,000

Source: Myanmar Times March 30

The number of applicants of two large-scale, low-cost housing projects in North Dagon township reached more than 14,000 last week

as the government prepares to announce the winners of nearly 1250 units, officials said. The applicants are competing for apartments

in the government subsidised Bo Min Yaung and the 114-acre Bo Ba Htoo housing projects, for which the application deadline has

concluded for the first, while proposals for the latter must be submitted by March 31.

Though about 14,000 people applied for the 448 apartments of Bo Min Yaung, just 310 had applied for the 800 homes in the Bo Ba

Htoo complex as of last week.Yangon City Development Committee (YCDC) deputy director of building engineering U Nay Win has

told The Myanmar Times that unsuccessful applicants for Bo Min Yaung will automatically be considered for Bo Ba Htoo and need not

reapply.

Altogether, YCDC plans to build a total of five affordable homes complexes, including those in Pin Lone, Ayeyarwon housing in Dagon

Seikan and another estate at the University in East Dagon, he said. Work at Bo Ba Htoo is already some 20 percent complete, and is

scheduled for completion in December.

REFORMS

Privatization Law Essential, Say Economists

Source: Myanmar Times, March 30

President Thein Sein’s chief economist, U Myint, is calling on the government to pass stringent privatization laws amid concerns of

continued cronyism and rent-seeking in the sale of government-owned property, services and other businesses. “There should be

regulatory control of privatization in the interests both of the public and the businesses concerned. Ensuring balance between the two

needs a strong law,” he said, adding the parliament should make establishing a privatization law a top priority. “People are worrying

that all the state-owned property went to cronies,” he said, adding that he has continue to propose suggestions to fix the problem

directly to President U Thein Sein, House Speaker Thura U Shwe Mann and National League for Democracy leader Daw Aung San

Suu Kyi.

In order to deal with the issue, U Myint suggests that the entire process of selling government entities be made 100-percent transparent,

from the tender process all the way through the transfer stage – this includes making available signed leases, concession paperwork,

tender proposals and the various contracts and licenses that go into the sales process.

Myanmar Parliament Speaker, Opposition Leader Agree On Constitution Amendment

Source : Myanmar Business Today (31st March)

Myanmar parliament speaker and chairman of the ruling party, the Union Solidarity and Development Party (USDP), Thura U Shwe

Mann and opposition leader Aung San Suu Kyi agreed last week on the need for amending the 2008 constitution. The move is

necessary for “rule of law and eternal peace,” both the leaders said at a joint press conference in Nay Pyi Taw following the end of the

9th parliament session. Both USDP and NLD said the parties will run in the upcoming by-election in all 30 vacant constituencies. The

by-election is expected to be held before the end of this year.

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YANGON (MYANMAR) H2 2013 PROPETY MARKET REPORT

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