PwC MyanmarWeekly Business Intelligence

Issue 11820 July 2018

www.pwc.com/mm

PwC | July 2018

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PwC | July 2018

1. Weekly Key Financial & Business News

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PwC | July 2018

Weekly Key Financial & Business NewsHeadlines

An Inside Look into Myanmar’s Airline Industry

Dawei SEZ Project to Restart in October

Myanmar Government Steps in to Curb Surging Fuel Prices

The New Yangon City Project: An Urban Planner’s View

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Projects being drawn to establish agri-zones in Mandalay, Nay Pyi Taw

PwC | July 2018

Weekly Key Financial & Business NewsHeadlines

Swiss government to implement SME development near Inle region

Aviation infrastructure upgrades under way

FMI Air suspends services as domestic aviation industry squeezed

Myanmar races to feed a growing Yangon

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Facts show Myanmar doesn’t need Hanthawaddy despite govt’s obsession

PwC | July 2018 6

Dawei SEZ Project to Restart in October

Situated in southern Myanmar, near the border ofThailand is a place called Dawei. In 2008 a majorconstruction project started, the project was tolink Dawei to the Kanchanaburi province, 119 kmnorthwest of Bangkok. This construction wouldlink production in the southern economiccorridor, and will help both countries enter intothe supply chain of globally important industries.However, the project halted in 2013 due to afinancial situation.“The project will restart in October this year”, UThan Myint, Minister of the Ministry ofCommerce, President of Dawei SEZ ManagementCommittee, said at the regular meeting betweenthe Vice President of Myanmar and local businessleaders.After a financial shortfall, The Dawei SEZ projectis eager to get underway. It has been confirmedthat the Initial and primary development of ZoneM, will be implemented at once. This project willrestart at the end of rainy season and will beimplemented by its former developer, Italian-ThaiCompany.The primary stage of the project includes heavy

construction projects, such as building port andindustrial zones, which will be jointlyimplemented by Myanmar-Thailand-Japan.“Since this stage has heavy projects, we willimplement with the use of internationaltechnicians,’’ U Set Aung, Deputy Minister of theMinistry of Planning and Finance, said.Japan is helping Myanmar in developing strategyfor Dawei SEZ and will invest in the zonedepending on Myanmar government’s policy, Mr.Masayuki Karasawa, Country Representative ofJICA, once said.

Source: Myanmar Timeshttps://www.mmtimes.com/news/govt-projects-increase-gdp-76pc-deficit-hits-high.html

NewspapersMyanmar Times

17 July 2018

PwC | July 2018 7

An Inside Look into Myanmar’s Airline Industry

Air traffic on international and domestic flights inMyanmar is increasing rapidly. Myanmar’s threeinternational airports and 30 domestic airportsare not enough to keep up with the growingtraffic, so a forth international airport is beingplanned in the Bago Region, the HanthawaddyInternational Airport. What opportunities andchallenges are facing Myanmar’s airline industry,and what can it do to keep pace with the influx oftravelers? To answer these questions, MyanmarBusiness Today (MBT) contacted Brian Davis,Vice President, Airlines, Honeywell Aerospace,and Aerospace Leader for HoneywellInternational Sdn Bhd, for his insight andperspective on this topic.We asked Mr. Davis what he does for Honeywelland he said, “I lead the airline products andservices business in the region, and I amresponsible for customer account management,sales strategy and all aspects of execution for AsiaPacific airline customers. Specific to Malaysia, Ialso oversee the establishment of our newaftermarket headquarters in Kuala Lumpur.”Prior to his current role in the company, he was

the VP of electrical sales and air trafficmanagement (ATM) for the Honeywell AerospaceAir Transport and Regional business, where heprovided guidance to the global sales team anddrove strategy for avionics and electronicsolutions.With 12 years of experience at Honeywell in theaerospace industry, we certainly found the rightperson to talk to, so lets get to it.MBT: Can you give us a brief overview of whatHoneywell does for the aviation industry?Honeywell Aerospace is one of the oldest playersin the industry with over 100 years of experiencemaking aviation hardware, and 50 yearsdeveloping software. We have pioneered much ofthe technology used in flight, and our productsand services can be found on virtually everycommercial, defense and space aircraft aroundthe globe.

Source: Myanmar Business Todayhttps://www.mmbiztoday.com/articles/inside-look-myanmar-s-airline-industry

NewspapersMyanmar Business Today

17 July 2018

PwC | July 2018 8

Myanmar Government Steps in to Curb Surging Fuel Prices

The Myanmar Government started selling 3million gallons of gasoline at 8 state-owned gasstations on July 1, to control possible price hikesamid fears that local fuel costs will follow thesurging global fuel prices, according to thestatement by the Ministry of Electricity andEnergy.Gasoline produced by Petrochemicals Factory(Thanpayarkan) under Myanma PetrochemicalEnterprise, will be sold at state-owned gasstations in Naypyidaw, Yangon, Mandalay, andBago Region.This move comes after the ministry sold 3 milliongallons of gasoline to Myanmar Petroleum TradeAssociation (MPTA) on April 24.Even though the Government is selling gasoline tothe private sector, consumers are stillcomplaining about high fuel prices.“Before the government stepped in, taxi faresfrom South Okkalapa to Tha Mine was K3,000,but has surged to K4,000,” said Ma Tha Zin, alocal resident from Tha Mine Township.As of July 4, 95 Ron was being sold at K930 perliter, 92 RON at K880 per liter, and a liter of high

quality diesel was listed at K925, in the domesticmarket.

Source: Myanmar Business Todayhttps://www.mmbiztoday.com/articles/myanmar-government-steps-curb-surging-fuel-prices

NewspapersMyanmar Business Today

17 July 2018

PwC | July 2018 9

The New Yangon City Project: An Urban Planner’s View

In 1988, Yangon measured about 80 sq. miles(around 207 sq. km). The city has grown in thethree decades since then and now covers morethan 300 sq. miles (777 sq. km). The author ofthis article has been in the urban planning fieldfor around 50 years and has never come acrossanother city that has more than tripled in sizewithin such a short period. However, theauthorities in Yangon are planning to expand thecity further by building the “New Yangon Cityproject.” A few questions regarding the project arejustified, such as:• Are we in need of more land for our present

and future activities? For example, forindustries, commercial activities, etc.?

• Are land and apartment prices in Yangonsoaring so much that we need to develop newareas around Yangon?

• Is Yangon’s infrastructure, such as watersupply, sewage and drainage, road networks,etc., satisfactory and functioning well?

• Obviously, these major issues confrontingYangon should be addressed when planningthe new city. The following are some relevant

facts and figures:• The Yangon City Development Committee

(YCDC) supplies the city with over 200 milliongallons of water daily, which should be morethan sufficient for Yangon’s 5.2 million people,assuming a rate of 30 gallons per person perday, the standard for Myanmar’s upper incomebrackets. However, only 330,000 out ofYangon’s 1.1 million households (or 28percent) are connected to the city’s watersupply; the rest get water from varioussources, mostly from underground. It is aknown fact that over-extraction ofunderground water has negativeconsequences.

• In the case of the electricity supply, around660,000 homes (or 61 percent) are connectedto the power grid and have meter boxes (basedon data from 2014).

Source: The Irrawaddyhttps://www.irrawaddy.com/opinion/guest-column/new-yangon-city-project-urban-planners-view.html

NewspapersThe Irrawaddy

17 July 2018

PwC | July 2018 10

Projects being drawn to establish agri-zones in Mandalay, Nay Pyi Taw

Projects are being drawn to establish agriculturalzones in Mandalay and Nay Pyi Taw in order tomanufacture agro-based products and finishedgoods, according to the Ministry of Agriculture,Livestock and Irrigation.In Myanmar's agricultural development strategyand investment programme, the ministry haspledged to establish such agricultural zones in theagricultural assistance plan stage (2) of GreaterMekong Sub-region (GMS).By providing market-related services in thoseagricultural zones, growers will be able toinnovate, handle modern equipment as well asproduction lines. Moreover, skilledmanufacturers will emerge and there will be fewerlosses and less damage to crops, as theprogramme highlights.The zones will be equipped with machinerygenerating electricity from biogas and watertreatment plants.The programme says such projects should beprioritised in the areas bordering China andThailand where border economic developmentprojects are going on. As the second priority, the

programme calls for wholesale markets in upperMyanmar such as Mandalay and Nay Pyi Taw.A wholesale market is now under construction inMandalay and plans are underway to builtanother in Nay Pyi Taw.

Source: Eleven Myanmarhttp://www.elevenmyanmar.com/business/14363

NewspapersEleven Myanmar

17 July 2018

PwC | July 2018 11

Aviation infrastructure upgrades under way

In a bid to facilitate rising passenger volumes atYangon International Airport (YIA), Myanmar hasmade plans to improve its aviation infrastructurein cooperation with the private sector, accordingto Ye Htut Aung, deputy director general at theDepartment of Civil Aviation (DCA).The official said in an exclusive interview YangonAerodrome Company Limited (YACL), whichoperates and manages YIA, will close Terminal 2by the end of this month for a year and a half torenovate and upgrade the existing infrastructure."Eleven airlines will move progressively fromTerminal 2 of YIA to Terminal 1 with the openingof its inter-terminal connection earlier thismonth. We have had discussion with YACL abouttheir renovation and relocation plans," said YeHtut Aung.The renovation of Terminal 2 is part of the firm'splan to improve airport infrastructure to providevisitors with a seamless experience linking theairport's two international terminals. Relocationof 11 airlines – Biman Bangladesh Airlines, AirAsia, China Airlines, Jetstar Asia, MalaysiaAirlines, Myanmar National Airlines, Nok Air,

Qatar Airways, Thai Airways International, ThaiSmile Airlines and Viet Jet Air – to Terminal 1 willhappen this month.The airport is strategically located between Indiaand China with two-thirds of the world'spopulation within a range of six hours flying time,including Tokyo, Dubai, Singapore, Beijing andNew Delhi. Serving 28 international airlines and24 international destinations, the airport handleda total of 5.92 million passengers in 2017,according to YACL."We usually receive an average of nearly 11,000passengers at the YIA. The visitor arrival hassurged when compared to the past few years, butit is yet to exceed our capacity. At YIA, we expectthat YACL is able to handle more than 10 millionat this point, and has committed to expand thecapacity to 20 million," he said.

Source: Eleven Myanmarhttp://www.elevenmyanmar.com/business/14348

NewspapersEleven Myanmar

17 July 2018

PwC | July 2018 12

Swiss government to implement SME development near Inle region

YANGON- Switzerland’s government will becarrying out poverty alleviation tasks, creatingnew job opportunities and implementing SMEdevelopment tasks around Inle region, SouthernShan State, according to the Ministry ofCommerce.The Swiss Franc 4.8 million worth project willlaunch from 2018 to 2022, near Inle region,Taungyi Township, Southern Shan State.Director General Aung Soe from Myanmar TradePromoting Team, Giacomo Solari, Deputy Head ofMission from Switzerland Embassy in Myanmarand Andrew Kirkwood, Myanmar CountryDirector of UNOPS signed the the agreement onimplementation of Upgrading HorticultureSupply Capacity and Sustainable Tourism toDevelopment Business Linkages on July 12th.Inle region is set to enjoy prosperity in eco-tourism development due to the state of the landthat boasts many natural scenic zones, uniqueculture and customs attractive to tourists.The project is also expected to boost farmingindustries in Inle region. The commerce ministrywill participate in the implementation of the

project together with the respective departmentsand organizations, says the commerce ministry’sDeputy Minister.

Source: Eleven Myanmarhttp://www.elevenmyanmar.com/business/14353

NewspapersEleven Myanmar

18 July 2018

PwC | July 2018 13

FMI Air suspends services as domestic aviation industry squeezed

YANGON — FMI Air will suspend its servicesfrom July 20 after less than six years in operation,a company spokesperson has confirmed, in thelatest sign of pressures in Myanmar’s domesticaviation industry.The airline was founded by businessman SergePun in September 2012 to operate commuterflights between Yangon and Nay Pyi Taw and hassince expanded to several tourist destinationsincluding Thandwe, Myeik and Kawthaung.A spokesperson said the company could notcomment on the decision to stop operating andthat further details would be released on Friday.In June 2015, First Myanmar Investment reducedits stake in FMI Air to 10 percent, selling a 40percent equity stake to Yangon Land, a subsidiaryof Serge Pun and Associates.At the time, the company said in a disclosuredocument to the Yangon Stock Exchange that itexpected competition in the domestic airlineindustry to intensify. “We are of the opinion thatthe aviation industry will require consolidation tobe more efficient,” it said.It was reported earlier this month by industry

website ch-aviation.com that FMI Air was in talkswith AirAsia Group to set up a new low-costcarrier in Myanmar, but the report said the dealfell through due to opposition from Myanmar’sDepartment of Civil Aviation.The Malaysian company’s chief executive Mr TonyFernandes told Reuters earlier this year he was intalks with a “potential partner” but said in Maythat negotiations had stopped. An FMIspokesperson declined to comment.U Win Khant, permanent secretary of theMinistry of Transport and Communications, toldFrontier today that Air Bagan and Apex Airlineshad also suspended services in recent years.Local airlines have been hurt by a slowdown inthe tourism industry, he said. “If tourist numbersdecrease, it will affect the domestic airlineindustry because most local people do not travelby air.”

Source: Frontier Myanmarhttps://frontiermyanmar.net/en/fmi-air-suspends-services-as-domestic-aviation-industry-squeezed

NewspapersFrontier Myanmar

18 July 2018

PwC | July 2018 14

Myanmar races to feed a growing Yangon

YANGON/BANGKOK — Rapid urbanization inand around Myanmar’s southern city of Yangonhas turned up the pressure to develop goods andservices that can meet the rising demand.The gap has provided an opening for companiesin one of Southeast Asia’s least-developedcountries.Local real estate and construction conglomerateDagon International set up a modern farmers’market in Yangon in January with the city’s urbandevelopment bureau. The new open-air marketsits on a 13 hectare, concrete-covered plot withspacious parking lots. The market’s 10-meter-tallroof is high enough to allow breezes in. The flooris several dozen centimeters high to facilitateloading and unloading onto small trucks.The new market stands in stark contrast to itspredecessor, where produce often came coveredin sand and muddy water. With no wind, foodwould go bad quickly. Vehicles navigated narrowaisles.But the new market “gives me ample space forbusiness,” said a vendor selling tomatoes grownin Shan State in the country’s north.

Dagon says it modeled the market on ones inTokyo and Bangkok. The company wants to opensimilar markets in other cities around Myanmar,Chairman U Win Aung says.Dagon is also developing an industrial park forfood factories in eastern Yangon, soliciting some80 foreign-owned companies, joint ventures andothers and expecting plants to come online by2020 on a roughly 200-hectare plot of land. Thepark, costing $100 million to $150 million, willboast full water and sewage systems, critical forcooking and cleaning, to enhance sanitation.A cargo railway base is expected to be set upnearby. Updates to the country’s north-southrailroad will boost transport capacity, making itpossible to more quickly ship fresh food from thefarmlands in the country’s northern and centralareas to population centers.

Source: Consult Myanmarhttps://consult-myanmar.com/2018/07/20/myanmar-races-to-feed-a-growing-yangon/

NewspapersConsult Myanmar

18 July 2018

PwC | July 2018 15

Facts show Myanmar doesn’t need Hanthawaddydespite govt’s obsession

The transport ministry is hoping to secure anOverseas Development Assistance (ODA) loanfrom Tokyo to resuscitate the failed Hanthawaddyairport project, according to the Department ofCivil Aviation (DCA). However, the facts showthat an airport 80km away from Yangon isunnecessary and that the focus should be onstrengthening the infrastructure for the existingairport and attracting more passengers instead.More alarmingly, officials said that the tenderprocess for the project will begin once theJapanese aid is approved, but failed to mentionany plan to undertake environmental assessment,which is required by law.DCA’s deputy secretary general U Ye Htut Aungsaid that the government is keen to revive thefailed project by securing an ODA loan fromJapan because the National League forDemocracy-led government regards it as apriority for the nation.“Hanthawaddy airport must be developed due tothe limited capacity of Yangon InternationalAirport [YIA]”, he said, referring to both theterminal as well as runway capacity. Authorities

have claimed in the past that the YIA is already atfull capacity with 3 million passengers annually.This claim however does not match with the facts.The Yangon airport managed a total of 5.92million passengers in 2017. According to YangonAerodrome Co Ltd (YACL), the operator of YIA,the airport was built to handle up to 20 millionpassengers a year. With only around one quarterof the airport’s terminal capacity utilised, Yangonhardly needs another international airport.In terms of runway capacity, the figures, too,deviate from the government’s position. Theauthorities repeatedly argued that YIA cannotaccommodate the increasing number of aircraftsand hence the Hanthawaddy project isimperative. But YACL spokesperson told TheMyanmar Times that the YIA’s handling capacityfor aircrafts is not expected to saturate in “thenext decade and beyond”.

Source: Myanmar Timeshttps://www.mmtimes.com/news/facts-show-myanmar-doesnt-need-hanthawaddy-despite-govts-obsession.html

NewspapersMyanmar Times

19 July 2018

PwC | July 2018

2. Weekly Key Policy News

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PwC | July 2018

Weekly Key Policy NewsHeadlines

Foreign investment permitted in mining sector under new govt regulations

Myanmar’s economic future hinges on reforming state-owned enterprises

New Chair of Kyaukphyu SEZ Wary of Chinese Loans

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Govt calls for private sector investments to manage food safety issues

Govt projects increase in GDP of 7.6pc as deficit hits high

PwC | July 2018 18

Foreign investment permitted in mining sector under new govt regulations

Local and foreign investments in Myanmar’smining blocks will be permitted under the newMyanmar Mining Rule enacted February 2018,according to the Ministry of Natural Resourcesand Environmental Conservation (MONREC)Mining activities had been suspended in 2016 sothat the ministry could assess the industry’scompliance with environmental rules andregulations.“We have since inspected up to 519 mining sitesand made many reforms. We believe the miningsector is now ready to contribute to our nation’sdevelopment,” U Khin Latt Kyi, director generalof the Mining Department under the MONREC,said during a press conference in Nay Pyi Taw onJuly 13.“The mining sector is now open to local andforeign investors after two years,” he told TheMyanmar Times. Applications made individuallyor online will be accepted starting from July 26.Foreign companies will now be able to invest inlarge-scale sites of more than 500,000 acres aswell as medium scale sites of up to 247.1 acres.Already, Australia mining company PanAust was

given permission to conduct feasibility studies ata large-scale block in Wuntho region on July 5.There are currently seven foreign companiesincluding from Japan, Australia and China nowapplying for such a permit.“However, we can’t give permission for foreigninvestments directly. We have to submit theseapplications to the government, which will grantpermission. Wuntho has been contracted for thefirst time. I think at least six or seven investmentswill came to exist in next three or four months,”said U Khin Lat Kyi, director general at theDepartment of Metal Mines.The MONREC will also allow investments insmall-scale mining sites for gold and otherprecious metals of up to 4 acres, sites of up to 10acres for other minerals and sites for rawindustrial materials and precious stones of up to20 acres.

Source: Myanmar Timeshttps://www.mmtimes.com/news/foreign-investment-permitted-mining-sector-under-new-govt-regulations.html

NewspapersMyanmar Times

16 July 2018

PwC | July 2018 19

Myanmar’s economic future hinges on reforming state-owned enterprises

State-owned enterprises (SOEs) play dominantroles in Myanmar’s economy. Collectively, theygenerate about half the government’s revenue,spend half the government’s budget, and regulatemuch of the formal economy - from forestry totelecommunications to mining.Yet these entities have remained “black boxes”,with their activities and finances shrouded insecrecy. Over the past two years, the RenaissanceInstitute and the Natural Resource GovernanceInstitute have worked with the Ministry ofPlanning and Finance to identify concrete stepsthat the government can take to improve SOEperformance and rationalise their finances.Through our research on natural resource SOEs,such as the Myanmar Oil and Gas Enterprise(MOGE) and Myanmar Gems Enterprise (MGE),we have discovered some remarkable facts.For one, Myanmar’s SOEs are in many cases notSOEs in the sense they are understood in othercountries. Some, like the MGE, are mainlyregulators and tax collectors. Others, like SecurityPrinting Works, provide a public service. Mosthave many, and sometimes contradictory,

mandates. For instance, the MOGE is a passiverevenue collector from offshore gas production,operates some onshore oil fields, and regulates oiland gas activities. And the Myanmar EconomicBank (MEB) is both the government’s treasurer —holding different government ministry and agencydeposits — and a lender to the private sector.Worryingly, many of the taxes collected by SOEshave been transferred to the MEB. From 2012 toJanuary 2017, SOEs deposited K11.5 trillion(US$8.5 billion at the time) in their so-called“Other Accounts”. This money has been held bythe bank as savings accounts, which do notaccumulate interest for SOEs. This system mayrepresent a large misallocation of resources.Instead of being earmarked as working capital ofSOEs and held by the MEB, this money couldhave been used to boost spending on education,healthcare and critical infrastructure through thebudget.Source: Myanmar Timeshttps://www.mmtimes.com/news/myanmars-economic-future-hinges-reforming-state-owned-enterprises.html

NewspapersMyanmar Times

16 July 2018

PwC | July 2018 20

New Chair of Kyaukphyu SEZ Wary of Chinese Loans

YANGON — Myanmar will endeavor to take on noloans from China to complete the KyaukphyuSpecial Economic Zone (SEZ) but would offer thedeveloper no sovereign guarantees to mitigaterisk if it does, said the project’s new chairman,seeking to allay fears of a debt trap.Sean Turnell, an economic adviser to StateCounselor Daw Aung San Suu Kyi, has called theexpense of the $7.5-billion project “crazy” and“absurd” and warned of a repeat of Sri Lanka’sexperience.The government of Sri Lanka borrowed heavilyfrom China to build the $1-billion Hambantotaport but was unable to repay the loans. As aresult, it gave China a 99-year lease to the facilityin exchange for debt relief. Turnell told a seminarin Singapore in May that Myanmar would have toborrow between $2 billion and $3 billion from theExport-Import Bank of China to make its ownport project happen.In an interview with Reuters on Monday, the headof the US Overseas Private InvestmentCorporation, Ray Washburne, also warned thatChina’s Belt and Road Initiative was creating a

debt trap for many poor nations.According to the initial master plan, theKyaukphyu SEZ, in Rakhine State, will cover atotal 520 hectares — 20 for the port, 100 forhousing, and 400 for an industrial park. Itallocates 50 percent of the land to fisheries, 30percent to garment factories and the rest to othersmall enterprises.U Set Aung, the new chairman of the SEZ’smanagement committee, told The Irrawaddy onMonday that the government has decided to starton a smaller scale and to expand based strictly ondemand.“Hence, the project will not [make] the Myanmargovernment bear the debt burden,” he said.The government that replaced his, led by theNational League for Democracy, has been tryingto double Myanmar’s stake to 30 percent.

Source: The Irrawaddyhttps://www.irrawaddy.com/business/new-chair-of-kyaukphyu-sez-wary-of-chinese-loans.html

NewspapersThe Irrawaddy

17 July 2018

PwC | July 2018 21

Govt calls for private sector investments to manage food safety issues

The private sector has an important role to play inensuring food safety and growth in the domesticagriculture, livestock and fisheries sectors, U TinWin, assistant director at the Plant ProtectionDivision under the Ministry of Agriculture,Livestock and Irrigation, told The MyanmarTimes.“There is a role for the private sector inencouraging the supply and usage of safequantities of inputs pesticides and veterinarydrugs, raising awareness and providing educationand training for farmers and enterprises along thefood supply chain,” he said.U Tin Win was speaking after the EuropeanChamber of Commerce in Myanmar (EuroCham)revealed this month that 27 percent of the fishsold by 84 fish vendors in Yangon contained theVibrio bacteria which can cause food poisoning inadults as a result of eating undercooked seafood.Another study by the regional government inYangon showed that 93.5pc of red bean cakes soldin the markets were laced with formalin.Meanwhile, research executed in the Inle Lakeregion at the beginning of this year also revealed

that 75pc of the vegetable samples obtained frommarkets and villages contained pesticide residue.In fact, among the 113 countries listed on theEconomist Intelligence Unit’s 2017 Global FoodSecurity, Myanmar ranked 71 for quality andsafety. This is lower than countries as Thailand,Laos and India, according to the World HealthOrganisation.Separately, the World Bank has also stated that ofthe $40 billion in losses made from wastage as aresult of food safety issues, Myanmar contributesaround $500 million to $700 million a year,which is up to 18pc of the total losses made.As such, the EuroCham concluded thatinvestments in food safety management systemsis a prerequisite for the growth of agribusiness,which accounts for 38pc of Myanmar’s GDP and23pc of the country’s exports.

Source: Myanmar Timeshttps://www.mmtimes.com/news/govt-calls-private-sector-invest-ments-manage-food-safety-issues.html

NewspapersMyanmar Times

18 July 2018

PwC | July 2018 22

Govt projects increase in GDP of 7.6pc as deficit hits high

The government is expecting GDP growth to hit7.6 percent in 2018-19, President U Win myintsaid at the National Planning Commissionmeeting last week. The higher level of growth isexpected amid higher government spending and awider budget deficit.The National Planning Bill and Union BudgetAllocation Bill for the new 2018-19 fiscal yearwhich will begin on October 1 has been submittedto the Pyidaungsu Hluttaw, which will resume onJuly 23. The two bills have already been approvedby the government.The president’s GDP forecast of 7.6pc is higherthan that of the World Bank, which is predictinggrowth of just 6.8pc over the same period. In2017-18, Myanmar’s GDP expanded by 6.4pc. Theyear before that, GDP grew by 5.9pc.While President U Win Myint is expecting theprojected level of growth to come supported byhigher foreign direct investments (FDI) flowingin, businessmen say the situation on the ground isless promising. U Win Oo, a businessman andformer Hluttaw MP, reckons “foreign businesseswhich have already invested here are in a

situation where they are worried about whethertheir business will be able to continue sustainablyor not,” he said on Monday.The way he tells it, “The government has beensaying that FDI will flow in for over three yearsnow. But even domestic businesses have beenfacing difficulties lately. Anyone who sees this willnot come to invest,” he said.U Khin Cho, Public Accounts Committee memberof Pyithu Hluttaw, said that if the government canresolve the Rakhine situation, FDI levels willimprove. “Growth in FDI depends on theproblems in Rakhine. If those problems can besolved, FDI will enter,” he said.Meanwhile, total earnings, mostly from taxescollected, in the coming fiscal year is targeted tobe around K20 trillion compared to totalprojected government spending of around K24.9trillion, resulting in a budget deficit of K4.9trillion for 2018-19.

Source: Myanmar Timeshttps://www.mmtimes.com/news/govt-projects-increase-gdp-76pc-deficit-hits-high.html

NewspapersMyanmar Times

18 July 2018

PwC | July 2018

3. Weekly Investment News

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PwC | July 2018

Weekly Key Investment NewsHeadlines

MoEE Inks Deal With Great Hor Kham Public Company to Purchase Electricity

Australia’s Listed Company to Invest Millions into iMyanmarHouse.com

Zone-B of Thilawa SEZ project in high demand

24

MIC approves investment in new ILBC campuses

Oil and gas companies urged to partner with foreign firms

PwC | July 2018 25

MoEE Inks Deal With Great Hor Kham Public Company to Purchase Electricity

Great Hor Kham Public Company is building ahydro power plant on Nam Paw Creek, about sixmiles south from Muse, Northern Shan Stateunder BOT system.A Build–operate–transfer (BOT) is a form ofproject financing, wherein a private entityreceives a concession from the private or publicsector to finance, design, construct, own, andoperate a facility stated in the concessioncontract. This enables the project proponent torecover its investment, operating andmaintenance expenses in the project.Great Hor Kham (GHK) was established onDecember 12, 2012, as a public limited company.GHK’s business focus is performing as the maincontractor in infrastructure construction andconcession business, and they are headquarteredin Shan State.Great Hor Kham Public Company builds the plantusing its own financial resources and will sell theelectricity to the ministry.“This is a purchasing agreement to meet demand,since Myanmar can only generate around 3,300megawatts during the summer months when

water resources are lower. We are alsoimplementing three Liquid Natural Gas (LNG)power plants as soon as possible to further helpmeet demand,’’ U Win Khaing, Union Minister forthe Ministry of Electricity and Energy, said.The total installed capacity in Myanmar is 5,458megawatts, but it’s lower in summer months; soMyanmar is seeking to buy electricity fromneighboring countries.When finished in December 2020, Nam PawHydro Power Plant can generate up to 82.32million kWh annually to supply electricity tonearby villages as well as to the national powergrid. It is expected to create 500 job opportunitiesfor local residents as well as for engineers.The government has said that it is committed toproducing more electricity, therefore it will usevarious resources to attract local and foreigninvestors.

Source: Myanmar Business Todayhttps://www.mmbiztoday.com/articles/moee-inks-deal-great-hor-kham-public-company-purchase-electricity

NewspapersMyanmar Business Today

17 July 2018

PwC | July 2018 26

Australia’s Listed Company to Invest Millions into iMyanmarHouse.com

Australia based Frontier Digital Ventures (FDV),is a a that was founded in May 2014 andheadquartered in Kuala Lumpur, Malaysia. Itfocuses on becoming the world leader in onlineclassifieds businesses in frontier markets. Theyare experts in the online classifieds space with aparticular focus on property and automotiveverticals and general classifieds websites, and areproud of the amazing track record in building andsupporting great companies they hold.They love frontier markets and thrive on theexcitement and challenge they present as well asthe opportunity they offer to self-startingentrepreneurs to become effective game changers.They seek out entrepreneurs with integrity,unwavering self-belief in their online classifiedsbusiness and extraordinary passion to make itsucceed. With the extensive support they offer,coupled with their own energy and work ethic,Frontier Digital Ventures is bringing outstandingcompanies of global significance to their fullpotential and setting a new global standard ofexcellence in the field.The FDV Company is a listed company registered

at Australia Stock Exchange. This company willinvest millions of US dollars into a local realestate website; iMyanmarHouse.com.The website is an online real estate servicewebsite, operated with 100 employees with over 1million visitors every month. It hosts manyhousing expos partnering with variousdevelopers, whilst selling 200,000 ads on itswebsite.The website will not disclose the investmentamount of FDV, and simply said agreeing toFDV’s investment is not only for finance but alsofor FDV’s expertise, experiences and knowledgeas well as its reputation. “We are proud to partnerwith a company listed at Australia StockExchange. It has a lot of experience. It managedto make their business iProperty successful withinyears and sold it at over $530 million,’’ U Nay MinThu, Founder and Managing Director ofiMyanmarHouse.com, said.Source: Myanmar Business Todayhttps://www.mmbiztoday.com/articles/australia-s-listed-company-invest-millions-imyanmarhousecom

NewspapersMyanmar Business Today

17 July 2018

PwC | July 2018 27

Zone-B of Thilawa SEZ project in high demand

There are high demands for spaces at Zone-B ofThilawa Special Economic Zone Project as Zone-Ahad ran out. Investors are expanding theirbusinesses, said Dr Than Myint, Union Ministerfor Commerce and Chairperson of MyanmarSpecial Economic Zone Central WorkingCommittee.Cho Cho Win, Vice-Chair-2 of the Thilawa SpecialEconomic Zone Management Committee said:“Now works in the Zone-B have started. At thesame time, seven companies have got permits.The Phase-I covers 101 hectares. The 57 per centof 101 hectares (250 acres) have been rent out.”The first phase of Thilwa Zone-B (101-hectare)was launched on 24 February last year. Theproject is expected to finish in the middle of thisyear. Some land plots have been rent out toinvestors since late last year.Most of investments in the Thilawa SEZ projectare manufacturing industries, according toThilawa Special Economic Zone ManagementCommittee.“There are 70 investments in the industry sector,one in logistics sector, nine in trading sector, four

in service sector, one in real estate sector and onein hotel sector, Cho Cho Win added.Until April this year, the total investments inThilawa SEZ project by 17 countries have reachedover US$ 1.373 billion.Singapore have topped the list of foreign investorswith US$ 503.71 million, followed by Japan withUS$ 425.54 million, Thailand with US$ 151.80million, South Korea with US$ 54.60 million,Hong Kong with US$ 47.15 million, Myanmarwith US$ 54.70 million, British Virgin Islandswith over US$ 20 million, UAE with US$ 19.16million, Taiwan with over 16 million, Austria withUS$ 15.35 million, Panama with US$ 13.91million, China with over US$ 12 million, Malaysiawith over US$ 15 million, Brunei with over US$eight million, Australia with over US$ sevenmillion, Vietnam with over US$ seven million andthe Netherlands with over US$ one million.

Source: Eleven Myanmarhttp://www.elevenmyanmar.com/business/14350

NewspapersEleven Myanmar

18 July 2018

PwC | July 2018 28

MIC approves investment in new ILBC campuses

The International Language & Business Center(ILBC) has been permitted to invest $52 millionto provide private educational services in Yangon,Mandalay, Nay Pyi Taw, according to theMyanmar Investment Commission (MIC).ILBC is planning to launch the new campuses inApril next year. The organisation has alreadyestablished 30 campuses in 9 major cities inMyanmar providing preschool, kindergarten,primary school, secondary school curricula as wellas English proficiency courses. Eight of theseschools are in Yangon. The overall ILBC studentpopulation amounts to 13,000 students with2,500 attending ILBC schools in Yangon.Earlier this year, the Yankin township municipaladministrative office sued the ILBC campus onPyi Thar Yar street in Yangon under the municipallaw following a mounting number of complaintsthat the school was causing major trafficcongestion in the area as a result of the number ofcars that come to drop off and pick up childrenfrom the school.Yankin also sued the school in November andDecember last year. Residents from the area have

also petitioned to relocate the Pyi Thar Yarcampus.Besides ILBC, the MIC on July 7 also approvedinvestments in steel production in Yangon by J.RFamily, India, as well as in the manufacturing andassembly of four-wheel motorcycles in Bago byTaiwan’s Her Chee Industrial Company.

Source: Myanmar Timeshttps://www.mmtimes.com/news/mic-approves-investment-new-ilbc-campuses.html

NewspapersMyanmar Times

18 July 2018

PwC | July 2018 29

Oil and gas companies urged to partner with foreign firms

Last week, the Ministry of Electricity and Energy(MOEE) confirmed in a press conference that itwould start holding tenders for offshore oil andgas production in Myanmar by the end of theyear.“Tender rounds will be floated before the endof 2018,” said Daw Khin Htay, director at state-owned Myanma Oil and Gas Enterprise (MOGE).During the press conference, the MOGE also saidthat the tender rounds will be open to foreign oiland gas companies. “It will no longer bemandatory to join with local firms. This willinstead be made voluntary in the future,” DawKhin Htay said.Nevertheless, local oil and gas firms areencouraged to up their game to attractpartnerships with foreign firms in carrying outexploration and production (E&P) activities bothonshore and offshore, according to an MOEEstatement.This is so local firms can benefit from foreign E&Ptechnologies and gain access to financing. It willalso protect local companies against substantialcapital losses.As such, experienced Myanmar oil and gas firms

interested to partner and work with foreignersshould register at the Oil and Gas PlanningDepartment under the MOEE. Those that registerwill be reviewed by the authorities.Raising the barNot every company that registers will receiveclearance to seek partnerships with foreign firms.Local companies that want to cooperate withforeign oil companies must be up to standard. Thecompanies must have substantial experience anda track record in the industry, access to financingand modern technology, the MOEE said.“As every company that registers will have to dealwith foreigners, it is best to make sure they are upto standard,” an MOEE official said.“So far though, no company has registered yet,”said Daw Khin Htay, adding that the companiesmay be taking time to get prepared. In 2011, 146Myanmar firms registered at the ministry.

Source: Myanmar Timeshttps://www.mmtimes.com/news/oil-and-gas-companies-urged-partner-foreign-firms.html

NewspapersMyanmar Times

20 July 2018

PwC | July 2018

3. Weekly New Tenders

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PwC | July 2018

Tenders (Myanmar)List

Note: tenders information are collected from http://www.mmtimes.com/, https://tender.yangon.gove.mm, http://consult-myanmar.com/, and http://www.myanmar-opportunities.org/mm/tenders http://www.buildersguide.com.mm/en/ .

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No applicable Tenders announced for the week ending 20 July 2018

PwC | July 2018

Tenders (Multilateral organizations) List

Note: tenders information are collected from https://wbgeconsult2.worldbank.org, www.devex.com, www.adb.org, https://www.ungm.org

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ADB: Enhancing Roles of Supreme Audit Institutions in Selected Association of Southeast Asian Nations Countries - Audit Review Specialist for Scope A (47291-001) Closing Date: 23 July 2018 (Individual)

ADB: Support for Strengthening Public Debt Management (CS-DRMS Implementation Expert) (47225-001) Closing Date: 23 July 2018 (Individual)

WB: Review of Structural Vulnerability Assessments in Buildings in MyanmarClosing Date: 06 August 2018

WB: Conducting a Building Regulatory Capacity Assessment in the City of Yangon Closing Date: 13 August 2018

PwC | July 2018

4. MIC Permitted Projects

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PwC | July 2018

MIC Permitted Projects (Meeting 9, 2018)

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No. Name of Company Type of Investment Form of Investment

1 Yangon J.R Family Limited (India) Production and marketing of iron and steel Wholly Foreign Owned

2 Her Chee Industrial Co., Ltd (Taiwan)Assembling, manufacturing and sale of various kinds of four wheel motorcycles

Wholly Foreign Owned

3International Language & Business Center (ILBC) Co., Ltd

Providing private education using national and international curricula

Joint Venture Investment

Source: DICA

PwC | July 2018

5. Upcoming Events

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PwC | July 2018

Upcoming Events (July 2018) List

Date Location Name of Event Sector Price Focus Points

20-22 July 2018 YangonMyanmar International Tourism Expo

Hospitality Free

“The first edition of Myanmar International Tourism Expo (MITE) is organized by ICVeX, a professional exhibition organizer in Southeast Asia. It will be a platform for foreign tourism organizations or all related business to source Myanmar partners and for Myanmar people to discover new overseas destinations as well as limited-time exclusive offers.

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Note: Events information are collected from https://www.go-myanmar.com/events-and-conferences and https://10times.com/myanmar .

PwC | July 2018

Upcoming Events (August 2018) List

Date Location Name of Event Sector Price Focus Points

02-04 Aug 2018 Yangon Builders MyanmarBuilding and Construction

Free

The event “features the presence of construction equipment, construction materials and goods, construction machines and tools, construction essentials, building materials and products, building equipment, building essentials and requirements and all products and services that are associated with the building and construction industry.”

17-19 Aug 2018 YangonMyanmar Retail Sourcing Expo

Retail Free

The event “features an exhibit of architecture, interiors, light & sound, window showcase, furniture, flooring, wall and ceiling, barcode, RFID, labelling, automation, internet retailing, safety equipment and material handling, cosmetics, personal care, fragrances, adult wear, kid wear, leather wear, shoes & footwear, accessories, electrical appliances, home decorative items, and much more.”

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Note: Events information are collected from https://www.go-myanmar.com/events-and-conferences and https://10times.com/myanmar .

© 2018 PricewaterhouseCoopers Myanmar Co Ltd. All rights reserved. In this

document, “PwC” refers to PricewaterhouseCoopers Myanmar Co Ltd, which is

part of the network of member firms of PricewaterhouseCoopers International

Limited, each of which is a separate and independent legal entity.

www.pwc.com/mm

PwC Myanmar Business Intelligence Publication

For further information please contact:

Jovi SeetSenior Executive Directorjovi.seet@sg.pwc.com

Brandon LyeDirectorbrandon.lye@sg.pwc.com

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