DefTech Targets Myanmar Projects

Malaysia’s leading armoured vehicle maker DRB-Hicom Defence Technologies Sdn Bhd (DefTech) is in talks about new projects with the relevant authorities in Myanmar, a top company official said.

The company is also finalising a deal with the Cambodian government for a new maintenance, repair and overhaul (MRO) contract for T-55 tanks, chief executive officer Amril Samsudin told Malaysia’s national news agency Bernama.

The project, which has an estimated worth of $50-$60 million for a five-year period, was set to commence by October, he said on the sidelines of the Defence Services Asia Exhibition and Conference 2014 (DSA 2014).

DefTech was also in talks with the authorities in Myanmar for similar MRO contracts, he added.

Another Malaysia defence firm Sapura Secured Technologies Sdn Bhd is also reportedly planning to make an overseas foray this year.

Another firm Zetro Aerospace Corporation Sdn Bhd has set its sights closer to Malaysia, eyeing ASEAN countries such as Indonesia, Thailand and Brunei for a further growth, Bernama reported.

The four-day biennial DSA 2014 ushered in a total of 33,544 trade visitors from 77 countries and regions, up from 26,980 two years ago. A total of 1,000 companies from 60 countries flaunted their latest offerings at the exposition this year.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Myanmar’s Palm Oil Industry:Challenges and Way Forward

Palm oil as edible oil is the second biggest important food item after rice in an average Myanmar household. However, Myanmar’s domestic edible oil production is not enough to meet the demand, so it imports palm oil from some of the world’s largest palm oil producing nations like Indonesia and Malaysia.

During the military rule palm oil import was controlled by state enterprises. But the recent economic and democratic transition has resulted in a market-based economy, which resulted in the Ministry of Commerce opening up the previously-restricted palm oil import market to local private players in April 2011. Myanmar imports refined palm oil, which is the liquid form of palm kernel oil after a process called fractionation, and is used for cooking and frying.

In Year 2012 Myanmar imported 400,000 tonnes of palm Oil and which has grown to 485,000 tonnes in 2013. Market is expected to expand further to 700,000 tonnes by 2017-18 due to growing demand, rising income of Myanmar households and shifting from costlier peanut oil.

One of the biggest challenges for palm oil trade is the cargo storage facility at Yangon port, which results into long waiting period for vessels at the port to discharge the cargo, leading majority of importers to face demurrage claims from their suppliers.

Due to shortage of storage space, importers are pushed to liquidate the cargo as soon as possible. Another concern is usage of delivery order mechanism in the local market where speculators and distributors play with forward contracts, creating speculation and defaults. Road infrastructure is also underdeveloped in Myanmar, so transportation cost also becomes very high, hurting margins and causing delays in delivery of cargoes to northern Myanmar.

Another major area of challenge is illegal border trade of palm oil from Thailand to Mon state and Tanintharyi region which impacts importers who are bringing cargoes to Yangon legally after paying customs duty, commercial tax and income tax.

Private players have invested in palm plantation in southern Myanmar to increase domestic production but it will take at least two to three years to make any significant impact on the palm oil trade. Various stake holders from government and industry can pursue the idea of promoting manufacturing industry for converting crude palm oil to refined palm oil which could create technical know-how and employment.

Currently in the local market palm oil is traded in loose which results into quantity loss and quality deterioration. However, that also provides great opportunity for investors to set up blowing units for ferry can production and packaging and distribution with right quantity and quality.

Vijay is working as Business Manager in Myanmar commodities market for more than two years. He is an agri commodity trader by profession. He can be contacted at vijaydhayal.eca@gmail.com. This Article was accomplished by the author in his own personal capacity. The opinions and views expressed here are his own.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Economic Opportunities Continue to Grow in Myanmar

This bulletin by Canadiars law firm Davis LLP provides an update on the significant changes Myanmar is experiencing in government, legislation, trade and tourism and outlines the opportunities in this growing country

With a population of more than 60 million people,opportunities in Myamnar are not limited to extractive industries, but also exist in manufacturing and the domestic market for consumer goods. Even so, Myanmar’s natural resources should not be underestimated: natural gas, petroleum, timber, zinc, copper, lead, coal, precious stooft, and agricultural land exist in abundance.

Political and legal reforms could open more doors for foreign investors

A general election is set to be held in Myanmar in November 2015. These elections could see Aung San Suu Kyi, Nobel laureate and leader of Myanmar’s main opposition party, the National League for Democracy (NLD), brought to power. Her release in 2010 after almost eleven years of house arrest imposed by the previous military regime, was instrumental in opening up trade relations with the West. Regardless of whether the current ruling Union Solidarity and Development Party (USDP) or the NLD forms a government next year, it is expected that political and economic modernisation efforts begun in 2010 by current President, Thein Sein, will continue.

However, it is important to note that at this time, Aung San Suu Kyi is barred from becoming President of Myanmar by virtue of the country’s Constitution, which prohibits anyone with family members who are citizens of another country from holding the country’s highest office. This provision did not prevent her from being elected to Parliament in 2012, when vacancies in 8 percent of the seats (46 out of 664) were filled following by-elections, with the NLD capturing all 43 seats in which they ran candidates. Another round of by-elections is anticipated late in 2014, to fill approximately 30 more vacancies. It remains to be seen whether the Constitution will be amended to enable Suu Kyi’s candidacy for President prior to the general election expected in late 2015.

Other legal reform is ongoing, making it more practical for multi-national companies to invest in Myanmar. It is anticipated that a new Companies Law will be introduced in 2014, to replace the current law that dates back 100 years. A draft Trademark Law is before Parliament and a proposed Condominium Law, that will allow foreign citizens to own a form of property for the first time, was also placed before Parliament in November 2013.

New incentives draw foreign investment despite trade restrictions

The government of Myanmar places restrictions on foreign investment within the country. The State-Owned Economic Enterprises Law (1989), Foreign Investment Law (2012) and the Foreign Investment Rules (January 2013) restrict certain types of business activities from occurring without government approval. Foreign investment is monitored and approved by the Myanmar Investment Commission (MIC) which has published a list of activities in which foreign investors are prohibited from participating or which require a joint venture with a local business.

At the same time, the country is also providing incentives to foreign investors. In January, 2014 a new Myanmar Special Economic Zone Law (MSEZL) was enacted, repealing earlier legislation regarding special economic zones. The MSEZL offers up to seven years of income tax exemptions for foreign investors, with further 50 percent discounts on income tax for another five years. Currently, this law applies in Myanmar’s three Special Economic Zones: Kyauk Phyu, Dawei and Thilawa. The MSELZ provides for the establishment of additional zones and contains dispute resolution procedures.

Economic sanctions

Domestic strife and ongoing corruption issues have certainly not disappeared. While Canada’s Special Economic Measure Regulations (sanctions) have been relaxed in recent years, Canadians are still prohibited from dealing with certain businesses and individuals, including the state banks of Myanmar. Military shipments are also prohibited. These sanctions are enforced by the Export Controls Division of Foreign Affairs and International Trade Canada, the equivalent of the US Office of Foreign Assets Control. It is worth noting, however, that the Canadian list of restricted persons is more limited than comparable US prohibitions.

While Japan did not impose economic sanctions against Myanmar, there was a pronounced slowdown in government aid and private sector investment during the years that Aung San Suu Kyi was under house arrest. China expanded its economic and political influence during this period, but faces greater competition now that other countries, including Japan, are investing heavily. The Japanese government has pledged almost $2 billion in loans and grants since Prime Minister Shinto Abe was elected in December 2012.

Japan and Myanmar are jointly developing the ambitious Thilawa special economic zone just outside of Yangon, the country’s largest city. Plans call for a deep sea port, a power plant and waste water treatment facility, all in support of a 2,400 hectare industrial park. Construction began in November, 2013 and commercial operations are expected to start in mid-2015.

Financial growth: foreign banks increase presence in Myanmar

Despite some remaining trade restrictions imposed by various countries, growth of foreign investment in Myanmar has been substantial. At least 14 banks in Myanmar now permit foreign currency accounts. Even though foreign banks are currently permitted to only conduct research in Myanmar, 35 foreign banks have opened representative offices and it is expected that some licences for foreign branches may be tendered within the year. Daiwa Securities from Japan is one of the interested foreign financial firms.

In late 2012, automated teller machines (ATMs) linked to the international payment system were introduced in Myanmar. There are now hundreds of ATMs around the country, and while not as reliable as similar-looking ATMs in North America, they are providing much needed convenience and liquidity. On a visit this year, one of the authors of this bulletin found it’s possible to access funds held in Canadian accounts using some ATMs.

Further bank reform is needed and is on the way, with the IMF assisting in changes to the central bank and the launch of the Yangon stock exchange planned for 2015. Myanmar has also acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as of July 15, 2013. This will allow multi-national companies to settle commercial disputes outside the domestic legal system. Myanmar has also drafted a new arbitration law, expected to be enacted in 2014, which is required to allow for the enforcement of foreign arbitration awards by the courts of Myanmar.

At the end of 2013, Myanmar became the 180th member of the Multilateral Investment Guarantee Agency (MIGA), meaning MIGA guarantees are now available for foreign direct investments. The US Ex-Im Bank also opened in Myanmar on February, offering financial support for short and medium-term US export sales to Myanmar.

Industrial growth: global brands eye untapped potential

The country is endowed with hydrocarbons. The first barrel of oil was exported in 1853 but little production or exploration took place during the past 50 years of military rule. However, Myanmar has 50 million barrels of proven oil reserves and 280 billion cubic meters of natural gas. This is expected to increase with the recent arrival of foreign oil and gas companies. After a tender process for 16 on-shore blocks, Canadian company Pacific Hunt Energy won two oil concessions in Myanmar last year.

Even more recently, in March the government announced the awarding of 20 offshore oil and gas blocks. Majors such as Shell (in partnership with Mitsui) British Gas (with partner Woodside Petroleum), Total, Chevron and Statoil (in partnership with ConocoPhillips) were among the successful bidders.

In the manufacturing sector, GM and Ford have both entered Myanmar. Coca-Cola re-entered the country in September 2013 after an absence of more than 6o years. GE, VISA, and MasterCard are all increasing their presence in Myanmar.

Telenor (Norway) and Ooredoo (Qatar) both received investment permits after winning a tender in June 2013 for provision of telecom services. Significant investment and rapid growth is expected in the wireless sector.

In the garment industry, H&M has started placing test orders to explore possibilities, and a group of 12 Hong Kong garment manufacturers look to be the first to invest in the Thilawa special economic zone.

To sustain ongoing investment in Myanmar, parallel growth in infrastructure is required. In addition to the ambitious Thilawa special economic zone project already mentioned, two other major port development projects are planned: a deep sea port at Dawei, 3ookm west of Bangkok, supported by Thailand and a smaller port on the Bay of Bengal, a joint project between India and Myanmar. Completion of these projects may not be imminent, but the need for related bridges, roads, highways and water systems are major opportunities.

The electricity grid is inadequate by western standards. Companies offering a distributed power generation model are taking up the challenge, particularly outside Yangon. Large scale thermal and clean energy projects are also expected over in next few years. In March, 2014 the Japanese government pledged approximately $450 million in new loans to help finance additions to Myanmar’s electrical system. Mitsubishi, Marubeni, Fuji Electric, Toshiba and Hitachi are among the foreign firms already involved or actively pursuing involvement in this sector.

The Environmental Conservation Law was passed in 2012, but implementing rules to govern environmental impact assessments are still being drafted. More specific criteria from the government are eagerly awaited. Tourism growth: influx of travellers bring economic opportunities

The tourism industry is growing at a rapid pace. Myanmar is welcoming almost two million tourists each year. While this is less than lo percent of the number of visits to neighbouring Thailand, this gap is starting to narrow. Those plane loads of tourists are looking for a place to stay, and hotel chains such as Hilton, Pan Pacific, Peninsula, Accor and Best Western are responding to the opportunity presented by nightly rates that have tripled in recent years.

This also creates strong opportunities for airlines flying into Myanmar. Expansion of the country’s largest airport, Yangon International, has been announced, with a goal to handle 3.3 million passengers per year. A new international airport is expected to open in Bago in 2018, and expansion projects at other airports are expected. The private sector has been encouraged to participate but delays have hit some projects, particularly the planned new $1.1 billion Hanthawaddy International Airport, 100km from Yangon International Airport.

There are eight domestic air carriers operating in Myanmar, with at least four more preparing to launch. However, these carriers only operate a combined total of 40 aircraft and only two, Myanma Airways and Air KBZ, operate more than five aircraft. Consolidation of domestic airlines seems probable, even as growth in domestic air travel continues.

Myanmar is also looking outwards and is playing a more active role in the international economy. The country hosted the East Asia World Economic Forum in its new capital city, Nay Pyi Taw, in June 2013. Myanmar also hosted the Foreign Ministers Meeting of the Association of Southeast Asian Nations (ASEAN) in January 2014, and for the first time ever Myanmar is now chair of ASEAN. The biggest newsmaker, however, was when the 27th Southeast Asian Games were held in Myanmar just before Christmas 2013.

Other information to consider

For those considering doing business in Myanmar, the cost of leasing office space or renting reasonable accommodation in Yangon can be daunting. Rents currently surpass $100/square foot, which is higher than the average rental rate in Manhattan. Relief may be on the way, however, as construction cranes are sprouting across the city.

Although the tight real estate market seems to have delayed the promised opening of Canada’s first embassy in Myanmar (it was intended to open in mid-2013), Mark McDowell was named last year as Canada’s first ambassador to Myanmar. He and a small contingent of staff are currently working out of the British Embassy, but for now Canadian citizens requiring consular services are still required to seek assistance at the Australian Embassy. Canada’s Embassy is now expected to open in mid-2014.

Myanmar’s rich resources and untapped market and labour potential have made it a hot bed of new international economic development. Still, there remain significant challenges in navigating the emerging financial and legal systems. Caution and careful planning is recommended.

Resource from Myanmar First Bilingual Business Journal May 1,2014

China’s Backyard Platform for Cooperation

While Chinese enterprises are entering the US “backyard,” Latin America and the Caribbean, one after another and settling down, the US also accelerates its entrance into China’s “backyard.”

Right before US President Barack Obama’s Asia trip, the US Department of State announced it would open its first commercial service office in Myanmar.

It has been widely noticed that the US is back. However, it isn’t back just for a new market. The situation is different from China’s seeking development drives across the world or transferring competitive industries to other countries and regions.

In January, the US embassy in Myanmar provided technological training for 150 civil society activists in Myanmar. And in February, the US funded the social activities of Bar Camp, an international network of open online workshops, which has attracted more than 5,000 participants.

These moves have naturally triggered China’s worries, and some media outlets exclaimed that Washington is nosing around China’s backyard. This is reminiscent of similar arguments from some US media outlets during Chinese President Xi Jinping’s Latin America visit last year that China was entering the backyard of the US.

Certainly, compared with the US, China is still a latecomer and is way behind in terms of soft power. Even with close neighbours like Myanmar, China still faces the challenge of winning more trust from them.

In a recent interview with the Beijing-based Caijing magazine, Elizabeth Economy, director for Asia studies at the Council on Foreign Relations, said that ultimately who would lead Asia would depend on the country’s development route and its diplomatic attitude in wider areas.

According to the historic logic of a great power’s rise and especially when a new order is still lacking in Asia, the fight for leadership may provide more room for speculation about Sino-US conflict.

But will things end differently? Just as a Chinese poem once quoted by Hillary Clinton goes, “After endless mountains and rivers that leave doubt whether there is a path out, suddenly one encounters the shade of a willow, bright flowers and a lovely village.” If we see each other’s “backyard” as a platform to know more about each other and contribute more to that region, we may find a way to establish a new order in the future.

Take Myanmar. Currently what’s most urgently needed in this country is to boost ethnic reconciliation, without which further realization of democratic politics and stable development will be unlikely.

The stability of northern Myanmar is very important for China, and it is not meaningless for Washington’s promotion of its own human rights values in Myanmar.

This is where the two sides’ interests converge, and cooperation on this point will enhance mutual trust.

So far the US has started to promote some activities facilitating the fostering of civil society, which is helpful for Myanmar’s good governance in the future. However, the arrangement of similar projects should lean more to specific issues of ethnic reconciliation.

China has made some efforts in this regard, such as collaborating and arranging negotiations between the Myanmar government and ethnic minority independent armed forces in northern Myanmar. It needs to consider how to also bring Washington in to promote such negotiations.

If China and the US can strengthen collaboration, communicate on these issues and accumulate experience of cooperation, this will be more important than increasing investment in Myanmar in the short term.

There are more than a few similarly thorny issues in the Asia-Pacific region, especially in China’s neighbourhood. If the two powers can cooperate over these specific issues that concern third parties in this region and influence the peace and stability of the entire area, it will benefit the construction of the future regional order, and will provide a peaceful way out of the fight for future leadership.

China and the US have already established diplomatic mechanisms for Asia-Pacific affairs, and the situation in Myanmar has been on the agenda. Nonetheless, the two should not just exchange information, but also solidly cooperate over specific issues.

Resource from Myanmar First Bilingual Business Journal May 1,2014

With an Eye on TPP, Garment Companies Flock to Vietnam

As China and its workers get wealthier, globaI manufacturers are looking south for less expensive places to do business. But Cambodia faces labour strikes. The Thai government suffers endless protests and Myanmar needs infrastructure updates. As a result, many companies are setting their sights on Vietnam.

Hundreds of them, in fact, descended on Ho Chi Minh City last month for Saigon Tex, a garment and textile expo. Sharing a border with China, Vietnam boasts geographic convenience, as well as political stability and low costs. Those attract companies like Spain-based Jeanologia, which showed off its laseron-denim technology at the expo.

“It is becoming such an important hub for American and European brands,” Jeanologia area manager Borja Trenor Casanova said of Vietnam.

The Trans-Pacific Partnership (TPP) helps, too. As one of 12 countries negotiating the trade pact, Vietnam stands to benefit most from a clause that would cut tariffs on textiles and apparel, which are among the nation’s top exports.

To take advantage of the tax reduction, foreign companies are shifting their factories to Vietnam. Nguyen Thi Cam Tu is general manager at Thach Anh Vang, which represents manufacturers from Germany, Turkey, the United States, and others. She said the TPP is part of the reason her company saw a 50 percent increase in annual turnover in 2013,

“I see a lot of investment going on, because we see quite a lot of inquiries recently,” Cam Tu said, as a giant yarn spinner roared at the vendor slot next to hers at the expo.

The growth is reflected across the country. Textile exports increased 20 percent in the first quarter of 2014, compared with the same period last year, according to the General Statistics Office.

While production and revenues have risen steadily, Vietnamese companies and officials recognise a gaping weakness in the garment industry: It buys most of its materials from other countries. The Vice Minister of Industry and Trade Ho Thi Kim Thoa told an audience at the expo that Vietnam must set targets to produce more fabrics on its own.

“These targets demonstrate an urgent need for technological innovation, improvement of quality control, labour management, environmental management, as well as improvement in the textile and garment supply chain in accordance with international standards,” Kim Thoa said.

If it doesn’t develop more local suppliers, Vietnam won’t be able to tap the full potential of the Trans-Pacific Partner ship. The agreement is likely to include a yarn-forward rule, which requires Vietnam to make clothes with materials from TPP member countries in order to receive tax-free import benefits.

But people are looking to improve the garment sector in other ways, too. Casanova said Jeanologia’s laser-printing is one of the technologies that could help Vietnam become a value-adding step in the production chain. The country, which achieved lower middle income status in 2010, is still very dependent on cheap labour. But to avoid the middle-income trap, it needs to find ways to add value to its exports. Casanova said it seems to want technology for that purpose, as well as to promote environmental substainability in business.

“Vietnam is showing interest in a change in the industry,”he said.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Airasia to Launch Long-Haul Services to Thailand

Thai AirAsia X, Thailand’s first long-haul low-cost airline, will take to the skies in June despite the tourism market being dragged down by the country’s political turmoil.

The new long-haul low-cost carrier was officially unveiled at an event in Bangkok last week, with CEO Nadda Buranasiri announcing the airline’s first routes and in-flight products.

Operating from its home base at Bangkok Don Mueang International Airport, Thai AirAsia X will start flying on June 17 with daily services to Seoul. It will then expand its operations with flights to the Japanese cities of Tokyo and Osaka commencing later in the year.

“We are absolutely thrilled to be Thailand’s first low-cost long-haul carrier,” said Nadda. “While Thai AirAsia’s Airbus A320 planes continue to offer the best connectivity for short-haul destinations, Thai AirAsia X will be operating Airbus A330-300 wide-body aircraft to destinations that are further than a four-hour flight time from Bangkok.”

Nadda revealed that future destinations could include Australia and China, as long as the flight times fitted in with the airline’s strategy.

“We know that Thailand is a preferred destination for Australians,” Nadda told Travel Daily at a media briefing. “We would [also] consider Chinese destinations over four hours in length.”

Thai AirAsia has already established a strong presence in China, with flights to nine mainland cities. And while Tassapon Bijleveld, CEO of Thai AirAsia, confirmed that “Thai AirAsia X will not take over any routes from Thai AirAsia”, the new airline’s four-to-nine-hour flight times could open up such destinations as Beijing.

Thai AirAsia X will also be looking to use Thai AirAsia’s network of short-haul routes to offer a greater range of destinations for its passengers. For example, passengers on inbound flights from Seoul, Tokyo and Osaka will be able to connect to a range of Thai domestic destinations such as Phuket, Krabi and Chiang Mai, or regional hubs like Siem Reap and Yangon, via Bangkok.

Thai AirAsia X will initially operate two Airbus A330-300 aircraft, each offering 377 seats 12 in business class and 365 in economy.

Thai AirAsia X received its Air Operator’s Certificate late last year, but delayed its launch-initially planned for February 2014 — due to the impact of Bangkok’s political protests on the country’s travel industry. But Nadda said he remained confident the airline would record load factors of up to 80 percent on both its new routes.

The CEO also predicted that traffic on both Korean and Japanese services would be a 50-50 mix between Thai and international. The destinations were selected in part due to the fact that South Korea and Japan both offer visa-free travel for Thai nationals.

Thai AirAsia X becomes the seventh branch of the AirAsia group, following AirAsia Malaysia, Indonesia, Thailand, Philippines and India, and AirAsia X in Malaysia.

Resource from Myanmar First Bilingual Business Journal May 1,2014

China Activist Missing After Trying to Help Striking Workers

A prominent Chinese labour activist has been missing and his wife suspects he was detained by state security agents after trying to help workers involved in China’s biggest strike in years organise their case.

Zhang Zhiru was last heard from when he spoke to his wife, Xiao Hongxia, by telephone at around noon on April 22. He told her he had been summoned to a meeting with state security agents from the industrial southern city of Dongguan.

Workers at a Yue Yuen Industrial Holdings Ltd shoe factory complex with about 40,000 employees have been on strike since April 14 over social insurance payments.

Labour activists say the strike, in the Dongguan town of Gaobu, is one of China’s biggest since market reforms started in the late 1970s.

“When he went out in the morning he said he was meeting Dongguan state security,” Xiao said by telephone from Shenzhen, where Zhang lives.

“Yesterday afternoon, and at night when it was very late and he had not come home, a lot of us tried to call him, but couldn’t get through.”

Zhang’s mobile telephone appeared to be off when Reuters tried to call him.

The Ministry of State Security (MSS) is the Chinese equivalent of the KGB in the former Soviet Union, an intelligence-gathering agency that also suppresses dissent and other activities it deems threats to Communist Party rule.

A man surnamed Wang who answered the telephone at the Dongguan branch of the MSS said he had not heard of Zhang’s possible detention.

“Nothing wrong”

Zhang had been closely following the Yue Yuen strike and was working with other activists and lawyers to try to help the workers organise to press their demands.

Lin Dong, a colleague of Zhang’s at the Shenzhen Chunfeng Labour Dispute Service Center, may also have been detained, Xiao said. Calls to the centre went unanswered.

On April 21, however, Zhang and a lawyer involved in labour issues went to Gaobu and met several workers to discuss their options, said Wang Jiang-song, a Beijing-based labour researcher.

“That’s why this has happened,” said Wang, referring to Zhang’s possible detention. “But there was nothing wrong with what they did, trying to help the workers.”

Resource from Myanmar First Bilingual Business Journal May 1,2014

Japan Inflation May Have Beat BOJ:Kuroda

Deputy governor says Japan can withstand tax hike pain

Bank of Japan Governor Haruhiko Kuroda said consumer inflation may exceed the central bank’s projection in the fiscal year that ended in March, voicing confidence the world’s third-largest economy continues to make headway in meeting its price target.

Deputy Governor Hiroshi Nakaso added to the optimism, stressing that Japan can withstand the pain from a sales tax hike that kicked off this month as companies are increasing hiring and wages due to brighter prospects for the economy.

“I think consumer inflation was actually slightly higher in fiscal 2013 than our current projection of 0.7 percent,” Kuroda told a parliamentary session last week.

“For now, we can say Japan is making steady progress toward achieving 2 percent inflation.”

His remarks suggest the BOJ will revise up the previous fiscal year’s price forecast and maintain its bullish projections for subsequent years in its twice-yearly outlook report due this week.

But both Kuroda and Nakaso reiterated the BOJ’s readiness to “adjust policy” with additional monetary stimulus should risks threaten achievement of the price target.

“There are various ways to adjust policy. We will decide what among these measures is appropriate depending on economic and price developments at the time,”Kuroda said”.

Resource from Myanmar First Bilingual Business Journal May 1,2014

IFC Probes HAGL Investment Linked to Land-Grabbing

The International Finance Corporation (IFC), the World Bank’s private sector lending arm, has launched an internal investigation into a complaint lodged against the institution for investing in a Vietnamese rubber firm accused of illegal logging and land grabbing in Ratanakkiri, an NGO and a villager said last week, according to Cambodian media reports.

Earlier in April, representatives of the IFC’s Compliance Advisor Ombudsman (CAO) met with leaders from 17 indigenous communities in Andong Meas and O’Chum districts, along with representatives of Vietnam-based Hoang Anh Gia Lai (HAGL), which operates rubber plantations on economic land concessions in the Kingdom’s northeast, according to Eang Vuthy, executive director at NGO Equitable Cambodia.

The IFC is accused of supporting HAGL’s actions by investing millions through an intermediary fund called Dragon Capital Group since 2002.

Last year, HAGL came under fire after UK-based NGO Global Witness published a report accusing the rubber giant of illegally logging outside concession areas and being in possession of at least 47,000 hectares of economic land concessions — almost five times the legal limit.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Indonesia to Make It Even Harder for Foreign Miners

Indonesia’s decision to start cancelling investment treaties with 62 countries has passed with little comment, but the move may have a greater impact than the recent banning of mineral ore exports.

Indonesia in March kick-started the process of terminating all of its bilateral treaties by notifying the Netherlands that its agreement to protect and promote investment would end in 2015, and signalling that the others would end as soon as possible.

The agreements, which are common between states, protect the rights of investors in each other’s country, and typically include clauses about fair treatment, no expropriation and guarantees that profits can be repatriated.

Most importantly for many investors in countries like Indonesia, with its patchy record on legal certainty, is the right of appeal to the Washington-based International Centre for Settlement of Investment Disputes (ICSID).

Among the countries that have treaties with Indonesia are major foreign investors including China, India, Australia, Britain, Singapore and Russia. However, the United States and Japan are among nations that don’t have agreements.

Why would the Indonesian government seek to end agreements that were designed to foster foreign investment and economic development, as well as protect Indonesian investments abroad?

The main argument seems to be that their time has passed and they belong to an earlier era when foreigners feared assets would be nationalised. The treaties are seen favouring foreigners over domestic investors, something at odds with the government’s drive to ensure greater control of Indonesia’s mineral resources.

This can be seen against the backdrop of a raft of changes to Indonesian law and regulations, which among others enforced a ban on exporting unprocessed ores, mandated the building of smelters and introduced laws to force the sale of stakes to locals of foreign-owned mines.

Indonesia is the world’s biggest exporter of nickel ore and supplies about two-thirds of top buyer China’s imported bauxite, the raw ingredient for making aluminium.

London-traded nickel has gained almost 32 percent so far this year after the export ban came into force in January, with China’s imports of nickel ore from Indonesia plunging 79 percent in March from a year earlier and bauxite slumping 86 percent.

Indonesia is also the world’s biggest exporter of thermal coal used in power-stations, but the impact on coal has been muted so far as it isn’t subject to a ban, but foreign owners will be caught by the need to divest.

The problem for many foreign investors is that they will doubt whether the need for investment protection has passed.

I doubt that any investor in the Southeast Asian nation would privately agree that his company would get a fair hearing in the legislative and court processes, especially if the opponent was the government or a well-connected local.

It seems that the decision to end investment treaties is part of the ongoing process to ensure that Indonesia’s resources are controlled by the government, and/or domestic investors.

Churcill dispute a trigger?

The dispute between the government and London-listed Churchill Mining provides a short-term impetus for the end of investment treaties.

The miner won the first round of its dispute over coal assets with the Indonesian government in February at an ICSID tribunal.

The Jakarta Globe reported on February 28 that the government will appeal the decision and it doesn’t want to face the risk of paying compensation to Churchill, which the newspaper said could be as much as $1.05 billion.

The risk for the Indonesian government is that it could be hit with dozens of cases in the ICSID from disgruntled foreign investors.

It’s not hard to imagine Indian or Australian coal miners challenging the rule that they have to sell half of their stake in a mine once it has been producing for 10 years.

Ending the investment agreements will mean foreign companies having to take their chances in Indonesian courts, a far better prospect for the government.

However, cancelling the treaties will take time, as some run for extended periods and have additional protection clauses once notice of termination is served.

This means the Indonesian government may well have to deal with foreigners in an international tribunal, but it’s a safe bet they will play for time if this is the case.

The trend still appears clear, Indonesia is doing all it can to get control of its natural resources from foreign investors. Clyde Russell is a Reuters columnist. The views expressed are his own.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Obama Reaffirms Commitment to Japan on Tour of Asia Allies

US President Barack Obama assured ally Japan last week that Washington was committed to its defence, including of tiny isles at the heart of a row with China, but denied he had drawn any new “red line” and urged peaceful dialogue over the islands. Obama also urged Japan to take “bold steps” to clinch a two-way trade pact seen as crucial to a broad regional agreement that is a central part of the US leader’s “pivot” of military, diplomatic and economic resources towards Asia and the Pacific.

US and Japanese trade negotiators failed to resolve differences in time for Obama and Prime Minister Shinto Abe to shake hands on a deal at the summit, but the two leaders reported progress and ordered their teams to keep working.

Obama, on the start of a four-nation tour, is being treated to a display of pomp and ceremony meant to show that the US-Japan alliance, the main pillar of America’s security strategy in Asia, is solid at a time of rising tensions over growing Chinese assertiveness and North Korean nuclear threats.

“We don’t take a position on final sovereignty determinations with respect to Senkaku, but historically they have been administered by Japan and we do not believe that they should be subject to change unilaterally and what is a consistent part of the alliance is that the treaty covers all territories administered by Japan,” Obama said.

“This is not a new position, this is a consistent one,” he told a joint news conference after his summit with Abe, using the Japanese name for the islands that China, which also claims sovereignty over them, calls the Diaoyu.

“In our discussions, I emphasized with Prime Minister Abe the importance of resolving this issue peacefully,” Obama added.

International rules

Obama also said there were opportunities to work with China – which complains that his real aim is to contain its rise – but called on the Asian power to stick to international rules.

“What we’ve also emphasised, and I will continue to emphasise throughout this trip, is that all of us have responsibilities to help maintain basic rules of the world and international order, so that large countries, small countries, all have to abide by what is considered just and fair,” he said.

Some of China’s neighbours with territorial disputes with Beijing worry that Obama’s apparent inability to rein in Russia, which annexed Crimea last month, could send a message of weakness to China.

Obama told the news conference that additional sanctions were “teed up” against Russia if it does not deliver on promises in an agreement reached in Geneva last week to ease tensions in Ukraine.

The two leaders also agreed that their top trade aides, US Trade Representative Michael Froman and Japanese Economy Minister Akira Amari would keep trying to narrow gaps in their trade talks.

Abe has touted the TPP as key to “Third Arrow” reforms needed to generate growth in the world’s third-biggest economy, along with hyper-easy monetary policy and fiscal spending.

Both sides have also stressed that the TPP would have strategic implications by creating a framework for business that could entice China to play by global rules.

But the talks have been stymied by Japan’s efforts to protect politically powerful agriculture sectors such as beef, and disputes over both countries’ auto markets.

Pointing to restrictions on access to Japan’s farm and auto sectors, Obama said: “Those are all issues that people are all familiar with and at some point have to be resolved. I believe that point is now.”

Resource from Myanmar First Bilingual Business Journal May 1,2014

Australia Inflation Lower Than Feared, Lessens Rate Hike Risk Underlying inflation surprisingly restrained in Q1 at 2.6pc

Australian inflation was surprisingly tame last quarter showing a moderation that greatly lessened the pressure for a hike in interest rates this year and sent the local dollar sharply lower.

A key measure of underlying inflation rose by only 0.5 percent in the first quarter and 2.6 percent for the year, well below forecasts of 0.7 percent and 2.9 percent respectively.

That was a big relief following a high reading the previous quarter and supported the Reserve Bank of Australia’s (RBA) confidence that inflation would stay consistent with its long-term target of 2 to 3 percent.

“The coast is relatively clear on the inflation front for the RBA to keep rates low,” said Ben Jarman, and economist at JPMorgan. “On the inflation front itself, things look relatively benign still.” Investors reacted by paring back the risk of a hike in the 2.5 percent cash rate at least until very late in the year. That in turn knocked the Australian dollar down over half a US cent to $0.9303, though local yields still remain high by rich-world standards. The anxiously awaited report from the Australian Bureau of Statistics showed the headline consumer price index (CPI) rose 0.6 percent in the first quarter, from the previous quarter when it climbed 0.8 percent.

The annual pace did edge up to 2.9 percent, the highest since late 2011, but that was well below forecasts of 3.2 percent. The quarterly increase was driven in part by seasonal increases in some sectors such as healthcare, transport and school fees, and by a large hike in tobacco duties. Education costs have been one of the main drivers of inflation, climbing by 5.1 percent in the year to March. That was balanced by falls in the cost of clothing, furniture, holiday travel and car maintenance.

The RBA had argued the pickup in inflation seen last year was temporary and that sluggish wage growth would keep it consistent with the target band over time.

“That high Q4 reading just never fit with weak wage growth and rising unemployment,” said Michael Turner, a strategist at RBC Capital Markets.

“Today’s data show the underlying pulse of inflation is not that strong. Market prices ex-volatiles were actually flat in the quarter and inflation in services moderated.”

Resource from Myanmar First Bilingual Business Journal May 1,2014

GM Seeks US Court Protection Against Ignition Lawsuits

General Motors Co filed a motion in a US court to enforce a bar on lawsuits stemming from ignition defects in cars sold before its 2009 bankruptcy as it fights proposed class action litigation that seeks to set aside the restriction.

Plaintiffs suing the company also filed a proposed class action lawsuit in Manhattan bankruptcy court last week, seeking an order declaring that GM cannot use the bankruptcy protection to absolve itself from liabilities.

The faulty ignition switch has been linked to at least 13 deaths and the recall of 2.6 million GM vehicles.

GM emerged from bankruptcy protection in 2009 as a different legal entity from the so-called old GM. Under those terms, the “new GM” shed liability for incidents predating its exit from bankruptcy, and any lawsuit involving pre-bankruptcy issues must be brought against what remains of old GM.

“New GM’s recall covenant does not create a basis for the plaintiffs to sue new GM for economic damages relating to a vehicle or part sold by old GM,” the company said in a filing in the Bankruptcy Court for the Southern District of New York.

The motion did not address claims stemming from accidents, including personal injury and wrongful death. GM has said it is committed to replacing the defective switches in cars.

“GM has taken respon- sibility for its actions and will keep doing so,” spokesman Jim Cain said in an emailed statement.

The company recognises its “civil and legal obligations relating to injuries” tied to the recall cars, Cain said, adding that GM has retained lawyer Kenneth Feinberg to advise it of its legal options.

Feinberg is known for his work in administering special payment funds for high-profile catastrophes like the September 11, 2001 attacks and the BP Plc oil spill.

Late last Tuesday, US Bankruptcy Judge Robert Gerber in New York issued an order setting a procedural conference for May 2 to determine how the case should move forward, saying that “no substantive matters will be decided.”

Also last Tuesday, GM said it was restructuring its engineering operations to improve the quality and safety of its vehicles.

Since it began to recall vehicles in February, GM has been hit by dozens of lawsuits on behalf of individuals injured or killed in crashes involving recalled cars, as well as protection from liability.customers who said their vehicles had lost value as a result of the company’s actions.

The plaintiffs have said they bought or leased vehicles that had the defective ignition switch and accused GM of fraudulently concealing its knowledge of the defect. As a result, they said, the company was not entitled to protection from liability.

“GM’s argument suggests that the US Government would have agreed to extend $4o billion of taxpayer money for GM’s restructuring, and supported shielding it from liability through the sale order, had it known of GM’s intentional misconduct,” the plaintiffs said in their lawsuit.

In its filing, GM asked the court to direct the plaintiffs to stop suing new GM for claims that are barred by the bankruptcy sale order and the injunction, and to dismiss the earlier claims.

“GM’s filing last night was a preemptive attempt to dominate the discussion about its so-called concern for the damages caused by defects it has been aware of for nearly ten years,” Mark Robinson, a lawyer for the plaintiffs, said in a statement.

Resource from Myanmar First Bilingual Business Journal May 1,2014

 

FDA Moves to Ban of E-Cigarattes to Minors

The US Food and Drug Administration proposed measures last week that would ban the sale of e-cigarettes to consumers younger than 18, but would not restrict flavoured products, online sales or TV advertising, likely disappointing some public health advocates.

Electronic cigarette advocates lobbied against restrictions on flavours and advertising, saying they would stifle innovation. Critics argue flavours such as strawberry and butterscotch appeal to youngsters, while unrestricted advertising threatens to make the products glamorous and could act as a gateway to traditional cigarettes.

If finalised, the long-awaited proposal would subject the $2 billion e-cigarette industry to federal regulation for the first time. A law passed in 2009 gave the FDA authority to regulate cigarettes, smokeless tobacco and roll-your-own tobacco and stipulated the agency could extend its jurisdiction to other nicotine products after issuing a rule to that effect.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Is Winter Coming?

I know that winter is not actually coming to Myanmar, literally speaking. Not now or ever. However, the recent premier of that bloody soap opera for men that, I waited so long for, reminds me of the need to be forward thinking even in an age where winter is not the life threatening yearly event it used to be. It also reminds me that the great oversized returns the market has recently delivered will not go on forever, as this cycle will eventually come full circle.

In colder climates than Southeast Asia, people used to have to spend most of the nice months of the year working very hard to try and prepare for the brutal winters that came every year relentlessly. One never knew what kind of winter was coming, so every year they had to get ready for the worst and hope for the best. Being ill prepared meant death, so this way of life definitely fostered a forward looking way of thinking.

Nowadays however, the only winter most of us have to deal with is the winter of our lives. This modern winter is a time when our financial demands outpace our ability to earn. Finding a balance in life during our working “summer” between preparing for a future that isn’t even guaranteed to come, and enjoying our lives in the here and now is a difficult thing. Many say there is only one here and now so live for today, and there is a lot of truth in it. Yet the future can be a long and tiring slog if you aren’t prepared for it financially.

When I look at the state of the world and the amount of financial life support the printing presses of the central bankers have given the financial markets, one thing becomes very clear to me. Winter is coming. It is not a question of if, but when. All Yellen has to do is open her mouth and if market participants view her comments as dovish, markets go up. If they view them as an indication interest rates could rise sooner rather than later, the markets go down. Since we know how this will eventually have to go (interest rates cannot remain low forever), many of those out there making the quick gains while this market pushes on to new highs on a less than stable world economy and political scene are certainly living for the day. We don’t know what kind of winter the next crisis will be, but one thing that is historically certain is that it will come.

So yes, winter is coming. Your earning potential will eventually wither and die and you need to be spending some of your earnings saving for what could be a very long winter with all of the advancements we are likely to continue to make in the field of increasing human longevity. Winter is also coming on this six-year-old bull market, but it is going to be the central bankers who determine when it is time to set the clocks back.

David Mayes MBA provides wealth management services to expatriates throughout Southeast Asia, focusing on UK Pension Transfers. He can be reached at david.m@faramond.com. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Amazon’s Revenue Increases Even As Spending Rises

Amazon.com Inc’s evenue grew more han expected for the first quarter, largely offset by a sharp increase in spending on technology, content and new warehouses as the e-commerce company branches into new businesses.

Amazon’s international unit, which accounts for 40 percent of sales, continued to be a drag as sales growth slowed to 18 percent during the quarter. Global unit sales, a closely watched measure of how many items Amazon has sold, also decelerated, rising only 23 percent.

The company is investing heavily in new markets abroad, particularly China, where it faces tough competition with Chinese e-commerce company Alibaba.

“A lot of the things that we’ve done – making sure that we have the right pricing in place on behalf of the customers, making sure that our service levels are where we need them to be — those are the things we continue to work on in China,” Chief Financial Officer Tom Szkutak said during a conference call.

“Is it a large investment? Yes, it is. And that investment has increased over the past several years.”

Szkutak added that Amazon was “encouraged” by the weekly growth in Prime users, even after the company increased the price of the service by $20 last month.

Shares of Amazon, which is also aggressively expanding its lineup of devices and computing services to sustain its growth pace, were little changed in after-hours trading.

Resource from Myanmar First Bilingual Business Journal May 1,2014

Myanmar Tourism Boom A Magnet for Gulf Investors

Tourism in Myanmar, the formerly most isolated Southeast Asian country, is witnessing an unprecedented boom with an astounding surge in international tourist arrivals, up 93 percent since 2012 as compared to 2013.

Tourism receipts were also skyrocketing and reached $926 million in 2013 against some $400 million in 2012, according to official government figures. The country is confident that visitor numbers will more than double, from 2 million in 2012 when the reclusive nation started to make it generally easier for tourists to visit and move around, to 5 million by 2015, said Myanmar’s President Thein Sein at a speech he gave earlier in April to tourism organisations in Yangon.

This is the upside of the development. The downside is that the country is in dire need of tourism and hospitality infrastructure and depends to a great extent on foreign investors to build enough hotels, resorts and roads, as well as develop formerly almost inaccessible areas that hold enormous potential for tourism such as the southern island in the Andaman Sea and the northern mountainous regions which boast Southeast Asia’s highest mountains but are practically out of reach for tourists due to non-existing roads or airports.

Thein Sein mentioned that the Myanmar Tourism Master Plan 2013 to 2020 has identified 38 projects that require $486 million of funding to bring tourist attractions up to an international standard, and this is only the beginning.

Tourist arrivals are expected to reach over 7 million in 2020, and revenue from the tourism industry should reach $10.18 billion in the same year, which indeed indicates explosive growth.

This is a window of opportunity for investors and tourism developers from the Gulf, as companies feel definitely enticed by the new open access to the country, with the two most remarkable developments being Qatar’s Ooredoo investing billions of dollars in Myanmar’s telecom infrastructure and Qatar Airways having opened direct flights from Doha to Yangon in October 2012.

Another Gulf company that has already set up shop in Myanmar is UAE industrial group Al Mar-wan, which wants to build road infrastructure and hotels and also set up trade and marine services in the country.

In the tourism segment, basically everything is needed, most of all, hotels and related leisure facilities, together with appropriate infrastructure. Yangon, for example, is suffering from a strong under supply in hotel rooms which has led to extreme price distortions in the hospitality market. Meanwhile, Novotel, Best Western, Hilton, Shangri-La and other chains have already entered Myanmar or have signed agreements with local partners.

What will also be needed are resort developers for high-end tourism project on Myanmar’s southern islands, which have been almost completely off the beaten tourist track up to now — apart from a few diving sites accessible by boat and special permit — but are part of Myanmar’s tourism master plan with which is obviously wants to compete with Thailand.

And the comparison is not far-fetched: Experts see Myanmar similar to Thailand 30 years ago with regards to tourism development, and having the same if not a better potential. And it could close up fast to its wealthier neighbour.

Resource from Myanmar First Bilingual Business Journal May 1,2014