MYANMAR 2017

PERSPECTIVE INVESTMENT EXTRACTIVE INDUSTRIES agriculture FISHING MANUFACTURING HEALTH infrastructure tourism

CONSTRUCTION & DEVELOPMENT ELECTRIC INDUSTRY HOTELS & TOURISM MANUFACTURING OIL & GAS PHARMACEUTICALS & HEALTHCARE TRANSPORTATION & LOGISTICS AYER SHWE WAH As one of Myanmar’s largest conglomerates, GROUP OF COMPANIES we have a diversified portfolio of businesses Headquarters that all contribute to our country’s economic Building C, 2nd floor, Kabar Aye Pagoda Road, growth and development. With our team of over Pearl Condo 1,000 highly-trained staff and state-of-the-art Bahan township, Yangon, Myanmar. technology and practices, Ayer Shwe Wah is Phone; +95 (1) 860 42569 committed to investing in the future of Myanmar. http://aysw.com.mm Shutterstock: Patrick Foto Patrick Shutterstock: AYER SHWE WAH GROUP OF COMPANIES

As one of Myanmar’s largest conglomerates, we have a diversified portfolio of businesses that all contribute to our country’s economic growth and development. With our team of over 1,000 highly-trained staff and state-of-the-art technology and practices, Ayer Shwe Wah is committed to investing in the future of Myanmar.

CONSTRUCTION & DEVELOPMENT ELECTRIC INDUSTRY HOTELS & TOURISM MANUFACTURING OIL & GAS PHARMACEUTICALS & HEALTHCARE TRANSPORTATION & LOGISTICS

Headquarters

Building C, 2nd floor, Kabar Aye Pagoda Road, Pearl Condo Bahan township, Yangon, Myanmar.

Phone; +95 (1) 860 42569 http://aysw.com.mm Contents

6 28 48 perspective AGRICULTURE INFRASTRUCTURE AND FISHING

8 The transformation of 50 Construction: Myanmar briefing 30 Reviving the rice bowl of A changing landscape briefing 10 Aung San Suu Kyi, Asia briefing State Counsellor 32 Oceans of potential 52 Mapping the road ahead in-depth interview in-depth 14 Aung Thet Mann, CEO, Publisher: SANTIAGO ORDIERES Ayer Shwe Wah Group of Companies interview 54 ASSOCIATE PUBLISHER: 35 barbara czartoryska MANUFACTURING TOURISM head of institutional relations: 17 sophia shepodd INVESTMENT 36 Made in Myanmar: 57 The path less travelled Editor: offers the most briefing CARMEN MOURA Manufacturing takes off briefing 59 Paradise found: Art Director: Shangri-La adds refinement STEVE FARDY 18 Investors are welcome 38 Strategic local player briefing to Yangon in-depth PRODUCTION COORDINATOR: Loi Hein sees opportunity ARI BASTART 20 Aung Naing Oo, amidst Myanmar’s drinks 61 Capital prospects: Director General, sector shake up in-depth The rise of Naypyidaw project director: JOACHIM LANTHIER Directorate of 40 Dr Sai Sam Htun, in-depth Investments and Company Chairman, Loi Hein Group PROJECT COORDINATOR: Administration (DICA) MAR MIQUEL of Companies interview interview Contributing EDITORS: NATHALIE BOURGEOIS SALLY CRAIL MARKO RANKOVIC 22 43 HEALTH cover image: © Krunja. The EXTRACTIVE Shwedagon Pagoda, Yangon INDUSTRIES Myanmar 44 The health of a nation briefing 24 New paradigm for 46 Medical sector set for Myanmar’s resources growth in-depth briefing 26 Dowstream movement in-depth

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myanmar 2017 5 Perspective

b rIEFINg Pi rof le

08 10 THE PROFILE: TRANSFORMATION STATE COUNSELLOR OF MYANMAR AUNG SAN SUU KYi Myanmar’s reforms will ensure the rapid growth of the last-frontier economy in Asia INTERVIEW

14 AUNG THET MANN — CEO, AYER SHWE WAH GROUP OF COMPANIES

FACTS & FIGURES

16 FIVE REASONS TO BELIEVE IN MYANMAR es denpictur E CC: CC: briefing Perspective the transformation of myanmar

economic policy for achieving this vision, which the over what they grow and when they grow it. It also senior country economist for the World Bank Habib intends to provide support for high value-added Rab described as “very strong.” crops and livestock breeding, enable more credit The Transformation of Myanmar The country’s overall strategy for growth is to focus access for farmers, and strengthen land tenure. on the development of industry and manufacturing, Myanmar needs better infrastructure: less than agriculture and infrastructure, diversifying exports half the roads are surfaced and two-thirds of the Myanmar’s democratically elected government is introducing reforms that will ensure the rapid growth of and expanding value-added production. These population is not connected to the electricity grid. the last-frontier economy in Asia. priorities were highlighted in the government’s first As a result, investment in power, transportation full budget, approved in March 2017 and worth and communications will be a major contributor approximately USD 15.3 billion. to economic growth in the near future. Manufacturing constitutes around Once a monopoly, the communications sector three-quarters of industrial output has already been liberalised, with four telecoms and 20% of GDP. Food processing licences being granted and 85% of the population The government has amounts to about two-thirds of now in range of a 3G network. Next up is electricity: initiated wide-ranging manufacturing, while wood and the National Electrification Plan aims to provide economic, social and garments are the major export universal access to electricity by 2030, and ADB products.5 The garment sector, in believes that, along with building the power plants governance reforms. particular, is growing and the World needed to meet the new demand, this will cost These have stimulated Bank has suggested that Myanmar USD 30 billion. Using a build, operate and transfer economic growth and led could become a “major new sourcing contract for a new 225MW gas turbine project hub for global brands in mid to near Mandalay, the government is developing a to a restructuring of the high-end international markets.” public-private partnership framework that it can

Professional economy, with improved The most important regions for use to encourage investment in other schemes. The B S E social indicators and industry are in and around Yangon country also wants to build its first deep-sea port and the city of Mandalay. Yangon and expand the bigger of its two major container rule of law alone accounted for a quarter of ports — Myanmar Industrial Port in Yangon, which

Shutterstock: Shutterstock: Myanmar’s GDP growth in 2014- handles more than 400,000 twenty-foot equivalent Asian Development Bank (ADB) As Myanmar grows and its ties with international investors deepen, the country is finally set to fulfill its potential 2015 and over 90% of its economy units every year. consists of industry and services.6 In order to foster a more skilled workforce, After over five decades of military rule, class is developing and per-capita consumption To spread the growth of industry further, there spending on education and healthcare increased Myanmar has emerged from economic isolation increased by about 14% in 2015-2016.4 will be three Special Economic Zones (SEZs) along from 8% of the state budget in 2010 to about 20% as a democracy and is transitioning into a stable Since 2012, international donors have been Myanmar’s coast, which will have specific incentives in 2015,8 and the new government is continuing market economy. It now offers “enormous potential returning and new investment programmes have and simplified business procedures, and which to invest in this area. Tourism is expected to grow for economic growth,” according to the World Bank, been introduced. Sanctions ended when the US the NLD wants to turn into the country’s growth significantly, and it needs skilled labour. not least because of its location. The Southeast Asian government lifted its final barriers in October 2016, engines. The first of these, Thilawa SEZ near Yangon, The NLD started its transformation of the country is bordered by China, India, Laos, Thailand turning Myanmar into a full trading partner. The has already opened and could generate 40,000 country’s finances at the top, by reducing the number and Bangladesh — which represent about 40% of US has also restored trade preferences, enabling jobs, says the World Bank. It’s jointly owned by an of ministries from 36 to 21, to create a more efficient the world’s population and slightly over 20% of the country to export products like jade without international consortium led by Mitsubishi, the government. Since then, it has “improved financial global GDP.1 duty. Furthermore, regulations for banks working in government and local businesses, and some of the management, banking supervision and prudential The move to democracy and liberalisation began Myanmar have been reduced, making cross-border 100 enterprises expected to move there are already controls and monetary policy tools,” notes ADB. in 2011 and culminated with the landslide victory of payments and transfers easier. in place making garments, medical equipment, The new government has also been commended Aung San Suu Kyi’s National League for Democracy The local population of 52.8 million has a high machinery, pharmaceuticals and other products. for its progress on financial sector reform by (NLD) party in the general election of 2015. Aung percentage of young people and, while unskilled, has The country’s agriculture sector is vulnerable to the International Monetary Fund. A Financial San Suu Kyi, as State Councillor, became the de facto a 76% literacy rate and wages that are lower than changes in prices, increased competition and natural Institutions Law, passed in 2016, lays down stricter head of government when her party took office in in neighbouring countries. Myanmar is also rich in disasters — such as floods in 2015, which reduced regulations for a more stable and modern banking March 2016, accompanied by international goodwill fertile land, forestry, fisheries, minerals, gems and References production and contributed to a drop in Myanmar’s system. The number and role of private banks has 1- World Bank, “New 7 and high expectations. Since then, “the government jade, and is responsible for almost half of natural investment law helps GDP growth forecast for 2016-2017 to 6.5%. But been expanded, with foreign banks now operating has initiated wide-ranging economic, social and gas exports in Southeast Asia. Myanmar rebuild its economy the government and international donors still see in the country and, through a Financial Sector and create jobs,” (Jan. 2015) governance reforms. These have stimulated economic But the country faces major challenges. Its business 2- World Bank, East Asia and agriculture as playing a very important role in the future Development Project supported by the World Bank, growth and led to a restructuring of the economy, environment, governance standards and financial stability Pacific Economic Update, development of the country: about three-quarters state-owned banks are being restructured to enable April 2017 EA 2017 with improved social indicators and rule of law,” are seen as areas of concern. Significant investment is of the population live in rural areas and agriculture better access to credit, improved payment systems 3- World Bank, Myanmar notes the Asian Development Bank (ADB). And needed in Myanmar’s infrastructure, with ADB estimating a Economic Monitor, (May provides half the country’s employment and 20% of and a modernised central bank. Myanmar also has the World Bank predicts this growth will continue, USD 120-billion investment gap for 2017–30 for 2016) exports. With one of the region’s lowest population a new, if small, stock market. with GDP increasing by about 7% every year until transport, energy and telecommunications alone. 4- Ibid densities, Myanmar has plenty of available, fertile Considered the last-frontier economy in Asia, 5- World Bank, Myanmar 2019, while the average expected rise for developing The Minister for Planning and Finance, Kyaw Economic Monitor, (Dec. land, offering great opportunities for increasing Myanmar has transformed its governance and countries in East Asia other than China is 5%.2 Win, says that economic growth is Myanmar’s 2016) agricultural production and diversifying into higher economy in a short period of time. With the 6- World Bank, Myanmar As well as growing, the economy is modernising, number one priority. The government’s vision is for Economic Monitor, (May value crops. The Farmland Law of 2012, however, continuing reforms being made and planned by with agriculture’s share of GDP falling from about inclusive and sustainable economic progress with 2016) prohibits farmers from growing these alternative the new government, its growth “will remain rapid 37% in 2010 to around 29% in 2015, while the main national reconciliation, equitable development, 7- World Bank, Myanmar crops without government permission. In order in the medium to long–term,” according to ADB. Economic Monitor, (Dec. growth areas have been wholesale and retail trade natural resource protection and job creation. In 2016) to support and modernise the sector, the NLD has “We think that our country is in a position to take services, transport and telecommunications.3 A middle July 2016, the government announced its 12-point 8- Ibid said it will give farmers full production freedom off,” affirms Aung San Suu Kyi.

128 LEADINGLEADING EDEDGEGE myanmarmali 2017 139 PROFILE PROFILE aung san suu kyi: taking stock

of a new era. But, as former US ambassador Derek make profits so that we can make profits as well,” Mitchell observed in an editorial in March 2017,1 Aung San Suu Kyi said at the time.2 “Economic underdevelopment, civil war, and International institutions point out that the Aung San Suu Kyi: TAKING STOCK degradation of virtually every institution […] over fundamentals are there. The World Bank and the the past 50 years cannot be wiped away by a single International Monetary Fund (IMF) both project election.” an economic rebound, with a strong growth of Since taking office as State Counsellor in Myanmar, Aung San Suu Kyi has had to contend with the country’s On the economic front, her record so far has respectively 6.5% and 6.3% for the fiscal year transition to a market economy, and to ensure that it’s on the way to greater and more equitable prosperity. fallen short of expectations, and business leaders ended in March 2017.3 Both welcomed the first at home and abroad are calling her government to steps towards liberalisation, in particular the new move more decisively towards reform, and, above investment law that came into effect this spring, all, to deliver clear goals and objectives. Indeed, which “along with other investment climate the 12-point economic plan presented in July 2016 reforms either approved or under discussion, [has] is a scant, 2.5-page series of bullet points, more a the potential to contribute to significant economic declaration of principles than a properly detailed growth,” said the World Bank. roadmap. Among the 12 priorities listed in the Aung San Suu Kyi herself emphasised that plan are efforts to “improve the operations of state- health and education were more important issues owned enterprises and privatise those that have the in this first year, and justifies her record. “We have potential to be reformed”; “improving and expand- witnessed a significant rate of development in ing vocational education and training” in order to the public health care sector. The international foster “a modern developed economy”; “asserting community has acknowledged our progress,” she the right of individu- said in her anniversary speech. als to freely pursue the Indeed, in April 2017, the World Bank recognised economic opportunities that, “In its first year, the new government has Our development rate is they choose, so as to ena- launched new economic policies, finalised new very fast. Some countries ble private sector growth health and educations sector strategies, stated new in line with a market priorities such as nutrition and rural development.” had to work for three or four economy system”, and It also pointed out the “opportunities to further years to achieve the level we “identifying the chang- deepen reforms, create shared prosperity for all, have achieved. This is ing and developing and for the country to resume its place as one of business environment the most dynamic economies in Asia.” encouraging. It gives us both in ASEAN and be- In a rare interview with the Nikkei Asian added strength to continue yond, so as to enable our Review this September, Myanmar’s State to push forward.” own businesses to situ- Counsellor reaffirmed her government’s ate themselves to take commitment to economic reform and openness advantage of potential to foreign investment. She insisted on two sectors Aung San Suu Kyi opportunities.” where FDI is particularly needed and potentially

Shutterstock: 360b Shutterstock: This may go without profitable: agriculture and infrastructure. “We are saying for international observers born and bred in concentrating on agriculture because about 70% free market economies and well aware of the new of our people still earn their living in this sector. “Nearly all men can stand adversity, but if the Sakharov Prize, the Jawaharlal Nehru Award trends that are shaping our global world, but for a And we do want to promote more investment in you want to test a man’s character, give him power,” and the Nobel Peace Prize for her steadfast struggle country such as Myanmar, which is emerging from that area. We are going for more public private said Abraham Lincoln. to usher in democracy in Myanmar, for which she decades of isolation, the simple fact that these are partnerships and for more SMEs in this sector,” As she takes stock of her performance thus far sacrificed her personal life. officially presented as the government’s goals is she said. As for infrastructure, she commented as leader of Myanmar, does Aung San Suu Kyi ever Indeed, when under house arrest, she was nothing short of a revolution. Now of course, the that it had “gathered strength in recent years. This ponder the words of the American president? More offered permission to leave the country if she questions are how — and how fast? should be an incentive for more investment. There importantly, do the people of Myanmar and the vowed never to return. She refused, and was parted One of her advisers, Sean Turnell, Associate are new opportunities, developments which would international community believe she has indeed from her husband and the father of her two sons, Professor of Economics at Macquarie University make investment a lot easier, practically speaking. arrived at a crossroads where she is put to the Dr Michael Aris, a British scholar specialising in in Sydney, defends the government’s progress, Construction work has gone very well over the last test by the complexities of political and economic Tibetan culture. He died of cancer in 1999, having arguing that economists expected a downturn at year and half, and there is massive demand.” governance? visited his wife only five times in ten years. But, “As this point in the reform process: “Lots [of foreign Aung San Suu Kyi calls on her countrymen The Lady, as she is affectionately called by a mother, the greater sacrifice was giving up my direct investment] came in at first, but mostly and the international community for patience, her people, now aged 72, has to manage the sons,” she said. “Although I was always aware of the in mining, energy, and natural resources. Now undoubtedly one of her most remarkable qualities. expectations raised by her 2016 accession to power, fact that others had given up more than me.” comes the harder stuff: how to attract investment “One year is not a very long time” she said in following almost fifty years of military rule. Following the victory of her National in manufacturing, in rural supply chains, in retail, March. “I have had conversations with people References Graceful and soft-spoken, the daughter of the League for Democracy (NLD) party in the 2015 and in tourism,” he told TIME Magazine in March. from countries that have gone through similar 1- Asia Nikkei, “Myanmar’s country’s independence hero Aung San, who was elections, she was appointed State Counsellor, a government: time for course The United States lifted all sanctions on experiences as ours. The majority acknowledged murdered when she was a toddler, has attained over position equivalent to that of prime minister and correction?” (March 2017) Myanmar in October 2016, showing its willingness that our development rate is very fast. In some of 2- Financial Times, “Obama the years a global status equal to that of freedom tailor-made for her in order to circumvent the vows to lift US sanctions on to engage economically with the newly-democratic their countries, they had to work for three or four icons such as Nelson Mandela. An Oxford-educated constitutional prohibition for a spouse or parent of Myanmar,” (Sept. 2016) nation. “I’ve always said that I have no use for busi- years to achieve the level we have achieved. This is admirer of Mahatma Gandhi, she received the foreigners to become president. The international 3- Asia Nikkei, “Can nessmen who are incapable of making profits, so I encouraging. It gives us added strength to continue Myanmar sustain growth prestigious American Congressional Gold Medal, community hailed her appointment as the dawn momentum?” (Feb. 2017) expect your businessmen to come to our country to to push forward.”

10 LEADING EDGE MYANMAR 2017 11 Situated in Southeast Asia, Myanmar is home to close to 53 million people and is slightly larger than France, with a total area INDIA of 676,578 square kilometres. With a 2,228km-long coastline on the Bay of Bengal and the Andaman Sea, it shares borders with five Kachin countries: (clockwise) Bangladesh, India, China, Laos and Thailand. Endowed with resources in oil, gas, precious stones such as rubies, Myitkyina myanmar sapphires, pearls and jade, and fertile soils, it is an emerging CHINA economy that has only recently begun to open to international at a glance trade and investment.

sagaing

Hakha Sagaing Mandalay CHIN SHAN MANDALAY Taunggyi K laos Akjab magwe Magwe Kyat EUCAT ( T +6:30) (MMK) Rakhine naypyidaw KAYAH Loi-kaw

bago thailand bay of bengal Po pulation (2016) GDP (2016) Bago region Irrawaddy Hpa-an MILLION bILLION Southeast Asia Pathien yangon KAYIN 52.8 U$D 67.40 Mawlamyaing

Total area Yangon MON GDP growth 2016 676,578 Tavoy square kilometres 6.5% estimated growth 2017-2019 tanintharyi Adul t literacy 7.1% 76% andaman sea GDP per capita at Purchasing Power Parity Caapit l gulf of thailand Naypyidaw U$D 5,351.60 p opulation (2016) GDP at Purchasing 924,608 Power Parity (2016 est.) GDP per sector (2016 estimate) P OPULAtion GROWTH (2005-2016) POPULATION pyramid (2016) Myanmar's largest city is (% real change) Yangon, with a population of 4.8 million bILLION U$D 304.7 60 100+ 95 - 99 Major religions 90 - 94 male 85 - 89 female (2014) 50 80 - 84 Buddhist 87.9% Hindu 0.5% Foreign Direct 27.5% 75 - 79 industry 70 - 74 Christian 6.2% other 0.2% Investment inflow 40 65 - 69 60 - 64 Muslim 4.3% none 0.1% (fy 2016-2017) 55 - 59 Animist 0.8% 46.2% 50 - 54 services 30 45 - 49 bILLION 40 - 44 U$D 35 - 39 7 20 30 - 34 Ethnic groups 25 - 29 26.3% 20 - 24 Burman (Bamar) 68% 15 - 19 agriculture 10 10 - 14 Shan 9% Inflation 5 - 9 (CPI — Consumer Price 0 - 4 Karen 7% million 0 Rakhine 4% Index) (forecast 2016-2017) 2005 2010 2016 3 2.4 1.8 1.2 0.6 00 0.6 1.2 1.8 2.4 3 Chinese 3% No te: the year million age million Indian 2% government recognizes 135 Mon 2% 6.8% indigenous Unit. Times, Economist Intelligence Economics, Myanmar Trading The Business Insider, Guardian, The Independent, Factbook, Bank, CIA World Sources: World other 5% ethnic groups

12 LEADING EDGE myanmar 2017 13 Interview PERSPECTIVE aung thet mann, ceo, ayer shwe wah group of companies

LE: The government is now launching a grand plan ATM: The infrastructure business is not a quick Interview with Aung Thet Mann, CEO, to substantially improve Myanmar’s infrastructure. investment, because of the construction times and Ayer Shwe Wah group of companies What is the future of the infrastructure network physical studies needed. Nowadays, companies in Myanmar? like Unilever, Coca-Cola and Pepsi are coming in, but they are not developing the country, they are ATM: If we compare Myanmar with Thailand, we just selling their products. These are well-known can see how big the infrastructure deficit is. Our international brands, so that’s OK. But I would Clear rules and committed partners population is 10% to 20% smaller than Thailand’s, like to see the manufacturing of other brands in but our country is considerably bigger. Every sector Myanmar. Otherwise our work force will never in our economy is only around 20% of the size of develop technical skills and will never evolve the same sector in Thailand, because we lack the and modernise. We need companies that are proper infrastructure. willing to invest, set up factories and train our Leading Edge (LE): How did the Ayer Shwe Wah Group start workers. and where does it stand today? LE: What would you say to opinion leaders, Aung Thet Mann (ATM): Ayer Shwe Wah started in 1998. At W e are looking for partners who whether in the public or private sector, about the time, our government was very focussed on food security. A will come to stay and enjoy a win- Myanmar’s potential? big plan to develop almost two million acres for farm production win situation. We believe that doing was launched, so we entered the market and started trading rice, ATM: The first good thing that has happened crops and beans. After that, we expanded into the construction business in Myanmar can be beneficial in our country is the removal of the American sector by participating in the development of the new capital, for foreign companies, for local sanctions. Also, the population is growing Naypyidaw. companies and for the country.” steadily and is now more balanced across the Around the same time, we entered the telecom and IT sectors, as territory. But, most importantly, the potential there was a great need to improve communications. We formed Aung Thet Mann, CEO, Ayer Shwe Wah Group of Companies for almost all sectors is huge; there are areas that the Elite Tech Group, one of our subsidiaries, and initiated a are still untouched. For example, Myanmar teak joint venture with Huawei, who provided a lot of important is very famous, but we are exporting only raw technology for the development of communications. Then, with LE: How do you see the future of the electricity materials. If we could produce more finished the new government in power, we entered the public transport sector in Myanmar? And what part will renewable products, a lot of profit would ensue. Finally, sector, modernising the bus service. In 2010, the government energies will play in it? tourism is an area where Myanmar can truly excel. announced the privatisation of the oil and gas sector, so we Eco-tourism could become an important business. expanded into that area as well. Since we are involved in fisheries ATM: My thinking is focussed on hydroelectric and logistics, it was paramount for us to purchase oil for our power and coal, because they are stable energy LE: What about the oil and gas sector?

own consumption. We now have gas stations and terminals, Milezaway Shutterstock: sources. Wind power is an option, but this is a and we will open our own petroleum and LPG terminals. The Ayer Shwe Wah Group is committed to the development of Myanmar tropical country and the wind speed is not constant, ATM: We currently have less than 700,000 cars so the investment in wind power would need to be in Myanmar. Compared to the population, it’s a LE: With all these different interests, what would you say is ATM: The agricultural sector, like others in Myanmar, is not higher or have a lower return. Solar energy is also small percentage. As the number of cars grows, your core business? organised; companies act on their own and they invest their own a huge gamble. It only works in the daytime; at we will definitely need more oil. Needless to say, cash. It’s clear that without planning, organisation and outside night, it´s not stable and we need the technology oil demand will rise in line with the growth of ATM: In telecoms, with giant foreign companies coming in, it’s investment, there can be no substantial growth. Secondly, there and the know-how to match it with our existing sectors like mining, forestry and road construction. difficult for us to compete. Our core businesses are in agriculture is a lack of technology. As for trade, at the time of sanctions we system. However, the first and most important Our problem at the moment is that our country and in the oil and gas sector. In the agriculture sector, most had to operate through Singapore and the trade houses there thing to improve is our distribution system. doesn’t have refineries. Once we do, we can of our traders export only raw products, so we would like to controlled our market. Once the sanctions were lifted, we tried manufacture the petrochemical products that process all our raw products into finished or semi-finished to start exports to Africa (notably to Nigeria and Ghana), but LE: A lot of foreign companies are coming we are now purchasing from Korea and Vietnam. ones. Currently we are exporting to Dubai, Canada and to some they only wanted to deal with Singapore. We need to build to Myanmar to do business and they need to To develop the refinery industry, we need the European countries. a new international market for our goods and products and partner with local firms that have connections government to provide policies, standards and organise the sector for that. and experience. What sort of partners do you procedures. Without them, it’s very difficult for LE: Myanmar’s economy is still based on agriculture, which want to work with? foreign investors to come to Myanmar. employs about half of the workforce. How do you see the LE: Financing is crucial to farming. Myanmar has a bank for future of the agricultural sector? agriculture, but it’s still difficult for farmers or SMEs to get ATM: We are interested in partners who can really LE: What would be your tip for investors coming letters of credit and small loans. What do you think is the core help develop our market and our country. Some here? issue in the financial sector? people would like to make a quick investment, to hit and run; we don’t want that sort of investor. ATM: The Myanmarese are a lovely people. You’ll ATM: The core issue is that we lack the proper setup. We We are looking for partners that will come to stay encounter smiles and hospitality everywhere. To grow as an economy, we need need credit reports, credit ratings and track records to help and to enjoy a win-win situation. We believe that But until recently, only a few could connect, the financial system identify who is credit-worthy and who is doing business in Myanmar can be beneficial for trade and communicate with the outside world. different sectors to grow in parallel, not. We need to strengthen our banking system to guarantee foreign companies for local companies and for People were told for years that Westerners and for that the action of the a certain level of security. Of course, to do that we need the the country. were bad for Myanmar, but this is not true government is paramount.” government to set up the right policies. To grow as an economy, anymore. Globalisation is a fact, and we need we need different sectors to grow in parallel, and for that the LE: What sectors do you think would be profitable to get the population to understand this new Aung Thet Mann, CEO, Ayer Shwe Wah Group of Companies action of the government is paramount. both for foreign investors and for local companies? reality.

14 LEADING EDGE MYANMAR 2017 15 F ACTS & FIGURES

Five reasons to believe in Myanmar investment

Hailed as the new Vietnam because of its potential, Myanmar has not become the instant economic miracle that analysts expected a few years ago. The pace of reforms is slow, although steadfast, and there are a number of daunting problems yet to be solved. However, the fundamentals have not changed. And whichever way you look at them, they only pinpoint to one direction: growth.

b rIEFINg INTERVIEW 1 USD 76 billion GDP by 2020, possibly USD 150 billion by 2030 Myanmar’s GDP has shot up from USD 49.5 billion in 2010 to USD 67.40 billion in 2016. Although 18 20 growth has somewhat slowed down recently, it is still predicted to average 7% annually over the next few years. Current forecasts put the country’s GDP at around USD 76 billion in 2020. Given Investors ALIGNING the current growth rate, it could rise to some USD 150 billion by 2030. Everything will depend are welcome INVESTMENT PRIORITIES on the pace of reforms and other macroeconomic factors, but there is no doubt that Myanmar is A new investment law is A CONVERSATION set to become one of Asia’s fastest-growing economies in the years to come. helping Myanmar climb in WITH: the international rankings for ease of doing business Aung Naing Oo, 2 19 million people in the consuming class by 2030 Director General, Ever since 2011, when Myanmar started opening its economy, a number of studies have forecast Directorate of the emergence of a new middle class with sufficient purchasing power to boost consumption, trade Investments and Company Administration and growth. In 2013, McKinsey forecast that the consuming class would grow from 2.5 million in (DICA) 2010 to 19 million in 2030. Even if expectations are now lower, this remains a fundamental trend: in 2015 a Euromonitor report estimated the number of middle-income consumers would double by 2020. Another telltale sign of confidence is that the World Bank upgraded Myanmar from low to lower-middle income country in 2015.

3 500 million potential consumers in the region Bordering the economies of Bangladesh, China, India, Laos and Thailand, Myanmar is within reach of approximately 40% of the world’s population. When narrowing this number to people living within a five-hour flight and having enough purchasing power to buy its goods and services, Myanmar’s market in the region has been evaluated by McKinsey at a whopping 500 million potential customers. This is a buoyant part of the world with a fast-rising middle class and a huge appetite for consumption, and Myanmar is strategically located at its heart.

4 70% of the population under 40 Myanmar’s population is young: according to the latest census (2014), close to 70% are under 40. This obviously presents a number of challenges, notably in terms of education and job creation, but also a wealth of opportunities. In particular, analysts consider it a factor that will make Myanmar leapfrog into the digital age. Already, social media are widely utilised by the young professionals of Yangon and Mandalay, and the telecoms sector is fiercely competitive. International and local analysts forecast that in the years to come Myanmar’s youth will be decisive in creating booming e-commerce, mobile banking, and tech startups.

5 10 million non-agricultural jobs by 2030 According to the OECD, many of the jobs likely to be created as Myanmar industrialises will not require university-level education, but rather strong technical and vocational skills, complemented by solid foundation skills. The McKinsey 2013 study forecasts that up to 10 million non-agricultural jobs could be created by 2030, including six million in manufacturing. An important factor to take into account is women’s access to the job market, when today only half of them (50.5%) are employed, compared to 80% in Thailand. According to the United Nations Population Fund (UNFPA), if more women entered the job market, there would be a “dramatic rise” in the country’s per capita income.

Sources: McKinsey Global Institute, Boston Consulting Group, Bloomberg, Euromonitor, Trading Economics, OECD, UNFPA

16 LEADING EDGE briefing Investment investors are welcome

past, any foreign investment also needed approval protection against unfair treatment, removes the from the Myanmar Investment Commission (MIC) required ratio of local workers in skilled positions, — a process that was complicated, restrictive and and MIC approval is no longer needed for moving INVESTORS ARE WELCOME could take up to six months. money out of Myanmar. The new investment law, which took effect in Furthermore, businesses can now apply for April 2017, is expected to halve the time to get space in one of the country’s Special Economic A new investment law in Myanmar is already bearing fruit, making the country climb in international approval for investment and also the number of Zones (SEZs), where incentives include corporate rankings for ease of doing business and bringing a broader range of investors. businesses needing approval. New regional investment tax exemption for up to five years, long leases and committees are now handling proposals of under import duty relief, as well as services to help get MMK 6.8 billion (approximately USD 5 million). businesses up and running. “We hope for strong Over that amount, investments that are deemed to interest in our industrial estates from developed need a full MIC permit are, firstly, those that the countries,” says Kyaw Win, Minister of Planning government sees as being and Finance. “Through increased investment strategic. In practice, in our industries, we will be able to develop our this means investments technology and create jobs.” We hope for strong interest in communications, The first of these to open was the 2,400-hectare in our industrial estates from technology, transport and Thilawa SEZ outside Yangon, which was developed developed countries. Through energy infrastructure, urban by a consortium of Mitsubishi, Marubeni, Sumitomo infrastructure, extractive and Japan International Cooperation Agency — increased investment in our and natural resources, collectively owning 49% — and a public-private industries, we will be able agriculture, urban land partnership between the government of Myanmar to develop our technology and media. Other ventures and local organisations. requiring full permits In 2016 and 2017, USD 262 million of foreign and create jobs.” include: investments over investment was injected into Thilawa,3 with a USD 20 million in activities portion coming from Suzuki, which is building an Kyaw Win, Minister of Planning and Finance under the government’s automobile and motorcycle factory in the area. In authority or that take addition, Germany’s Metro Group — one of the

azybones place across country borders; investments over biggest international retail companies — is setting L USD 10 million and in a border-conflict region; up a wholesale depot for a new food distribution and investments involving more than 100 platform. Metro’s Chairman, Olaf Koch, says it is acres of land. Likewise, any investments over investing in Myanmar because it is “a promising USD 100 million need approval, as does anything market that offers abundant opportunities.”

Shutterstock: Perfect Perfect Shutterstock: that might impact the environment. A second SEZ, Dawei, on the Myanmar-Thailand The changes in Yangon, Myanmar’s largest city, reflect the growth of the economy MIC permit holders can access a set of incentives border is a joint project between the two countries that have been set up entirely with a view to and was first planned in 2008. After being suspended Myanmar became decidedly more attractive livestock, fisheries and agriculture.2 Some of the encouraging investment, such as reduced tax for some years, its development has been back on to foreign capital in 2017, after the government companies investing in Myanmar in 2016 and 2017 and long-term leases. Investors who don’t need track since March 2017 and will include a new implemented a new Foreign Investment Law include Japan’s Kirin, which had previously bought a permit, but want the incentives, need to get highway between the nations and a deep-sea port. in April. Although there has been some recent a controlling stake in the country’s biggest beer the new MIC endorsement, which is considered Kyaukphyu SEZ in Rakhine State — 85%-owned uncertainty from investors, the country has seen company, Myanmar Brewery, and is now buying to be relatively quick and easy. There is a sliding by China’s CITIC Group — has also been approved substantial growth in foreign investment: from into the competing Mandalay Beer. scale of incentives, designed to guide investment and should include yet another deep-sea port. This USD 1.4 million in 2013 to USD 6.72 billion for 2016 In the same timeframe, Total started offshore gas to the geographical areas and market sectors that investment is part of China’s major One Belt One to December, according to production, Norway’s Norfund has been building the government is prioritising for growth. For Road initiative to create a transport and energy Myanmar’s Directorate of distributed power networks and Dutch animal- example, businesses can obtain up to seven years’ network linking China and other parts of Asia. The new investment law is Investment and Company feed company De Heus has opened a production tax exemption if they invest in the least developed In terms of further legislation, the government Administration (DICA).1 factory. The logistics division of German railway areas, and up to three years in developed zones, like drafted a new companies act in January 2017, expected to halve the time to In fact, the reforms have company Deutsche Bahn has set up a subsidiary and Yangon. However, as Aung Naing Oo, Secretary of which as well as simplifying requirements for small get approval for investment already improved Myanmar’s Singapore’s Kepple Land has developed a 23-storey the MIC, confirms, investments have to be in one businesses, will allow foreign investors to trade on and also the number of business environment, office block in Yangon, with the company saying it of the government’s priority industries for growth the Yangon Stock Exchange and own up to 35% moving it from 177th on is “committed to participating in and contributing or “they will not get income tax relief, whichever of a Myanmar company. Previously domestic businesses needing approval the World Bank’s global to the growth of the country.” The variety of recent zone they are in.” Some market sectors are not companies were not allowed to have any share Ease of Doing Business investments doesn’t stop there: financial services open to foreign businesses at all, unless in a joint of foreign ownership. In 2016, a new arbitration index in 2015, to 170th in 2017. More strikingly, company Diebold Nixdorf opened a Myanmar venture with a local company. law was introduced, which follows international Myanmar’s ranking for the ease of starting a office, as did India’s Tata Group. The priority growth sectors are agriculture, standards to resolve commercial disputes. Also business moved from 189th to 146th place in the Any business in Myanmar has to be conducted References forestry, livestock, fisheries, manufacturing, the in 2016, a condominium law was passed, giving same period. through a locally registered entity, with foreign 1- DICA, Yearly Approved establishment of industrial zones, urban and foreigners the right to buy up to 40% of a block. Amount of Foreign China accounted for 25.8% of foreign investment investors able to set up either a subsidiary or a Investment, 2016 transportation infrastructure, transport services, The World Bank is confident that these reforms, in 2016, followed by Singapore, Thailand, Hong branch. 2- Ibid power generation and distribution, renewable especially the new investment law, “will spur Kong and the UK, in the major sectors of oil After lodging an application to do one of the 3- Myanmar Times, “Fiscal energy, telecommunications, education, health, significant foreign direct investment growth and job and gas, power, transport and communication, two with DICA, a permit to trade and a temporary year 2017-18: a new dawn for information technology, tourism, and research creation, as business opportunities and increased economic policies,” manufacturing, real estate, mining, tourism, incorporation certificate are quickly issued. In the (March 2017) and development. The new law increases investor investor confidence flow.”

18 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 1319

Interview investment aung naing oo — director general, dica

LE: Another sector you mentioned is manufacturing. There has been interest from neighbouring Interview with countries and foreign investors in moving factories Aung Naing Oo, Director General, Directorate of Investments and Company Administration (DICA) O ur economy is still agriculturally- to Myanmar, particularly in the textile sector, based, with about 70% of the population which is expected to flourish with the removal of US sanctions. What will be the key driver of employed directly or indirectly in this development? agriculture. So one priority is to attract Aligning investment priorities and promote investments in that sector.” AN: For the next five to ten years, the textile industry will be the most promoted sector, because Aung Naing Oo, Director General, it creates a lot of jobs. Our manufacturing sector Directorate of Investments and Company Administration (DICA) was damaged by the sanctions, but now we have regained access to the European and American markets, which opens great possibilities. In the Leading Edge (LE): DICA was created in 1993 and has since that sector. The government has set new guidelines short term, our focus will be on rebuilding the enjoyed quite a bit of success, especially under your tenure. regarding new priority sectors, which include trade ties we formerly had with the US. The food Can you explain its main functions and how it helps investors? healthcare, education and tourism. processing and electronic assembly sectors could also attract investment, but our priority will be to Aung Naing Oo (AN): As the agency’s name indicates, DICA LE: One of the campaign promises of the present develop an added-value industry. For instance, we operates across two major areas: investment and administration. government was to provide affordable housing. want to add value to our raw materials in order In investment, DICA acts as a kind of secretariat for the How can foreign companies get involved in that to expand our exports, especially agro-products. Myanmar Investments Commission (MIC), the authority sector? governing all investment decisions in Myanmar. We are also LE: This brings us directly to the third priority the investment promotion agency. AN: According to the new law, they can own 100% area for DICA: agriculture. How can foreign As for administration, we operate as a regulator for investment of a project or form a joint venture either with the investors enter Myanmar’s agricultural sector? and as a company registrar; whoever wants to do business in government or with local private sector companies. Myanmar must register with us. Our head office was moved Affordable housing is very important for us and will AN: There are two very easy ways to invest in to Yangon from Naypyidaw in 2014, in order to get closer to be an interesting business in Myanmar, because the agro sector in Myanmar. First, investors can the business community here. We now have nine branches it has a lot of potential. Look at Yangon: within acquire virgin lands from the government and use across the country, but we are planning to expand to at least 15. a few years it will be a mega-city, so we do need them for plantations; or they can work together a proper housing plan and that will be of great with farmers and help them by providing the LE: DICA takes care of both domestic and foreign companies interest to foreign investors. The government is technology they need. Cooperatives are not really and investments: what types of investment are available to already planning to expand Yangon by building an option, because of the farm system currently foreign capital? new houses and reducing prices, which at the in use in Myanmar. moment are very high. AN: There are three ways for a foreign company to do business LE: Rehauling a whole country’s economy is a here. The first is to submit a proposal to MIC and obtain the LE: Regarding infrastructure, the government difficult task. What you would like to accomplish necessary permission. Second, they can do business in a special has announced a plan for building a new road as Director General? economic zone (SEZ), in which case they have to go there and grid and many investments have been made apply to the management committee. The third, and probably to construct schools and hospitals. Where do AN: I have a very big dream, not just for me, but the easiest way, is to register their business with us; within Aung Naing Oo, Director General, you think there is an opportunity for foreign also for my country. When I was appointed, I three days, they will be able to start operations. What are the Directorate of Investments and Company Administration (DICA) companies to come in? had to train my staff and find a way to convince differences between these three methods? If somebody wants the government of the need for liberalisation. We to enjoy the incentives they have to apply to MIC. We have Myanmar. Under this law, only a few businesses will need to AN: If you ask what we need in infrastructure, worked hard, and as a result Myanmar went from incentives for investors who want to do business in a SEZ, but get the MIC’s approval; most will just need to inform it of my answer would be: You name it, we need it. being the last country on the Ease of Doing Business the rules are different. DICA has worked with the government their intentions. But there are priorities. We need to generate list to the one that made the most substantial on a new investment law that came into effect at the start of more electric power, which is fundamental improvements in 2016. So my dream is to continue 2017 and will make it much easier for investors to come into LE: A lot of companies are looking at the new investment for industrialisation. There is a lot of room doing well and to improve my country. law with great interest. In addition, Myanmar has moved up for investors in this sector, as only 30% of on the World Bank’s Ease of Doing Business list. What kind Myanmar is covered by the electricity grid. Ports LE: What message would you send to international of companies have been knocking at Myanmar’s door, and are another priority; if we want to promote investors about coming to Myanmar in 2017? what businesses do you think would be good for the country? trade, we need deep-sea ports. Currently, there DICA has worked with the is a project in Dawei for the construction of a AN: We are now on the right track for political government on a new investment law that AN: Our government policy — and priority — is to create deep-sea port, with investment from China and change, which is the most important thing for the more job opportunities. Currently at DICA, we are promoting Japan. Due to our geographic position and our future of our country. Myanmar has a population came into effect at the start of 2017 and investments in labour-intensive industries. Manufacturing is long coastline, we will prioritise port construction of over 50 million, making it a substantial market will make it much easier for investors to our first priority because it will create stable jobs. Our second and that will require foreign investment. for investors. We have natural resources and a come into Myanmar.” priority is infrastructure, because the two are interdependent. The previous government did a good job of strategic location between two global giants, as Our economy is still agriculturally-based, with about 70% of developing the telecommunications sector, but well as access to cross-border markets. We have Aung Naing Oo, Director General, the population employed directly or indirectly in agriculture, there is still much to do, and investments will political stability and economic growth, so our Directorate of Investments and Company Administration (DICA) so our third priority is to attract and promote investments in be needed. prospects are very bright and promising.

20 LEADING EDGE LEADING EDGEMYANMAR Azerbaijan 2017 1521 EXTRACTIVE INDUSTRIES

b rIEFINg In depth

24 26 New paradigm Downstream for MYANMAR’s movement resourceS Significant potential is Hydrocarbons move emerging in Myanmar’s from strength to strength, downstream industries, while mining undergoes along with greater a major revamp market access emin D Shutterstock: Pan Pan Shutterstock:

LEADING EDGE Azerbaijan 17 briefing EXTRACTIVE INDUSTRIES new paradigm for myanmar’s resources

country, continues to be expanded by the French supermajor in partnership with Chevron-Unocal and Thailand’s PTTEP. New paradigm for Despite the volumes of gas produced, electrification is a major issue in the country. Only 35% of the Myanmar’s resources population currently has access to regular power. Low pricing and a lack of reinvestment have prevented rehabilitation and further development The extractive industries sector has undergone a rapid transformation since economic liberalisation. Hydrocarbons of existing generation and distribution assets. have moved from strength to strength, while a hitherto troubled mining sector is undergoing a major revamp. One solution could be better utilisation of Myanmar’s gas reserves, and the country’s biggest gas-fired power plant, capable of generating 225MW, is nearing commissioning in the region of Mandalay. With project costs of approximately USD 300 million, this Singaporean-led project pioneers the endeavour to meet domestic electricity demand.5 Myanmar’s mining industry, mostly focused on gem stones, has not met with the same success after economic liberalisation as the oil and gas sector. At present, it is held back by complex licensing procedures, a lack of transparency and

Shutterstock: Mongkolchon Akesin Mongkolchon Shutterstock: tax evasion issues.6 Consequently, efforts are A gem trader offers her rubies in Mogok being made by the government and civil society to reform the industry and bring it into line with between 2015 and 2016. This amount accounts for international standards. over half of total inbound FDI for this period, and Systemic shortcomings such as these, reforms to licensing and production agreements alongside unsafe mining practices, a high social have succeeded in attracting an array of operators. cost and environmental concerns have led the A testament to the government to undertake a number of dramatic strides being taken in measures to reform the sector. These include a urraheeshutter E Today, Myanmar’s Myanmar’s energy industry virtual moratorium on new mining permits since hydrocarbon sector is known is the commissioning of July 2016 as well as a non-extension of existing the South East Asia Crude licenses. A number of mining concessions all over

Shutterstock: Shutterstock: for natural gas production, Oil Pipeline (SEAOP) the country have since been suspended, though Myanmar’s gas industry alone accounts for half of total exports in Southeast Asia which is overwhelmingly in April this year. A valid mining permit-holders continue to operate. destined to foreign markets. flagship energy infra- At the time of writing, new legislation (the When visiting Myanmar in 1898, Rudyard in 1853, long before any major discoveries in the structure investment, the 2017 Gemstone Law) to reform the industry is Kipling wrote, “This is Burma, and it will be quite Middle East. The Yenangyaung field — whose Alone it accounts for almost USD 2.45 billion pipeline being examined in parliament. There are concerns unlike any land you know about.” He was referring name means stream of oil — was the first major half of total gas exports in is over 700km in length. that the new law will significantly increase red to the culture, people and sights he experienced 19th-century discovery in the country, and still Southeast Asia It transports crude oil tape, thus rendering the sector less viable. Some in Mandalay, but the continues to produce oil. overland from the In- regulatory tests and adjustments continue as quote could just as well Today, however, Myanmar’s hydrocarbon sector dian Ocean to southern stakeholders, including industry representatives, Myanmar’s old Sanskrit name be applied to the country’s is better known for natural gas production, which China, bypassing the need to ship supplies through actively engage with law-makers on the issue. The unique geology. is overwhelmingly destined to foreign markets. References Singapore. It will now deliver an estimated two government has indicated that license renewal and means golden land, and it Myanmar’s old Sanskrit Alone it accounts for almost half of total gas 1- Myanmar Times, “Joint- million tonnes of oil to energy-hungry China the award of new concessions will only resume venture between British and not only boasts significant name means golden land, exports in Southeast Asia. Myanmar firms eyes oil and every year. following the new law’s enactment. and it not only boasts Of the 1.9 billion cubic feet of gas it produces gas sector,” (March 2017) The China National Petroleum Corporation Previously, jade exports — largely meeting hydrocarbon reserves — 2- Myanmar Times,, “Better significant hydrocarbon every year, between 300 and 400 million cubic gas technology, infrastructure (CNPC) leads the consortium for the project along Chinese demand — were a major cash cow for roughly on a par with India’s reserves — roughly on a feet are used domestically. The lion’s share, some crucial to solving power with Myanmar Oil and Gas Enterprise (MOGE), government revenue collection. Better oversight problem,” (Aug. 2017) par with India’s1 — but 1.5 billion cubic feet, is exported.2 as well as Korean and Indian majors.4 and regulations could see this subsector return — but rich mines of gold and 3- Ibid, “MIC approves precious stones rich mines of gold and Significant discoveries continue to be made another offshore oil and gas Plans are underway to replicate the success of much needed revenue to state coffers. The gold precious stones such as offshore, such as in the Rakhine Basin in the supply base” SEAOP by building a second conduit to deliver mining industry is also facing a similar inquiry 4- Myanmar Times, sapphires and rubies. Bay of Bengal, and increases in production are “Pipelines will supply oil and two billion cubic metres of gas to China annually. as outstanding tax payments are sought. It is the premier producer of jade in the world. expected there. gas to Myanmar for domestic Gas supplies will feed into the system from the The extractive industries sector is currently consumption,” (June 2017) The lush green mountains of Mogok in Mandalay Altogether the oil and gas sector generates 5- Myanmar Times, “Gas- Shwe Gas Project in the Bay of Bengal. adjusting to the new economic and political Region are famous for the volume of unique gems approximately 23% of Myanmar’s total GDP.3 fired plant in Mandalay to Other large international companies are realities Myanmar faces. Oil and gas has emerged operate with BOT agreement,” unearthed in the area, boasting pigeon blood It has been the main recipient of FDI following (June 2017) committed to the market, including Total, as a lucrative and important sector for the country. rubies and royal blue sapphires. liberalisation and the subsequent arrival of the 6- Myanmar Times, which has been actively engaged in Myanmar Mining is facing a sector-wide overhaul that, if The country was one of the world’s first crude world’s biggest oil and gas companies, which “Proposed gemstone since 1992. Development of the Yadana gas field successful, should see the industry become a safe, legislation risks leaving flawed oil exporters, establishing outbound operations committed some USD 4.8 billion to the sector system intact,” (May 2017) in the Andaman Sea, the biggest field in the clean and once-again prosperous undertaking.

24 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 1925 in-depth EXTRACTIVE INDUSTRIES downstream movement

2016, a tender to update one plant was withdrawn due to lack of interest and the government’s 2015 Myanmar Energy Master Plan presumes that all DOWNSTREAM MOVEMENT LPG will be imported by 2020. Historically, MPE had a monopoly on importing LPG, some by sea, which it stored While the upstream investment opportunities in Myanmar’s oil and gas industries have been widely at facilities in Thanlyin near Yangon and then recognised, there is also significant potential emerging downstream — and increasingly easy market access. sold to private distributors. In 2011, to promote privatisation, a handful of local companies were given import licences. One of these was Universal Energy Company (UEC), part of the Ayer Shwe Wah Group of Companies, which, along with its sister company Elite Petrochemical, provides a useful picture of how the LPG sector currently

operates and how it is Kodda Shutterstock: opening up. The rise of liquefied petroleum Set up in 2009, UEC gas is being encouraged by the received technical support Energy, the fuel-storage and petrol-station business and services from MPE and majority-owned by Singapore’s Trafigura and the government’s national energy by the end of 2011 it was Angolan Sonangol Group, will start building a policy, which aims to make it the distributing LPG throughout USD 30-million LPG facility at Thilawa in 2017, and country’s leading alternative fuel the country. UEC’s products has received a licence to import, store, distribute are sold under the Eco and sell fuel, according to Puma Country Manager Friendly Fuel brand name, David Holden. which it is positioning as the choice LPG brand. As Puma is interested in other petroleum part of its aim to be Myanmar’s leading supplier, product sectors as well. This year it became the its LPG is a mix of high-quality purified propane first foreign investor to be granted a licence to and butane, which it sells in 4kg, 15kg and 40kg import, distribute and sell petrol and diesel, via a cylinders, all of which pass through quality and USD 92-million terminal at Thilawa. Rob Jones, quantity testing before delivery to clients. It also Puma’s Chief Operating Officer for Asia-Pacific and

Shutterstock: ndoeljindoel Shutterstock: supplies stoves, hoses and regulators. the Middle East, believes that Myanmar can become D ownstream product consumption and manufacturing are on the rise in Myanmar UEC has branches nationwide, a wide network a regional supply hub for petroleum products, and of distributors and a substantial distribution fleet, the company has sized its new infrastructure with An important step was taken this year for since 2011 and is predicted to rise by 20-30% in including large-scale vehicles for deliveries to both that in mind. investors interested in the burgeoning oil and 2017, with annual growth of about 15% continuing urban and rural areas. The company is upbeat Puma’s entry could shake up the fragmented gas sector of Myanmar: the government removed for at least five to ten years.2 This is being driven about the sector’s potential and says it is investing filling station market. The company intends to sell the requirement for foreign businesses wanting by households and restaurants moving from tradi- to improve the supply, distribution and availability petrol and diesel at Puma-branded outlets and, as to import, export, transport, store or distribute tional firewood and charcoal to LPG for cooking, of LPG, and to capture an increasing share of the Holden says, “We don’t have any retail stations today, petroleum products to form a joint venture with because it is easy to store, cheap, reliable and clean. expanding market. It believes that providing value- so clearly we would love to work with companies the Ministry of Electricity and Energy. Investors Commercial demand is also increasing rapidly as added services will be the ultimate differentiator. that do.” 5 It has a large number of retailers available in energy infrastructure are also no longer the country becomes more industrialised. Also operating along the length of the value to talk to. In 2010, Myanma Petroleum Products prevented from trading fuels. In addition, the The rise of LPG is being encouraged by the chain, Elite Petrochemical is currently focussing Enterprise, which had the monopoly, privatised all Petroleum Act 1934 has been replaced by the government’s national energy policy, which aims to on building Myanmar’s LPG sea imports and but 12 of its 260 petrol stations. There are now over Petroleum and Petroleum Products Law 2017, to make it the country’s leading alternative fuel. LPG is storage facilities. In 2016, it started constructing 1,228 private stations in the country and another provide up-to-date guidance and governance for more environmentally friendly and its use reduces a 3,000-tonne marine import terminal in the Ayer Shwe Wah company, Terminal Petrol Filling the industry. the burden on the country’s insufficient electricity Thilawa Special Economic Zone. According to Stations, is a good example of a current operator.

DICA believes there are strong opportunities for grid. To improve standards in the industry, a range References MPE, this will be completed around 2020. A It runs about 12 outlets in Yangon, Naypyidaw and foreign investors in the establishment of facilities of regularly renewed licences has been introduced 1- Maung Maung Thaw, similar project, Asia AVA Gas — a joint venture Ayerwaddy selling petrol and diesel imported from for refineries, fertiliser plants, liquefied petroleum for players at all stages of the LPG value chain, as “International LP Gas between Singapore’s Ava Kahyasi Investments and Singapore, and employs over 400 staff.6 Seminar 2017: Outlook of gas (LPG) and liquefied natural gas (LNG); well as new testing and inspection procedures. “The LPG Business in Myanmar,” local operators — should open in 2017. These will be Holden believes that the government’s decision compressed natural gas refuelling stations; and in aim is to expand LPG use among the public and for (7th-8th March 2017) the country’s first two privately run LPG sea import to award Puma licences for petroleum products 2- Gas Academy, LPG the marketing, distribution and retail of petroleum vendors to sell it safely,” explains Maung Maung Myanmar 2017 terminals and, as it costs much less to import LPG is significant and “should make international products; parts, equipment and machinery; Thaw.3 3- Myanmar Times, “Ministry by water than by road, they should have a large investment more attractive for sure. If I look at the promotes LPG industry,” consulting services; and educational and research Although Myanmar is rich in natural gas, it (June 2017) impact on the market: the Asia AVA Gas project general downstream infrastructure in the country, institutions. does not have sufficient capacity to process it for 4- Gas Academy, LPG alone could lower the price of LPG by at least 20% there is a lot of upgrading that is required.” He The nascent LPG market, for example, is already domestic demand and is reliant on LPG imports, Myanmar 2017 and make it cheaper than electricity.4 reassures other would-be investors that the process being transformed. In March 2017, market demand most of which arrive by road from Thailand and 5- Frontier Myanmar, “Puma Other international businesses are now entering went smoothly and quickly and that the sector is Energy chief: Competition was about 60,000 tonnes a year, says Maung China. It currently has three LPG plants, all of will help to improve the market. The Laugfs Holdings Group of Sri growing strongly enough for more players to join standards and pricing,” Maung Thaw, Deputy Director of the government which need modernising, and which produce a (June 2017) Lanka, which owns LPG tanker ships and is setting it. “This is now a market that is opening up. They 1 agency Myanma Petrochemical Enterprise (MPE). total of 800 tonnes per month. There appear to be 6- aysw.com.mm/oil-gas up a production plant in Bangladesh, is considering haven’t opened it up only for Puma but for all That demand has been increasing by 15-20% a year no plans to encourage investment in production: in 7- Frontier Myanmar, op. cit. an investment of up to USD 200 million. And Puma international investors,” he says.

26 LEADING EDGE MYANMAR 2017 27 AGRICULTURE AND FISHING

b rIEFINg In depth

30 32 Reviving the Oceans of rice bowl of Asia Potential As an important A long coastline and contributor to GDP and clean waters create the employment, Myanmar’s conditions for Myanmar agricultural sector only to become a leading needs reform, technical seafood exporter, at the input and investment same time as industries to rival that of its begin to create added neighbouring countries value for products Shutterstock - SasinTipchai Shutterstock

LEADING EDGE Azerbaijan 23 briefing AGRICULTURE reviving the rice bowl of asia

Reviving the rice bowl of Asia

H istory has shown that Myanmar has great agricultural potential. With the right regulatory reforms, technical input and financial investments, there is every expectation that the country can revitalise the sector. ight L Shutterstock: Soft Shutterstock: Once the world’s biggest producer of rice, Myanmar’s potential for agriculture is considerable

been demonstrated by the ban on livestock export was lifted and state Garments are increasingly technical and financial loans promised to graziers. cooperation with inter- However, infrastructure upgrades must be appystock

H becoming Myanmar’s most national partners such as made to support agriculture, with paved roads promising value-added Japan. Targeted support needed to move produce and bring inputs to export, and the industry in this case included the countryside. Garments are increasingly becoming Shutterstock: Shutterstock: construction of storage Myanmar’s most promising value-added export, The popular markets of Myanmar showcase the abundance and variety of its agricultural output is dependent on locally silos and provision of and the industry is dependent on locally-grown grown cotton, with farmers higher-yield rice strains cotton, with farmers struggling to meet demand. Myanmar has been, and could again become, world’s leading export-producer.1 To put the scale struggling to meet demand to generate bigger har- Foreign investors, particularly from China, are a regional agricultural powerhouse. The country in perspective, by 1940 over 5 million hectares of vests and provide much behind the strong growth seen in the business is endowed with the natural conditions and territory had been converted to rice production, 2 needed storage. over recent years. But the further growth of the hard-working people that once made it a leading an area larger than modern-day Slovakia. Although legislation introduced in 2017 sector is limited by a shortage of foreign direct food producer. However, legislative sector-wide Today, the sector provides a much more diversified has removed many of the barriers for foreign investment (FDI).6 reforms, investment and technical support for picture. Farmers continue to produce unmilled investment in the country, agriculture rates low One area the authorities are keen to develop is farmers are needed to make this a reality. The rice during the monsoon, but grow other major in appeal when compared with other sectors. It food processing, which adds value to agricultural government of Myanmar is currently grappling export crops during the dry season. Myanmar’s accounts for less than 1% of the massive influx produce. Representing two thirds of the current with these issues in a bid to include the sector in most significant agricultural export product is of investment into Myanmar’s economy, a figure industrial production, food processing is set to the economic boom that still rice — although not at the levels prior to which reached USD 7 billion for the fiscal year grow as Myanmar manages to branch out into is sweeping the country. independence — followed closely by maize, beans 2016-2017. neighbouring markets. Indeed, the overproduction Without doubt, agricul- and pulses, oil seeds and rubber, as well as fruits The government’s 12-point economic strategy, of sugar and reduced prices experienced this year Agriculture is the most ture is the most important and vegetables.3 announced in July 2016, acknowledges structural highlight the need for Myanmar to develop its important sector of Myanmar’s sector of Myanmar’s Myanmar’s populous neighbours make up its issues facing the sector, with point 5 focussing on value-added food industry. economy. It accounts for economy. According most important export destinations, with China providing extension services, initiating regulatory FDI is also crucial for the creation of new plants to the World Bank, it and Thailand (primarily for rice) and India (for reforms, tackling land rights issues and providing or the expansion of existing facilities. Large scale References 26.3% of GDP, over 20% accounts for 26.3% of beans and pulses) buying the lion’s share.4 Markets finance to small-holder land users. It states that investment by the Japanese in local breweries are 1- “A Colonial Economy of exports, and provides the GDP and 20% of in border towns have proven particularly lucrative in Crisis: Burma’s Rice the agricultural sector will be given support in an example of the successful transformation of exports, and provides for the sale of vegetables and maize to Thailand, Cultivators and the World order to “promote inclusive growth, enhance raw material into fast-moving consumer goods employment for almost 70% of Depression of the 1930s”, Ian employment for almost where price differentials help move produce. Brown. food security, increase exports, and boost living that can help Myanmar perform a leap in terms the population 70% of the population, While the sector is vulnerable to economic crises 2- “A Century of Rice standards”. The strategy goes on to grant “full of industrialisation. Improvement in Burma”, either directly or indi- — it was devastated during the Great Depression Khin Win, page 18. production freedoms” to support “high value- Encouragingly, new crops are appearing in rectly. In the 2016-2017 when rice price halved for most of the 1930s — it 3- www.export.gov, Burma- added crops” and “livestock breeding.” Critically, Myanmar’s fields. The emergence and growth of fiscal year, Myanmar exported over has also demonstrated remarkable fortitude and Agriculture farmers will have “more access to credit, land high-quality coffee beans in recent years, despite 4- Myanmar Times, USD 2.9 billion-worth of agricultural products. the ability to recover from catastrophe. Recent “Agricultural exports still rely tenure will be strengthened, and production chain existing regulatory and economic impediments, Historically, Myanmar was best known for natural disasters such as Cyclone Nargis in 2008 on neighbouring markets,” sectors improved.” 5 demonstrates that new business lines can take (June 2017) rice, and was even called the rice bowl of Asia. and floods in 2015 ravaged the Irrawaddy Delta, 5- Myanmar Times, A review of the Farmland Law 2012 is needed root in the sector. Reviving the agricultural sector Conversion of swampland into rice paddies began the cradle of agriculture in the country. However, “Government reveals 12-point to follow much of this strategy. At the time of would dramatically boost the national economy, economic policy”,” (June in the 1870s under British influence, and turned harvest levels were subsequently restored with 2016) writing it is still being drafted, with the vocal generate profits for associated industries, increase huge tracts of land over to cultivation. By 1900, international support. 6- Myanmar Times, “More input of stakeholders, civil society and industry food security — both domestically and regionally Myanmar (then called Burma) exported over two The need for extension services and inter- FDI essential for substantial groups. Furthermore, a step towards boosting — and provide better livelihoods for the huge part increase in garment exports,” million tonnes of rice annually, making it the national investments to increase rice yields has (Aug. 2017) the sector was made in July of this year when of the population that depends on it.

30 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 2531 in-depth FISHING oceans of potential

The company he leads, Shwe Yamone, is part of the Ayer Shwe Wah group and one of the companies that has earned this coveted certification, showing oceans of potential what the industry has the potential to achieve. Established in 2001, it has three factories for freezing fish — two in Yangon and one in the Irrawaddy As added-value products multiply and a switch from fishing to aquaculture is undertaken, the seafood region — and it concentrates on higher-value industry becomes vital to Myanmar’s export strategy, and one of the most promising areas for investment. prawn varieties such as sea tiger, black tiger, white, pink, bamboo, fresh water and flower, as well as sea perch, hilsa, cuttlefish and squid. With its newest processing plant, opened in 2014, the company is now one of a handful in the country that is able to produce value-added goods like breaded scampi. All the company’s fish, which come from farms, rivers and deep sea, are of high quality. “Our fish come from water that is free from pollution,” says Tun Aye, “We have great demand from Japan, where consumers are very aware of the risk of chemical contamination and they have confidence in our products.” 9 About 40% of Shwe Yamone’s exports go to Japan, where its clients include companies like

Shutterstock: PKittiwongsakul Shutterstock: Kohyo, Daiko and Mitsubishi, with much of the Only 19% of fish in Myanmar come from farming, and a greater shift to aquaculture is desirable remaining 60% going to China, Hong Kong, the EU, the US and the Middle East. Since 2004, it has been investment in some areas is restricted for foreigners Myanmar’s leading seafood exporter, earning up to and it may, for example, require the formation of a USD 25 million a year with fish exports, although it isarut Sankham

V joint venture with local companies. also supplies shops, households, restaurants, hotels Even though about 90% of Myanmar’s seafood and embassies in its domestic market.10 is eaten within the country, exports in 2016/7 were In order to promote itself to EU buyers, Shwe

Shutterstock: Shutterstock: worth USD 605 million and are expected to reach Yamone was one of four fish processing companies High-quality prawns from Myanmar are coveted by neighboring countries, and can become a value-added product of the local seafood industry USD 700 million in 2017/8, according to Khin from Myanmar that exhibited at Seafood Expo Nyunt, Director of the Department of Fisheries.5 Global 2017 in Brussels: the world’s largest seafood With a coastline of about 2,228km, relatively less exploited than elsewhere and there are Hnin Oo, Senior Vice President of the Myanmar trade fair. Its participation was part of a Dutch- 213,720km2 of sea waters and 82,000 km2 of inland opportunities for investments inshore, at deep-sea Fisheries Federation, believes income from exports government-supported one-million-euro three-year lakes, rivers and reservoirs, Myanmar is rich in fish locations and by expanding the value chain. DICA could generate around USD 1 billion a year by 2020.6 marketing programme, for which the Netherlands’ and seafood. sees specific potential for foreign investors in fishing One reason for recent growth is that, since the Centre for the Promotion of Imports is providing The fisheries and aquaculture sector employs and aquaculture of shrimp and prawns; fish food removal of sanctions, Myanmar benefits from tariff companies and the industry as a whole with export three to four million workers, domestic consumption production; fish and seafood processing facilities; elimination for fish and seafood products as part coaching, promotion and branding development to of its products is high and it provides the biggest cooling, canning and packaging facilities; and in the of its membership deal with the Association of help expand high-value exportation from Myanmar source of animal protein in the local diet. Total establishment of education and research institutions Southeast Asian Nations. And it also has free trade to Europe. fish production has to broaden industry knowledge and develop human or preferential agreements with other countries, This project sits alongside four-year trade grown by an average resources. including Australia, China, India, Japan, New development and five year sustainable aquaculture References of about 14.5% a With the decreasing availability of wild fish Zealand, South Korea and the European Union. development programmes that have received The majority of producers 1- http://unctad.org year over the last two around the globe, aquaculture in particular is 2- Seafood Trade Intelligence Although exports to markets like the US and EUR 31 million in EU funding. The first of these should be utilising breeding decades and reached thought to offer significant potential. It also Portal, Myanmar the EU are growing, Myanmar’s fisheries sector is aims to help seafood processors and aquaculture 3- unescap.org, Fisheries farms. There must be a around 5.31 million generates much higher returns for landholders in Myanmar still focused on its regional neighbours, with China farmers comply with EU regulations, while the latter nationwide shift to breeding tonnes in 2014/5, with comparison with those from farming staple crops. 4- Myanmar Business Today, buying 35% in terms of its value and Thailand is focused on smallholders and inclusive supply 54% of production Although this sector has increased substantially, it “National Fishery Industry 26%.7 This is due in no small part to the costs of chain development. Other countries’ governments from sea fishing.” Projects Growth, Still Lags being marine and 46% is still underdeveloped and only 19% of fish come Behind ASEAN Neighbors,” compliance with the food safety standards and and organisations are also providing funding and fresh water fish.1,2 The from farming. “The majority of producers should be (Aug. 2017) sustainability requirements set by developed programmes for Myanmar. For example, Australia Tun Aye, Managing Director, 5- Ibid Shwe Yamone Manufacturing Company processing of fish is also utilising breeding farms,” says Tun Aye, Managing countries in other parts of the world. Insufficient is helping to build the research and development 6- The Nation, “Myanmar increasing and in 2017 Director of Shwe Yamone Manufacturing Company fishery export income set to electrical infrastructure in Myanmar also poses capacity of the Department of Fisheries and there were 112 fish-processing plants in the country, and President of the Myanmar Fishery Products double,” (March 2017) problems, with the ability to freeze reliably being universities, Japan and the US are supporting the 69 of them based in Yangon. The vast majority Processors and Exporters Association. “There must 7- http://unctad.org vital for long-distance exports. At present, only a development of human, technical and physical 4 8- Myanmar Times, “More of these were local businesses, with international be a nationwide shift to breeding from sea fishing.” fish processors eye EU certifi- minority of the processing companies is capable of resources for sustainable aquaculture, and Denmark investors having an interest in only 8.4% of them.3 At present, two types of low-value carp — rohu and cation,” (June 2010) creating products to export standard and just 21 and Switzerland are encouraging the creation of 9- Myanmar Times, “Shrimp community-based co-management systems for Although foreign direct investment in the catla — are the most farmed species. But analysts Industry battles through have been certified by the EU. This certification is sector is low, it is rising. According to DICA, predict that the culture of species like tilapia, external challenges,” (Aug. key for expanding the export market, says Tun Aye: fisheries. FDI in livestock and fisheries increased from climbing perch, grouper and sea bass will increase 2010) “EU standards are recognised by every country. If “Nobody can underestimate our sector,” notes 10- http://www.shweyamone. USD 8.25 million in 2015/16 to USD 96.68 million rapidly in the near future. The fishing industry is com products are produced to EU standards, they can Hnin Oo. And with initiatives like these in place, in 2016/17. Fishing grounds in Myanmar may be key to Myanmar’s new national export strategy, but 11- The Nation op. cit. get a premium price.” 8 possibly nobody should.11

32 LEADING EDGE MYANMAR 2017 33 manufacturing WE BUILD POWERFUL b rIEFINg IN-DEPTH BRANDS 36 38 MADE IN MYANMAR: LOI HEIN GROUP OF COMPANIES: How manufacturing could The changes in the become one of the main local beverage industry engines of the economy bring opportunities A leading player in Myanmar’s manufacturing, marketing, sale and distribution of consumer products since 1992, Loi Hein Co. Ltd is INTERVIEW now working hard to become one of the country’s top ten companies. We are already the market leader in drinking water and 40 energy drinks and as a privately owned, DR SAI SAM HTUN, local company that is highly familiar with CHAIRMAN, LOI HEIN GROUP the Myanmar market, we see enormous OF COMPANIES: growth potential and delight in pursuing our Brand building, business ambitious long-term vision. models and beer

Head Office Nay Pyi Taw Mandalay Branch Office No. 117, Wardan Road (Kele Road) No.6/44, near Gasoline Station Corner of 26th and 69th Street Lamadaw Township, Yangon Yangon-Mandalay Rd Chanayetharzan Township Myanmar Pyinmana Mandalay Tel. +951-229954 Tel. +9567-23855 Tel. +952-66417 Fax. +951-229954 LEADING EDGE Azerbaijan 13 briefing manufacturing made in myanmar

MADE IN MYANMAR: MANUFACTURING TAKES OFF

Manufacturing is set to become one of the main economic engines in Myanmar. Low labour costs are a competitive advantage, and new special economic zones are already attracting leading international investors. ohari J afiz H Shutterstock - Shutterstock The renovation and expansion of main ports will be an important part of the drive to increase exports

by structural problems Planning and Finance Minister Kyaw Win told Thilawa, the fastest-growing such as the lack of reliable delegates: “We will prevent the monopoly that has of the three special economic power supply, the need for persisted in Myanmar due to years of protectionism.” Shutterstock - Kzenon Shutterstock zones, has progressed better communication and He added that in order to minimise the trade Myanmar could become the next garment-manufacturing hub in Asia transport infrastructure deficit, the ministry is focusing more on the significantly and has already and a skill shortage. manufacturing sector and that it would support small As the new administration of the National Ho Chi Minh (Vietnam), New Delhi (India), Bangkok attracted more than The lifting of sanctions and medium enterprises (SMEs) in acquiring land, League for Democracy (NLD) strives to open up (Thailand) and Guangzhou (China). USD 122 million in FDI by the European Union securing finance and accessing new technology.5 and diversify the economy, it is hoping to use However, even though the country is keen to in 2013 and by the US in The government also hopes that the three new manufacturing as a key driver of growth. create jobs as a means to fight poverty, it does not over this fiscal year October 2016 opened the special economic zones in development in Kyauk By doing so, Myanmar is following the path intend to fuel a race to the bottom in terms of labour door to foreign companies. Phyu in Rakhine State, Dawei in the Thanintharyi taken by other Asian countries, which built trade conditions. This is why one of the first measures Clothing manufacturers from Japan, China and Region and Thilawa on the outskirts of Yangon relations with the rest of the world prior to greater implemented by the government in 2015 was to South Korea turned towards Myanmar, followed by will attract domestic and foreign investment in and more value-added industrialisation. China, set a minimum wage of 3,600 kyat (USD 2.80) for Western retailers. That year, the country exported manufacture. In particular, the development of Thailand, the Philippines, Vietnam, Cambodia have an eight-hour working day, in a move to protect some USD 900 million worth of sewn products, Thilawa, the fastest-growing of the three SEZs, has all become manufacturing workers but also boost investment. a figure admittedly dwarfed by Vietnam’s and progressed significantly and has already attracted hotspots over the years; This reform, which was called for by some Cambodia’s similar exports, but nevertheless a sign more than USD 122 million in FDI over this fiscal The manufacturing sector now it’s Myanmar’s turn. leading international retailers including Hennes that it is on its way to becoming a new garment year, according to DICA. 2 is both full of potential and The sector has already & Moritz (H&M, Sweden) and Gap (US), puts manufacturing hub. The Myanmar-Japan Thilawa Development recorded strong growth since Myanmar’s minimum monthly pay at around The Japanese clothing retailer Honeys was the Limited (MJTD), a joint venture set up in 2014 hampered by the legacy of 50 2010, and contributed 21% to USD 67 a month, based on a six-day working week, first to bank on Myanmar’s manufacturing potential between the governments of Myanmar and Japan, years of quasi-autarchy. But the GDP in 2014, according giving it a competitive advantage over thriving in 2012, when it opened a factory in Yangon. It announced in June that the 2,000-ha zone B of the the government is hopeful that to the latest available figures garment makers such as Vietnam and Cambodia now runs two plants with over 2,600 workers and project would be put on lease shortly due to high by Myanmar’s Central where the monthly minimum wage ranges from References produces some 18,000 pieces of clothing per day, or demand from investors, in spite of power supply investor-friendly measures 1- Reuters, “Myanmar sets Statistical Organisation. USD 90 to USD 128, according to the International $2.80 daily minimum wage over 20% of its sales in Japan. The company is now shortages. In addition, the government recently coupled with Myanmar’s The main manufacturing Labour Organisation.1 in bid to boost investment,” considering opening a third factory in Myanmar.3 announced it would open a new SEZ near Yangon sub-sectors are garment There is a further indicator of the dynamism (Aug. 2015) As the government is keen to see manufacturing and upgrade 29 industrial zones across the country 2-Nikkei Asian Review, undeniable assets will bear fruit 6 and textiles, agricultural of Myanmar’s manufacturing industry: foreign “Myanmar manufacturing set spearhead the country’s industrialisation and with a view to boosting manufacturing. in the next year processing, automotive direct investment. FDI in manufacturing has for takeoff,” (Jan. 2017) economic take-off, it recently announced new As with other areas of the economy, the parts, canning and bottling. shot up from USD 3.5 million for the fiscal year 3- Ibid. measures to spur exports and investment. manufacturing sector is both full of potential and 4- Myanmar Times, “More One of Myanmar’s main competitive assets for 2004/05 to 33.2 million in 2009/10, 400 million economic zones needed to Speaking at an investment forum organised in hampered by the legacy of 50 years of quasi-autarchy. manufacturing is its low labour costs compared in 2012/13, and a peak of 1.8 billion in 2013/14, boost manufacturing: MIDA,” Yangon in June 2017 by the Myanmar Investors But the government is hopeful that investor-friendly (June 2017) to other countries in the region. According to a according to DICA. 5- The Myanmar Times, Development Association (MIDA), the Deputy measures coupled with Myanmar’s undeniable January 2016 survey of the Japanese External However, it has slowed down since then to “Government vows more Minister of Commerce, Aung Htoo, said the assets will bear fruit in the next year. Speaking reforms as it sees economy Trade Organisation, at an average of USD 147 USD 1.5 billion in 2014/15; 1 billion in 2015/16, taking off this year,” (June ministry would simplify procedures for trade and at the June investor forum in Yangon, Kyaw Win (200,000 kyat) per month in the garment industry, and 883 million by end of 2016. This reflects a 2017) exports, and stressed that the government seeks summed up the mood prevailing among officials: Yangon has the lowest wage levels when compared to general trend towards reduced FDI in Myanmar in 6- The Myanmar Times, to attract new investment by revising legislation “In 2016, Myanmar was like a plane running on “Thilawa SEZ zone B open to major Asian cities such as Phnom Penh (Cambodia), the past two years, as investors remain hampered investors soon,” (June 2017) and cutting red tape.4 the runway, but it is ready to take off in 2017.”

36 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 1537 in-depth manufacturing Strategic local player Loi Hein sees opportunity amidst Myanmar’s drinks sector shake-up

Strategic local player Loi Hein sees opportunity amidst Myanmar’s drinks sector shake-up

A main player in Myanmar’s marketing and distribution of purified drinking water, carbonated soft drinks and energy drinks, Loi Hein Group of Companies has adapted admirably to recent region-wide rumbles in the expanding drinks sector

The ten states of the ASEAN region have hurdles that companies have traditionally faced experienced something of a collective growth spurt when trying to do business in the country. Brands in the soft drinks industry over the last few years. such as Snapple, G, G2, Perrier, Dr Pepper, Pocari Major reasons include economic expansion goals and Sweat are all to be found in the fridges of local facilitating the entrance of beverage companies stores, forming a healthy line-up of US, European into the region and also lifestyle changes in these and Asian brands. To top it all, locally bottled Co- sweeter than any drink” and has set itself goals that growth is sustainable for both parties in the societies which created a new demand for different ca-Cola and Pepsi are also in supply. of an annual revenue growth of 30% for the next long term. types of drinks. Indeed, the wider picture in Asia Indeed, ever since the two global heavyweights five years, and a USD 1 billion annual turnover One of LHC’s notable strengths is its trading suggests that the continent taken as a whole will returned to Myanmar’s soil in 2013, they have made in the next 10-15 years. LHC’s focus is the rural division. Situated between China and India, add to its drinks consumption the equivalent of 1.5 it a battleground between local and international market, which accounts for 70% of Myanmar’s Myanmar has a unique geographic location times West Europe’s current beverage consumption players in the region. They have also contributed to population. While international drinks brands offering direct border access to 40% of the by 2018, meaning it will account for almost 50% growth in the sector in a major way; the year they take hold in Areas of Dominant Influence (ADI) world’s population. In order to benefit from this of global commercial beverage consumption. Soft arrived, the country’s carbonates reached a market markets in cities such as Yangon, Naypyidaw and strategic advantage, LHC is in the process of drinks (juice and carbonates) lead the charge but value of USD 100 million. Mandalay, local brands maintain their competitive opening representative offices in China and India beer follows closely with sizeable migration from With Coca-Cola firmly settled in town, advantage in rural areas. Being local enables LHC to support trade activities with these two major Europe and North America into Asia (as well as Myanmar’s local brands — Star Cola, Blue to understand the trends and forces that will shape markets. It already has a Singapore trade office, Africa and Latin America). Mountain and Crusher among them — have Myanmar’s future, strengthening the marketing offering assistance to companies wanting to bring Within this wider Asian context, the thriving been forced to reassess their game and think of side of the company. products into Myanmar. As the country opens up, market in Myanmar has its own dynamic bubbling new strategies. Having to compete in advertising Organic growth, acquisitions and partnerships LHC’s vision is to increase significantly the range away, with the rise of the lower-income class in expenditure posed enough of a challenge on its are key strategies in the company’s vision to support and volume of products traded with neighbouring the starring role. Consumers are increasingly own. One local company that has taken the bull by the drinks market’s expansion in the country, and countries. demanding healthier, higher-quality products. This the horns is Loi Hein Group of Companies (LHC). to develop LHC into the leading consumer goods Increasing demand for premium food, an applies particularly to those living in Myanmar’s LHC, based in Yangon, controls about 30% distribution and marketing company in Myanmar. influx of Western restaurants, and the rapid major cities whose purchasing power is notably of Myanmar’s beverage market, producing and LHC’s openness to partnerships is striking, and a expansion of the tourism industry are creating higher than before. And so, regardless of fierce distributing a spectrum of drinks, and 2017 is its clear reflection of its entrepreneurial energy. growing opportunities for Western exporters in the competition, the fact that consumer behaviour 23-year anniversary in the industry. LHC’s brands Its market-leading Shark energy drink is beverage industry. Adding further traction to the is changing at a steady rate means opportunities include Alpine, Life and Blue Mountain (purified the product of a collaboration with Osotspa Co. growth spiral is the development of the retail sector. continue to abound for entry into this nascent drinking water); Lemon Sparkling, Fantasy and Ltd from Thailand, while its SPY Wine Cooler Supply stock for the retail market in Myanmar is market. Blue Mountain (carbonated soft drinks); and is manufactured by Siam Winery Co. Ltd, also expected to double by 2018 to meet demand. Positive changes to Myanmar’s distribution Shark and Royal Lipo (carbonated soft drinks). Thai. In September 2016, LHC announced its In this colourful context, LHC is striving channels and infrastructure have also aided the Alpine water was the company’s first own brand. partnership with Japan-based Toyo Seikan for to extend its current market leadership in supply of commodities Launched in 2002 it swiftly became the market the building of a can-manufacturing factory. Toyo several categories even further by garnering like beverages to finally leader in bottled purified drinking water in the Seikan pledged to invest USD 23.5 million in the new customers, increasing available products, LHC is striving to extend its meet market demand, country. project. partnering with key vendors and making existing market leadership in several and these are set to im- LHC is the leading distributor of FMCG The joint venture is to be founded under the products more available to the entire country. prove still further. The products in Myanmar and has over 100,000 name of Yangon Can Manufacturing and the Meanwhile, foreign drinks companies are categories by garnering new country’s authorities are outlets overall. With access to everything from factory is expected to produce 200 million cans assessing their options about how to enter the customers, increasing available creating a network of supermarkets to luxury hotels across the country, per year, with fruit juice as the primary offering. ASEAN region’s epic drinks party. In the case of products, partnering with key international highways it serves wholesalers, hypermarkets, convenience The factory will be built in the Thilawa Special Myanmar, such companies are expected to make to boost regional coop- stores, minimarts, restaurants, schools, hospitals, Economic Zone (SEZ), and the hope is that it will one of three moves: appoint a distributor to manage vendors and making existing eration, with Myanmar small retailers, mom-and-pop shops and kiosks. become operational in 2018. Toyo Seikan will own import permits, shipment and distribution; products more available to the holding the potential to Many of the brands distributed are market leaders 75% of shares with the remaining 25% in LHC’s establish offices and handle imports; or set up entire country become a land bridge in their categories. hands. Partnerships may allow LHC to blossom, manufacturing plants in the country. LHC would between Southeast and A proud domestic company, LHC finds its but it is important for the company that they are be in an apt position to become a local partner in mainland Asia, tackling driving force in the philosophy that “success tastes created in a fair and mutually rewarding way, and one or all of these areas.

38 LEADING EDGE MYANMAR 2017 39 Interview MANUFACTURING dr sai sam htun — chairman, loi hein group of companies

to stop Coca-Cola, Pepsi and the like from taking and create the right packaging, we will partner over the whole thing. For example, I have already with an international company to do so. In fact, Interview with committed to Nestlé for my water and so I cannot we have already started to prepare designs and are Dr Sai Sam Htun, Chairman, Loi Hein Group of Companies give the whole thing to them, and they select exploring how we can process and export canned somebody else for that. food. Myanmar is in a good position to push its Yes, I partnered with Asahi and I intend to processed food and agricultural goods as we can grow with them. Our company may now be worth still create organic products, whereas in countries USD 50 million but I think we can grow alongside like China the soil is already contaminated. Brand building, the multiple Japanese products that will arrive in Myanmar in the next 5-10 years, by partnering with LE: Can you tell us about your diversifcation business models and beer them and expanding into sales and production. into the finance industry?

LE: Do you plan to launch new brands in the SSH: Under the name of Ruby Hill Finance we future? have partnered with the best securities trading house, KT-ZMICO. We hold 51% and they own Leading Edge (LE): The manufacturing sector is set to become SSH: I’m more interested in working alongside 49%. As soon as the stock market booms, we a key contributor to Myanmar’s economy. How do you see it foreign brands, for instance in the beer business, can invite a whole host of Thai investors. As the developing in the next five to ten years? than launching alone. We can’t afford the whole country opens up for them to purchase on the investment and the beer market seems to be very stock exchange of Myanmar, and cross-border Sai Sam Htun (SSH): Manufacturing is our core business, and competitive; Carlsberg is here, Heineken is here. investment is freely facilitated, we will be able the most important thing we can build is the brand, because it So, if we get a permit for beer then we have to to develop our financing relations with Thai has more value than the facilities. Manufacturing can be done look for somebody to partner with. At the same companies even further. The reason we focus on in Thailand and the products shipped in, already branded. The time, we are building another product line that financing is to delve deeper into our agriculture branding sector is only recently starting to be better known includes condensed milk, evaporated milk and sector. Myanmar’s entrepreneurs can’t go for in Myanmar because in the past the country didn’t appreciate rocket science and IT. Our country’s first priority branding as much. Now, everybody has noticed that building should be to emphasise agriculture: 70% of our a brand can bring great value. One example is the soft drink people are farmers. So we have to focus on this Blue Mountain, in which we currently have MMK 10 million The Chinese market is vast and has sector with partners from abroad who have the invested. Ultimately, we can sell it or partner with a foreign changed a lot due to lifestyle shifts technical know-how and the funds. company, such as Asahi Loi Hein, for the manufacturing. We affecting wine consumption. This is a could then value it at MMK 50-60 million — that’s the value LE: Can you briefly talk about your foray into of branding. great motivation for us to partner with property development? Since we opened the door, five or six years ago, multinational somebody in the beer and companies like Coca-Cola, Pepsi, Unilever and Nestlé have wine business.” SSH: Rosehill Residences project is a partnership arrived. In the past few months alone, multiple multinational with Singapore Soibuild Group. We built the beer companies like Carlsberg and Heineken have also come Dr Sai Sam Htun, Chairman, Loi Hein Group of Companies condominium, and we are waiting to go to market in. The multinationals are in place, and I think the fastest from 2018 — right now the market is too slow for growth in manufacturing will be in beverages. optimum results. New rules and regulations for UHT milk under the name of Alpine Dairy. We foreigners to buy will come into effect soon and LE: Will you partner with foreign brands in terms of are also producing natural juices with Green Hill. we expect that by 2018 the property business will distribution? Dr Sai Sam Htun, Chairman, Loi Hein Group of Companies If we do build our own brands, we would like to be good. Our group is also trying to accumulate do so in parallel with the beer and wine business. land for property development, possibly to build SSH: We intend to become one of the biggest distribution We are the sole distributor of SPY Wine Cooler commercial office towers. and logistics companies in Myanmar. We already have over — sparkling wine — and we intend to move into 100,000 outlets and big warehouses across the country, and through wholesalers. In contrast, our Alpine brand is mainly still wine for which we already have the permit LE: Since the new government has come into we cover almost all the channels of distribution, one of which distributed directly by us and relies on wholesalers for 15% of to import and manufacture. However, wine place, doing business in Myanmar has become is our wholesale network. The wholesalers did the job of business. We also appointed some of the distributors. production would be complicated to carry out easier. Some think that things are moving too distribution on behalf of our company. In certain cases, like We also partner with people at the village track level. They in Myanmar because it’s such a sophisticated fast, and that there is no protection for local that of energy drinks, 80% of our products are distributed take care of the distribution and make a profit. Our agents help process. We are thinking about bringing it in, in companies. What is your view? them to distribute our product. But their salary is paid by the bulk, bottling it and branding it here, then going mother company. So by adapting to the market and mastering to another market. The Chinese market is vast and SSH: We are waiting for the government to speak O ur country’s first priority should be every level of distribution, we try to create the best distribution has changed a lot due to lifestyle shifts affecting up more about its policies, the future and the network and this gives us great value, increasing our potential. wine consumption. This is a great motivation economy. Businesses are not entirely sure where to emphasise agriculture: 70% of our for us to partner with somebody in the beer and they stand. However, foreign interests are looking people are farmers. So we have to focus LE: You mentioned that you have partnered with Asahi, the wine business. up since the US sanctions were lifted. Local and on this sector with partners from abroad Japanese company. Do you see yourselves producing for some foreign investors are excited but looking for solid of the larger international brands or is it just the distribution LE: Have you considered packaged food like information. Currently, we are lacking policies: who have the technical know-how and side that interests you? chips and nuts? monetary, exchange rate and job creation policies. the funds.” We also need to decide which model we are going SSH: The reason for partnering with multinational companies SSH: Yes. As we are an agriculture-based country, to follow: the Chinese model, the Indonesian Dr Sai Sam Htun, Chairman, Loi Hein Group of Companies is that we are in a very critical position. Essentially, we need if we can build up quality agricultural products model or the Vietnamese model — or another.

40 LEADING EDGE LEADING EDGEMYANMAR Azerbaijan 2017 1941 health

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YANGON OFFICE MANDALAY OFFICE SERVICE ENGINEER MEDICAL & LABORATORY Nº 28, Pyay Road, Hlaing Tsp, Nº 94, Groud Floor, Corner of 73rd & Service Hotline: 09 730 96702 CONSULTANT Yangon, Myanmar 28th Street, Chan Aye Tharzan Tsp. [email protected] Sales Hotline: 09 315 43544 Yangon, Myanmar [email protected]

Tel: +95 (1) 500049 / +95 (1) 538023 Tel: +95 (1) 500049 / +95 (1) 538023 www.okkarthiri.com Fax: +95 (1) 505209 Fax: +95 (1) 505209 LEADING EDGE Azerbaijan 13 briefing HEALTH the health of a nation the health of a nation

The task of raising the quality of life of its citizens and improving health care, as well as providing universal health access by 2030, is one of the most challenging and yet most pressing for Myanmar. Shutterstock: Tooykrub Shutterstock: ABOVE: Monks await treatment at a provincial clinic. Extending healthcare and building more hospitals outside the main urban centres are priorities; RIGHT: Trained nurses and medical staff are in increasing demand. Shutterstock: Tooykrub Shutterstock:

Shutterstock: Plufflyman Shutterstock: Opportunities can be found in a wide range of sectors: in the health insurance gradually increased to Yu, an investment officer at the Hong Kong a more comprehensive International Finance Centre (IFC). “Since Long isolated, Myanmar has low health among young women. Infectious diseases are yet market, in the building set of services. The setting up an office in Yangon in 2012, we have standards in comparison to the rest of Asia and another area of concern, notably tuberculosis, of facilities and in the commitment of the focused our investments on building up road the world. According to the Ministry of Health malaria and HIV/AIDS. To combat these diseases, pharmaceutical sector government, coupled and power infrastructures. We are keeping a and Sports, life expectancy at birth is 64.7 years, Myanmar is working with international agencies with economic growth, watchful eye on the health sector. […] With the lowest among ASEAN countries. The rate of and NGOs, including the Global Fund, which will which paves the way the government easing restrictions on foreign child and infant mortality is 140% higher than provide USD 497 million until 2020 to carry out for the emergence of and private investment, and patient demand the average across Southeast Asia and nearly two three national strategic projects undertaken by a middle class that is set to reach 19 million by for better quality healthcare services on the times higher than other developing countries, the Ministry of Health and Sports. 2030, are encouraging signs for stakeholders rise, Myanmar’s health market is laden with with 72 deaths per 1,000 In its 2017-2021 National Health Plan, and potential investors. One of the government’s possibilities. Private investors will be a big part births compared to a unveiled in December last year, the government key non-governmental partners in the health of the market’s development and IFC plans to Myanmar’s government regional average of 30 acknowledges that the health system faces many sector, 3MDG Fund says that “looking at be at the table,” he wrote. per 1,000, according to challenges, such as lack of physical infrastructure, developments in 2016, there are many reasons to Opportunities can be found in a wide range of aims to strengthen its health the UN Population Fund human resources (nurses and doctors), medicines be optimistic about health in Myanmar.” It goes sectors: in the health insurance market, which is system and ultimately (UNFPA). and supplies, as well as insufficient financial on to cite the increase in public spending from in its infancy in Myanmar but is set to grow as reach universal coverage, But there are sharp resources. “Myanmar currently allocates only USD 94 million in 2012 to USD 850 million in living standards rise and the population ages; in regional disparities. For 3.65% of its total budget to health, which is 2016, the economic upturn, and the rapid uptake the building of hospitals and other health facilities, “choosing a path that is example, to the south of extremely low by global and regional standards,” of mobile technology. of which there are currently only approximately explicitly pro-poor.” the country, in townships the plan states. “As a result, out-of-pocket (OOP) Another key factor is the new investment law 200; and in the pharmaceutical industry. The of the Irrawaddy Delta, spending by households remains the dominant enacted in April 2017, which includes health in local drug market was worth USD 390 million one in six children dies source of financing for health.” a list of 190 promoted sectors where investors in 2014, with most of the supplies in the form before the age of five. According to UNFPA, the Through the plan, Myanmar’s government aims are offered incentives such as tax breaks. The of generic drugs imported from India. main reason for the high infant mortality rate is to strengthen its health system and ultimately government had already opened up this sector It is also worth noting that wealthy the lack of access to essentials like safe drinking reach universal coverage, “choosing a path that in 2014, allowing up to 80% foreign investment Myanmarese spend between USD 250 million and water, toilets and electricity. is explicitly pro-poor.” The main goal for the in private hospitals, clinics, diagnostic services USD 600 million per year in treatments overseas, Another stark indicator is maternal mortality. period 2017-2021 is to extend access to a Basic and devices, and health education. according to various estimates. The health sector In a September 2016 report, UNFPA said that Essential Package of Health Services (EPHS),” to Asian investors in particular have shown would therefore be a lucrative market for private 2,800 women die each year in childbirth and be comprised of assistance available to all, such interest in this area. In April, HealthInvestor investors, provided the infrastructure and human pregnancy, which represents one in five deaths as antenatal care and vaccinations, which will be Asia published an upbeat appraisal by Jiadi resources are in place to cater to high demand.

44 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 1545 in-depth HEALTH medical sector set for growth

not perfectly trained, nobody will trust them. So it is unquestionable that the number one priority for Myanmar is technical education.” Medical sector However, the expertise of existing medical staff in Myanmar is not in question. “There is set for growth an impressive level of competence,” says Felix, attributing it to the high standard of education and stringent training for those students who can Training and a local partner are key to unlocking opportunity in the health industry, believes afford it. Christophe Felix, CEO of medical devices distributor Okkar Thiri. He speaks to Leading Edge together “In France, for example, doctors train in one with the company’s Chairman, Dr San San Yi. subject, while in Myanmar they have to train in three,” Felix explains. For the future of healthcare, this is a harbinger of hope. “It is a matter of means, not a matter of competence,” adds the CEO. “There Health is one of the priorities for the part of Euro Continent, a foreign-owned company, are a select few in Myanmar who have been to government of Myanmar, which raised the and the idea was to supply non-Chinese equipment all the workshops and seminars in the world. percentage allocated to it in the budget to 5.1% to Myanmar. We worked with relatively expensive Myanmar is not just beginning, it started a long in 2017-2018. This was a strong sign of things but well-regarded brands like Dräger.” time ago.” continuing to look up for healthcare, coming on Felix explains that he took what he calls “a In addition to training more doctors, Felix is the back of a nine-fold increase from 2011 to 2016. technical approach to the health business”. He confident that the economic growth of the country Indeed the percentage of GDP allocated to health instructed his technicians “to go into every hospital will attract talent back to its shores. “I was in has increased year on year from 2.4% in 2012, to and repair whatever they could find to repair free Cambodia in 1994, and it went through a system 3.14% in 2013 and 3.6% in 2015. Following many of charge.” He smiles as he adds: “They looked that eliminated all the educated classes. Myanmar years of neglect prior to 2012, the sector was then at me like I was crazy. I told them to look for the never went through such a system. Educated people declared open for business, and public expenditure equipment that could realistically be repaired. At simply left. There are a lot of doctors from Myanmar dramatically jumped as political reform reignited the time there was a lack of technical support, working in the UK, Singapore and Thailand and the country. and about 90% of the market was in the hands of Dr San San Yi, Chairman, and Christophe Felix, CEO, Okkar Thiri most of them went abroad for economic reasons, The government’s investment in healthcare Chinese and Indian traders. So broken equipment but they will come back. They love their country, is divided across three main areas: medicines, tended to be replaced by new, sale after sale. That which show that 70% of the turnover comes and these people are thirsty for learning.” building infrastructure for health insurance was cheap, but our companies — like Hitachi and from the public sector, and 30% from the private. Felix points out that there are many other and medical devices. Dr San San Yi, Chairman Phillips — are not cheap. We can provide service.” “The Ministry of Health is our biggest customer,” sectors with potential in addtion to health, of medical equipment distributor Okkar Thiri, The company’s proposal certainly seemed to says San San Yi. “For the last four years we citing mining as the main one. “So far there has recalls, “Before 2011 there was a big gap in the work. “We started with no turnover and achieved have won every tender.” Even though the not been enough financing available. Mining, of market. The only issue the equivalent of USD 8 million in just four years,” government plans to further ramp up spending course, requires cash. The country is full of natural at the time was the says Felix. “However, in 2006 it was only possible on health, given the rise of the middle class and resources and it has natural gas. The fishing sector The government’s Ministry of Health’s to invest in Myanmarese kyats and that was the recent implementation of health insurance is also key, with Myanmar boasting a very long investment in healthcare is budget — this was only not easy for a foreign company to do. Instead of in Myanmar, the private sector should continue coastline. But up until now, the opening in the MMK 6 million for shutting down operations and causing 75 people to to flourish. “Private market has been narrow, with most of the fishing divided across three main medical equipment for lose their jobs, Dr San San and I set up Myanmar- hospitals will grow, as done by Thai boats with a Myanmarese crew.” areas: medicines, building the whole country. But owned Okkar Thiri and transferred the workforce Today, the Myanmarese well as foreign-owned There is no doubt that the healthcare system in 2012, they increased there. Now we are number one in the market.” private hospitals, which in Myanmar is ripe for development, and foreign infrastructure for health might go to Thailand or insurance and medical devices.” it to MMK 30 million.” So what makes Okkar Thiri stand out from will work for the more companies have already begun to sit up and take The budget for health other distributors in the sector? “I think the most Singapore for treatment, but affluent part of the notice. Corporations, doctors and professors has more than doubled distinguishing factor is our after-sales service,” population,” adds San are coming to Myanmar from abroad, often to Dr San San Yi, Chairman, Okkar Thiri in ten years time they will stay since then. suggests San Yi. “All the other companies have San Yi. carry out workshops. “Indeed, we are offering There is clearly three to five engineers, but we have more than 30, in Myanmar.” Of course, after an increasing amount of workshops with a lot of demand, and willingness to pay, for Western all trained by manufacturers abroad.” many years of sub- manufacturers. Today, the Myanmarese might go medicine among the Myanmarese people, whose Currently, Okkar Thiri caters to clients both in Christophe Felix, CEO, Okkar Thiri optimal investment and to Thailand or Singapore for treatment, but in ten access has hitherto been limited. A previously the public and private sector. “Traditionally, there understaffing, healthcare years time they will stay in Myanmar,” says Felix. under-funded public sector has resulted in the has been a dominance of private clinics because in Myanmar is not without its challenges, the most However, success often relies on relationships population becoming used to taking responsibility government infrastructure has been inadequate,” acute being its ability to keep pace with its own built on trust, so suppliers or investors from for their own medical treatment. Public says Felix. growth. “Healthcare is a big challenge in Myanmar abroad must seek a competent local partner. willingness is increasingly backed by means, In part, Myanmar’s culture has favoured the largely due to the lack of specialists,” says Felix. “The most interesting thing in this country,” says with a middle class emerging in the wake of the private system: “In Myanmar, extended families Indeed, Okkar Thiri identifies education as Felix, “is that you start with your heart and finish economic upturn. This may have eased to 6.5% in often live together. If someone has health the key to sustainable growth in the sector: “The with your head. Your partner is very important.” 2016 due to flooding and other challenges, but it problems, but does not have money, everybody country is rich with potential and the development He advises companies considering opportunities is set to steadily rise at an average of 7.1% per year will chip in. In the past this meant that the private of infrastructure and agriculture will not be a issue,” in Myanmar to be patient. “Myanmarese people until 2019. sector was very active, but nowadays because of says Felix. “With plenty of countries interested, are like oysters — it takes effort for them to open Okkar Thiri identified a demand in the market government efforts in health, people are returning investment is not a problem either. But the medical up, and if you go too fast, they will close. But for medical equipment as far back as 1998, to the public sector. sector here only has five oncologists. You can have once you have earned their friendship, they are according to CEO Christophe Felix: “We started as This trend is confirmed by Okkar Thiri’s data, the best equipment in the clinic, but if the staff are like family.”

46 LEADING EDGE myanmar 2017 47 INFRASTRUCTURE

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50 52 CONSTRUCTION: MAPPING THE A CHANGING ROAD AHEAD LANDSCAPE Myanmar’s potential is The residential sector and hampered by inadequate much-needed upgrades of infrastructure, but infrastructure drive the ambitious public-private construction industry partnerships are set to transform land, air and sea transport

LEADING EDGE Azerbaijan 19 briefing INFRASTRUCTURE construction: a changing landscape

in particular at potential foreign investors, was sponsored by the Yangon City Development Committee (YCDC), the Mandalay City construction: a changing landscape Development Committee (MCDC), the Myanmar Investors Development Association (MIDA), the Myanmar Construction Entrepreneurs Association The cranes dotting Yangon’s skyline and the shiny new skyscrapers rising above the city’s mix of colonial (MCEA) and the Myanmar Engineering Society and low-lying buildings are the visual proof that Myanmar is on a rapid path to modernisation. (MES). A presentation document for the summit says that projects include “land connectivity, transportation links with regional economies to boost economic integration, improvement

azybones of basic amenities such as affordable housing, L universal electrification, safe drinking water, and modernised sewage systems.” 4 Several governmental plans address these issues. The National Transport Master Plan (NTMP),

Shutterstock: Perfect Perfect Shutterstock: designed with the Japan International Cooperation Agency, the Japanese foreign cooperation body, details projects for new highways, ports and projects and individual mortgages. According to airports as well as a railway upgrade for a total Myo Myint, Chair and CEO of MKT Construction, of USD 22.7 billion of public investment up until guyen

. N the number of new construction projects dropped 2030. The plan earmarks USD 11.7 billion for D by half in 2016.2 road projects, USD 6.6 billion for railways, and However, even though the depreciation of USD 8.5 billion for inland water, sea and airport the kyat against the dollar drives up the price of projects, and will need some USD 4 billion in building materials, chewing away construction private investment.5

Shutterstock: Phuong Phuong Shutterstock: companies’ profits, the market now shows Another important area is energy, which is New housing for the rising middle class drives the construction market signs of picking up. In particular, construction addressed through the National Electrification stakeholders expect more clarity in the regulations Programme (NEP), launched in 2014 in cooperation With strong demand for affordable the industry and is expected to reach a value of governing the sector. with the World Bank with the aim of providing housing and large-scale plans to build and USD 9.7 billion in 2020. An important new piece of legislation is the universal access to electricity by 2030. The modernise infrastructure, Myanmar appears as Infrastructure construction was the second- Condominium Law, which allows foreigners to World Bank estimated that this would require a promising market for construction companies. largest market in the same period, accounting buy up to 40% of condominium apartments, 7.2 million new connections as Myanmar had, But in a country that only very recently started for 19.4% of the industry’s total value in 2015. provided they are on the sixth floor or above. and still has, one of the lowest electrification to open up its economy, the construction sector This market rose from USD 1.3 billion in According to market players quoted in the local rates in the world, with an average at the time of is going through growing pains. 2011 to USD 1.9 billion in 2015, at a nominal press, this could bring up to USD 1 billion in foreign only 33% of the population and huge disparities It’s hampered at the moment by a growth rate of 20.1%. It is expected to reach currency, as well as welcome tax revenues. The between cities and rural areas, where close to Myanmar’s construction lack of essential elements such as USD 4.2 billion in 2020. Myanmar Real Estate Entrepreneurs Association 70% of the population lacks electricity. industry is expected to grow power supply, transport channels Yangon’s rapidly growing population acts as estimates that, coupled with domestic demand, Yet another area that will call for new at an annual average rate and skilled staff. It also suffers a barometer for the construction sector. There, the law will lead to the delivery of some 20,000 investment in infrastructure is trade, as the from regulatory uncertainties. the market surged until 2015, with hundreds condominium units in 2017. government seeks to foster new manufacturing of 10.3% between now and According to a June 2016 of expensive condos and affordable housing Further legislation expected to be issued and agro-processing clusters in the central and 2020. The industry’s value analysis by Timetric’s Construction developments springing up around town, which in 2017 is the new Yangon zoning plan, which southern parts of the country, which will need stood at USD 8.2 billion Intelligence Centre, which surveys in turn pushed prices up. It started cooling off has been several years in the making. It will to be connected to large consumption zones and construction markets around the in 2015, as potential buyers waited to see the specify what types of building can be erected in export markets. in 2015, and is forecast world, Myanmar’s construction results of the general election. which zones of the city and also clarify the legal Lastly, a sector that will also require new to reach USD 13.5 billion industry is expected to grow Then, in 2016, the new Yangon regional situation of developers. Under the draft plan, infrastructure is tourism. The 2013-2020 Tourism in 2020 at an annual average rate of government reformed the review process for References 30% to 35% of the city’s total land area would Master Plan sets a target of 7.5 million visitors 10.3% between now and 2020. construction sites and suspended more than 1- The Irrawady, “Analysts be made available for new high-rise buildings by 2020. In 2016, according to the Ministry of say 2016 is the worst year for The industry’s value stood at 200 high-rise projects that did not meet urban Rangoon construction sector,” and apartments, and 20% would be set aside Hotels and Tourism, tourist arrivals totalled USD 8.2 billion in 2015, and is forecast to reach planning standards.1 During several months, (Dec. 2016) as recreational open spaces for the public, in 2.9 million and in the first two months of 2017, USD 13.5 billion in 2020. inspections were carried out and most of the 2- Myanmar Times, accordance with international urban planning the number had already reached 900,000, a “Construction and real estate There was a palpable boom from 2010, 200 projects were finally allowed to proceed, sectors pin 2017 hopes on standards.3 20% jump from last year. To promote further when democratisation started, until 2015 — except for 12 buildings that were deemed in new legislation,” (Dec. 2016) Apart from the residential sector, which growth, the government is planning to invest 3- Myanmar Times, “YCDC particularly in the residential sector, which pulls need of improvements such as reducing height planner targets 30 percent essentially concerns Yangon, and to a lesser extent USD 486.8 million to develop 38 projects by the whole market. According to the same source, and improving safety. parkland,” (March 2016) other cities such as Mandalay, a major driver for 2020, including the modernisation of resorts, This controversial measure led construction 4- Myanmar 2017 6 residential property accounted for 49.9% of the Infrastructure Summit construction companies lies in infrastructure, hotels and roads. The 2012 Investment Law, construction industry value in 2015 and grew companies to temporarily mothball construction 5- Ken Research, “Buoyant for which the government is pursuing a number which grants foreigners the right to own up to from USD 3.6 billion in 2011 to USD 5 billion sites and lay off personnel, including foreign Foreign Investments driving of key projects and is keen to attract foreign 50% of all joint ventures, will be key for Myanmar the Construction Industry in in 2015, recording a 17.8% growth in nominal experts, but also had an effect on the banks’ Myanmar” investment. The needs are immense. The March to achieve its ambitious investment goals in the terms. This segment will continue to dominate willingness to extend credit for big construction 6- Ibid. 2017 Myanmar Infrastructure Summit, aimed construction and infrastructure sector.

50 LEADING EDGE LEADING EDGEmyanmar Azerbaijan 2017 2151 in-depth INFRASTRUCTURE mapping the road ahead

for the 2013 Southeast Asian Games, Naypyidaw constructed near Mandalay to encourage river apartment blocks, educational establishments haulage from more and larger vessels. But in terms like Pathein Technology University, the Mandalay of water transport, ports offer the most potential in mapping The road AHEAD Football Academy and cyclone shelters. Through the country’s ambition to become a regional hub. its sister enterprise the Asia Might Company, which Myanmar has nine ports, with most international employs 200 people, it is also involved in developing cargo currently going through Yangon Port, near the Myanmar’s plans to develop its transport infrastructure are being boosted by the Chinese Belt and Road Yangon’s electricity infrastructure. Thilawa Special Economic Zone (SEZ) that is owned Initiative. Strategically located, the country will benefit from this hugely ambitious project. The government’s first priority is to position by a Japan-Myanmar consortium. Additional deep- Myanmar as a logistics hub by improving overland sea ports are planned for Myanmar’s two upcoming routes with neighbouring countries. Myanmar SEZs — Dawei and Kyauk Phyu. currently has a 157,000km road network, but plans Dawei SEZ is a USD 8-billion joint industrial to build another 34,400km within 20 years, as well and trade project being developed by Myanmar and as to upgrade existing roads and renovate bridges. Thailand. The Italian-Thai Development Company The option of privatising 82 roads4 also exists, was awarded the contract for its initial construction, although nationwide but stopped work in 2013 for financial reasons. The projects are focused on project is expected to restart soon and the tender With deep seaports, long the country’s economic may be reissued. Rakhine State’s China-funded centres and on upgrading USD 10-billion Kyauk Phyu SEZ project, which land borders and a network international corridors. includes a deep-sea port and industrial park, has of rivers, Myanmar has great Some financing is coming been awarded to a consortium led by China’s CITIC potential to develop a cross- from international that comprises four other Chinese enterprises and donors: ADB is helping to Thailand’s Charoen Pokphand. The consortium border multi-modal transport develop the road linking will hold 70-85% of the shares in the port, with system, which can turn the Yangon to Thailand, for Myanmar retaining the remainder. country into a regional transport example, and in 2016, These ports are set to play an important role in the China Road and Bridge huge Chinese scheme that will have an high impact logistic centre.” Company won the on how Myanmar’s transport infrastructure moves USD 700-million tender forward: the Belt and Road Initiative (BRI), which Stephen Groff, Vice President for East Asia, Southeast Asia and the Pacific, Asian Development Bank (ADB) to build sections of this. aims to rebuild the land (belt) and maritime (road) Another ADB loan of networks linking China with other Asian countries, around USD 80 million will be used to expand 64km Europe, the Middle East and Africa. The initiative

Shutterstock: Tonkinphotography Shutterstock: of the Yangon-Naypyidaw-Mandalay highway — a involves Chinese investment in six economic The upgrade of land, sea and air connections will demand multi-billion dollar investments to be undertaken as public-private partnerships project that went to international tender in 2017. corridors — two of which go through Myanmar. Much of the country’s rail network also needs The Bangladesh–China–India–Myanmar corridor “With deep seaports, long land borders and Transport and Communications. “With very poor improvement and the state-owned Myanmar includes land and sea routes. a network of rivers, Myanmar has great potential infrastructure, limited budget and weak legislation, Railways, which runs 6,107km of lines, is actively The land road connecting the four countries to develop a cross-border multi-modal transport the one and only way to carry out the master plan is seeking investors for schemes that include is 2,800km long and passes from India through system, which can turn the country into a regional through public-private partnerships (PPPs).” 3 modernising, repowering and upgrading lines, Mandalay to China. It is nearly complete, but a transport logistic centre,” states Stephen Groff, Vice To help promote those, ADB is providing and buying new trains. Two big projects are being 200-km section in Myanmar needs improvements. President for East Asia, Southeast Asia and the “strategic and transaction advisory services” funded by a Japanese loan: the Yangon-Mandalay Progress on the maritime route has been slow, but Pacific at Asian Development Bank (ADB). 1 to support the government in identifying and Railway Improvement Project and the Yangon it should go from India to Myanmar’s Sittwe Port, But the country’s ability to meet this potential developing transport projects through PPPs. While 47km Circular Railway Line Upgrading Project. In near the Kyauk Phyu SEZ, and then via river and is hampered by an inadequate transport the government is opening up these emerging addition, the government may privatise lines in and road back to India. infrastructure, which saw little investment between opportunities to foreign businesses, many will around Yangon. Myanmar also features in the BRI’s China– 2005 and 2015. As a result, 20 million people still prefer to partner with a strong Myanmarese Myanmar has 69 airports and plans are IndoChina Peninsula economic corridor, which have no access to all-weather roads, and 60% of construction company that has experience of large underway to expand, upgrade and privatise many will link five ASEAN countries to each other and roads and most rail lines are in poor condition. civil infrastructure projects and an understanding of them. A consortium led by Mitsubishi is now China through cross-national highways and a high- References River infrastructure, ports and airports also need of local industry, regulations and communities, in managing Mandalay Airport, and in a PPP, local speed railway from Bangkok to Singapore. For 1- Myanmar Times, developing. Both ADB and the government believe order to mitigate risk and possibly boost chances of “Implementation in key: ADB company Asia World has opened the first phase of a example, Dawei SEZ will gain a direct connection to the sector requires USD 60 billion of investment in winning tenders. The country has a number of these Vice President,” (March 2017) USD 633-million third terminal at Yangon Airport, Bangkok. To date, Chinese companies have been the 2 2- Asian Development Bank, the next 15-20 years. companies, with one of the most prominent being Myanmar Transport Sector with help from Singapore’s CPG Corporation. In 2017, main contractors for the BRI, but analysts predict The government is strengthening transport leg- Ayer Shwe Wah Construction. Policy Note, 2016 the government announced its next tenders would that the project could start to dominate the global 3- Myanmar Times, “Lack of islation and implementing the National Transport Established in 1999 and with ISO-9001 investment throttles transport be for PPP upgrades to Kawthaung, Mawlamyine infrastructure industry, and increasingly China Development Plan (NTDP) it created with the certification, Ayer Shwe Wah Construction prides infrastructure,” (Sept. 2012) and Heho airports. But the country’s main air will need partnerships with foreign companies. Japan International Cooperation Agency (JICA). It itself on its state-of-the art practices, technology and 4- Global Team Finland, transport priority is building an international Businesses in Myanmar generally welcome the way “Opportunities in developing includes 142 projects — 48 road, 14 rail, 32 air, 33 machinery. It has developed and taken part in a wide transportation infrastructure airport at Hanthawaddy near Yangon. Japan’s their government is approaching infrastructure inland water and 15 maritime — and is budgeted range of construction projects, such as the Yangon- in Myanmar,” (Jan. 2017) JGC Corporation, Singapore’s Changi Airport development in order to become a regional hub 5- PwC, Myanmar Business at about USD 22.7 billion. However, “the ADB and Naypyidaw-Mandalay highway; ports, including Guide, 2017 Planners and Engineers, and Yongnam Holdings and the investment boost the country will gain from JICA have pointed out that we need a budget at carrying out deep-sea work at Kyauk Phyu; and 6- Myanmar Times, have won the tender to build, own and operate this the BRI. As one local executive puts it: “With its least three times this size to meet our targets,” says railways. In addition to transport infrastructure, “Myanmar is where ASEAN, USD 2-billion facility.5 Waterways are going to be strategic location, Myanmar is where the Belt and Belt and Road converge,” Win Khant, Permanent Secretary at the Ministry of its other civil projects include dams, buildings (Sept. 2017) updated, sediment removed, and an inland port Road ambition meets the ASEAN vision.” 6

52 LEADING EDGE MYANMAR 2017 53 TOURISM

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57 59 THE PATH LESS PARADISE FOUND TRAVELLED OFFERS THE MOST Shangri-La adds refinement to Yangon Myanmar’s attractions are undeniable, and there is a lot more for visitors to discover 61 CAPITAL PROSPECTS Naypyidaw is in the business traveller’s radar for its convention centres and easy access to the countryside s U For s U ust J Shutterstock: Shutterstock:

LEADING EDGE Azerbaijan 25 briefing

THE PATH LESS TRAVELLED OFFERS THE MOST

One of the last untapped frontiers in tourism, Myanmar offers history, nature, culture and architecture. From snow-capped mountains to 800 islands, there is a lot to tap into. Shutterstock: Plufflyman Shutterstock: Shutterstock: Ruksutakarn Studio Ruksutakarn Shutterstock: Fisherman in the bio-diverse Inle Lake Novice monks at Shwenandaw Monastery

Boasting irresistible attractions, is based on its Tourism Master Plan 2013-20. The Myanmar has seen its tourism industry undergo plan aims to develop Myanmar into a sustainable, rapid growth since 2011. Tourism directly contributed year-round, geographically diverse destination, USD 2.1 billion or 3% to its GDP in 2016.1 The World receiving 7.5 million tourists who will spend Travel and Tourism Council (WTTC) ranks Myanmar’s USD 10.18 billion a year by 2020.3 Strengthening tourism second in the world in long-term growth, the sector’s governance, building a work force predicting an average increase in its contribution dedicated to tourism, improving destination planning of 7.5% every year till 2027. Visitor spending has and management, developing quality attractions, seen the highest growth globally, rising 73.5% a year improving infrastructure and promoting Myanmar on average from 2010-16, to USD 2.26 billion and internationally are all key elements of the plan. 26.4% of exports. The The country already has specific policies for WTTC sees this increasing responsible tourism, community involvement in Ecotourism is at the centre by 8.3% a year until 2027, tourism and ecotourism, and a new tourism bill is in hitting USD 5.2 billion and the pipeline to ensure that regulations and safeguards of our tourism strategy. We 37.6% of exports. meet international standards. Governance is also have to be careful, because Foreign investment being improved by setting up regional committees we cannot develop too fast in tourism is also and what Ohn Maung describes as “a private network increasing, with DICA of 11 bodies working together as a team with our and spoil the natural beauty stating that it rose 12% to ministry,” which includes the Myanmar Tourism of the country.” USD 2.5 billion in 2016. Much Federation, the Myanmar Hotelier Association and of this recent investment the Myanmar Restaurant Association. Ohn Maung, Minister for Hotels and Tourism has gone into hotels, with Until recently, tourism was focused on the colonial at least 144 new ones cities of Yangon and Mandalay, the pagodas of Bagan being approved last year, and the bio-diverse Inle Lake, as was investment. and most funds coming from Asia.2 Ohn Maung, In 2016, the International Finance Corporation Minister for Hotels and Tourism, thinks other (IFC) lent USD 13.5 million to Myanmar’s United regions “haven’t opened their eyes yet” to Myanmar’s International Group, to address what it saw as an potential, explaining that “competition is not as “acute need for quality hospitality infrastructure y Shanin tough as in more mature economies and returns outside the commercial capital, Yangon.” The aler V are much higher and quicker.” money will help build five-star hotels at Bagan Understandably, tourism is now a major focus and Inle Lake. But Ohn Maung is concerned about for the government, whose strategy for the sector overdevelopment of the main tourist sites.: “These Shutterstock: Shutterstock:

LEADING EDGEmyanmar Azerbaijan 2017 2757 TOURISM in-depth the path less travelled

recent launch is the Myeik Archipelago, which has seen interest from Thai investors and could become a luxury cruise destination. Accommodation in many of these areas will be specially built, traditional Paradise found: Shangri-La ethnic housing. But hotels are also needed and Chin State, for example, which sees itself as an ADDS REFINEMENT TO YANGON adventure-tour destination, is looking to build seven new international-standard hotels. All community-based schemes include training As Myanmar moved toward a market economy, Shangri-La Hotels and Resorts was quick to anticipate the for locals, who receive classes in hospitality, guiding needs of the business visitors and tourists flocking to Yangon, as well as the desires of its rising middle class. tours and English, with support from international organisations and companies. “Human resource development is very important,” says Ohn Maung, recognising the country’s lack of skills. “We have a lot of young people ready to work and looking for jobs. We need staff who understand the jobs they are meant to do.” Myanmar also now has vocational training schools, with one to twelve-month courses in hospitality management, and three universities are providing degree courses in tourism and hospitality. Other training organisations include the Hospitality and Catering Training Academy, run by a foundation set up by Aung San Suu Kyi in memory of her mother. However, transport infrastructure needs significant improvement for Myanmar to be able

Shutterstock: Tooykrub Shutterstock: to reach its Master Plan targets. In 2015, 1.2 million A stunning pagoda landscape in the plains of Bagan foreign visitors arrived by air, up over 200% from 2011. Most others came through 11 border gates, places have enough hotels and rooms, so we are not five each with China and Thailand, and one with The beauty of the Shwedagon Pagoda can be appreciated from the Sule Shangri-La Hotel encouraging investment in those areas. We want India, while about 27,000 came by water — either to protect the unique collection of well-preserved by sea, or by using the Kyan river crossing between WhilE Naypyidaw is Myanmar’s official capital, Resorts. One of the world’s premier hotel groups, historic buildings in Yangon. Singapore, for example, Rangong in Thailand and Kawthaung in Myanmar.4 Yangon is considered its tourism hub, with Yangon Shangri-La is based in Hong Kong and currently has barely any of its colonial buildings left.” There A large increase in domestic travel is also stretching International Airport receiving about 91% of the owns or manages over 95 five-star deluxe hotels are now tighter controls on new development the system — in the 2015-2016 peak season, over country’s total airborne visitors in 2015. and 40,000 rooms in five continents. The group requests: “We won’t just hand out hotel permits 6 million Myanmarese took holidays, 1 million more Yangon’s traditional markets, parks, lakes, was founded by Robert Kuok, who took the brand anymore in areas that are already congested.” than expected.5 Ohn Maung admits the problem: ancient pagodas and its high number of colonial name from the novel Lost Horizon, which describes Instead, Ohn Maung stresses, “Ecotourism is “We need to improve transportation infrastructure buildings attract tourists interested in exploring a paradise on earth that “cast a spell over all who at the centre of our tourism strategy. We have to on land, in the air and on the water. More airports, the history of the country. But the city is also reside there.” be careful, because we cannot develop too fast and aircrafts, roads, rail networks and buses are needed.” Myanmar’s centre of industry, business and Shangri-La opened its doors during Myanmar’s spoil the natural beauty of the country.” Currently, for example, Myanmar only has three increasing wealth: in 2015, Year of Tourism campaign in 1996. The hotel was Myanmar’s first ecotourism site was the international airports; however, some smaller ones 81% of all recorded business built next door to the 2,500-year-old Sule Pagoda, Indawgyi Lake Wildlife Sanctuary, established in should be upgraded for international flights by As Yangon’s first visitors were bound for which has marked the city’s exact central point for 2013 and already on UNESCO’s World Heritage 2026 and the Hanthawaddy International Airport completed skyscraper, Yangon. centuries. As Yangon’s first completed skyscraper, list. The government is targeting 22 other regions project, near Yangon, got back on track in 2014. Changing to keep pace the 22-storey hotel transformed the skyline. It is for ecotourism and Ohn Maung intends a major Ohn Maung is also increasing the presence the 22-storey Sule with the transitions in still one of only a handful of tall buildings in the part to be played by “community-based tourism, of Myanmar at tourist events. “We are going to Shangri-La transformed Myanmar, Yangon now commercial centre of the city, making it the place organised by travel agencies or non-governmental participate in all the world trade shows and our the city’s skyline offers international shopping to go to get a bird’s-eye view of its most important References institutions, with training courses for the villagers private sector will accompany us to promote tourism outlets, luxury hotels and sights. 1- World Travel and Tourism who will be running the show.” from their perspective and work with colleagues other facilities for business Initially, the hotel was given Shangri-La’s mid- Council, “Travel and Tourism Economic Impact Myanmar,” The most developed of these schemes is around from abroad,” he says. At those shows, people will travellers. In early 2016, the Asian Development market brand name, Traders. A combination of (2017) the Irrawaddy dolphin sanctuary, where eight villages hear him talk about how his country has “fantastic Bank (ADB) thought these were not being developed the Asian financial crisis, sanctions and a travel 2- Myanmar Times, “Government puts in effort to provide bed-and-breakfast accommodation, with tourism destinations that need to be served by world- quickly enough, stating that “the steady increase boycott convinced the group that Yangon was not boost tourism,” (May 2017) package tours by the Inn Chit Thu Tourism Group, class hotels and resorts, unique travel experiences of international visitors and the surge in demand ready for luxury accommodations. By 2011, with 3- Ministry of Hotels and amongst others. In 2016, Kayah, near Inle Lake, and better infrastructure” and how tourism has the for hotel rooms, long-term accommodation and the country beginning its transition to democracy Tourism, “Myanmar Tourism Master Plan 2013-2020” was launched as a new destination. This scheme, potential to rise from the seventh most important office space are currently overwhelming Yangon.” and attracting international businesses and tourists, 4- Myanmar Ministry involving the International Trade Centre, is creating contributor to GDP to the third. Myanmar is a Nowadays, a number of international chains Shangri-La decided it was time to launch a five-star of Hotels and Tourism, “Myanmar Tourism Statistics” links between local producers, service providers and “path less travelled with many possibilities,” Ohn are stepping in to fill the gap in hotel rooms, brand. Using part of a USD 80 million loan from 5- Myanmar Times, international tour operators. It is aimed at visitors Maung says, “it is up to the individual investor to including Melia, Novotel, Wyndham and Best the International Finance Corporation (IFC), the “Myanmar embracing who want to get off traditional routes, experience decide what they want to do — opportunities are Western — but the company that first changed hotel opened again as the Sule Shangri-La in 2014, domestic travel boom,” (Dec. 2016) village life and follow new walking trails. Another abundant and in all tourism sectors.” the city’s landscape was Shangri-La Hotels and after three years of renovations.

58 LEADING EDGE myanmar 2017 59 tourism in-depth paradise found: shangri-la adds refinement to Yangon

The new interior, designed by Singapore-based residential development and best residential interior RSP Architects, Planners & Engineers, was conceived design prizes at the Asia Property Awards that year. At to show that a hotel in Myanmar could be as lavish the project’s launch, Area Manager Phillip Couvaras as hotels anywhere. All 479 guestrooms have large remarked that “As more corporate travellers set up CAPITAL PROSPECTS: windows with views over the city, and modern, five homes in Yangon, it is a natural progression for star amenities. Suites on the top floor have separate Shangri-La to provide residential facilities and to THE RISE OF NAYPYIDAW working and living areas; at 189m2, one of them is the serve as an extended family to new members of the largest in Yangon. A 490m2 executive lounge on the Yangon community.” 21st floor has unobstructed views of the Shwedagon A lack of office space had also held Yangon back: Although tourism in the capital city of Naypyidaw is underdeveloped, it has Pagoda and two private meeting rooms. Another in 2016, it had a net lettable area of 315,000m2, 4% excellent hotels, convention centres and infrastructure, as well as easy access to a three floors are dedicated to state-of-the-art meeting of the total in Bangkok. As part of the solution to lush countryside, local villages and the protected areas around Bagan and Inle Lake. rooms of all sizes, including a ballroom that hosts up this problem, Shangri-La opened its Sule Square to 750 people and is regularly used for conferences Mall and Office in December 2016. It’s a “truly and other functions. international grade office tower,” says Tony Picon of There is a beauty salon, a fully equipped health estate agents Colliers International, adding that it Developing tourism in Myanmar’s businesspeople, and the number coming and fitness centre and an outdoor pool. The hotel also will “set the benchmark for the next few years.” Sule young capital city, Naypyidaw, is a key element through travel agencies was below 4%, notes the boasts five restaurants and bars which are already Square contains 28,800m2 of Grade A offices over 15 of the government’s Tourism Master Plan 2013- Naypyidaw Hotel Entrepreneurs Association. gaining an international reputation. One of these, the floors, 5,618m2 of shops and restaurants (including 2020, which aims to make the country a year- Apart from visiting government officials, the Peacock Lounge on the double-height ground floor, Rolex and Emporio Armani), and indoor parking. round, geographically spread tourist destination. other main draw to Naypyidaw is its world-class is where the emerging middle class of the city comes The new office development is adjacent to the Sule Located in the centre of Myanmar, 391km from convention centres that offer the best meetings, to gather, according to the British newspaper The Shangri-La hotel and directly connected to it. Yangon and 302km from Mandalay, Naypyidaw incentives, conferences and exhibitions (MICE) Independent, which notes: “If you want insight into Bringing the story of the development of Yangon’s was a quiet rural area before 2002, when the facilities in the country. The city has two major the new Myanmar, you’ll find it here.” tourism and business infrastructure full circle, Mr country started building its new capital from centres, with the largest being 58,250m2. As well As well as a lack of deluxe hotels, Yangon has Picon explains that “In the past, many people used the scratch. In just 15 years, it has become the third- as various other facilities, Naypyidaw contains suffered from an insufficient amount of quality Shangri-La Hotel lobby as an unofficial office. Even largest metropolis in Myanmar and one of the state-of-the-art indoor and outdoor sports long-stay accommodations. The city only had 1,520 we used it as a secondary office when the internet ten fastest-growing cities in the world.1 It is stadiums, the latter able to accommodate 32,000 serviced apartments in 2016 — just 8% of the elsewhere was bad. Hopefully those people who now a modern administrative centre with grand people. These venues have successfully hosted amount in Bangkok. Though international operators started their business in the Shangri-La can now buildings, wide highways, green spaces, reliable the World Economic Forum in 2013, the 24th are starting to increase the supply of long-term have a real office in Sule Square.” electricity and the best telecommunications and 25th ASEAN Summits in 2014, the ASEAN accommodation, once more Shangri-La led the way. infrastructure in the country. Tourism Forum in 2015 and the Southeast Asian As well as funding its hotel refurbishment, the IFC’s Easily accessible from all parts of the Games in 2013. loan to the company went towards developing its country, Naypyidaw has one of Myanmar’s three As part of the Tourism Master Plan, the Shangri-La Serviced Apartments — two 21-storey international airports, which opened in 2011. government wants to increase MICE activities towers in 15 acres of gated gardens beside central Domestic carriers provide transportation to and in Naypyidaw and make full use of the new Kandawgyi Lake. from many of the country’s other airports, with the infrastructure. “We have done a lot of marketing The towers contain 240 two-to-four bedroom, trip to Yangon taking over the past three years, aiming to get people fully-equipped luxury apartments, as well as a under an hour, while to hold meetings and exhibitions in Naypyidaw. gym, a swimming pool, tennis courts and shops. China Eastern Airlines We will continue with this strategy,” says Daw The apartments opened in 2015 and won the best Naypyidaw has a number of and Bangkok Airways Khin San Win, Deputy Director General at the tourist attractions, including offer international Directorate of Hotels and Tourism. pagodas, a gem museum, flights. The airport’s In the run-up to the large MICE events that 1 three terminals can started in 2013, the government encouraged numerous gardens and parks, handle 3.5 million the building of a significant number of hotels 2 a zoo and safari park, the passengers a year2 and there are now more than 50, providing over 1. The grandiose lobby of the Sule Shangri-La national museum and archive, but, even though use 5,000 rooms. These range from luxury five-star 2. Impeccable service is a hallmark of the brand is rising, that capacity properties from international operators like 3. The suites at the hotel are some of the most lavish in Yangon and golf courses is underutilised at Accor, Hilton and Kempinski, to budget hotels. 3 present: in 2016, only Given the current focus on MICE tourism, 16,224 people arrived in Myanmar via the new there is a selection of business-standard hotels. capital’s airport,3 which represents only 0.6% of A good example of these is the Myat Thinzar visitor arrivals to the country. Naypyidaw is also Hotel, located in in one of three hotel zones, on the main Yangon to Mandalay railway line, and between ten and 30 minutes’ drive from the and a new highway to Yangon has cut travelling parliament, convention centres and airport. time between the two cities to roughly four hours. The Myat Thinzar is operated by Ayer Shwe The city houses the national parliament (the Wah, one of Myanmar’s largest conglomerates, Hluttaw) and government offices in a 31-building which was founded in 1999 and has a wide complex, as well as the presidential palace. portfolio of business interests. The hotel was Perhaps it is not surprising that at the moment built in 2011 and includes six bungalows and most visitors come on government business: one two-story building with a total of 16 superior in 2016, the majority were from international rooms and 12 executive suites. According to the non-governmental organisations, 30% were company, it aims to provide tourists with luxury,

30 LEADING EDGE MYANMAR 2017 61 in-depth acancylizm V Shutterstock: Shutterstock: The Uppatasanti Pagoda, also known as Peace Pagoda, is a major landmark in Naypyidaw

comfort, a convenient location and value for safari park, the National Museum and National money — and it would appear to achieve this, as Library, and golf courses. Considering the it receives ratings of very good to excellent on the country’s concern for sustainable tourism, it is main international travel websites. also a good base for day trips to local villages and It offers everything a business visitor expects: the protected areas around Bagan and Inle Lake. air conditioning, an all-day restaurant, free The government and city council are promoting high-speed Wi-Fi, on-site parking, taxis, a cash these attractions to tour operators and planning machine, guided site-seeing trips, flat-screen other events, such as golf tournaments, to raise cable television, gardens, massage treatments, a awareness of the city. “We want tour companies badminton court and 24-hour reception, room to add Naypyidaw to their itineraries when they service and security. It also contains a meeting offer packages,” says Myint Htwe, Director of the room that can seat up to 20 people. Ministry of Hotels and Tourism. “It has excellent The Myat Thinzar Hotel’s affordable rates hotels and infrastructure, and easy access to the are a reflection of the increasing competition surrounding countryside.” 4 for tourists in Naypyidaw and a recent 20% fall This countryside is an important component in the cost of rooms. This is welcomed by the of the most recent initiative for developing government, which sees it as an advantage for tourism in Naypyidaw. In 2016, the city council attracting visitors. announced a five-year plan to transform the As Daw Khin San Win says, “Now hotels capital into a green city. are reducing their room prices competitively, The USD 8.5-million programme is supported without needing to be encouraged by us.” by Aung San Suu Kyi, who wants to see it under- Although the hotel sector might appear saturated taken while her government is in office. As well at present, unless niche markets can be targeted, as introducing eco-friendly trips to local forests, there are opportunities for investors within the mountains and the Ngalike Dam, Naypyidaw will capital’s tourism. Restaurants, bars, shops and bring in measures for clean air and water, with other facilities for networking and relaxation are financing from the Japan International Cooper- References limited, states Phyoe Wai Yar Zaw, Chairman of ation Agency. “And we need to consider building 1- www.travelnaypyitaw.org Myanmar Marketing Committee and Managing an electric train,” says council member Tin Tun. 2- Myanmar Times, “Nay Pyi Taw’s hotel conundrum,” Director of All Asia Exclusive Travel Company, Many are hopeful that the continuing (June 2015) who believes it will take a public-private transformation and promotion of the city will 3- www.tourism.gov.mm partnership to build Naypyidaw into a truly pay dividends. Franck Droin, General Manager 4- Myanmar Times, “Amid successful MICE destination. of the Kempinski Hotel, says, “We need to show tourism dip, ministry While the city might need more people what we have here. If people haven’t urges tour packages for Nay Pyi Taw,” (Nov. 2016) entertainment, it does already have a number seen something, they won’t know they want it. 5- “Nay Pyi Taw’s hotel of tourist attractions, including pagodas, a gem Naypyidaw is the centre of Myanmar. This city is conundrum,” op. cit. museum, numerous gardens and parks, a zoo and perfect for the curious traveller.” 5

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