THE PREMIUM BUSINESS MAGAZINE FOR EXECUTIVES ISSUE NO 2 OCT–DEC 2018 FREE COPY EuroMatters

12 — COVER STORY serge pun charts bold vision for Yangon

10 — MICROECONOMY Working in a European company - from a Myanmar perspective 18 — SUCCESS STORY Towns and towers: shaping Myanmar’s urban landscape 32 — EAR ON MARKET Positive developments despite pressures EuroMatters 2 OCT–DEC 2018

EXECUTIVE DIRECTOR & CHIEF EDITOR MESSAGE FROM EUROCHAM Filip Lauwerysen DIRECTOR OF PRODUCTION Laurenne Sautier It is with great pleasure that we present you the second CREATIVE DIRECTOR edition of EuroCham’s new magazine EuroMatters, the only Richie Chan premium business magazine for executives in Myanmar. INTERNAL CONTRIBUTORS Marc de la Fouchardière Kai Heymans Our first issue focused on the energy sector. This time, EXTERNAL CONTRIBUTORS we will highlight different aspects of the developments in the Kantar TNS construction sector, a sector of critical importance to many PHOTOGRAPHY European businesses in frontier economies, including Myanmar. Kyaw Linn Oo Pietro Borsano The industry has seen a tremendous change over the last five Pun Hlaing Estate (Facebook) years, with a rush of hotels and hospitality infrastructures, a The Strand Hotel (Facebook) rise in manufacturing plants and factories and the creation of The Yangon Excelsior (Facebook) sizeable real estate projects. These include a brand new airport PRINTER GURU Print in Yangon, privatisation of Mandalay’s airport, international Reg. No. 01376 shopping centres and office spaces such as Junction City and the No. (A/6), Room No. (F), Natchaung Condominium, first shopping mall in Shan State. Tamwe township, Yangon

ADVERTISING INQUIRIES Htet Ko Ko This edition will take you on a journey starting with an +95 9 250 020 798 interview with SERGE PUN, one of the most recognisable [email protected] Myanmar names in the international community. In Myanmar’s story of reform and opening up, MR PUN serves as a go-to PUBLISHER partner for international investors. He will share with readers his Filip Lauwerysen (02375) extensive knowledge and experience in navigating the country’s construction industry, as well as his vastly ambitious scheme for Yangon - the New Yangon City - covering a landmass twice as big as Singapore.

European Chamber of Commerce In addition, we will take you through a success story of in Myanmar architecture consulting firm Archetype, which has been very active in shaping Myanmar’s urban landscape, as well as a site 271–273, Bagayar Street Sanchaung township, Yangon, Myanmar visit to a paint factory of Norwegian Jotun, in Bago Region, which supplies construction players with coatings and paints. +95 9 450 582 335 [email protected] The three feature stories will cover the issue of safety, www.eurocham-myanmar.org standards and design, as well as Yangon’s incredible heritage. eurocham.myanmar eurocham.myanmar Having interviewed investors, academics and managers, we will EuroCham Myanmar look at how the market demands and regulations are changing, and what role European companies are set to play. •

CO-FUNDED BY We wish you an insightful reading. European Union

This publication has been produced with the assistance of the European Union.

DISCLAIMER The information and views set out in this magazine are those of the author(s) and do not necessarily reflect the official opinion of the European Union or EuroCham Myanmar. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained. Filip Lauwerysen Laurenne Sautier No part of this publication can be reproduced EXECUTIVE DIRECTOR & MARKETING & COMMUNICATION or transmitted in any form without prior written CHIEF EDITOR MANAGER permission from EuroCham Myanmar. The editors, employees and contributors cannot be held responsible for any errors, inaccuracies or omissions that may occur.

COVER PHOTO SERGE PUN by Kyaw Linn Oo EuroMatters 2 OCT–DEC 2018

CONTENTS

06 SNAPSHOT 24 BUSINESS Revellers enjoying Ferris wheel SAFETY AND at the pagoda festival in PROTECTION Mandalay Safety in Myanmar’s construction gradually improves 08 UPDATES Relevant news and 27 BUSINESS developments in Myanmar’s 10 business environment STANDARDS 24 AND DESIGN Raising the game with 10 MICROECONOMY PROFILE Myanmar’s construction Working in a European standards and materials company - from a Myanmar perspective 30 SITE VISIT Painting Myanmar’s 12 INTERVIEW next wave of industrialisation serge pun charts bold vision for Yangon 32 EAR ON MARKET Positive developments despite 18 SUCCESS STORY pressures and uncertain Towns and towers: outlook for Myanmar shaping Myanmar’s urban 12 consumers 27 landscape

34 EVENTS ON REVIEW 21 BUSINESS Anti-Illicit Trade Forum HERITAGE AND A recollection of our successful event CONSERVATION in Naypyidaw Yangon takes centre stage in the race to become Southeast Asia’s heritage darling 36 UPCOMING HIGHLIGHTS Overview of key events in the upcoming quarter

18 34

EuroMatters 1 JUL–SEP 2018 4 5 EuroMatters 1 JUL–SEP 2018 SNAPSHOT SNAPSHOT SNAPSHOT SNAPSHOT

REVELLERS ENJOYING FERRIS WHEEL AT THE PAGODA FESTIVAL IN MANDALAY

This human-drive Ferris wheel is around 20-foot high and can carry around 40 revellers for each 3-minutes long ride. These fairground rides are usually found at the pagoda festival around the country. The photo was taken at the Kyauktawgyi Pagoda festival, one of the most popular pagoda festivities in Mandalay. At the festival, revellers can also enjoy other attractions like carnival tents and traditional opera troupe performances. Every year there are twenty pagoda festivals across Myanmar.

Photo by HTOO TAY ZAR

EuroMatters 2 OCT–DEC 2018 6 7 EuroMatters 2 OCT–DEC 2018 UPDATES UPDATES Retail, wholesale sector latest opportunity Long-term outlook for Myanmar’s construction for foreign players and joint ventures sector ‘robust’, Fitch Solution says

FOREIGN INVESTORS are now consumer goods (including clothes, services registration includes specifying THE LONG-TERM growth outlook In particular, transport projects such y-o-y, noting various potential downside allowed to invest in the retail and watches and cosmetics), foodstuff the type of company, procedure for for Myanmar’s construction industry as roads, railways and airports will drive risks, including the Rohingya crisis, wholesale sector, as the government (including agri, fishery, animal, instant retail and wholesale operations, lowest is rated “robust”, consulting firm Fitch growth. The transport sector accounts political instability in border areas and has moved to clarify the policy details. products, beverages and domestically investment amount, land area, whether Solutions Macro Research announced in for the largest share of the country’s potential for economic reforms to be produced liquor), household goods, the business involves opening shops or September. project pipeline as well as foreign stalled. The figures for 2018 and 2019 The commerce ministry issued kitchen products, drugs and medical enterprises and the registration period. investment flowing into the sector. were also revised down to 13.3% and the Directive 25/2018 on May 9, equipment, animal feed and drugs, Fitch Solutions Macro Research, Asian countries including Singapore, 13.8%, respectively, from 16.5% and authorising 100 percent foreign-owned writing materials, furniture, sports The minimum capital requirements a unit of Fitch Group, predicted that China, India and Japan are particularly 14.7%. companies as well as joint ventures accessories, communications products for 100% foreign-owned firms to operate the country’s construction industry active in investing. between international and domestic (including cameras and phones), in retail and wholesale industries are expansion will be the second fastest in “Investors are concerned that investors to carry out retail and electronics, construction materials, US$3 million and $5 million respectively. Asia after Cambodia, averaging almost In addition, FDI to the real estate required reforms to the business wholesale businesses. More recently, electrical goods, chemicals for industrial For joint ventures where the local 10% year-on-year up to 2027. industry increased by 21% to US$1.1 environment, such as boosting the government issued a standard manufacturing, inputs for agriculture, investor has at least 20% equity ratio, billion in the fiscal year 2017-18, showing bureaucratic efficiency, opening up the operating procedure for retail and machinery for agriculture, various the minimum capital necessary are “Myanmar’s construction industry rising foreign interest in infrastructure economy to foreign participation and wholesale business registrations as well machineries, bicycles, motorcycles, $700,000 and $2 million respectively. remains on a strong growth trajectory. assets. There is a total value of $19.2 improving government coordination as a list of products allowable for trade. spare parts for motor vehicles, All capital requirements exclude We are expecting construction industry billion of infrastructure projects in the and capacity, will not move forward as The updates were announced on July 26, children’s toys, decorative materials for rental fees. Domestic businesses are growth to average 9.5% y-o-y in real pipeline, compared to the current size quickly as planned. more than two months after the original households, souvenirs and handmade exempted from the requirements. terms over our long-term forecast of the country’s construction industry notification was issued. products as well as fine art and period, making it the second-fastest which is worth around $4.5 billion. “Any backsliding on reform instruments, according to the commerce EuroCham said the reform will growing in Asia after Cambodia. This momentum would act as a barrier to The list of permitted products ministry. “invite more competition to bring down is based on the country’s pressing Despite the substantial growth foreign investment, which is crucial provides operational details and specific consumer prizes and create more jobs infrastructure deficits, including in potential over coming years, Fitch for infrastructure development in the information on the type of goods allowed The standard operating procedure for everyone”. transport, power, housing and social Solutions meanwhile has cut Myanmar’s country,” the company stated. to be traded in the country. It covers to apply for retail and wholesale infrastructure, which the government is short-term growth forecast for the committed to addressing,” the research sector in 2017 from 18.5% to 10.3% firm said. Third business confidence survey launched

EUROCHAM MYANMAR launched its third Business Confidence Big step forward for financial inclusion Survey on September 3, which will be open until October 9. The survey is a MYANMAR HAS seen a significant The statistics shows that over 6 means “Myanmar has improvements in highly important tool to obtain valuable increase in the number of adults with million more adults have access to financial sector,” whileKEITH JEFFERIS market data and has been endorsed access to financial services, according to formal financial services now than in from the UNCDF said the progress by the European Union. It aims to the nationwide Making Access Possible 2013. Adults with more than one formal can be attributed to people’s desire to monitor economic developments and (MAP) financial inclusion study. The MAP financial product also increased to 17%. secure loans. create a more transparent business project is funded by the UK government, environment in Myanmar. By collecting the United Nations Capital Development Myanmar Financial Inclusion The study highlighted that a major factual data, EuroCham Myanmar Fund (UNCDF) and Myanmar’s Ministry Roadmap (2014–20) was drafted by the driver fuelling this inclusion was endeavours to advocate the suggestions of Planning and Finance’s Financial government after carrying out the first strong expansion in the microfinance of European companies towards the with last year’s. Nevertheless, more in 2017, most see prospects improving Regulatory Department (FRD). survey in 2013. Through the Roadmap, and cooperative sectors. PAUL governing entities. respondents will allow EuroCham over the next few years and almost all one of the targets was to increase LUCHTENBURG, UNCDF country to secure a more reliable, in-depth have opted to continue doing business Based on a survey of 5,500 rural and formal financial inclusion from 30% to coordinator in Myanmar, was upbeat The survey’s key objectives include overview of the business environment in the country. The 2017 survey found urban households, the research found 40% by 2020. But, according to this 2018 about the promising findings. He said measuring European business sentiment in Myanmar. that more than three quarters of the 70 that adults with access to at least one survey, the reach has already exceeded that MAP’s 2018 findings confirm towards the domestic economy, getting European companies active in Myanmar, formal financial product increased from the 2020 target. the multi-faceted developments in an overview of sectoral representation Results will be presented in which responded to the poll, rated the 30% in 2013 to 48% in 2018, an almost Myanmar’s financial sector and offer of European firms in the country and December this year (see page 37). Myanmar business environment as poor two thirds increase in financial inclusion, U ZAW NAING, FRD director promise for continued financial inclusion investigating the issues and concerns or needing improvement, compared to against a target set in 2014 of 40%. general, commented that the number expansion as the financial industry gains faced by those businesses. Findings from last year’s survey 67 percent in 2016. The companies cited traction with digital financial services. showed that while European companies regulatory issues, lack of a qualified This year the number of responses in Myanmar concurred that the domestic labour force and legal uncertainty as has already increased in comparison business environment has deteriorated the biggest challenges in the country.

EuroMatters 2 OCT–DEC 2018 8 9 EuroMatters 2 OCT–DEC 2018 MICROECONOMY PROFILE

Every quarter, EuroMatters conducts a personal interview with a Myanmar employee working at a European company in Myanmar. They share with us their personal story and life in Myanmar. Working in a European company - from a Myanmar perspective

Can you tell us about country is rich in national yourself? What is your resources, we need to learn background? What do you and improve our technically do in your company? skills so I would like to say that travelling is good for me as I get My name is MS YU WAR WAR Maung a chance to know how it is going in and I graduated with a B.E. mechanical other countries. engineering from Magway University in 2009. After my graduation, I started Do you speak or are you learning a working in Yangon and now, I am European language? serving as an assistant for a managing What have you learned from working director at a Europe-based company. for a European company? I speak English and I’m also learning Chinese, though it’s not a European How do you find working for a I have learnt a number of skill- language. European company? sets, including time management, organisation skills and how to set up What are your interests and hobbies? I find that working for a European a long-term plan systematically and company is a fantastic experience. So effectively. I have also grasped the I am interested in learning foreign far, I have learnt a lot by working with skills on how to schedule my own work languages and my hobbies include a team of colleagues from different priorities and commitments. reading, swimming, listening to music cultures. It is a good way to develop and playing badminton. professionally. Have you ever travelled outside of Myanmar? If yes, which countries and Where do you like to spend your free Did you face any cultural challenges what experiences did you have? If no, time in the country? working for a European organisation? do you have any plans to do so? How did you overcome them? When I have holidays, I visit my native I have been to China, Cambodia, town and go travelling with my family I didn’t face any cultural challenges Singapore and Thailand for work. By and friends to the beaches and other because the company has been very travelling to those countries, I found out beautiful places in Myanmar such like supportive. The workplace is like a that our country still needs to improve Pyin Oo Lwin, Taunggyi and Kalaw. family and colleagues are warm and in tourism, logistics, transportation kind towards each other. and many other things. Although our

EuroMatters 2 OCT–DEC 2018 10 INTERVIEWINTERVIEW WITHWITH SERGESERGE PUNPUN INTERVIEW WITH SERGE PUN

SERGE PUN CHARTS BOLD VISION FOR YANGON

t a time when the government is tapping SPA and FMI are consistently ranked among the top 10 in the into the business community to provide Transparency in Myanmar Enterprise/ PwintThitSa report, put strong leadership on the economic front, together by Yangon-based Myanmar Centre for Responsible such as the appointment of Deloitte’s Business. Meanwhile, Yoma Strategic has been consistently U SOE WIN as the new finance minister, ranked in the top 5% of the Governance and Transparency small wonder that Myanmar’s most Index in Singapore. renowned tycoon is in charge of expanding and upgrading the commercial capital. After all, securing investments Yoma Strategic has an extensive portfolio of businesses, and infrastructure for greater Yangon will determine notably real estate, financial services, automobile and food the future of millions of people – and a large part of the and beverage (F&B). Real estate has made significant inroads, national economy - for generations to come. including FMI City, Pun Hlaing Estate, StarCity and, most spectacularly, Yoma Central. These sizeable projects reflect the The son of a Chinese banker who was forced to take his family long-term vision MR PUN has in mind. For example, StarCity, from Myanmar in the 1960s following a military coup, SERGE in Thanlyin township, is the only large-scale residential PUN (U THEIM WAI) moved to China, and later to Hong Kong, development near the Japan-led Special Economic Zone (SEZ), with barely any money. His rise from hardships and poverty and therefore taps onto the demand arising from investors to being ranked by Forbes as Singapore’s 35th richest man in and managers in Myanmar’s only SEZ in operation. 2017 is an inspiration for millions of those whose lives remain a struggle in one of Asia’s poorest countries. The flagship which stands out is Yoma Central, featuring The Peninsula Yangon located on a 10-acre site and involving more MR PUN owns and controls Serge Pun and Associates (SPA), a than US$600 million investment. The project, sealing the fate private investment holding company. Yoma Strategic Holdings of the iconic Burma Railways headquarters, is a collaboration Ltd (Yoma Strategic), is one of three publicly listed companies between Yoma Strategic, FMI and the Hongkong and Shanghai that have grown out of SPA, which was originally founded in Hotels together with Mitsubishi Corporation, Mitsubishi Estate, 1983. The other two are First Myanmar Investment Company IFC and ADB. Limited (FMI), joining Yangon Stock Exchange’s inaugural listing in 2016, and Singapore-listed Memories Group, a spin-off from At the same time, Yoma Bank aims to use technology to bring Yoma Strategic and FMI’s tourism assets. the rural population, hitherto left behind in financial services, on board. One study found that adults with access to at least The tycoon is the go-to investor for international partners, one formal financial services product increased from 30% in counting Mitsubishi Corporation, the International Finance 2013 to 48% in 2018, an almost two thirds increase in financial Corporation (IFC), Asian Development Bank (ADB), Yum! Brands, inclusion. Yoma Bank, as the country’s fourth largest bank by New Holland, JCB, Dulwich College International, Kokubu and market share, plays a huge part in this transformation. The JCDecaux among them. Corporate governance is a key factor – bank is currently in discussions with international payment

EuroMatters 2 OCT–DEC 2018 12 13 EuroMatters 2 OCT–DEC 2018 INTERVIEW WITH SERGE PUN INTERVIEW WITH SERGE PUN

Yoma Land has an extensive geographical reach in Yangon to go out and find a piece of land where you can master-plan Region. How is that related to your vision of the city’s it, creating a lifestyle and a desirable environment for people future? to live in. And all that needed is enough space. Hence, we have always been on the outskirts of the sphere of “Yangon proper” SERGE PUN • Our real estate development, from the very due to land availability. onset, has a mission to create affordable housings as well as housing of different rates, which was acutely in shortage at But there’s one more reason: we would like to spend a lot of that point of time. When I started my first project, FMI City, time designing something proper and then be able to replicate back in 1995, there was very little private housing available that over a long period of time. Take FMI City: it took more in the country and so we decided to do this large affordable than 15 years. Pun Hlaing Estate is 18 years old; StarCity is now housing project. going into its 6th/ 7th year, with another 15 years to go. We like to do something which we can do it over a very long period of Another consideration is to have some degree of impact. You time instead of a one-off shot. can’t just do one building or a dozen houses - you need to amass sufficient number of units to have an impact on what Speaking of Yangon, the “new city” scheme is the talk your mission is. Therefore, the first project we started - FMI of town. What opportunities does that represent for City - was 465 acres and today it houses 2,000 units. Pun Hlaing international and European investors? Estate covers 650 acres, followed by StarCity which is more than 400 acres. It is impossible to get such acreage in downtown SP • The most paramount goal for Yangon’s “new city” is to Yangon, or within the very congested urban areas. You have create 2 million jobs. Creating 2 million jobs would bring in

networks and regional remittance companies on cross-border The state of the overall economy is not helping businesses. remittances. As the new administration reaches midpoint of their five-year term, it is presiding over falling approved FDI, stagnant tourism However, it is Yoma Strategic’s F&B business which has the numbers and slowing reform momentum. The tycoon is also a widest reach across the country. The firm boasts a joint venture business leader who regularly weighs into the debates about with Pernod Ricard to manufacture and distribute whisky the economy. In mid-2017, he urged the Myanmar government in Myanmar, and another joint venture with German Metro to give more attention to much-needed economic reform. A Group for a one-stop food distribution platform. As KFC’s local year later, in an annual financial forum in September this year, franchise holder, Yoma Strategic is operating 26 KFC outlets as he told the energy minister that universal electricity subsidy of now, covering Yangon, Mandalay, Taunggyi, Monywa, Bago is wrong and that the authorities should push for changes in and Pyay. International hotpot restaurant Little Sheep is also the tariffs. scheduled to open its first Myanmar franchise soon. The F&B business is targeting to include six brands and more than 125 Whatever the difficulties, MR PUN is determined to see it stores nationwide by mid-2023. through. More than that, he has a vastly ambitious programme for Yangon’s regeneration and renewal. The Pun business empire is not a one-man show. It’s teamwork - father and sons. MELVYN, his eldest son, took the reins The Yangon regional government formed the New Yangon from him in 2015 as Yoma’s CEO after 12 years at Goldman Development Company (NYDC) to develop a landmass twice Sachs, while CYRUS is now managing director of Yoma Land, the size of Singapore. MR PUN, as NYDC’s CEO, is at the helm overseeing all the real estate operations. Both of them are of this. His vision is that the area will be primarily developed active in the business community: MELVYN is a board member based on a Public-Private Partnership model, with businesses of the newly set-up Myanmar Institute of Directors, advocating contributing in equity investments. The total area of New corporate governance. Compared to many family businesses Yangon City will cover 1,500 km2, stretching all the way down in Myanmar, the Puns are unusually well-prepared for the to the Gulf of Martaban. The megaproject is not without eventual succession and leadership handover. controversy. But MR PUN insisted that, with a target of creating 2 million employment opportunities, the project must go on. This is not to say that the ventures have been all plain- sailing. After all, Myanmar, despite its huge potential, is From construction to digital banking to urbanisation to family, a frontier economy. Sales in the group or Yoma Strategic EuroMatters sat down with Myanmar’s leading tycoon for a properties in StarCity and Pun Hlaing Estate have not lived wide-ranging interview. up to expectations. Recently, FMI Air had to close down because “operating in Myanmar’s aviation sector has become increasingly challenging,” in MR PUN’S own words.

EuroMatters 2 OCT–DEC 2018 14 15 EuroMatters 2 OCT–DEC 2018 INTERVIEW WITH SERGE PUN INTERVIEW WITH SERGE PUN

benefits for the country and our people in a magnitude that I If you cannot afford what’s on the market, then there’s no populations is banked. But the new concept of banking will To bring up good children you just need to set a good example. don’t think anyone needs explaining. If the NYDC is successful, market. Affordable housing is the biggest challenge in this change that. Digital banking, to a lot of people, is playing It is no good if you talk about big theories and then they know we will have 2 million new jobs and income. Now imagine country today. There’s a tremendous amount of demand out with your phone. It actually isn’t. Ultimately, digital banking you are practicing something totally different. what that does politically, economically, socially. The knock-on there among people who want to own their properties. But can supersede conventional banking because it serves a vast effects are too tremendous to explain in a few words. That’s that is seemingly out of reach for most people. percentage of population that has not been served. That’s the We talk about governance and corruption in Asian society. the paramount goal for the NYDC. crust of the issue, not the fancy digital stuff. Parents may go out and make speeches about how important That is something we want to address because a high percentage it is not to be corrupted, to be good, but then in their daily In that process, opportunities are abundant because we are of the population owning their properties, particularly their Yoma Bank has, since three years ago, committed to achieving business they will display exactly what they’re saying is no going to build this under PPP, with equity from the private own homes, is an extremely significant stabilising factor for that goal of becoming one of the first true digital banks in the good. If that’s the case, how can you expect children to believe sector of all countries and we are inviting everybody to join the society. The mass majority of our population cannot afford country that serves a vast population who has not been served that corruption is not good? There are other smaller things like in. We welcome whatever interest you have to invest - no a housing that is available on the market today and we want by commercial banks. Our first foray in the first few years is how you treat people. It’s all good to say that you should be matter where you are from - to fill in the needs of building a to correct that. I would actually encourage developers to think Wave Money, but more is to come. Wave Money is but the a nice person but when you see your parents treating other new city, be it infrastructure, public transport, service industry, along those lines - to try to provide affordable housing. If that precursor of things to happen. people not very nicely or taking advantage of other people, educations and health. Every aspect needs investment. can be achieved, it is, no doubt, still a very promising sector that’s where the training comes from. That’s basically it. There’s and will continue to be promising. A true digital bank today is judged not by how many branches nothing special or unique about it. The conventional thinking is that the government alone is the you have or how sole party responsible for building a new city. A lot more can Yoma Central secured financing from various international much hardware you How important is be done if the private sector is allowed to take part, which is partners. Did corporate governance play a role? have - it’s judged by FDI for Myanmar to what we intend to do. For instance, in Yangon New City, all how many people develop into a fair, the basic infrastructure development will be done by private SP • Yoma Central, together with The Peninsula Yangon, is a you serve. How far democratic and investors, including some services which are traditionally the very high-profile project, due to its location being in one of the can you reach? In unified country? government’s job. Why? Because to service the public in certain most prime areas in downtown Yangon, and that is one factor. due course, people services you cannot make money - it’s always a money-losing There is no dispute about that. I doubt one could find 10 acres don’t need to visit a SP • FDI is always situation and hence the government has to subsidise. Typically, of prime land which is in one piece - continuous, not split up, in bank branch to take very important, and the private sector is not interested in those businesses. But very good shape and rectangular - in the main intersection of care of their banking probably the most we’re trying to create a new model that would attract private the most important locality in the city. That itself carries a lot of needs. That’s what important factor players to join by allowing them to make a profit, not necessarily attraction for many people. we are working hard when a country is from that business alone but from other means of receiving a towards. trying to come out reasonable return on their investment. The fact that we can attract IFC, ADB, Mitsubishi Corporation of poverty. Without and Mitsubishi Estate, as well as The Hongkong and Shanghai Your children FDI, it’s probably not We would very much welcome European investor interests to Hotels to be our partners has another shade of meaning. It have been pro- possible. So, there take part in the new city’s development. is because of corporate governance. Our corporate values, actively involved is no argument on compliance issues and governance issues have been the in the family whether FDI is the What is the prospect for the real estate industry? bedrock of the group. It is not easy to establish that reputation. business. What most important It is not something that can be established overnight. It is your approach factor, particularly SP • The real estate sector in Myanmar has gone through quite requires many years of constituency in what you do and how in educating and in developing an extraordinary period of growth and, as I’ve said, in the 90s you behave. That has been the reason multilaterals like ADB supporting them? one’s economy. there was a very scarce amount of supply of private housing. and IFC have been very interested to be our partners, not only You cannot have Towards the end of the 90s and also towards the first decade Yoma Central but many other projects. We are proud of that. It SP • I must say that a country that has of this millennium, real estate became a booming sector. would not have been difficult for anybody else to attract these I’m very blessed to have children who rise up to the challenges great benefits for your workers without first making agood Particularly, in the first half of 2011-15, we had an extremely calibres of investors if they themselves were the right partner. of life, but even more so to have children who share your success in the economy. How can the poor look after the poor? hot market. values in life. Just the material nature alone is a blessing, You have to become rich then you can look after the poor. Myanmar has gone a long way in digital inclusion. How will because there is a lot of luck involved. Hence, FDI is definitely important. A lot of it is because of demand, but it is also because there is this change the game for the banking sector? a scarcity of alternate investment instruments in this country. I have many friends who are extremely good parents but who Somehow, particularly in Asia, when you talk about FDI, the Traditionally, if people have excess money, they like to buy real SP • Myanmar’s banking sector is going to experience a very have a little problem with their children. I had been very lucky. first thing that comes to mind is FDI from the West. But, in the estate - land or buildings or homes - or gold, because these big change in the coming decades. Conventional banking I have four children who have in their own separate ways future, FDI is principally coming from the East – not the West. are what they consider as hard assets, which are hedge against - as we know it - will be substituted or taken over by a new independently performed very well and they have lived up to The West will continue to participate in the FDI contribution, inflation and currency depreciation. So the market went generation of banking. If you look at this country, as in many my expectations on how to conduct themselves in life. That, I but the bulk of FDI will come from the East. Therefore, when through a very robust period. It had a distortion that the real other underdeveloped countries, 92-93% of our population has think, is the most important. you are trying to analyse your political future or the sensitivity estate sector will continue to be buoyant for a long period of never been to a bank branch. They do not have accounts and of politics in this country, you need to also understand how time without any correction. That unfortunately was knocked don’t deal with banks, for many reasons, maybe because they Smart children are not the only thing worth looking for. Good the East Asian, Southeast Asian and South Asian countries view by a rather hard knock in the last two years. live in remote areas so there’s no bank branch to serve them, children are what we hope for. In that regard - I will repeat politics, because clearly there is a different way and a different or they may not have sufficient savings to attract the banks. - I am very lucky. I don’t have any secret formula. I feel that definition between the West and the East. However, what people are not realising is that the softness children don’t need much nagging or specific coaching or of the market today is mainly due to the lack of affordability. Whatever the reason, the fact remains that only 8% of our teaching. Children learn and emulate what their parents do. This interview has been edited for length and clarity.

EuroMatters 2 OCT–DEC 2018 16 17 EuroMatters 2 OCT–DEC 2018 SUCCESS STORY SUCCESS STORY

In every edition, one of our partner members has the opportunity to be featured in the Success Story, wherein the details of an international “The Excelsior is a long process. We investor coming to Myanmar are revealed. We are granted with a unique take on the challenges faced, as well as with an illustration of the started back in 2012 because there was potential they recognise which has motivated them to expand into Myanmar. a government tender by the Ministry of Trade and Commerce. During the tender there were a lot of participants in Inle Lake, southern Shan, stands out who wanted to be involved in the TOWNS AND TOWERS: in its charm and colour. More recently, renovation of the building. We went the Yangon Excelsior Hotel has finally through all the different rounds of opened. The building originally housed selection and did the feasibility study; SHAPING MYANMAR’S the headquarters of the conglomerate I went to present the proposal several Steel Brothers. Archetype was in times to the authorities,” he remarked. URBAN LANDSCAPE charge of the architectural design, It wasn’t a mere design suggestion. The the whole engineering (Excelsior) and proposal covered all the financial set- project management for these two up and the business rationale done by iconic landmarks. their client.

Well known to every businessman/ Having been awarded the project woman in the commercial capital is in 2013, Archetype started the design, the Le Planteur Restaurant in Inya architecture, structure and other Lake, north of Yangon, another project aspects of planning. construction, and had to adapt Since 2015, Archetype has been done by Archetype, which designed and amend the drawings. The working on the master plan, including the entire renovation and extension “We did all the necessary surveys designs evolved along the way,” MR the infrastructural drawings, which kitchen, cellar, basement as well as the for the building - the structural PETROVIC continued. The space has already been approved by the exterior. Also crafted by the firm is the survey, architectural survey - we within the building was also very tight Myanmar Investment Commission. Pun Hlaing Lotus Garden master plan worked closely with the Yangon City and presented challenges for the including its villas. Development Committee [YCDC] and developers. “We finalised, a while ago, the the Yangon Heritage Trust [YHT],” the infrastructure documentation for In addition, industrial projects architect explained. “But, finally, it is a success story. It is like construction, meaning all the roads, the company has been involved in giving birth to an existing but revived systems, the network, power supply, DINBURGH IS Founded in 2002 by French are Jotun paint factory, Coca-Cola’s The Excelsior renovation took place building. We are tremendously happy water supply for the project are defined by the majestic architects and engineers in Vietnam, Myanmar factory, Crown Myanmar within the framework of a Conservation and proud of this project and we hope covered. The documentation is ready Arthur’s Seat, Hong the group now has a presence of factory, German Stada factory and Management Plan drawn up by the everybody will enjoy it,” he exclaimed. for construction.” Kong has the iconic 1,100 employees in 15 countries with DKSH distribution centres. YHT. The framework provided a very HSBC complex, and core services in architecture & master detailed plan on how the developers Vision for Mandalay When completed, that will attract Malaysia prides itself planning, building & infrastructure But, for both Archetype and the would work on the building and how the growing domestic affluent class over the Petronas Towers. With engineering, industrial & process country, the best days lie ahead. the historical components would be Moving forward, EuroMatters asked as well as tourists, golf-lovers in Myanmar seeking to develop and engineering and project, construction preserved. about the Yedagon Taung Mandalay, particular. After all, Mandalay’s cool modernise its cities, the question & cost management. The firm has Among the projects the company an urban project located in Yedagon, season is longer than Yangon’s. The residents and tourists have in mind is been active in Myanmar with an office has been tasked to design are the “During construction and 3.8 miles east of Mandalay city. The northern hub already boasts a few golf what and who are shaping their urban in Yangon since 2012. visionary Yedagon Taung master plan, demolition work, we discovered some scheme comprises 680 detached villas courses, with one - Mytho Golf Club - landscape. and the highly ambitious Yoma Central new bracing beams in the building. and a 36-hole golf course, as well as a set to open in December. MARK PETROVIC, managing as executive architect. These ventures We modified the part of the design in 3-star as well as a 5-star hotel. Yangon has an unusually varied director and architectural design span from downtown Yangon to Bago order for the hotel to showcase those Human capital is identified by the and abundant collection of heritage, director of Archetype’s Myanmar to Mandalay and Inle, stretching across steel element structures.” “We started to work towards the World Bank as one of the four key factors and that’s not limited to British colonial operations, sat down with EuroMatters the country. end of 2015, looking at the 555 acres for Myanmar’s economic success. buildings. One only has to look at the to share his thoughts. MR PETROVIC The investor was keen to convey articulated around 27-hole golf course. Making good use of international Shwedagon to appreciate what the has been with Archetype in Vietnam Evolving along the way the hype and style of the American The project was aiming to expand the architectural expertise is critical to the city can offer. As new skyscrapers since 2006 and first arrived Myanmar Industrial Revolution, polishing and 27 holes by 9 more holes to reach a country’s urban regeneration in a way and towers rise up and as historical in 2002, coming back at the dawn of its MR PETROVIC talked at length about presenting an industrial theme and 2x18 golf course. which accommodates both the old landmarks are renewed and revived, opening up in 2012. his work for the Yangon Excelsior. mood. “Hence, we minimise the and the new in a commercially viable, architectural expertise is at the driving demolition as much as possible and “Centring on this, we want to design sustainable and inclusive manner. seat for Yangon’s and Myanmar’s In Myanmar, Archetype Group has Renovating the building for we keep the facade exactly as it was. a small town which offers residential regeneration. Archetype Group, a a diverse portfolio of projects, ranging Excelsior was a long and complicated We use the location of the windows apartments, villas, an international- Looking at Archetype’s private construction consultancy in from tourism to heritage building to process, where Archetype was to create the grid of the rooms. The standard hospital, an international involvement, the best days are Asia Pacific with an extensive presence industrial complexes to real estate. For instrumental in moving the project project took a long time because of school, shopping malls, shop houses still to come for Myanmar’s urban in the ASEAN region, is one of those hospitality and commercial buildings, forward. the very complex renovation - we and a water park,” the architect said. landscape. supporting this process. the 96-room 5-star Sanctum Inle Resort often discovered surprises during

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Architecture & Planning HERITAGE AND CONSERVATION PROJECT REFERENCE IN MYANMAR Building Design & Engineering WORLDWIDE Process & Industrial Engineering Project/Construction management Yangon takes centre stage in the race to become Cost Management Southeast Asia’s heritage darling

• Hospitality • High rise buildings Buildings & • Residential • Commercial Real Estate • Healthcare • Public Facilities

• Pharmaceutical • Nutrition, Food & Beverage Industry & • Oil & Gas HOSPITAL • Chemical Energy • Energy & Power • Manufacturing

• Water & Waste Water Treatment • Solid Waste Treatment Environment & • Geographic Information System • Transportation Infrastructure • Urban Development • Tourism & Leisure Development

67 139 Mandalay Hospital H H

Archetype Myanmar Ltd Sanctum Inle Lake Resort Location: Inle Lake, Myanmar Shwe Hintha Tower B, Room 306 Service: Architecture and Project Management Facility: Resort No. 51. Pyay Road, 6 1/2 Miles Size: 100 rooms Yangon, Myanmar T: +95 (0) 9 425 033 463 E: [email protected]

Yangon Excelsior CAMBODIA|CHINA|FRANCE| INDIA|INDONESIA|KAZAKHSTAN| YANMAR’S In Yangon, most large-scale heritage landscape. For CATHERINE HENDREN, COMMERC- work is geared towards hospitality. research analyst at Yangon-based FMR LAOS|MONGOLIA|MYANMAR| IAL capital Examples include the Peninsula, Research and Advisory, the initiative and PHILIPPINES|QATAR|SINGAPORE| has a uniquely Rosewood Yangon, the Excelsior and the energy for heritage is moving in the right SRILANKA|THAILAND|VIETNAM valuable Strand. Firms working on a smaller scale direction and more of these projects will plethora of for individual use, community space or be expected in the future. heritage which can play a vital part in restaurants tend to be social enterprises its municipal evolution. As the country or NGOs like Doh Eain’s colonial home One of the imminent projects is opens up to investments and visitors, restoration projects or Turquoise Rosewood Yangon. Situated in a building putting conservation management at the Mountain’s work on the Ministry of which was constructed in 1927 as the heart of Yangon’s urban development Hotels and Tourism Building. New Law Courts, the restored hotel presents an excellent opportunity to will be managed by Rosewood Hotels & boost the city’s tourism, real estate and Conservation work occupies a small Resorts, under Hong Kong-based New cultural industries. segment of Myanmar’s construction World Development. The property was industry but is conspicuous in the urban the first building to receive approval

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from Yangon Heritage Trust (YHT), A lot to offer as “doing an impressive job”, and founded in 2012 by Myanmar historian emphasised that sustainable heritage and writer DR THANT MYINT-U. Yangon’s rich collection of heritage development requires the “joint efforts” buildings bodes well for the property of the government and the private Also at the city centre lies the 10-acre market and should reinforce the city as a sector. project site of the US$600 million luxury key destination in the region, according hotel venture The Peninsula Yangon, to Colliers International Myanmar. In Yet, if conservation efforts are to as part of First Myanmar Investment’s downtown alone, where many of these succeed, the socio-economic benefits real estate megaproject Yoma Central. preserved and architecturally well- of the country’s cultural heritage need Designed by Sri Lankan-British curated colonial buildings stand, their to be made clear to the public and architect, CECIL BALMOND OBE, the rehabilitation and eventual conversion private sectors. Funding issues present proposed development will feature The will definitely boost investments and a key difficulty given the time, expertise Peninsula Yangon hotel by renovating tourism. and cost needed for restoration, the old Burma Railways headquarters, MS HENDREN added. MR POBRE together with luxury residences, two “When implemented with well- concurred: rehabilitation of a heritage office towers, a business hotel and defined conversion techniques and building is capital-intensive and the serviced apartments. The project is a guidelines, supported by proper possibilities for its optimal uses has to collaboration between Singapore-listed planning, infrastructure and effective be thoroughly identified. Incentives Yoma Strategic, the FMI, the Hongkong branding and identity, the potential is from the government is essential to and Shanghai Hotels (HSH) and other high and could be at par with similar- attract foreign investments. While the investors. themed heritage destinations in the majority of local companies are not region - Singapore, Malaysia and focused in this area, some have started The fate of the old Burma Railways Vietnam to name some,” KARLO POBRE, to take an interest in heritage work, headquarters, dating back to the 1880s, Colliers’ deputy MD in Myanmar, told such as KT Group’s Pegu Club. The Strand Yangon had been the talk of town owing to EuroMatters. its enormous potential as a tourist In Myanmar, the culture ministry been involved in two conservation and mouth-blown glass imported from use highly-reflective modern glass and attraction, its historic significance and Similarly, Southeast Asia-focused shoulders the responsibility of heritage projects so far. France for another one and clear solar use a neutral glass. Secondly, it was its central location. CLEMENT KWOK Archetype Group is impressed by what protecting and preserving the heritage control for the third. non-tempered glass which is not very from HSH said last year that the project Yangon has in store. The construction buildings in coordination with central According to METHI PIEPER, its safe for residents in the buildings,” MR will “truly reflect the heritage and beauty consultancy has been involved in and regional authorities. Several laws resident director, a client requested DAMIEN BUSSON, Saint-Gobain’s BUSSON explained. of the city” and “become an iconic numerous major projects in the regulate the sector heritage and one RHDHV to design a new container development manager in the country, landmark that locals can be proud of, as country, including Yangon Excelsior of them prohibits commercial use of terminal at Sule wharf, which estimated that 30% of the renovation Besides, increasing the thickness it brings a new level of distinction to the Hotel, the iconic Yoma Central and Jotun historic buildings. would require demolishing colonial projects in the pipeline are related to or employing double glazing products Myanmar hospitality scene.” paint factory in Bago Region. The 74- warehouses. “RHDHV challenged conservation. can match both the heritage aspect as room Yangon Excelsior, which recently For NISHANT CHOUDHARY, co- the client that if we could designer a well as energy efficiency. Coating on Having a viable economic case for opened its doors, is a renovation of a chair of EuroCham’s legal advocacy terminal to the specifications of the “Yangon has a tremendous the interior face blocks solar heat while heritage matters. If there is a business British colonial heritage which traces group, this “boils down to the client and using less land, we would like architectural legacy, and many actors allowing natural light to get through. argument and sustained demand back to the 19th century. implementation issue”. Furthermore, to propose an alternative solution for are engaged in reclaiming this heritage This will increase reflectivity but in a for these types of spaces, then there an amendment to restriction on use the remaining wharf. Having achieved by restoring buildings nowadays. decent amount so as to not denature will be more interest, MS HENDREN “It is unique [for downtown of historic buildings for commercial a highly efficient design, we made a Renovating buildings implies paying a the building. said. Currently, heritage work is quite Yangon] to have so many cultural purpose should be necessary and a design in cooperation with the YHT to tribute to the past by respecting the a niche area of the construction heritage in such a concentrated area,” policy of how that could be achieved renovate the remaining warehouses original building’s design,” he said. MR BUSSON said Saint-Gobain’s industry because it requires highly MARK PETROVIC, MD of Archetype’s would be helpful. into an entertainment area similar to Verrerie de Saint-Just factory, which skilled labour, technical expertise, and Myanmar operations, said, stressing Asiatique in Bangkok,” he explained. Using building materials with specialises in renovation, manufactures innovative design, which are scarce that the city should consider “making Given the lack of local knowledge Unfortunately the client did not choose thermal or acoustic performance products for renovating Louvres domestically. “As far as I can tell, many use of this opportunity” because not on the execution of heritage projects, the solution. Inspired by this example, allows the building to be rehabilitated Museum, The Palace of Versailles and local firms don’t yet have the desire many places in the region have so European firms have been making RHDHV was requested to make a similar and become comfortable, safe and other projects in continental Europe. or the capacity to execute large-scale much to offer. Conservation will “make inroads in the sector, importing the design for Botataung Wharf, which is “usable” with efficient material. Often, As people are increasingly aware of the heritage projects without some help downtown Yangon a unique place in know-how and techniques. still under consideration. existing glass is replaced by new glass importance of conservation for tourism, from international partners. We might Southeast Asia, showcase its cultural during renovation. Buildings from the real estate and the urban development, see more partnerships where local heritage and enhance all these heritage, Making inroads Meanwhile, Saint-Gobain is busy 19th century and pre-WWI era relied Yangon’s rich colonial heritage will firms team up international players that which suffered a bit in the past.” with a growing clientele. The 353-year- on non-tempered 2mm/3mm/4mm surely find help from this aspect of have the required skills and technical Dutch Royal Haskoning DHV has been old glass company, headquartered in clear glass. “To replace this glass we sophistication. capabilities,” she explained. MR PETROVIC praised the YHT and present in Myanmar since 2013 and France, is in the process of supplying have to think first about the design: It Yangon City Development Committee fire-rated glass for a renovation project, was clear glass. So we do not want to

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SAFETY AND PROTECTION Safety in Myanmar’s construction gradually improves

For Yangon-based Myanmar Centre Regional lessons MR CHOUDHARY said that for Responsible Business (MCRB), the Myanmar Penal Code, among the lack of legally established safety In early 2017, local magazine Frontier others, provide for criminal liabilities standards for the construction industry Myanmar reported that it is “so for negligence and reckless actions. and, in particular, construction workers common” for construction workers Meanwhile, an action under the Code poses a serious issue. not to follow a safety standard that does not preclude the victims to bring seeing them not putting on helmets or a civil suit for compensation. Both the Until the draft OSHL is adopted, belts has “almost become a norm in criminal and civil proceedings can run MCRB director VICKY BOWMAN Myanmar”. A construction worker was simultaneously and are distinct and with said, the writ of Ministry of Labour, quoted saying that safety standards in separate parameters of adjudication. Immigration and Population’s labour Bangkok, the Thai capital, were higher: inspectors doesn’t extend to the “When I worked in Bangkok they cut a Despite the legal provisions, the lack construction sector. third of our salary if we didn’t wear a of awareness regarding the liabilities safety suit ... We only wore it to make contributes to the poor standards in the “We observed this gap in our money – not for safety.” country. “I guess this is due to lack of research on the ICT sector-wide impact awareness and it cannot be discounted assessment [SWIA] where safety in the PIETRO BORSANO, lecturer at that some employers may be taking construction of the telecoms tower Mandalay International University and a conscious decision to not spend on was in effect entirely outsourced to Shinawatra International University in the safety measures,” the co-chair the telecoms companies and their Bangkok, confirmed that it is common commented. subcontractors, some of whom took practice for Thai construction firms to it more seriously than others. This deduct a worker’s salary when he does While some lessons on safety means companies have to set their not adhere to the rules. awareness could be drawn from own standards, and ensure that Thailand, MR BORSANO stressed that subcontractors comply, including “While this shows that many Thai the private sector in Myanmar should through on the spot checks,” she employers do not pay a meaningful focus on how multinationals, such as observed. effort to promote safety awareness and Valeo or Toyota, develop a real safety Thai laws prohibit deduction of wages, culture at the workplace. These MNCs The MCRB’s 2015 ICT SWIA such a penalty is in fact very effective,” are able to pass on this awareness underlined that the rush to expand the academic explained. Such “illegal and standards to their local suppliers. the telecoms network meant many measures” are mostly the result of the “The shortcut for Myanmar to improve companies and their local subcontractors “massive presence of international its H&S standards is to appeal to were learning on the job, some of whom investors in Thailand in the field of more construction multinationals and EALTH AND The existing occupational safety and will apply to construction sites. The do not operate any systematic safety construction”, which compelled Thai European contractors who plan to safety standards health laws such as Factories Act, Oilfield proposed law imposes obligations procedures. The human rights impacts employers to comply, at least on the invest in the country with a long-term in Myanmar’s Labour and Welfare Act and Shops and on employers, employees and those observed during the research were “in face of it, with higher standards. perspective. Their best practices will be construction Establishment Act are in process of who design, manufacture, import, sell, some cases quite visible”, particularly shared along the supply chain.” industry are being replaced with a new Occupational install or demolish machinery and in tower construction and laying fibre, Criminal and civil liabilities for unsurprisingly Safety and Health Law (OSHL), according equipment which may cause risks to including safety violations. employers in the case of accidents are Indeed, one example is Swiss lacking, since the country was isolated to NISHANT CHOUDHARY, co-chair safety or health. Besides, there will be a consideration for companies. Thai LafargeHolcim, a merge of Lafarge and for decades. But as more European of EuroCham’s legal advocacy group. wide-ranging penalties for violations In the absence of national employers can be criminally charged Holcim, which operates a 20,000-tonnes firms join the game, industry players A draft of the new law was shared last such as fines from K1 million to a standards, the MCRB recommended for negligence and also be found cement terminal in Myanmar through hope an upcoming legislation and year but the update isn’t yet available. maximum of K5 million, as well as up to that companies apply international responsible by civil courts, when the its local subsidiary Thilawa Cement and international best practices will raise the three months of imprisonment or both. standards such as the Environmental victims and/ or their relatives seek a Building Materials Ltd (TCBM). Then- bar and offer workers better security. The new legislation aims to improve Health and Safety Guidelines from compensation. “This obviously forces Lafarge opened a cement re-packing and integrate existing occupational “The urgency is with regard to the World Bank/ International Finance employers to take some actions to and storing factory, involving US$10- There are several laws in Myanmar safety and health standards spread consolidating various laws. This is Corporation. tackle reckless behaviour at work,” he 20 million in Thilawa Special Economic which are very old and do not address among the varying pieces of laws. creating a lot of concern with all the suggested. Zone (SEZ) in 2014 with domestic firms the changing work environment . After the draft OHSL is passed, it employers,” the lawyer told EuroMatters. Aung Myin Thu and My Associates.

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STANDARDS AND DESIGN

HARI KRISHNA REDDY, TCBM’s said, adding that there is a lot for the insurance in the country yet. “These CEO, said the firm implements all the government to do in this regard. need to be bought abroad and re- Raising the game with Myanmar’s group’s “H&S Standards and Guidelines” insured via a Myanmar insurance for its workers at the factory. Insurance company. The only place this can be construction standards and materials done directly is in Thilawa,” he told For road and other sites, TCBM Workers at TCBM has medical insurance EuroMatters. The lack of options means HE LAST few years has an H&S manager who is involved - a rare exception in a country where construction employers cannot insure have not been easy in every business decision to ensure the insurance sector is sealed off from the workers, which can result in high for Myanmar’s safety checks from project stage. At foreign insurance providers. The only costs if the former do compensate out construction LafargeHolcim, all the managers and exception is Thilawa SEZ, where three of their own pockets. It also means businesses. Changes employees are trained regularly on Japanese insurance firms are allowed to many companies can’t be compliant to the regulatory safety topics and are given “Direct operate. with company requirements or need framework and budget deficits have Responsibility for Safety” performance. to pay a lot to be compliant. Moreover, had an impact on real estate projects, “We even train employees of our There are healthcare insurance many international construction whereas plans to upgrade the country’s customers on safety standards,” he options offered by state-owned Myanma contracts can’t be used without being infrastructure have faced economic and remarked. Insurance. But it is little used. According heavily amended for this. political constraints. to Methi Pieper, co-chair of EuroCham “Myanmar has weak laws for construction advocacy group, this is due For MR BORSANO, opening up This does not mean that the sector workers safety and for compensation to the fact that those insurance benefits the insurance sector will go a long is at a standstill. Quite the contrary, when they are killed or injured. A mere are minimal and they are only sufficient way not just in promoting safety, but buildings are rising across Yangon’s K9,000 maximum is paid on a monthly for low-income workers. in attracting foreign investments. skyline and elsewhere, from downtown as social security contribution from “Awareness also plays a crucial role – do to Pun Hlaing in the west of the city to which they get paid in case of a mishap, There isn’t third-party insurance, local construction workers know what StarCity near the first Special Economic which is nothing actually,” MR REDDY accident or construction all-risk the term insurance means and what it Zone, located in Thilawa township. And implies? I am doubtful,” he observed. these are only a small part of the story. For example, Mottama Holdings, owned by Myanmar-Chinese entrepreneur U YANG HO, has nine major projects in Students visit a Valeo factory in Thailand the pipeline, valued at US$1 billion and expected to be all completed by 2022.

But the economic setback does have a direct impact on the standards in the industry.

For CATHERINE HENDREN, research analyst at FMR Research and Advisory, the lack of formal regulations and enforcement mechanisms in Myanmar has made the market susceptible to sub-standard construction material. While there is growing demand for better materials, how quickly that demand grows depends on how the construction industry does overall.

“The adoption of a coherent building code and transparent, rules-based approach to development and building approvals is at the heart of encouraging steady industry growth,” she told EuroMatters.

In particular, the commercial capital is experiencing the detrimental effects

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from poor construction practices, such Increasingly, local businesses are follow suit with regards to standards all hurdles facing the industry. The [coming] into play,” MR BROWN went Significantly, the industry in as pollution and energy wastage. These concerned with building structure and and regulations. rise in expenses has not been met by on. Myanmar is becoming more aware issues could grow into serious problems how the projects affects the urban a simultaneous increase in consumer of the importance of glass quality, if not tackled soon. environment in terms of noise, vibration While the construction ministry prices, according to MS HENDREN. The number of Western tourists MR BUSSON said. Glass surface in and air pollution. Hence, Myanmar has not given a timeline on the release The real estate market is still sluggish, has been going down for the last building designs is increasingly popular “I think the authorities recognise Bureau Veritas serves as an international of the Myanmar Construction Code, and developers are forced to lower three years. For the tourism market compared to the past. Designers, the issues, but they also face significant third party to confirm the quality and industry players hope this, when the rates, even as the cost of inputs is to pick up, Myanmar has to develop architects and developers began to challenges such as the lack of funding test environmental parameters. enforced eventually, will spell changes increasing. But there is light at the end the infrastructure, including the realise the importance of natural and manpower to carry out regulatory for the standards in materials, products of the tunnel. roads, airports, bridges and power light for residents and end users. “For changes,” she continued. For example, the firm works with and building solutions. supply. More recently, U ZAYAR MYO example, more and more curtain-walls BYMA - a joint venture between Dragages “Though the construction sector has AUNG, director of the hotel ministry’s are deployed rather than just windows,” International certification Singapore Ltd and Singapore-listed MR GAYUBO-GIL suggested that if experienced some turbulence in recent Tourism Promotion Department, said he added. Yoma Group - to build the Peninsula there is a genuine interest in following years, opportunities in the country are Naypyitaw would turn into the next Those who are present in the country Yangon. Besides, retailer factories up on the Code and related regulations, vast. Sustain economic development, tourism destination based on MICE Meanwhile, average glass thickness since 2012 include French Bureau hire the company to assess and audit Myanmar should consider adopting clear regulation and the overall need for (meeting, initiatives, conferences and for buildings is also going up, reflecting Veritas, an internationally recognised their safety, fire prevention, electrical international standards, in the same infrastructure and housing indicate the exhibitions). While the capital has an awareness for safety, thermal and certification and verification body safety and structural facilities. This is way the oil and gas sector has done. sector will continue to grow,” she noted. a plethora of big and small hotels acoustic insulation. Many businesses established in 1828. a requirement of some international available, the rest of the infrastructure also opt for a glass that is more neutral brands such as Belgian fashion chain Not all gloomy At the same time, as the local - from hospitality entertainments to in colour, compared to highly-reflective AGUSTIN GAYUBO-GIL, its industry C&A. City Mart, in comparison, secured construction industry lags behind commercial attractions to theme parks blue or green glass that used to be and construction services manager in a loan to develop a project and needed Right now, unclear and incoherent regional standards, international firms - is non-existent. This represents a huge installed extensively in the early 2000s. Myanmar, said most of their clients are an international third party to certify regulation or standards, lack of access are key to filling this gap. opportunity for quality construction big players in telecoms, construction, the suitability and set up a project. to finance, external pressures such businesses. How will the sector regain its retail and manufacturing sectors. For Currently, all the requirements come as fluctuating exchange rates and the “In Yangon, we have seen a rise in momentum? example, they provide surveillance from the private sector. In the long run, absence of an efficient, transparent demand particularly for on-going real Reviving renovation services to Telenor. government departments will hopefully and affordable permitting system are estate projects. Requirements come TORSTEN NOWACK, general in various stages of the construction - For French Saint-Gobain, renovation manager of Swiss company Sika Pun Hlaing Estate - Lotus Hill belonging to new projects as well as new represents a growing and robust Myanmar, commented that the phases leading to the operation phase. industry. construction market has an oversupply We have seen projects using different of luxury real estate with low quality but materials such as a steel structure. “I’m thinking about the Yangon high pricing - this has to shrink back to a Excelsior, the Peninsula, the National normal level. “This technique is new in Myanmar Library and the Burma Tourism and local workers are not experienced in Building…” DAMIEN BUSSON, the firm’s The way he saw it is that there must large-scale projects, thus that requires development manager, remarked. be more real estate developments specialist foreign firms to train the local for the middling sort. In fact, Yangon- companies,” NEIL BROWN, director Doing business in Myanmar, which listed First Myanmar Investment for property management at Colliers is a frontier market, is inevitably not (FMI) announced that the firm would International Myanmar, explained. a walk in the park. Companies have prioritise affordable housing to offset trouble paying upfront 100% of the cost falling revenue from its construction Colliers observed that there is a for building materials and loans/ letter businesses. trend of development for large-scale of credit are not widely used. mixed-use developments which is “sure Despite the lacklustre outlook, to spur demand” for construction- As with other emerging economies, there are concerted efforts to improve related services. This isn’t limited to the the domestic market usually values building quality and standards. commercial capital. price before quality, including glass. European contractors are following Glass is a material that connects people international standards. But manpower, “Outside Yangon, Mandalay from the inside to the outside and vice- not technology, will be prevalent as is likewise delving into large-scale versa. It’s a construction material that long as labour costs remain low in the developments including commercial, allows natural light to penetrate the country. residential and tourism-related projects. building, which is key to health and well- Although at a nascent stage, the being. But with light comes heat. Hence, prospects are promising especially with glass with its characteristics and fragility China’s Belt and Road Initiative comes carries risks, which should be addressed for any construction work.

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commercial capital and therefore the skilled labour shortage as well as the Jotun is one of the three leading PAINTING MYANMAR’S NEXT WAVE country’s biggest municipal market, transport infrastructure present key Norwegian investors in Myanmar, the while its location makes it easier to challenges. other two being energy multinational reach out to major hubs in northern Statoil and telecommunications giant OF INDUSTRIALISATION Myanmar, such as Mandalay, compared The import process, especially with Telenor. Furthermore, the Ministry to areas like Dala and Kyauktan. regard to new raw materials, can take of Industry is in discussion with up to five or six months. Hence, the Osle-headquartered Energeia Asset Double-digit growth government should consider modifying Management to build a solar power the procedures to reduce the time cost plant in the Eco-Industrial Park located The factory has been in operation for and smoothen the process, which will in Mon’s Thaton township. over a year now. MR MORE was very enable the factory to become more upbeat about the market demand and efficient in its production. Securing Going back to paint manufacturing, prospect. skilled workforce in Bago is also a Jotun is now enjoying a first-mover difficulty, as Jotun had to recruit labour advantage. When many factories are “We always see two-digit growth in from Yangon and elsewhere. still under construction in Thilawa SEZ our sales since we started. The market is and industrial zones, when others growing, and our estimation is that the Moreover, the underdeveloped are still mulling whether to come in, paint demand will grow by 15% per year transport infrastructure puts the the Norwegian firm already has the in next couple of years,” he predicted. company in a risk of leakage and spillage entire plant up and running, supplying The main clientele for their paints and of the paints during deliveries. In fact, customers not just in the south but coatings system includes commercial, road conditions and traffic have been a also in the north, where a fair share of residential and industrial purposes. major source of complaints among other prosperity lies. With such readiness, businesses. For the logistics sector, it is Jotun definitely has what it takes to With a paint plant established in difficult to provide secure, safe and on- succeed in this frontier market. the country, Jotun is well-positioned to time delivery for manufacturers and ride on the rising demand on all fronts. clients. Industrialisation has been prioritised SCANDINAVIAN location in the centre of Asia’s rapidly 2017, the factory started commercial by the government, with factories and paint maker is growing countries, abundant natural operation, with 5 million litres per manufacturers springing up not just in riding on Myanmar’s resources and a sizable 53 million annum at full capacity. Yangon’s industrial zones but beyond. construction of population, Myanmar has all the right Thilawa Special Economic Zone, the new factories and bases for strong economic growth,” he The company undertook a study to only SEZ in operation in Myanmar, buildings with a fully- commented. evaluate the best location for the plant has seen over 90% of land in Zone A fledged production plant in Bago, 91km in 2012–13, and chose Bago because of and 50% of land in Zone B sold as of northeast of Yangon. “The new factory will strengthen its location and support they received March. Meanwhile, Mandalay’s Myotha our presence in the country, by building from the regional authorities. “We did Industrial Park and the vastly ambitious Jotun, a privately-owned Norwegian confidence with our existing and future receive very good support from Bago’s New Yangon City have been under paint manufacturer, opened a K14 customer of Jotun as their preferred regional government,” he said. investor spotlight. These major projects billion factory in Bago Region in late paint partner,” VO CHI LINH, Jotun’s are set to attract a new wave of industrial 2017. Located in the Bago’s industrial general manager, added. A significant number of garment sites as well as residential buildings. zone, the 4-hectare plant provides paint factories and manufacturing plants are manufacturing jobs for more than 60 EuroMatters talked to VISHAL either established or in the pipeline All production from Jotun is for employees. MORE, operations manager of Jotun in in Bago. International brands include domestic consumption. In the future, if Myanmar. Danish Carlsberg, Japanese Nissan and the manufacturing capacity scales up, The Sandefjord-headquartered Hong Kong-listed Lee & Man Paper the company will consider exporting to chemical multinational first entered The Bago factory produces Manufacturing. More recently, Yangon- other markets in the region. Myanmar in 2013. Subsequently, they decorative paints, marine coatings and based Hantharwady Development secured an investment license from protective coatings - three of Jotun’s four Public Co. began the implementation “Economic reforms and the Myanmar Investment Commission main segments - to protect and decorate of the proposed industrial park in Bago modernisation will definitely help us to to build the plant in 2014. Globally, the surfaces in the residential, shipping and Region, alongside an “eco-resort” and promote and sell high-quality products company has 64 subsidiaries and 40 industrial markets. In Myanmar, the urban complex. The industrial area, from our global product range in the production facilities, present in over 100 company operates through subsidiary including residential, manufacturing, local market,” MR MORE went on. countries. Jotun Myanmar Co Ltd. logistics and other components, will cover around 2,500 acres and is located Logistics difficulties Jotun chair ODD GLEDITSCH said The paint maker set up their business in Inntagaw township. at the factory’s opening ceremony here in 2013, bringing materials from As Myanmar is a frontier economy, that Myanmar presents “an attractive their sister companies and distributing Northeast of Yangon, Bago Region operation has not been without market” for the firm. “With its strategic them across the country. In June enjoys geographical proximity to the difficulties. For Jotun, import process,

EuroMatters 2 OCT–DEC 2018 30 31 EuroMatters 2 OCT–DEC 2018 EAR ON MARKET EAR ON MARKET

more variety in products, brands and As with the global health and POSITIVE DEVELOPMENTS DESPITE quality levels. wellness trend, and especially amongst PRESSURES AND UNCERTAIN OUTLOOK consumers aged 30 years and above Consumer Increasing access to smart phones there is greater preference for a brand Confidence and the internet has made a strong which has a health focus, be it mental SIDE FOR MYANMAR CONSUMERS dropping STORY impact on product understanding, or physical support and especially expectation and brand perceptions. relevant in metro Yangon. YANMAR Household incomes are also continuing than they did in 2015. It is unlikely Consumer Confidence: An indicator for how optimistic HAS had to rise with 38% of households now that these categories of expenditure When citing sources of information Communicate local care and consumers feel about the state of about brands, events and trends, attention among the declaring incomes above K500,000 will see a turn around until consumer the econony and their financial higher GDP MMK, compared to 12% in 2015. confidence starts to rebound. internet and digital platforms have situation which will affect their growth See side story. increased from 19% (2015) to 45% Response and decoding of economic decisions - primarily rates in the Increasing household expenditure (2018). However traditional word communications is also becoming their spending, and saving. Southeast Asian region during the How consumers are changing of mouth and the influence of local more sophisticated as Myanmar period 2012 to 2018 and this has had Overall households are spending, opinion leaders has also remained consumers become more exposed to Key aspects that contribute towards the index include a mostly positive impact on individuals excluding any investments such as Myanmar consumers are becoming strong, (and potentially disruptive), more and higher quality executions. increasing from 14% (2015) to 22% employment, the value of the and households with rising incomes gold and savings, 29% more than relatively more discerning, making Myanmar Kyat, the cost of living, and opportunities. However these they did in 2015. Compared to 2015, more informed purchase decisions as (2018). Advertising research reveals that Myanmar’s economy and my positive shifts are being offset with households in 2018 are spending an brands and products are more clearly attractive communication are still personal standard of living. rising cost of living and uncertainties increasing proportion of total monthly understood and differentiated (e.g. Growing role of brands in Myanmar those with a practical, functional focus, within a more realistic context Despite the introduction of the for the near future. expenditure on groceries (23.9%, up ingredients and source). new Myanmar Companies Law Myanmar’s “brand curiosity” is relatable to average day-to-day life from 20.8%), housing (14.5%, up from and other regulatory reforms, the Since opening to the world in 11%) and education (11.6%, up from Myanmar people can be increasing and consumers are open (which is often focused close to home). humanitarian crisis in Rakhine 2012, Myanmar consumers have 10.4%) indicating these are the priority surprisingly progressive and involved to trying new things with nearly half of However there is also stronger State and associated international headlines, as well as conflicts in changed, notably as a result of areas for households. in positive social causes aimed at consumers stating, I switch brands a lot emotional connection created with the just to try and I often try new products utilisation of key cultural values around Kachin State and northern Shan changing economy, infrastructure and developing their community (and the State have resulted in deteriorating subsequently lifestyle and income Household leisure activities country) – individuals and groups before my friends do. We can look to the kindness and generosity, respect, consumer confidence since 2015. growth with average personal incomes (entertainment, travels/ holidays and feel a strong sense of community success of Wave Money and brands togetherness and community and increasing from US$122 (2014) to $219 eating/ dining out) have seen a decrease responsibility and collectivism. like Royal D that have found open appreciation, strongly influenced by a The positive sentiment score (far consumer minds to their propositions. Buddhist foundation. better, a little better) outlook over (2018) per month*, a greater exposure in overall proportion of total monthly the next 12 months has dropped Ownership of branded goods and to overseas trends via mobile internet expenditure indicating that these In a relatively short amount of time from 50.3 in 2015 to 45.5 in 2017 and contact with people from abroad, expenditure areas are less essential markets have developed from basic, material is increasingly seen as a way By tapping into Myanmar’s to 31.8 in early 2018. and the influx of international brands for households, despite still spending with few products to choose from, little to showcase personal success with optimism for stability, happiness Although household incomes are and products. more in each respective area in 2018 differentiation and often low quality, to consumers increasingly saying they and peace (after a long period of prefer to buy well-known brands and like uncertainty) advertisers can deliver increasing across metro, urban and rural locations, positive confidence to use a brand which “shows my success”. an emotionally resonant message for is diminishing across a range of More wealthy individuals are willing to domestic consumers. areas since 2015. Notable key MONTHLY HOUSEHOLD INCOMES - TOTAL (%) MONTHLY HOUSEHOLD CATEGORY pay more for higher quality brands. areas of concern were personal EXPENDITURE CHANGES standard of living, employment, 44 Myanmar’s international image and Category Change (2015–2018) (%) progress on roads and transport The following trends information has been compiled from MyLife, an annual Kantar TNS Myanmar survey infrastructure in the next 12 35 Household groceries 54% of at least n=1,000 people across metro, urban and rural areas of Myanmar to assess changing lifestyles months. and patterns of behaviours and attitudes to brands and consumption each year. Housing 76% * Note that MMK to USD exchange rates as equivalent rate at time of survey. Diminished consumer confidence 25 Education 50% is likely to affect domestic personal 23 23 and household consumption 21 Household travel / holiday 3% as households prioritise lower Household entertainment -20% spending decisions and strive to save more in expectation of Household transportation 34% the rising cost of living and the 9 KANTAR: INSPIRATION FOR AN 7 Household healthcare 49% decreasing value of the Myanmar EXTRAORDNARY WORLD Kyat. Sectors such as travel and 4 4 3 Household eating / drinking out 14% 2 tourism and restaurant and Kantar TNS one of the world’s largest research agencies Household communication 29% entertainment venues may find this with experts in over 90 countries. With expertise in to be especially challenging in the K1,300,000 innovation, brand and communication, shopper activation Household utilities 39% coming 12 months. 300,000 500,000 800,000 1,300,000 and customer experience, Kantar TNS helps clients Household toiletries 23% identify, optimise and activate the moments that matter to 2015 2018 drive growth for their business. Total household expenditure 26.1% COUNTRY LEADER (excluding investments) Jason Copland

EuroMatters 2 OCT–DEC 2018 32 33 EuroMatters 2 OCT–DEC 2018 SITE VISIT

EVENTS ON REVIEW

THE FIRST Anti-Illicit Trade Forum, The second panel discussion, hosted by EuroCham Myanmar in 05 Enhancing an Investor-friendly partnership with the Transnational Alliance Environment, focused on the uneven to Combat Illicit Trade (TRACIT), took place SEP playing field caused by illicit trade on September 5, 2018 in Naypyidaw. The • WED • which deters investors. Illicit traders can objective of the forum was to improve NAYPYIDAW undercut legitimate businesses as they the knowledge and understanding of the do not incur the costs associated with regulatory environment and economic tax and regulations. circumstances which enable illicit trade. Anti-Illicit Trade Smuggling was identified as possibly Following executive director FILIP Forum 2018 the most prolific illicit trade activity LAUWERYSEN’S opening speech, HIS during the Illicit Trade Patterns: EXCELLENCY U AUNG KYI, chair of the Counterfeit, Smuggling & Parallel Anti-Corruption Commission, gave the keynote address. Trade discussion. The lack of data surrounding illicit trade has Afterwards, MARIE PEGIE CAUCHOIS, UNODC’s deputy proven to be a barrier to combatting the issue. country manager and anti-corruption adviser, and JEFFREY HARDY, director general from TRACIT, gave presentations on Discussing Challenges to Public Health, the panellists illicit trade data and on the Global Illicit Trade Environment explored how counterfeit products such as foods, cosmetics, Index respectively. pharmaceuticals and pesticides pose a threat to consumer safety. The panel discussions comprised leading private sector representatives, high-level government officials and key During the Enforcement and Control Mechanisms: experts from international organisations and academics. An Sharing of Best Practices panel discussion, current efforts overview of the Index results for Myanmar was presented by to tackle illicit trade were explored. Myanmar’s Customs different expert panels: Department is set to employ modern technologies to facilitate customs clearance. During the VIP Roundtable on Policy Developments, the prevalence of illicit trade in Myanmar was discussed, with the The panellists underlined that, while the government is economy of illicit trade exceeding Myanmar’s total GDP. This taking steps to tackle illicit trade, it is also an international issue problem was attributed to border-control corruption, poor law harming all the economies globally. There was a consensus that enforcement and taxation barriers. information-sharing and cooperation among law enforcement officials at a regional level should be adopted.

EuroMatters 2 OCT–DEC 2018 34 UPCOMING HIGHLIGHTS UPCOMING HIGHLIGHTS

Myanmar insights: Business opportunities in Business confidence survey and overview of the investment Myanmar market business guides launch landscape in Myanmar Eurocham Myanmar is organising with Eurocham The third Business Confidence Survey will be presented on Singapore a seminar on business opportunities December 12. Feel free to join the event and discuss the There have been many changes in the regulatory and in the Myanmar market. latest findings on the perspectives of European investment in investment climate in Myanmar over the last several Myanmar. We will also present our new Business Guides 2019 - years. In this event organised in cooperation with A presentation will be given on the business general and six sectoral guides on agriculture, consumer goods, EuroCham Myanmar, the European Union Chamber climate in Myanmar, with tangible advice on how energy, garment, health and manufacturing. These will provide of Commerce in China aims to provide prospective In this section, the most to successfully enter the market. up-to-date, entry-level information to European companies investors with an overview of the investment regulations planning to invest in Myanmar. notable events of the in Myanmar, as well as an introduction to investment The country presentation will be followed by upcoming quarter are incentives, taxes and business regulations. highlighted. From joint events a legal presentation from Luther on Investing EuroCham Myanmar thanks all the respondents for their input in Myanmar and the new Wholesale & Retail to the survey and is looking forward to presenting the results on Get more information and register on EuroCham website. with bilateral chambers to the Regulations. December 12. business guides launch, be sure not to miss out on these essential events in Myanmar. More information to come on our website: OCT DEC DEC eurocham-myanmar.org/events/upcoming • FRI • • MON • • WED • 19 SHANGHAI 03 SINGAPORE 12 YANGON

OCT DEC JAN • TUES • • WED • • • YANGON 05 YANGON 09 YANGON

Joint networking event between EuroCham Myanmar Joint chambers networking event Japanese Chamber of Commerce Construction Forum 2019 with all European Chambers and Industry and EuroCham EuroCham Myanmar, together with leading European construction companies represented This event organised by 7 European Chambers, BritCham, CCI France Myanmar, German Japan Chamber of Commerce and Industry and in the Construction and Infrastructure Advocacy Myanmar Business Chamber, EuroCham Myanmar, Chamber of Commerce Italia - Myanmar, EuroCham Myanmar are pleased to invite you to their Group, are pleased to announce an upcoming Norwegian Chamber and SwedCham altogether in the presence of H.E. KRISTIAN joint networking evening at the Lotte Hotel on December forum representing a wide range of construction SCHMIDT, EU Ambassador to Myanmar, will be a great occasion to network while enjoying 5 from 6.30 to 8.30pm. This first edition will be a great practices in Myanmar. The Construction Forum is food and drinks. occasion to expand your network with business leaders aimed to be held in January 2019 and will take place and professionals and enjoy the evening catching up in Yangon. Come along and join us for a great evening while meeting ambassadors from member states, with peers. A variety of canapés will be served, along trade counsellors, business leaders and professionals enjoying Yangon’s skyline from the with your choice of wine or beer to drink. Stay tuned on soonest updates and expect insightful terrace of Le Cellier Wine Bar & Restaurant of Novotel, our event sponsor. panel discussions, expert presentations, and a Get more information and register on EuroCham website. wide representation of local and international key players empowering the Myanmar Construction Industry.

EuroMatters 2 OCT–DEC 2018 36 37 EuroMatters 2 OCT–DEC 2018 Every stay at a Mercure Hotel offers you a new experience!

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