Burmese SMEs demand an equal chance under FDI laws

Tuesday, 26 June 2012 

Burmese SMEs demand an equal chance under FDI laws

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By KATE KELLY

Burma's Central Bank building is seen in Naypyidaw 17 May 2012. Burma's central bank wants to weaken its newly floated currency and prevent further rises that could derail reforms to its economy, said the deputy central bank governor said. (Reuters)

Published: 19 June 2012

Burma's Central Bank building is seen in Naypyidaw 17 May 2012. Burma's central bank wants to weaken its newly floated currency and prevent further rises that could derail reforms to its economy, said the deputy central bank governor said. (Reuters)

As the Burmese government irons out the finishing touches to the much-anticipated Foreign Direct Investment (FDI) law, members of the country’s credit-starved small business sector say a five-year tax exemption for foreign firms is unfair.
Myat Thu Winn, Managing Director of Shwe Minn Tha Enterprises Co, a family owned group of real estate, media and printing companies, says a five-year tax break for foreign investors will disadvantage local business.
Myat Thu Winn says many Burmese small to medium enterprises (SMEs) still struggle to access sufficient credit from the country’s weak banking sector to grow their business and will suffer if forced to compete against sophisticated and well-financed foreign companies.
“I understand the (FDI) law will help encourage foreign investors, however local companies also need a great deal of assistance to improve their business techniques,” says Myat Thu Winn.
“We need fair and equal opportunities. If everything is equal, then we can all compete — foreign investors and local Burmese — but first we need to have an equal chance.”
Burma’s parliament has drafted new legislation that will allow a five-year tax holiday for foreign firms, which is extended from the current three-year holiday.
The parliament has yet to pass the law but it is viewed as a first step before the country takes on more reforms aimed at boosting foreign direct investment.
However Myat Thu Winn says the government’s proposed five-year tax exemption will give foreign firms a competitive advantage over their Burmese counterparts.
He says SMEs need to compete on a level playing field with foreign investors and says the new law should give equal opportunities to all businesses.
“There are many challenges for the local businessman,” he says. “Our country is very poor and we need foreign investment, not only to provide capital, but to provide new infrastructure and techniques.”
“So as a normal Burmese citizen, I welcome foreign investment, but as a businessman I think all companies need to have an equal chance at profitability.”
Jared Bissinger, a PhD candidate at Macquarie University studying Burma’s economy and a consultant with Vriens and Partners says he doesn’t recommend a tax exemption for foreign businesses.
“This part of the new FDI law is certainly creating the biggest bones of contention so far and domestic business doesn’t like it,” says Bissinger.
“You want to create a level playing field for all business so there’s no need to prejudice one over the other.”
Myat Thu Winn says foreign investment in the construction and tourism sectors could give a much-needed shot in the arm to the country’s economy as well as provide jobs for thousands of Burmese.
“I understand if you are a businessman, you are trying to make money, but I encourage foreign investors to think of how they can also contribute to the community,” says Myat Thu Winn.
Bissinger says foreign investors can help Burma’s development by creating employment and training opportunities however he warns of the potential for bigger, better-financed and business-savvy investors to put local firms out of business.
“What you don’t want is a bunch of foreign companies coming in and displacing local companies,” says Bissinger. “And there’s a big risk of that happening.”
“Instead, you want foreign companies to come in and do things better through introducing more efficient production methods, more capital or new management techniques.
“These can bring production costs down and quality up, so new foreign firms don’t just take a slice of the pie but expand the size of the pie.”
A recent report by the Economist Intelligence Unit (EIU) says access to credit is the biggest challenge faced by Burma’s SMEs.
“A major impediment to rapid growth remains that of weakness in the banking sector, with small- and medium-sized enterprises (SMEs) still struggling to obtain sufficient credit,” the report states.
The report says credit-starved SMEs could benefit if economic and financial reforms allow foreign investors to enter Burma’s banking sector.

-Kate Kelly is a pseudonym for a journalist working in Burma.

Tags: business, currency, fdi, imf, Investment law, reforms, SMEs

Author: KATE KELLY              Category: Economics, News

Immigration officials prevent conference attendees from entering country

Tuesday, 26 June 2012

Immigration officials prevent conference attendees from entering country

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By KATE KELLY
Published: 21 June 2012

Police officers stand outside the gates of the embassy of Burma in Singapore on 27 April 2008. (Reuters)

Eager foreign investors paying top dollar to attend the New Myanmar Investment Summit 2012  have been sent home empty handed after immigration officials refused to grant them visas.
The Burmese government last month announced businessmen could apply for visas on arrival (VOA) at Yangon International Airport after 1 June 2012.
However, a bureaucratic bungle by the conference organisers meant many attendants, who had paid up to $1,495 each to attend the lucrative two-day conference, were turned away at Yangon International Airport.
To be eligible for a business visa, businesspersons need two documents — a letter from a Burmese company or organisation plus a letter of recommendation from their host country.
“The organisers’ invitation to the participants was not recognized by the immigration. The [Union of Myanmar Federation of Chambers of Commerce and Industry] told us that they initially supported the conference but they pulled back their support because the organisers were charging an exorbitant conference fee,” said one businessman whose colleague was turned away at the airport.
“This could be one of the reasons why those conference participants were turned away. They did not receive an invitation from a local company or association.”
Singaporean-based Centre for Management Technology organised the two-day conference that is being held at Rangoon’s Park Royale hotel. CMT reported that representatives from about 300 foreign firms along with local businesspersons are attending the conference.
However, attendants reported that fellow businesspersons holding letters of invitation from the conference organizer were refused a VOA by Burmese immigration staff.
One Rangoon-based businessman said his colleague was due to fly in from Canada for the conference, however because his letter of invitation was from the Singaporean company, an immigration official had refused to allow him out of the airport in Rangoon.
The businessman had to pay for his own return ticket to Canada, the source said.
“What does this mean for openness and investment in Myanmar – if investors can’t even get through the airport gates,” another business source said.
A group of Malaysian investors said one of their colleagues was forced to return to Hong Kong after being refused a VOA.
Another European investor said he was aware of the VOA option but opted to secure his visa before the long flight to Burma, saying the VOA option is an accident waiting to happen.
Immigration officials were unavailable for comment.
-Kate Kelly is a pseudonym for a journalist working in Burma

Tags: immigration, investment, Ministry of Immigration, reform, singapore, visas

Author: KATE KELLY              Category: News, Politics

Australian businesses set to boost Myanmar stake

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By Victoria Bruce

The Myanmar Times
Volume 32, No. 632
June 25 - July 1, 2012

 

AUSTRALIAN firms are being tipped to take up the challenge of investing in Myanmar following the early June announcement by Foreign Minister Bob Carr to lift all remaining travel and financial sanctions on the country.
In Yangon, the lobbies and bars of the city’s high-end hotels have transformed into impromptu offices for foreign investors – including a new stream of Australians – seeking their fortune in the resource-rich country.
“Right now, Myanmar is a blank canvas,” one investor said. “And we’re the artists.”
A Yangon-based business consultant said some Australian construction and agricultural firms are already exploring investment opportunities in Myanmar.
“There’s been interest from a Brisbane-based property development and construction company specialising in modular building systems that could possibly service Myanmar’s huge demand for hotel and serviced accommodation,” he said.
He added that representatives from oil and gas giant BHP Petroleum recently visited.
“BHP have been revisiting the previous onshore opportunities in the oil and gas sector and no doubt eyeing the lucrative offshore market,” the consultant said.
“And if you’ve got BHP Petroleum coming in here then it would be highly likely BHP Billiton will be hot on their heels.”
Australia’s mining expertise, he added, could provide essential technology to help exploit Myanmar’s rich resource reserves.
Nestled between the heavyweight economies of India and China, Myanmar has proven natural resources, including oil and gas, minerals, gems and forestry, and vast potential for new agricultural projects.
Recent political and economic reforms by President U Thein Sein’s government have been rewarded as many Western nations – including the United States, Europe and Australia – suspended or lifted sanctions restricting trade and investment and stepped up aid and development budget commitments.
Myanmar economy expert and professor at Macquarie University Sean Turnell said Australian expertise in areas such as agriculture was in high demand.
“Australia has a lot to offer Burma as we are a big, rich resource/agricultural-led economy while Burma is a big but poor resource-rich agricultural economy,” Prof Turnell said.
He added that Australia could step up its presence in Myanmar as an alternative to Chinese or Asian investment.
“The biggest players here are other Asian countries and in that there is a bit of an upside for Australia.
“There’s a real hankering for connections with the West, mostly the US because it’s the most visible, but in a sense Australia could profit from that.”
However, Mr Turnell said many investors had been surprised by how difficult it was to do business in Myanmar. Limited infrastructure and restrictive legal and economic conditions are the main hindrances to international investment, he said.
U Myat Thu Winn, managing director of Shwe Minn Tha Enterprises Co, a family-owned group of real estate, media and printing companies, said foreign investment in the construction and tourism sectors could give a much needed shot in the arm to the country’s economy and provide jobs for thousands.
“I understand that if you’re a businessman you’re trying to make money, but I encourage new foreign investors to think of how they can also contribute to the community,” U Myat Thu Winn said.
Tim Harcourt, former chief economist of Austrade, the Australian government’s trade and investment arm, said investors have much to offer Myanmar.
“Australia could help Burma develop its rural industries as well as in education and training in tourism in much the same way as in Vietnam, Laos and Cambodia.
“The emphasis will be in capacity building and helping people to reach their potential. But it would be a ‘softly, softly’ approach provided the pro-democracy reforms continue.”

This article was published in the print and online editions of the Myanmar Times on Monday 25 June 2012

Australian investors jostle for Burmese business

Investors jostle for Burmese business

• by: Victoria Bruce
• From: The Courier-Mail
• June 15, 2012 12:00AM

OPEN SEASON: Myanmar (Burma) opposition leader Aung San Suu Kyi talks to the press as Australian Foreign Minister Bob Carr looks on. Source: AFP

AS THE investment boom hits Burma, eager Australian companies have been given the green light to enter the race to invest in the impoverished South-East Asian nation.

Last week's announcement by Foreign Minister Bob Carr to lift all remaining travel and financial sanctions signalled the starting gun for Australian investors to stop jostling on the sidelines and join the hordes of foreign firms entering Burma.
In the rundown economic capital, Rangoon, lobbies and bars of high-scale hotels have transformed into impromptu offices for hordes of foreign investors seeking fortunes in the resource-rich country.
"Right now, (Burma) is a blank canvas," one investor said. "And we're the artists."
Bringing Burma into the 21st century is a challenge. It needs new roads, train lines, ports, electricity grids and telecommunications networks.

A Rangoon-based business consultant said Australian construction and agricultural firms were already sussing out investment opportunities.
"There's been interest from a Brisbane-based property development and construction company specialising in modular building systems which could possibly service (Burma's) huge demand for hotel and service accommodation," the consultant said. He said BHP Petroleum representatives recently visited.
"BHP has been revisiting the previous onshore opportunities in the oil and gas sector and no doubt is eyeing off the lucrative offshore market," he said.
Australia's mining expertise, he added, could provide essential technology to help exploit Burma's rich-resource reserves.
Nestled between the booming economies of India and China, Burma has proven natural resources, including oil and gas, minerals, gems, forestry plus vast potential for new agricultural projects which once saw it labelled the "rice bowl of Asia" at the height of British rule more than 50 years ago.
But decades of economic mismanagement and restrictive international sanctions have crippled Burma's economy, making it one of the most under-developed countries in South-East Asia. However, recent political and economic reforms by President Thein Sein's Government have have been rewarded as many Western nations - including the US, Europe and Australia - eased, suspended or lifted sanctions restricting trade and investment and stepped up aid and development budget commitments.
Australian economist and Burma expert Professor Sean Turnell from Macquarie University in Sydney said Australian expertise in areas such as agriculture was in high demand.
"Australia has a lot to offer Burma, as we are a big, rich resource/agricultural-led economy while Burma is a big but poor resource-rich agricultural economy," Prof Turnell said.
Prof Turnell said Australia could step up its presence in Burma as a regional superpower and as an alternative to Chinese investment.
"The biggest players here are other Asian countries and, in that, there is a bit of an upside for Australia," he said. "There's a real hankering for connections with the West - mostly the US, because it's the most visible - but, in a sense, Australia could profit from that."
But, he said, many investors were surprised by how difficult it was to do business in Burma with its limited infrastructure and its restrictive legal and economic conditions being the main hindrances.
Khoo Kay Peng - a business analyst and founder of i3M Group, a market research, business advisory and investment management firm that focuses on Burma - said foreign firms should do their homework.
"Market research is essential and crucial for a new market such as (Burma)," he said. "It is smarter and more prudent to spend a few thousand dollars on market research than to spend millions to find out if a business works on not."
A draft copy of the Burmese Government's new foreign direct investment laws states foreign investors can provide up to 100 per cent in capital for new projects, or have the option to forge a joint venture with a Burmese business partner.
However, a Rangoon-based business consultant warned eager Australians to be prudent when considering entering into a joint-venture arrangement with Burmese companies.
During the decades of military rule, access to Burma's business circuit was controlled by a small, elitist circle of business tycoons with close ties to Burma's former military regime, who still control the majority of private enterprise.
"And, as Burma opens up for business, foreign investors invariably have to deal with the tycoons who control access to the country's crippled economy," the consultant said.
"Past indiscretions could catch up with unsuspecting new investors and entering into joint ventures with these companies could be viewed by the international community as condoning the excesses committed," he said. "Therefore new investors should choose their bedfellows carefully."
Former Austrade chief economist Tim Harcourt says Australian investors have much to offer Burma.
"Australia could help Burma develop its rural industries as well as in education and training in tourism in much the same way as in Vietnam, Laos and Cambodia," he said.
"The emphasis will be in capacity building and helping Burmese people reach their full potential. But it would be a 'softly, softly' approach provided the pro-democracy reforms continue."

Investment conference draws mixed reaction from corwd

Dr Kan Zaw is interviewed by journalists at the New Myanmar Investment Summit. 

 

 

 

 

 

 

 

 

 

Investment conference draws mixed reaction from crowd

By Victoria Bruce
Volume 32, No. 632
June 25 - July 1, 2012

HUNDREDS of delegates attended an investment conference at Yangon’s Parkroyal Hotel last week but many said they left with key questions unanswered.
Around 300 delegates from more than 250 companies from the United States, Canada, the United Kingdom, Japan, India, China, Vietnam, Singapore, Thailand, Cambodia, Malaysia, Sri Lanka, Indonesia, and Bangladesh attended the 2012 New Myanmar Investment Summit on June 20 and 21.
Singaporean businessman and managing director of Inle Investment Partners, a firm focusing on investments in infrastructure and energy, U Moe Moe Oo, said there were still many grey areas concerning foreign investment in Myanmar.
“As an investor, my main concerns are around ownership issues, disputes with joint venture partners, arbitration and enforcement issues,” U Moe Oo said.
“A lot of this focuses on big issues such as the rule of law that Daw Aung San Suu Kyi has raised. However, at this point in time, none of that seems to be clear.”
U Moe Moe Oo said the government was keen to secure foreign investment to gain credibility for its reform process.
“But the problem is that although they know they want foreign investors to engage in Myanmar, they don’t really seem to know how to do it beyond telling us we are welcome to invest,” he said.
Dr Kan Zaw, the deputy minister for National Planning and Economic Development, said the government’s new investment law would put Myanmar in line with international standards and make it more competitive regionally.
Parami Energy Group chief executive officer U Ken Tun encouraged foreign investors to test Myanmar’s market during his presentation.
“Businessmen, if you wait until 2015, I don’t know what opportunities will be left for you,” he said.
The managing director of a Yangon-based market research company said Myanmar was open for business and their investments would be protected by the existing Foreign Investment Law.
“You can start doing business in Myanmar – you do not have to wait for the new foreign investment law,” said U Moe Kyaw of Myanmar Marketing Research Development.
Previously, a web of overlapping US sanctions on Myanmar were the biggest deterrent to Western investors, U Moe Kyaw said. He added that the US government’s recent suspension of sanctions would encourage new investment from that country.
German businessman Joerg Gulden, managing partner of German-based integrated advisory firm Roedl & Partners, said the current investment framework was encouraging but a more comprehensive legal framework would be required before the country attracted sustainable foreign investment.
“The conference drew a good picture of today’s investment climate in Myanmar: a typical frontier market with big opportunities, big risks and even bigger uncertainties,” Mr Gulden said.
“It showed an investment framework that might be acceptable for foreign investments in the primary sector, but is far from being ready for capital intensive and sustainable foreign direct investment,” he said.
Dr Kan Zaw said Western investors could surpass China and Thailand as the biggest contributors to Myanmar’s economy.
“Western countries will be the top investors in Myanmar in the coming years,” Dr Kan Zaw said.
However, American lawyer Steven Dickinson said Myanmar still had a long way to go before becoming an attractive investment option for Western firms.
“Other than for oil and gas, Western companies won’t come to Myanmar for some time,” said Mr Dickinson, a lawyer for Hong Kong-based law firm Harris & Moure.
He said a lack of infrastructure and high operating costs, coupled with political instability and a crippled banking system, would deter many Western investors, particularly those in the manufacturing industry.
“That’s a bad thing for Myanmar because there are people who are going to come here, particularly for the areas of oil and gas, minerals and timber,” Mr Dickinson said.
“And those investors are going to strip the country bare, leave the money in the hands of a few top people and give little back to the general population,” he said.
Alessio Polastri, managing partner of Yangon-based law firm P&A Asia and a speaker at the conference, said he had received a positive response from most participants.
However, he said the high price of land was a major deterrent to potential investors.
“Land prices are a deal-breaker,” Mr Polastri said.
“Seventy-five percent people who contacted me were already planning to invest – they are cash-ready – but they couldn’t complete the negotiation because the price of the land was too high,” Mr Polastri told The Myanmar Times.
Delegates paid up to US$1495 each for the event, which was organised by Centre for Management Technology, a Singapore-based firm.

Australia joins to race to invest in Burma

Investors jostle for Burmese business

• by: Victoria Bruce
• From: The Courier-Mail
• June 15, 2012 12:00AM

OPEN SEASON: Myanmar (Burma) opposition leader Aung San Suu Kyi talks to the press as Australian Foreign Minister Bob Carr looks on. Source: AFP

AS THE investment boom hits Burma, eager Australian companies have been given the green light to enter the race to invest in the impoverished South-East Asian nation.

Last week's announcement by Foreign Minister Bob Carr to lift all remaining travel and financial sanctions signalled the starting gun for Australian investors to stop jostling on the sidelines and join the hordes of foreign firms entering Burma.
In the rundown economic capital, Rangoon, lobbies and bars of high-scale hotels have transformed into impromptu offices for hordes of foreign investors seeking fortunes in the resource-rich country.
"Right now, (Burma) is a blank canvas," one investor said. "And we're the artists."
Bringing Burma into the 21st century is a challenge. It needs new roads, train lines, ports, electricity grids and telecommunications networks.

A Rangoon-based business consultant said Australian construction and agricultural firms were already sussing out investment opportunities.
"There's been interest from a Brisbane-based property development and construction company specialising in modular building systems which could possibly service (Burma's) huge demand for hotel and service accommodation," the consultant said. He said BHP Petroleum representatives recently visited.
"BHP has been revisiting the previous onshore opportunities in the oil and gas sector and no doubt is eyeing off the lucrative offshore market," he said.
Australia's mining expertise, he added, could provide essential technology to help exploit Burma's rich-resource reserves.
Nestled between the booming economies of India and China, Burma has proven natural resources, including oil and gas, minerals, gems, forestry plus vast potential for new agricultural projects which once saw it labelled the "rice bowl of Asia" at the height of British rule more than 50 years ago.
But decades of economic mismanagement and restrictive international sanctions have crippled Burma's economy, making it one of the most under-developed countries in South-East Asia. However, recent political and economic reforms by President Thein Sein's Government have have been rewarded as many Western nations - including the US, Europe and Australia - eased, suspended or lifted sanctions restricting trade and investment and stepped up aid and development budget commitments.
Australian economist and Burma expert Professor Sean Turnell from Macquarie University in Sydney said Australian expertise in areas such as agriculture was in high demand.
"Australia has a lot to offer Burma, as we are a big, rich resource/agricultural-led economy while Burma is a big but poor resource-rich agricultural economy," Prof Turnell said.
Prof Turnell said Australia could step up its presence in Burma as a regional superpower and as an alternative to Chinese investment.
"The biggest players here are other Asian countries and, in that, there is a bit of an upside for Australia," he said. "There's a real hankering for connections with the West - mostly the US, because it's the most visible - but, in a sense, Australia could profit from that."
But, he said, many investors were surprised by how difficult it was to do business in Burma with its limited infrastructure and its restrictive legal and economic conditions being the main hindrances.
Khoo Kay Peng - a business analyst and founder of i3M Group, a market research, business advisory and investment management firm that focuses on Burma - said foreign firms should do their homework.
"Market research is essential and crucial for a new market such as (Burma)," he said. "It is smarter and more prudent to spend a few thousand dollars on market research than to spend millions to find out if a business works on not."
A draft copy of the Burmese Government's new foreign direct investment laws states foreign investors can provide up to 100 per cent in capital for new projects, or have the option to forge a joint venture with a Burmese business partner.
However, a Rangoon-based business consultant warned eager Australians to be prudent when considering entering into a joint-venture arrangement with Burmese companies.
During the decades of military rule, access to Burma's business circuit was controlled by a small, elitist circle of business tycoons with close ties to Burma's former military regime, who still control the majority of private enterprise.
"And, as Burma opens up for business, foreign investors invariably have to deal with the tycoons who control access to the country's crippled economy," the consultant said.
"Past indiscretions could catch up with unsuspecting new investors and entering into joint ventures with these companies could be viewed by the international community as condoning the excesses committed," he said. "Therefore new investors should choose their bedfellows carefully."
Former Austrade chief economist Tim Harcourt says Australian investors have much to offer Burma.
"Australia could help Burma develop its rural industries as well as in education and training in tourism in much the same way as in Vietnam, Laos and Cambodia," he said.
"The emphasis will be in capacity building and helping Burmese people reach their full potential. But it would be a 'softly, softly' approach provided the pro-democracy reforms continue."