Sino-Japan and Myanmar’s SEZ

China and Japan are eager to be involved in massive special economic zone (SEZ) projects in Myanmar, amid rising economic competition in the Greater Mekong Subregion (GMS). Since 2011, Myanmar has rapidly improved its diplomatic relations with the West and Japan in order to broaden its economic relations and mitigate its excessive dependence on China.

Currently, three SEZs are being implemented in Myanmar: Kyaukphyu in Rakhine state, Thilawa in the Yangon region and Dawei in the Tanintharyi region. China has been mainly involved in the Kyaukphyu SEZ, in the troubled western Rakhine state, where a Chinese consortium, led by the Chinese state-owned China International Trust and Investment Corporation (CITIC), began development in February.

But Chinese involvement in SEZs in Myanmar can be traced back to a note on the master plan for ‘Thanlyin-Kyaukdan Industrial zone’ signed in 2004. While the proposed site was located in same area as the present Thilawa SEZ, the project was not implemented at the time, since neither the military regime nor China viewed it as a high priority.

China’s strategic involvement in Kyaukphyu is motivated by sea lane and energy security concerns, as the site provides an alternative to the Strait of Malacca sea route. An oil and gas pipeline constructed by the China National Petroleum Corporation now links Kyaukphyu overland to the landlocked Yunnan Province. This has attracted the ire of locals over displacement, inadequate compensation and environmental degradation.

CITIC first started a feasibility study for the $10 billion development of Kyaukphyu in 2007. Yet approval of the first phase was delayed by several years due to doubts about commercial viability, financing and rising anti-Chinese sentiment as well as weakening bilateral ties in the face of Myanmar’s burgeoning relationship with Japan.

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Japan is equally eager to be a part of Myanmar’s SEZ development. A key point in Myanmar–Japanese economic cooperation came during former president Thein Sein’s visit to Tokyo in April 2012, with the signing of a bilateral memorandum for the development of Thilawa. Construction began in 2013, in cooperation with Japan. The Thilawa SEZ become operational in September 2015 as the first and most successful SEZ in Myanmar.

Two months before the opening of Thilawa, the Japanese government decided to participate in the Dawei SEZ projects, along with Myanmar and Thailand, though this project ran into funding problems. Tokyo also pledged to provide 750 billion yen ($6.7 billion) for economic assistance to the Mekong Region at the seventh Mekong–Japan Summit in 2015. The Dawei SEZ, just 300 kilometres west of Bangkok, is to be linked with the GMS Southern Economic Corridor. Its abundance of low wage labour makes it an ideal production location for Japanese companies.

In response to Japan’s involvement – and to progress the ‘One Belt, One Road’ (OBOR) initiative, including the proposed Bangladesh-China-India-Myanmar Economic Corridor – Beijing ingratiated itself with Myanmar. China has established financing bodies such as the Asian Infrastructure Investment Bank and the Silk Road Fund to fund OBOR projects amounting to $250 billion.

A consortium including private and state-owned Chinese companies is also currently being formed for infrastructure projects in Dawei, including three deep sea ports and a 132 kilometre four-lane road linking Dawei with Kanchanaburi in Thailand. Originally, the projects were to be jointly implemented by Thailand, Myanmar and Japan, but it is uncertain whether the Chinese consortium will now get approval from the Dawei SEZ management committee instead.

The Kyaukphyu SEZ development, though it has already attracted financing, is more problematic. The government stresses that the SEZ would be very beneficial for economic growth both nationally and in Rakhine State. Compared to other SEZs, Rakhine State is home to numerous ethnic, religious and other minorities, including Rakhine, Muslims and Rohingya. And it is far from major commercial cities and borders – unlike other planned SEZs, which are suitably located for light and labour-intensive industries. It may therefore be more likely to face community disapproval.

Ba Shein, an Arakan National Party member for the lower house, has already expressed concern, declaring that ‘it looks like the current government just wants to go ahead with the project as planned, rather than [adjust it] for the region’s benefit … it seems they want certain companies to have a go’.

For her part, Aung San Suu Kyi declared that Myanmar would keep friendly policies with all countries, including China, and praised China’s OBOR. The National League for Democracy has declared that it will decide whether to continue the development of the Kyaukphyu and Dawei SEZs after analysing the commitments made by the former government to investors, state and regional governments and local residents.

The Kyaukphyu SEZ has the potential to become the country’s largest and busiest port. But the distance from commercial and industrial clusters may delay its incorporation into production and sales networks in the Mekong region. Although there is potential for oil and gas processing, this will employ less people than the labour-intensive manufacturing industry. And linkages between the resource-based industry and other sectors are weak. SEZs may therefore provide fewer benefits to the local economy than politicians and foreign investors would have the public believe.

Read Also : Myanmar Second Stock Listing MTSH delay to list YSX

Myanmar Second Stock Listing MTSH delay to list YSX

Myanmar Thilawa SEZ Public (MTSH) will not list its shares on the Yangon Stock Exchange until the second week of May at the earliest, according to bourse officials, having initially targeted mid-March.

The firm, which is expected to be the second to move its shares onto Myanmar’s new exchange, has not yet received approval from the YSX to list, said Kensuke Yazu, Myanmar representative for the Japan Exchange Group, which co-owns the stock exchange.

First Myanmar Investment became the first firm to list on the exchange on March 25.

Once the YSX gives a firm approval to list, the bourse then requires – due to logistical necessity rather than regulation – 10 business days to prepare the YSX and securities company systems, and make public the company’s disclosure documents and prospectus, Mr Yazu said.

If MTSH were to receive approval this week then the earliest it would be able to list would be the second week of May, he said. The company said in February that it aimed for a listing date in mid-March.

Rudi Rolles, managing director at KBZ Stirling Coleman, one of the securities firms working with MTSH on its initial public offering (IPO), said he expected MTSH to list in mid-May.

MTSH chair U Win Aung told The Myanmar Times in February that MTSH was working with AYA Trust Securities Company, Myanmar Securities Exchange Centre, CB Bank Securities and KBZ Stirling Coleman Securities on its IPO.

Any firm applying to list on the exchange has to go through an examination process, which requires interviewing the company’s staff, accountants and management, Mr Yazu said.

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During the examination the YSX judges whether a firm is eligible to list based on criteria such as “financial soundness, corporate governance and [the] internal management system”, he added.

The examination typically takes at least 45 days and the YSX began examining MTSH in February, he said. The fact that MTSH had yet to receive approval was due to the long New Year holiday rather than issues with the company, he said.

That MTSH has so many shareholders could also mean the listing takes more time, Mr Yazu said. When FMI listed on March 25 it had 6800 shareholders, whereas MTSH has more than twice that number. In order for these shares to be traded on the YSX each shareholder has to first open an account at a securities firm.

“MTSH has more than 15,000 existing shareholders and all [the] securities companies [are] trying very hard to manage the situation,” Mr Yazu said, adding that he understood the process was going smoothly.

When trading in MTSH does start, the increase in the number of people buying and selling shares on the YSX could also present problems. Even dealing with the rush of demand to trade FMI shares caused issues for securities firms, who struggled to properly explain trading risks to so many eager clients.

FMI chair Serge Pun called a meeting of securities companies at the end of March after his firm’s shares lost and then regained 24 percent of their value in just a few hours.

One factor in these swings may have been that brokers at securities firms had difficulty explaining how different types of bids and offers worked due to the sheer volume of new investors, said U Thet Htun Oo, executive senior manager at the YSX administration department.

FMI’s shares closed at K33,000 yesterday, down K1000 from the previous day. The shares were listed at K26,000 and hit a high of K41,000 in late March.

Mr Rolles declined to comment on whether KBZ SC had hired new brokers in preparation for trading MTSH shares.

Also Read : Flymya to expand its Platform for small travels and tours company

Flymya to expand its Platform for small travels and tours company

Local travel and tourism company Flymya has launched an online portal where small scale   tourism operators can upload itineraries and tour packages to Flymya’s website.

This move is expected to help smaller companies compete against larger companies as Myanmar tourism sector booms, according to Flymya.

As the number of projected tourists entering Myanmar grows each year, the ease for tourist operators accessing the growing numbers is still proving difficult for the small operations as larger companies have financial ease to access them before they arrive.

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The deal would also allow tourist agents to avoid setting up their own websites, payment gateways, online banking and marketing operations, as sales made through the portal go directly to the operators, Flymya announced.

With this opportunity operators will be able to focus their efforts by improving their deals from the review system as well as leaving business hassles to Flymya, which provides domestic air tickets, hotel reservations and car rental services.

Currently the tourism market in Myanmar is far and few in-between with many operators spread throughout downtown Yangon absorbing the majority of the business when they can. Yet, this allows larger companies to pitch abroad using social media and webpages.

“With small time operations begin given the opportunity to use our website as a sounding board to potential customers, this will help smaller enterprises with great tourist deals and all them to have their voices heard,” Flymya CEO Mike Than Tun Win said.

A total of 4.68 million tourists entered Myanmar in 2015, up from 3.08 million in 2014, with projections citing that tourist arrivals will reach 7.5 million by 2020. However, this government provided figures are strongly contested. Despite the inflated figures, there has indeed been a boom in Myanmar’s tourism sector.

Flymya’s claims its portal will be able to connect 2 million visitors to the tour operator portal sorting out payments and fees before arrival.

“What Flymya’s package portal will do is let businesses track sales in real time, connecting Myanmar businesses with the global travellers. We will have the biggest assortment of tour packages in Myanmar,” said Mike.

According to the Ministry of Hotels and Tourism, for the year of 2015 there are 1,906 licensed local companies operating within the country, 39 joint venture operations and only one foreign company. About 18 percent of tourists arriving in Myanmar are in package tours with 24 percent of travellers are solo independent travellers.

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Chinese plan to build Myanmar Largest oil refinery in Dawei

A Chinese-led US$3 billion plan to build Myanmar’s largest oil refinery near the southern city of Dawei has raised questions about China’s strategic intentions in launching apparently commercially unviable projects, while local groups have already signalled their opposition.

Guangdong Zhenrong Energy Co, a Chinese state-controlled commodity trader, said the Myanmar Investment Commission (MIC) had signed its approval at a ceremony in Nay Pyi Taw on March 29 – the last full day in office for U Thein Sein’s government.

That day Guangdong Zhenrong also signed an agreement to take a 70 percent stake in the project consortium with military-linked Myanmar Economic Holdings Limited, state-owned Myanma Petrochemical Enterprise (MPE) and Yangon Engineering Group which is controlled by Htoo Group. The MIC confirmed it had signed its approval.