PwC Myanmar Weekly Business Intelligence Issue September 2017

Transcription

1 PwC Myanmar Weekly Business Intelligence Issue September 2017

2 1. Weekly Key Financial & Business News 2

3 Weekly Key Financial & Business News Headlines Rules to new Condominium Law now being refined, will be enacted soon Property taxes worth less than a cup of tea Farmers decry confiscation of land for civil servant housing project YSX Trade Up After Sluggish Monsoon Months Ministry Deliberates Increase in National Minimum Wage 3

4 Weekly Key Financial & Business News Headlines Internal Revenue Department Dives into Digitalization GE to Supply Yangon s Tharketa Power Plant With Gas Turbine First Private Bank may mull delisting from the YSX Can LNG fill Myanmar s power gap? 4

5 Newspapers Myanmar Times Rules to new Condominium Law now being refined, will be enacted soon 12 Sep 2017 Regulations to the 2016 Condominium Law, which will be enacted soon, will allow foreign nationals to take a maximum stake of 25 percent in a condominium property, among other new provisions, said U Nway Hmu, deputy director of the housing division under the Urban and Housing Development Department. If foreigners are allowed to buy apartments, it can support the condominium market. Under the new law, the condominium land area must be more than 2000 sq. ft. and it must be also more than six storeys. The regulations also involve the condominium builders. Now, they must notify the registration officer after 30 percent of the foundation of a new project has been laid, and only after that can preconstruction unit sales begin. Meanwhile, money obtained from pre-sale activities must be deposited into the bank and utilized only for building construction purposes and nothing else, U Nway Hmu said. Construction companies are also discouraged from speculation and must sell at least 75pc of each property project, the law stated. U Sai Khon Naung, deputy chair of Myanmar Real Estate Development Association, said the rules to he Condominium Law could also include high-rise buildings to facilitate inheritance issues, getting land-ownership permits, applying for insurance and bank instalment loans. Before the law is issued, construction companies will be able to register their buildings. If the buildings are in line with the new law, they will be regarded as condominiums. Source: Myanmar Times 5

6 Newspapers Myanmar Times Property taxes worth less than a cup of tea 12 Sep 2017 Bi-annual property taxes paid by many urban residents in Myanmar are merely worth the price of two cups of tea, according to an August study conducted by Yangon-based Renaissance Institute, which is funded by the UK, Australia and Switzerland with support from The Asia Foundation. In Yangon, the amount collected over the same period is worth less than one cup of tea, assuming each cup costs K350, or 26 US cents. The study reviews the existing property tax system of the country, discusses the areas in need of reforms and places the issue of taxation in the wider context of Myanmar s urbanisation process. Notably, if the country is to capture the social and economic benefits of rapid urbanisation, then a strong property tax system, under which more taxes are collected, backed by effective governance, will be necessary. Property taxes are distinct from other taxes and charges that are levied on property such as stamp duties and capital gains tax, which are paid to the national government and triggered only by the sale or transfer of the property. Property taxes, in Myanmar, are also distinct from user fees, which are only paid if a customer uses a good or service. The Myanmar property tax system uses the annual rental value approach to estimate the tax base, Lachlan McDonald, one of the authors of the study, told The Myanmar Times. This property valuation system is common to former British colonies, including countries in Asia such as Singapore, Malaysia, Pakistan and parts of India, he said. Source: Myanmar Times 6

7 Newspapers Myanmar Times Farmers decry confiscation of land for civil servant housing project 14 Sep 2017 The lands were given to the farmers to plant crops by the government in 1997 under the name Sein Lan So Pyay Yay [meaning to be green and lush] but on August 8, the authorities prohibited the farmers from cultivating as a government housing will be constructed in the area, the farmers said. Nine farmers will not be able to pursue their livelihoods as a result of project, and they wanted to discuss with the government so they can be provided with another farmland or alternative jobs, according to U Myo Win, one of the affected farmers. The Central Committee on Confiscated Farmlands and Other Lands, on August 26, met with the farmers and told them to stop their farming activities in the area, U Myo Win said. Since it was rice-planting season, the farmers requested for a two-month reprieve to allow plantation in other places, apart from the lands that were filled by sand. An initial agreement was reached to allow the farmers to continue planting in the area not yet filled with sand but on September 9, the township administrator published a notice warning that there should not be any farming in the project land. The notice warned of legal actions if the warning is ignored. The retirement housing project is being undertaken by the Yangon Metropolitan Development Public Company, and the groundbreaking ceremony was held on August 27. The government has drawn a list of civil servants in the country who wish to live in Yangon after their retirement, and The Civil Servant Housing Project is for those enlisted who are still working, and also for staff who would retire in about two years time. The project will comprise of 6-storey buildings with 4, 8 or 12 units per floor, totaling 4000 units. Source: Myanmar Times 7

8 Newspapers Myanmar Business Today YSX Trade Up After Sluggish Monsoon Months 14 Sep 2017 Yangon Stock Exchange s (YSX) trade volume reached K2.3 billion in August, K1 billion more than the previous month. Trade peaked in March at K3 billion and has since slowed, volume each month after hovering around the K1 billion average. In August, seasonal confidence typical of the ending of monsoon season saw share volume of t, seasonal confidence typical of the ending of monsoon season saw share volume of Myanmar Thilawa SEZ Holdings Public Limited (MTSH) and First Myanmar Investment Co., Ltd (FMI) nearly double. MTSH share value in July was roughly K400 million and in August shot up to K720 million, a phenomenon the SESC attributes to expansion of facilities. The historic rise in MTSH value was likely a response to the SEZ expanding its operation area into a second phase. The second phase invited new attention and investment from international and local market players, U Htay Chun, a member of the Myanmar Securities Exchange Supervisory Committee, told Myanmar Business Today. The 'end of summer surge' also occurred at FMI where assets in July went from K558 million to K670 million in August. In August, First Private Bank Limited leaded the YSX s listed companies in terms of asset value and trade activity. The YSX was introduced in March 2016 March and facilitated K70 billion worth of trade in As of September 6, a share of FMI costs K140,000, MTSH s share price is K3,450, Myanmar Citizen Bank s shares go for K8,800 each, and First Private Bank s share cost K24,000 per share. Source: Myanmar Business Today 8

9 Newspapers Myanmar Business Today Ministry Deliberates Increase in National Minimum Wage 14 Sep 2017 Under the Minimum Wage Law, the ministry must submit an updated daily minimum wage every 2 years to the Union government for approval. This rate increase must be submitted by January 2018, U Myo Aung, Permanent Secretary of Ministry of Labor, Immigration and Population, told Myanmar Business Today. We will announce the new minimum wage in May In the meantime we are conducting a thorough review of the labor market, various economic conditions, and consulting with academic and private sector experts, U Myo Aung said. The Minimum Wage Law was first legislated in 2013 and is updated once every two years. The most recent update saw the daily minimum wage rise to K3,600, or $2.5, in 2015 August. Setting the minimum wage is a sensitive issue for both workers and employers and input from both is necessary in rate discussions. This takes time to mediate as employers often do not want to pay their workers more money, U Myo Aung, said. The Federation of Trade Unions Myanmar (FTUM) has asked the Ministry of Labor, Immigration and Population to set the daily wage at K5,600, or $4. FTUM argues this amount is the minimum to live in decent housing while being very affordable for most businesses and employers. FTUM has been active in defending labor rights and taking action against employers who refuse to abide by the minimum wage and other labor laws. They have taken several exploitative businesses to the Labor Arbitration Council, the organization responsible for overseeing labor unions, laws, and procedures. They have also been very vocal in arguing for more worker control over trade unions. Whereas currently labor unions must gain their employers approval before making policy or gaining better rights, FTUM has assisted in the worker s fight for self-determination and more autonomy. Source: Myanmar Business Today 9

10 Newspapers Myanmar Business Today Internal Revenue Department Dives into Digitalization 14 Sep 2017 The Internal Revenue Department is working to shift its tax collection system to a digital platform over from the current manual system, U Min Htut, Director General of Internal Revenue Department told Myanmar Business Today. The Internal Revenue Department has been formally discussing with bank representatives exactly how they ll assist collecting taxes, utilize the online platorm, and the fee they ll request for this service. We ve already begun receiving taxes from Thilawa Special Economic Zone through an online banking service. This is part of our larger effort to move appropriate government services online while also expanding the tax base. But time is needed to educate people on this process as well as the internet itself, U Min Htutsaid. The Internal Revenue Department will work hand-in-hand with local banks to educate the laymen on the benefits of fintech services as well as designing the system so that it s is easy to use. The department is currently negotiating with banks to determine the fee they ll charge for participation in these services, U Min Htut, added. The fee is expected to be announced by the end of the year. This attempt at digitalizing financial services by the Internal Revenue Department is a meaningful step to increasing government revenue from income tax, commercial tax and special commodity tax. In the initial rollout, we are targeting private companies in Yangon and then immediately after, across the nation, U Min Htut added. The Internal Revenue Department aims to raise government revenue while simultaneously cracking down on chronic tax avoidance. Source: Myanmar Business Today 10

11 Newspapers Myanmar Business Today GE to Supply Yangon s Tharketa Power Plant With Gas Turbine 14 Sep 2017 The new power facility is expected to begin operations by the first quarter of 2018 with a capacity to produce 106 megawatts (MW). SEPCOIII will undertake the site s Engineering, Procurement and Construction (EPC) while integrating the turbine into a combined-cycle configuration for maximum efficiency. SEPCOIII, the owner and operator of the facility, is a joint venture between the Union Resources & Engineering Co., Ltd (UREC) and Yunnan Energy Investment (YEIG). The Tharketa facility will play an important role in supplying Myanmar s power demands. In Yangon, electricity consumption is more than 52% of usage, said Zhang Yushi, Director of Thaketa project, SEPCOIII. We are excited to partner with GE Power on this important project, and look forward to leveraging their technology to benefit the people of Myanmar. GE Power s F-Class turbine is an industry leader and one of the company s most tested power generation technologies. After entering the market 30 years ago, its is being used in1,300 units worldwide. With more than 72 million fired hours in service, the F-Class gas turbine has a proven track record with a reliability rating of 98 percent. This deal closely follows two similar announcements made by GE Power in 2016 to provide two of the same 6F.03 turbines for the Myingyan IPP power project and two 6F.01 turbines for a new facility in Thaton. Altogether, the GE technology in these three power plants will contribute roughly 450MW of new power to Myanmar. This marks our third energy-related project announced in less than 20 months, said Andrew Lee, GE Chief Country Representative for Myanmar. Coming from Myanmar myself, I am proud that GE is working so hard with the Ministry of Electricity & Energy, EPCs and IPP developers to solve the country s energy challenges. Source: Myanmar Business Today 11

12 Newspapers Myanmar Times First Private Bank may mull delisting from the YSX 14 Sep 2017 First Private Bank (FPB) appears to be mulling a delisting from the Yangon Stock Exchange (YSX) at a time when many more companies are needed on the bourse to boost trading and develop more robust capital markets. Among the 11 general resolutions passed during the company s 26th Annual General Meeting on August 27 was one delegating authority to the Board of Directors (BOD) to delist FPB s shares for the purpose of protecting its shareholders if and when it becomes necessary. The statement comes just nine months after FPB became the fourth company to list onthe YSX. It means getting the approval of shareholders for the mandate to the BOD. An actual delisting will depend on market conditions. At present, we cannot say anything, FPB senior executive director and joint secretary of BOD U Zaw Myint told The Myanmar Times during the Yangon Stock Exchange Expo held on September 10. While no confirmation was given, FPB may well be planning to delist if its share price continues to fall. On the face of it, FPB s listed status has not been very beneficial to its shareholders so far. Shares of FPB closed September 13 at K24,000 each, down about 30 percent from its listing price of K34,000 on January 20. Before listing, FPB shares were priced at K39,000 each. Currently, FPB has over 8,400 shareholders, K100 billion in authorized capital, K24.72 billion in paid-up capital and 34 branches. Source: Myanmar Times 12

13 Newspapers Myanmar Times Can LNG fill Myanmar s power gap? 15 Sep 2017 Insufficient electricity is one of the major problems Myanmar faces when it comes to attracting investment. As the economy expands, demand for power is rising rapidly. However, the lack of it has impeded the progress of many businesses in the country Can Myanmar achieve its power generation target? Are its goals realistic? Although coal is recommended as one of the generators of power for the country, so far, no coal-fired projects have been approved. Meanwhile, nearly all the hydro-power projects in the country have been delayed owing to social and environmental concerns. LNG option leaves the government with gas as the main source of power. Yet, production at Myanmar s gas fields has also been declining. To be sure, there have been several gas discoveries off the coast of southern Rakhine in recent years, but it will take ten years or more before those fields are developed and ready to produce. According to ministry data, in the fiscal year, state-owned power generation was 65 percent and private sector generated 35pc. By that ratio was Contributions by the private sector are expected to rise in the future. As you know, the lower tariff rate for consumer cannot cover the overall cost of generation, transmission and distribution of power. But in order to achieve 100pc electrification, over 10,000-15,000 of MW of energy may be needed, Daw Mi Mi Khaing said. The problem is how to balance between power coming from the private sector and government investment and how to limit the financial liability in the whole sector to avoid further government losses. Source: Myanmar Times 13

14 2. Weekly Investment News 14

15 Weekly Key Investment News Headlines Businesses more optimistic on the Myanmar investment arena compared to last year US$6bn in foreign investment expected this fiscal year DICA Advocates for Investment in Conflict Zones 15

16 Newspapers Myanmar Times Businesses more optimistic on the Myanmar investment arena compared to last year 13 Sep 2017 Prospects for the Myanmar economy are looking promising despite the unrest in northern Rakhine, officials from the public and private sector said today. Inflation pressures are expected to ease and private and public investments in infrastructure services and non-commodity sectors such as light manufacturing and hospitality are forecast to grow, said U Maung Maung Win, Deputy Minister of Planning and Finance, during his keynote speech during the 2017 Myanmar Global Myanmar Investment Forum holding in Nay Pyi Taw. Investment is critical to national economic development, not just from the locals but from the international arena as well, U Maung Maung Win added. ''Myanmar government has already legislated the laws and regulations needed for smooth foreign direct investment (FDI) and the Companies Act is soon to be released. Then, FDI will rise exponentially," he said, adding that Myanmar is targeting total FDI of US$11 billion per year within the next 13 years. The Myanmar Companies Act was drafted in order to streamline procedures and to lower the compliance costs for doing business. The Companies Act is already passed by Upper House and it is to be waited the approval of lower house, which can be considered to have final approval by the end of 2017, U Aung Naing Oo Secretary of Myanmar Investment Commission, said. Between now and 2020, the plan aims to strengthen the economic and investment base by reducing poverty, and raising FDI to US$ 6 billion per year. Over the longer term, the implementation of mega infrastructure projects such as roads, ports and power grids should bring FDI tous$ 8 billion per year. According to the Asian Development Bank, Myanmar's economic performance should improve, with GDP growth of 7.7 percent in 2017 and 8 percent in 2018.The world bank also forecasts that Myanmar's economy will grow an average of 7.1 percent per year in next three years. Source: Myanmar Times 16

17 Newspapers Eleven Myanmar US$6bn in foreign investment expected this fiscal year 13 Sep 2017 Foreign investment in Myanmar is expected to reach US$6 billion this fiscal year ( ), and investment has already reached $3.5 billion, said Dr Wah Wah Maung, director-general of the Ministry of Planning and Finance, during Myanmar Global Investment Forum held at the Myanmar International Convention Centre-2 in Nay Pyi Taw on Tuesday. "Investment has improved now. We expect about $6 billion. Up to now, we have seen $3.5 billion in foreign investment," said Dr Wah Wah Maung. She added that foreign investment had improved this year and in the previous year, even as investors have been likely to watch and wait as the government transitions. "They know Myanmar faces challenges. Meanwhile, they also know there are many opportunities. They take an interest in Myanmar. The world is willing to help the government. If we know what sectors they want to invest in when they come here and what sectors we want them to invest in, we will know the balance between our needs and their investments. So we hold this forum every year," said Wah Wah Maung. Most foreign investors come to invest in Myanmar s manufacturing sector, with Singapore holding the highest value in investments, followed by China, Hong Kong and Thailand. Most foreign investment goes into Yangon Region, followed by Mandalay and Bago regions and Mon State. The forum was attended by experts and government officials. They discussed Myanmar's economic outlook, the investment situation, banking and financial reforms, the combination of the electricity and energy sectors, challenges to infrastructure, industrial development, agricultural and livestock breeding development and tourism development efforts. Source: Eleven Myanmar 17

18 Newspapers Myanmar Business Today DICA Advocates for Investment in Conflict Zones 14 Sep 2017 By the end of the month, the Myanmar Investment Commission will open a branch office in Sittwe to provide a solution to regional conflict, U Than Aung Kyaw, Deputy Director General of Directorate of Investment and Company Administration (DICA) told Myanmar Business Today. Both the Union and State governments have expressed their desire to achieve not only peace and stability in the recently embattled Rakhine State, but also economic development. Bringing long-term investment into conflict areas may provide a solution to the fighting that has consumed Northern Rakhine State for the last two weeks. Investment creates job opportunities and increased standards of living for residents, U Than Aung Kyaw said in a phone interview with Myanmar Business Today. The deputy director spoke about the MIC's efforts to decentralize investment approval away from Yangon and into regional offices. When asked about the effects of conflict on foreign or local investment, especially as a deterrent for the international community, the deputy director simply replied that investment boosts job creation. The majority of current foreign and local investment goes to Yangon, with relatively small amounts trickling into Rakhine State s tourism industries in Thandwe and Ngapali townships. The latest surge of conflict in Rakhine State began after members of the Arakan Rohingya Salvation Army (ARSA) attacked a 10 police outposts and weapons caches on August 25. Economic analysts, experts, and academics agree that conflict adversely affects investment by destabilizing local financial and political institutions, creating enormous risk that is typically unattractive to investors. From the start of fiscal year to September 1, MIC has approved 120 foreign investments with assets of $3 billion and 45 local investment proposal with the assets of K1.4 trillion ($10.35 billion), according to DICA statistics. Source: Myanmar Business Today 18

19 3. Weekly New Tenders 19

20 Tenders (Myanmar Government) List No applicable Tenders announced for the week ending 15 September 2017 Note: tenders information are collected from and

21 Tenders (Multilateral organizations) List Strengthening the Business Climate - Internal Audit Expert (Taxation), Closing Date: 19-Sep-2017 (Individual) Strengthening the Business Climate - Tax Data Expert, Closing Date: 19-Sep-2017 (Individual) Mandalay Urban Services Improvement Project - National Package Specialist, Closing Date: 20-Sep-2017 (Individual) Mandalay Urban Services Improvement Project - International Knowledge Specialist, Closing Date: 20-Sep-2017 (Individual) Note: tenders information are collected from

22 4. MIC Permitted Projects 22

23 MIC Permitted Projects (Meeting 12, 2017) No. Name of Company Type of Investment Form of Investment 1 Global Agriculture Joint Venture Co., Ltd Plantation, production and sale of teak Joint Venture 2 Mandalay Brewery Ltd Manufacturing and sale of beer and other spent grains Joint Venture 3 Delicious Food Ltd Production and sale of food and consumer products Myanmar Citizen 23

24 5. Upcoming Events 24

25 Upcoming Events (October 2017) List Date Location Name of Event Sector Price Focus Points Oct 2017 Yangon Building & Construction Myanmar Construction Free The event showcases product from Building and Construction industry as well as to help the professionals to discuss about the new opportunities and trends associated with the industry Oct 2017 Yangon Mining Myanmar Mining Free This event showcases product from Minerals, Metals & Ores industry. This event showcases product from Minerals, Metals & Ores industry. like will provide companies with opportunities to see first-hand the potential in Myanmar's Mining sector Oct 2017 Yangon Electric, Power & Renewable Energy Power Free Showcases product from Electronics & Electrical Goods, Power & Renewable Energy industries etc. in the Electronics & Electrical Goods, Power & Renewable Energy industries Oct 2017 Yangon Oil & Gas Myanmar Oil & Gas Free Opportunities and difficulties facing in Myanmar Oil & Gas Industry as it embarks on its exciting new phase of growth. 25

26 Upcoming Events (November 2017) List Date Location Name of Event Sector Price Focus Points Nov 2017 Yangon Myanenergy Energy Free Show exhibits a wide range of latest technology aided products and equipment related to the power industry. The leading industrialists will be present in this show to exhibit the respective range of modernized and productive range Nov 2017 Yangon Myanwater Water Free Will provide a platform to the technical and professional experts related to waste management industry. Attendees will get a scope to improve and enhance their knowledge by attending this international trade show 29 Nov 2017 Yangon Myanmar Satellite Forum & Exhibition Technology $750 An opportunity for the global and regional satellite industry to meet with invited guests from Myanmar in broadcasting, B2B, government and homeland security. The Forum is part of the CommuniCast Myanmar event. 26

27 PwC Myanmar Business Intelligence Publication For further information please contact: Jovi Seet Senior Executive Director Brandon Lye Director 2017 PricewaterhouseCoopers Myanmar Co Ltd. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Myanmar Co Ltd, which is part of the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 27