Myanmar Outlook Update

March 6, 2015

Economic Statistics

Apr-Sep 2014

GDP growth rate (2013-14)

7.5%

Inflation (Sep 2014)

3.98%

Imports

USD8,254 mn

Exports

USD5,791 mn

MMK/USD (Feb 2015)

1,030

FDI

USD3,676 mn

Highlights

Myanmar continued to record a trade deficit in the first half of

the fiscal year 2014-15, which totaled USD2.46 billion, due to
high demand for input materials and equipment for production

Gas continued to be the top export product in first half 2014-15,

reaching USD2.35 billion, accounting for 40.5 percent of total
export turnover.

Singapore, the leading investor, contributed 65.9 percent of the

total capital inflows. The Netherlands replaced South Korea for
the second place, followed by China and Canada.

FDI inflows during the first six months of 2014-15 continued to

speed up, reaching USD3.67 billion. This was a great
improvement compared to full year 2013-14s level of USD4.1
billion. The strong surge of FDI inflows came from the telecom
and oil and gas sectors.

Inflation reached 6.26 percent for the year ended March 2014. It
declined to four percent in September 2013 after staying around
six percent from February through June. It could be under
higher pressure in the coming year as an increase in salaries of
about 1.4 million civil servants will be implemented this April.

Foreign banks and securities companies, which are interested in

Myanmars securities business, were invited to apply via a joint
venture with a local partner in which they can hold up to 49
percent of the shares.

GDP Growth (%)

East Asia & Pacific (Developing only)
Myanmar
Vietnam

10.5
9.5
8.5
7.5
6.5
5.5
4.5

2010 2011 2012 2013 2014f 2015f 2016f

Source: World Bank

FDI by sector, Apr Sep 2014, USD mn

Transport & communication

1,354

Oil & gas

805

Real estate

623

Manufacturing

364

Hotel and Tourism

355

The SEC has not yet decided the number of securities licenses
that will be granted, but certainly, it will be very limited. The
winners of the licenses will be announced in April, 2015.

Major Vietnamese investments updates

* Please see the important disclosure at the end of this report

- BDIV to lend USD30 million to Myanmars

SMEs
- Viettel Global to invest USD800 million in
Viettel Myanmar
- Dong A Ship building holds 49 percent
stake in USD175.4 million joint venture

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Contents
MACRO-ECONOMIC UPDATE (APRIL SEPTEMBER 2014) ............................................................................................... 3
Trade .................................................................................................................................................................................... 3
Exports ............................................................................................................................................................................. 4
Imports ............................................................................................................................................................................. 4
Vietnam Myanmar bilateral trade............................................................................................................................... 5
Investment ........................................................................................................................................................................... 6
Myanmar citizens investment ....................................................................................................................................... 6
Foreign Direct Investment .............................................................................................................................................. 6
Kyat ...................................................................................................................................................................................... 7
Inflation ................................................................................................................................................................................ 7
RECENT INVESTMENT UPDATES ......................................................................................................................................... 8
Banking ................................................................................................................................................................................ 8
Securities ............................................................................................................................................................................. 8
Power ................................................................................................................................................................................... 9
Oil and Gas ........................................................................................................................................................................ 10
Telecom ............................................................................................................................................................................. 10
Hotel and Real Estate ....................................................................................................................................................... 11
Manufacturing ................................................................................................................................................................... 11
Food and Beverage ........................................................................................................................................................... 12
Transportation................................................................................................................................................................... 12
CONTACT INFORMATION ................................................................................................................................................... 13
DISCLAIMER .......................................................................................................................................................................... 14

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MACRO-ECONOMIC UPDATE (APRIL SEPTEMBER 2014)

Trade (USD mn)

Export

Import

16000
14000
12000
10000
8000
6000
4000
2000
0
2009

2009

2010

2011

2012

2013

2013 (Apr- 2014 (AprSep)

Sep)
Source: MNPED, VPBS collected

Trade
Myanmar continued to record a trade deficit in the first half of the fiscal year 2014-15,
which totaled USD2.46 billion, due to high demand for input materials and equipment
for production. Imports grew significantly more than exports compared to the same
period last year. Export revenue posted at USD5.79 billion and total import revenue
reached USD8.25 billion.
Key exported items 2013 -2014 (%)
4.8% 3.6%
3.3%
28.8%

8.8%

USD5.79
billion 10.1%

Major markets (USD mn)

2012-2013

Rice
Matpe
Base metal and ore
Garment
Jade

40.5%

Gas
Others

2013-2014

2014-2015 (Apr-Sep)

5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Source: MNPED, VPBS

www.VPBS.com.vn

Source: MNPED, VPBS

Page | 3

'

Exports
Gas continued to be the top export product in first half 2014-15, reaching USD2.35
billion and accounting for 40.5 percent of total export turnover. This year gas exports
totaled just 71.1 percent of 2013-14s export value. The recent plummeting oil and gas
prices will affect Myanmars export value in 2015. However, Myanmar also is a heavy
importer of refined mineral oils, so the net impact of the declining oil prices on the
country will not be significant.
Other major exported products include jade, garments, rice and matpe. Base metal
and ore exports soared to USD190.1 million, which is well above the level of
USD130.1 million recorded for the year 2013-14.
Due to the export ban on raw timber logs since April 1, 2014, export value from teak
logs and hardwood were only USD4.5 million and USD2.1 million, respectively,
compared to USD637.5 million and USD225.3 million in the fiscal year to March 2014.
China has surpassed Thailand to become the largest export market of Myanmar.
Export value to China reached USD2.3 billion, accounting for around 40 percent of the
total export value in the first half 2014-15 and 80 percent of the total export value
recorded in 2013-14.
Exports to Malaysia increased considerably to nearly USD200 million in the first half
of the year 2014-15, from just over USD100 million recorded in the full fiscal year
2013-14. Export value to the U.S has also been rising recently, reaching USD26.1
million in six months through September 2014, compared to USD24.8 million and
USD2.8 million recorded in 2013-14 and 2012-13, respectively.
Key import items Apr - Sep 2014 (%)

Major import markets (USD mn)

Refined Mineral Oil

16.57%
44.54%

USD8.25
billion

5.63%

11.15%

27.74%

Base metals and

manufactures
Machinery non-elec. &
transport equip.
Electrical machinery
and apparatus

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

2012-2013

2013-2014

2014-2015(Apr - Sep)

Others

Source: MNPED, VPBS

Source: MNPED, VPBS

Imports
The top three imported products were machinery, non-electric and transport
equipment (USD2.29 billion), refined mineral oil (USD1.37 billion) and base metals
and manufactures (USD920.2 million).
China continued to be the largest import market during the period of April to
September 2014, with total value of USD2.5 billion. China was followed by Singapore,

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Japan and Thailand. Notably, import value from the U.S rocketed to USD450.8 million
in the six months through September 31, 2014, from only USD79.66 million recorded
in the whole year 2013-14, surpassing South Korea to become the fifth largest import
market of Myanmar.
Vietnam Myanmar bilateral Trade (USD mn)
600

Vietnam exports to Myanmar

Vietnam imports from Myanmar

500
400
300
200
100
0

Source: GSO, VPBS collected

Vietnam Myanmar bilateral trade

Trade value between Vietnam and Myanmar in the full year 2014 increased by 36.8
percent y-o-y to USD480.65 million. Although Vietnams import value from Myanmar
rose only 9.1 percent y-o-y to USD134.79 million, Vietnams export value to Myanmar
soared by 51.8 percent to USD345.86 million.
Vietnams leading export products to Myanmar in 2014 include steel and steel
products (recorded at USD81.6 million, up 45.3 percent y-o-y), machinery and spare
parts (USD30.96 million, + 65.8 percent), metals and other products (USD21.1 million,
+117.1 percent), plastic and plastic products (20.1, + 47.5 percent), and vehicles and
spare parts (USD13.9, +10.0 percent).
Vietnams exported products to Myanmar 2014
(USD Mn)

23.60%
53.79% USD345.868.95%
million
5.82%
3.80%
4.03%

Vietnams imported products from Myanmar 2014

(USD Mn)

Steel and steel

products
Machinery and spare
parts
Plastic and plastic
products
Textile
Vehicle and spare
parts
Others

Source: Vietnam General Custom Office, VPBS

www.VPBS.com.vn

18.91%
3.71%

34.35%
USD134.8
million

43.03%

Wood and Wood

products
Vegetable
Seafood
Others

Source: Vietnam General Custom Office, VPBS

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Meanwhile, import value of agricultural products from Myanmar more than tripled yo-y to USD57.99 million. Despite dropping 30 percent in import value, wood and
wood products occupied the second place with import value reaching USD46.3
million.
Investment
Myanmar citizens investment
Domestic investment seemed quiet during the period of April to September 2014.
Only 22 local enterprises received permission to invest. Total investment capital
deployed was only USD115.88 million versus USD1,131.72 million in 2013-14. Real
estate, manufacturing, construction and hotel and tourism were the most attractive
sectors for local investors.
Myanmar citizens investments Apr Sep 2014
1.62

Real Estate

8.74
18.74
USD 115.9
mn
67.47
19.31

Manufacturing
Construction
Hotel & Tourism

Major investment sectors (USD mn)

400.00

2012-2013

2013-2014

2014-2015 (Apr-Sep)

350.00
300.00
250.00
200.00
150.00
100.00

others

50.00
0.00

Source: DICA, VPBS

Source: DICA, VPBS

Foreign Direct Investment

FDI inflows during the first six months of 2014-15 continued to speed up, reaching
USD3.67 billion. Although this official number is below the USD4 billion level
reported widely by local media last October, it is a great improvement compared to
full year 2013-14s level of 4.1 billion. The strong surge of FDI inflows was thanks to
the telecom and oil and gas sectors.
FDI by sector Apr Sep 2014 (%)

FDI by country Apr Sep 2014 (%)

Oil and gas

4.77%
21.9%
16.9%
USD 3.67
9.6% billion

36.8%

9.9%

Manufacturing
Transport &
communication
Hotel and tourism
Real estate development

Singapore

9.7%
6.2%

Canada

7.6% USD 3.67

4.2% billion

The Netherlands
65.9%

China
Others

Others

Source: DICA, VPBS

www.VPBS.com.vn

Source: DICA, VPBS

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Singapore, the leading investor, contributed 65.9 percent of the total capital inflows.
The Netherlands replaced South Korea for second place, followed by China and
Canada.
Kyat
The kyat had been stable for more than a year through September 2014. However, it
started to surge from around 970 MMK/USD in mid-September to above 1,050
MMK/USD in November 2014. The depreciation of the kyat was mainly caused by the
appreciating U.S. Dollar and the increasing trade deficit figure. However, the kyat has
remained around 1,030 MMK/USD since then.
MMK/USD exchange rate

Inflation (y-o-y) Jan Sep 2014 (%)

1100

6.5

1050

1000

5.5

950

900

4.5

850

800

01/15

11/14

09/14

07/14

05/14

03/14

01/14

11/13

09/13

07/13

700
05/13

3.5

03/13

750

Source: Bloomberg

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Source: MNPED

Inflation
Even though Myanmars inflation has been fairly stable in the past five years
compared to hyper-inflation in the 1990s and 2000s, the fast growth of the economy
in the past two years has again raised inflation concerns.
Although prices of fuel and foods have decreased recently, in early February 2015 the
IMF increased its inflation forecast for 2014-15 to six percent from 5.8 percent
recorded a year ago. Inflation could be under higher pressure in the coming year as
an increase in salaries for about 1.4 million civil servants will be implemented from
April 2015.
Government Bonds
In order to finance public expenditures without hurting inflation, the Central Bank of
Myanmar (CBM) held the countrys first ever bond auction on January 28, 2015.
Although only five local institutions participated in the auction and only half of the
MMK50 billion offering in short-term bonds and treasury bills were sold, this first
government bond auction through a public bidding system marks an important step
in the countrys financial reforms under the government that took power in 2011.
Previously, the CBM had issue three-year and five-year bonds through state-owned
banks in 1993 and two-year bonds in 2010.

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Interest rate could float in 2015

The CBM plans to allow free floating interest rates for U.S. Dollar loans in 2015 before
moving to Kyat loans. The change will come as the nine foreign banks open this year,
as discussed below. Currently, interest rates for kyat loans are restricted from 10
percent to 13 percent, while eight percent is the minimum deposit rate.

RECENT INVESTMENT UPDATES

Banking
Nine foreign banks were awarded licenses
On October 1, 2014, nine foreign banks (out of 25 qualified applicants) were awarded
licenses to provide banking services to foreign companies and domestic banks. All
three Japanese banks, including SMBC, Mizuho and Bank of Tokyo-Mitsubishi UFJ
got into the wining list. However, Vietnamese lender, BIDV failed to make the cut.
List of nine foreign banks
No

Bank

ANZ Bank

ICBC
Bank of Tokyo-Mitsubishi UFJ
Mizuho Bank
Sumitomo Mitsui Banking Corporation
Maybank
OCBC
United Overseas Bank
Bangkok Bank

3
4
5
6
7
8
9

Country
Australia
China
Japan
Japan
Japan
Malaysia
Singapore
Singapore
Thailand
Source: VPBS collected

Vietnams BDIV to lend USD30 million to Myanmars SMEs

On November 19, 2014, Vietnams BIDV signed an agreement to lend USD30 million
for the development of Myanmars SME sector, following a MOU in June. The loans
will be processed through Small and Medium Industrial Development Bank of
Myanmar (SMIDB) over five years.
On the same day, BIDV and its local partner Mahar Bawaga a consumer
microfinance company, were awarded a license to establish a financial company
named BIDV Finance Company Limited (70:30). The newly established company will
be allowed to provide money deposit and transfer services in Yangon.
Securities
Securities regulations were approved by the Cabinet
After many years of preparation, the Securities Exchange Law was passed in July
2013. Since then, the authorities have been working hard with support of foreign
advisors on the rules and regulations. 198 rules were approved by the Cabinet in the
middle of January 2015 and are currently waiting Parliaments approval.

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Opportunities for foreign securities companies

Notification No. 1/2015 released in January invited companies to submit applications
for securities licenses with the deadline for submission originally set for February 27
but then postponed to March 6.
Even though, foreign investors will not be allowed to invest in the Yangon Stock
Exchange when it first opens, foreign banks and securities companies can join the
securities business via a joint venture with a local partner and they can hold up to 49
percent of the shares.
Capital requirements for Securities Business in some ASEAN countries (USD)
Myanmar

Type of license

Vietnam

Cambodia

Laos

Securities Underwriting License

15 mn

7.7 mn

10 mn

Securities Dealing License

10 mn

4.7 mn

6.25 mn

7 mn

1.2 mn

1.5 mn

3.75 mn

0.03 mn

0.47 mn

1 mn

0.625 mn

Securities Brokerage License

Securities Business Advisory License

12.5 mn

Source: VPBS collected

Four types of securities licenses will be granted. The capital requirements are
different for each type of license, but these capital requirements are much higher than
those of neighboring countries such as Vietnam, Laos and Cambodia, except for
Advisory License. Additionally, the paid-in-capital cannot be filled by bank loans and
should be the income after tax of the applicants, which can disclosed as their source
of income.
The Notification included certain minimum experience requirements for directors and
technical officers of securities companies, such as: the majority of the directors of the
company must have at least one year of experience in the securities business or some
other relevant financial services institutions and the applicant company should have
one technical officer who has at least three years of experience in the securities
business. Given the fact that Myanmar does not yet have a stock exchange, it means
that local citizens are not likely to have such experience. So foreign experts and
Myanmar citizens with overseas experiences are welcome.
Many companies have shown their interest in the securities business. Around 40 to 50
firms were expected to apply for the four types of securities licenses (mostly
Investment Advisory License). The Myanmar Securities Exchange Commission (SEC)
has not yet decided the number of licenses that will be granted but it will certainly be
very limited. The winners of the licenses will be announced in April 2015.
Power
Expanding power sources to thermal and green energy
Myanmar has huge hydropower potential of more than 100,000 MW, according to
ADB. However, hydropower output is unstable due to the large difference in rainfall
levels between the rainy and dry seasons. The country therefore plans to expand its
power resources to thermal and green energy.

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Recently, Singaporean Asiatech Energy Private Limited and Thai Toyo Corporation
have signed agreements with Myanmar lighting IIP Co and MEPE, respectively, to
develop a 230 MW and a 120 MW gas-fired power plant in Yangon. U.Sheadquartered APR Energy PLC will build a 100 MW gas-fired power plant in the
central Mandalay region. Toyo also made plans to invest USD2.7 billion in a 1,280
MW coal-fired power plant in Mon state.
On October 2014, several MOUs between the Ministry of Electricity and foreign
investors were signed for feasibility studies regarding coal-fired and solar plants.
Japans Marubeni will work with Thai PTTs subsidiary Global Power Synergy EGAT
to conduct a feasibility study for a 1,800 to 2,000 MW coal-fired power in Myeik. Thai
Ratchaburi Electricity Generating Holding PCL will team up with its home country
partner Blue Energy Environment Co. Ltd and two local partners for a coal-fired power
plant with capacity of 2,460 MW. Green Earth Power from Thailand signed a new
MOU to conduct a feasibility study of a 210 MW solar plant.
Oil and Gas
Four offshore blocks have been signed
Last March, 20 offshore blocks (10 deep water and 10 shallow water) were awarded to
18 international and local investors. After a long delay, the first four offshore
production sharing contracts were signed in December 2014. The companies now
need to complete environmental and social impact assessments and they will
probably be able to start exploration this October.
Myanmar plans to award another 15 oil and gas blocks by the end of this year to
foreign investors.
Corporate income tax rate of 25 percent was confirmed for offshore oil and gas
The disputed corporate tax issue was ended thanks to Myanmar Investment
Commission (MIC). After months of discussion among many government bodies, on
January 2015, MIC confirmed that a 25 percent CIT rate will be applied for all FDI
companies under the Myanmar Foreign Investment Law.
It was previously discussed that some projects, such as offshore oil and gas, should
be taxed 35 percent. The dispute had delayed the signing of production sharing
contracts of the offshore blocks awarded last year.
Telecom
Viettel Global to invest USD800 million in Viettel Myanmar
Given the low mobile/telephone subscription rate and internet penetration rate,
Myanmars telecom sector has attracted high attention of foreign investors. In a
public bidding in 2013, Qatars Ooredoo and Norways Tenelor trumped nine other
competitors (including Vietnams Viettel) to get exclusive licenses to operate in
Myanmar.
However, at the end of last year, Viettel Global revealed its plan to invest USD800
million in Myanmar. Viettel Myanmar and its local partner Yatanarpon Teleport will be
the fourth telecom provider in Myanmar along with Ooredoo, Telenor and Myanmar
Post and Telecommunication (MPT).

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Telecom race speeds up

Given the Governments plan to increase the mobile/telephone subscription and
internet penetration rates, a large amount of work must be completed. The two
foreign and other local telecom providers have been seeking support from other
foreign partners. In July 2014, MPT signed a joint operating agreement with Japans
KDDI. Ooredoo and Samsung will work together for 3G service. Telenor selected HTC
and Huawei as the device suppliers, while teaming up with Samsung for market
development.
It is reported that Ooredoos network covered 40 percent of the population at the end
of 2014 and the Qatar telecom provider is currently expanding its services to other
regions after six months of operating in major cities like Yangon, Mandalay and Nay
Pyi Taw.
Hotel and Real Estate
Well-known global hotel groups open in Myanmar
In October 2014, Accor Group opened the first Novotel in Myanmar in Inle Lake (Shan
State). A month later, the first Hilton Hotel in Myanmar, which is located in the Nay
Pyi Taw, started operation. The second Novotel has been scheduled to open in March
2015. There are many other hotel chains also planning to operate in Myanmar from
2016 and 2017.
Rowsley Ltd invests USD275 million in HAGL land
On February 12, Singaporean firm Rowsley Ltd sign an agreement to invest USD275
million for a 50 percent share of HAGL Land - the owner of many projects, including
HAGL Myanmar centre. Rowsleys target is the Myanmars project, so capital
investment is expected to mainly go to Yangon to fund the next phrase of HAGL
Myanamar Centres construction.
Manufacturing
Cement
As construction sector is on the rise, construction materials, especially cement, got a
lot of attention from foreign groups such as Semen Indonesia, Siam Cement, Lafarge
and Anhui Conch Cement. Semen Indonesia announced it would invest up to USD200
million on an acquisition in Myanmar following its acquisition of Vietnams Thang
Long Cement although the planned amount could drop due to several reasons. Siam
Cement plans to invest USD400 million in a factory in Mon State and is scheduled to
start operation by mid-2016. On November 2014, Frances Lafarge launched a small
factory in Thilawa SEZ, while Chinas Anhui Conch Cement signed a BOT agreement
to operate Kyauk Se Cement factory.
Taiwan-based group to invest USD100 million in a shoe factory in Yangon
In July 2014, Pou Chen Group, the manufacturer of many famous bands such as, Nike
and Adidas, announced investment of USD100 million in a shoe factory in Yangon.
The factory will start operation at the end of this year with monthly capacity of
300,000 pairs and it will increase to 800,000 per month by 2019.

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Food and Beverage

KFC to open in Mid-2015
The fast-food segment is currently in its early stage with only six Korean Lotteria
stores and two Malaysian Mary Brown stores in the country. American fast-food chain
KFC will be franchised to Yoma Strategic Holdings. The first KFC store is schedule to
open in Mid-2015.
Made in Myanmar Nestle products to be distributed at the end of 2016
Nestle will invest about USD50 million in Myanmar over the next five to six years
through a joint venture with Myanmar Distribution Group, with the initial phrase of
USD25 million to produce coffee products. The group then will expand to dairy, ice
cream and chocolate. Raw inputs will be imported at the first stage as the local
products have not yet satisfied the requirements.
Transportation
Dong A Ship building holds 49 percent stake in USD175.4 million joint venture
Vietnams Dong A Ship Building and Myanmar Shipyards have recently signed an
agreement to establish a joint venture with capital value of USD175.4 million. Dong A
Ship Building holds 49 percent stake and Myanmar Shipyards control the rest. The
joint venture will be able to build vessels of up to 22,000 tons, to repair vessels of up
to 30,000 tons and to conduct other related business.

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CONTACT INFORMATION
For further information regarding this report, please contact the following members of the VPBS
research department:

Barry David Weisblatt

Head of Research
barryw@vpbs.com.vn
Nguyen Thi Thuy Linh
Director Macro and Financials
linhntt@vpbs.com.vn
Hoang Thuy Luong
Research Analyst
luonght@vpbs.com.vn

For any questions regarding your account, please contact the following:
Marc Djandji, CFA
Head of Institutional Sales and Brokerage
marcdjandji@vpbs.com.vn
+848 3823 8608 Ext: 158

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