Você está na página 1de 26

Myanmar

The Last Growth Market Frontier in South East Asia GES 2012
Dr. Aung Thura CEO Thura Swiss

About Me
Education Dr. oec. in Banking and Finance at the University of St. Gallen (2008) M.A. in Quantitative Economics and Finance at the University of St. Gallen (2005) M.Sc. in Mechanical Engineering at the Swiss Federal Institute of Technology (ETH) in Zurich (2003)

Professional Experience CEO Thura Swiss: Research, Consulting, Technology (2012) Quant with Zrcher Kantonalbank (2012) Exotic derivatives trader with Zrcher Kantonalbank (2008 2012) Business development with Credit Suisse (2005 2008)

Myanmar: The Last Growth Market Frontier in South East Asia

Time Line of Myanmar History


Year
1948 1962 1988

Event
Independence Coup dEtat starting the Burmese Way to Socialism Student Protests

Sentiment

1991 2007
2008 2008 2010

General Elections Safran Revolution


Cyclone Nargis Referendum for New Constitution General Elections

2011 2012
2012 2014

Civilian Government By-Elections


Suspension of Sanctions Chairmanship of ASEAN

The sentiment curve is purely our own view and not based on any statistics
3

Myanmar: The Last Growth Market Frontier in South East Asia

Driving Factors in Myanmar Politics


Inflow of Kuomingtang after Chinese civil war Chinese support of Burmese Communist Party International support/ protection by China Uneasiness about rising influence Colonial complex Support of KMT by US in the past Perception of opposition leader as a Marionet of the West Fear of invasion

Relationship with China

Strained relationship between Burmese majority and ethnic groups a legacy of colonialism Fear of secession

Conflicts with Ethnic Minorities

Xenophobia

Myanmar: The Last Growth Market Frontier in South East Asia

What Are the Reforms?


Unification of exchange rate Freeing of political prisoners Participation of the NLD in the by-elections in April 2012 Ceasefire agreements with armed groups Invitation of Myanmar people living abroad to come back Suspension of the Myitsone dam project Revision of the Foreign Investment Law More autonomy for Central Bank You cannot just read the Myanmar Foreign Investment Law to judge if it is investor-friendly. More relevant are the actual procedures.
5

Myanmar: The Last Growth Market Frontier in South East Asia

The Exchange Rate Dilemma


Official rate: Black market rate: 6 Kyats per USD (fixed) 750 1200 Kyats per USD

State Economic Enterprises (SEEs) are a burden on the countrys budget Losses are covered up by an extra foreign exchange budget SEEs can buy foreign currency at the official exchange rate
6

Myanmar: The Last Growth Market Frontier in South East Asia

Next Steps
Foreign Investment Law (2012?) Tenders for Oil and Gas (2012?) South East Asian Games (2013) ASEAN chairmanship (2014) ASEAN Economic Community (2015) General Elections (2015)

Beside the main topics there are so many things to be done that require full attention
7

Myanmar: The Last Growth Market Frontier in South East Asia

Myanmar in Comparison
Thailand is a good peer to compare for Myanmar in size of population and area Myanmars GDP (PPP) is about 8 times lower than Thailands
Country Myanmar Thailand South Korea France

Population

60

66

49

66

Area
GDP (nominal in billion USD)

676,578
43

513,120
319

100,210
1,163

674,843
2,808

GDP (nominal) per capita (USD)


GDP (PPP in billion USD) GDP (PPP) per capita (USD)

702
76 1,250

4,992
587 9,187

23,749
1,556 31,753

44,400
2,216 35,048

Myanmar: The Last Growth Market Frontier in South East Asia

Comparison of FDI
Foreign Direct Investment in Myanmar is comparable to FDI in Thailand and Korea in the late 80s Both Thailand and Korea experienced a sharp rise of FDI within the coming decade

Myanmar: The Last Growth Market Frontier in South East Asia

FDI by Sector
Sector Power Oil and Gas Mining Manufacturing Hotel and Tourism Real Estate Livestock & Fisheries Transport & Communication Industrial Estate Agriculture Construction Other Services Total
Data as of 31/07/2012
10

Approved amount of investment (mln USD) 19,067.498 14,181.972 2,814.360 1,826.282 1,064.811 1,056.453 324.358 313.906 193.113 182.751 37.767 23.686 41,086.957

Percentage 46.41 34.52 6.85 4.44 2.59 2.57 0.79 0.76 0.47 0.44 0.09 0.06 100

Myanmar: The Last Growth Market Frontier in South East Asia

GDP Growth projections by Economist


2012 Core Scenario Golden Era Scenario 5 5 2013 5.3 6.3 2014 5.9 7.2 2015 6.5 8.1 2016-2020 7.7 8.5

Dark Forces Scenario

4.6

4.2

4.4

Real GDP growth projections, % change


10 8 6 4 2 0 2012 core scenario 2013 2014 golden era scenario 2015 2016-20 dark forces scenario

The core scenario implies ongoing reforms with limited real structural change (60% probability) Golden era scenario implies rapid political and economic reforms (25% probability)

Dark forces scenario where reforms are reversed (15% probability)

Data taken from Economist Intelligence Unit 11

Myanmar: The Last Growth Market Frontier in South East Asia

Myanmar as an Investment Case


Abundance of natural resources: The government of Myanmar is continuing to offer new hydrocarbon blocks for exploration. Development of the natural resources sector will have a spillover effect on the rest of the economy now that sanctions are suspended and that social responsibility is one of the issues the government is raising when dealing with foreign investors. Strategic location between China and India A population of 60 mln. which is a big unsaturated market and at the same time a relatively young and cheap labor force (although cheap is an inconstant variable)

13

Myanmar: The Last Growth Market Frontier in South East Asia

Energy Sector
Energy Source
Crude Oil (Offshore & Onshore) (Proven + Probable) Natural Gas (Offshore & Onshore) (Proven + Probable) Hydro Coal

Potential
648.59 MMBBL 166.13 TSCF 108,000 MW 711 Million Metric Tons

Biomass

52.5 % of total land area covered with forest. Potential available annual sustainable yield of woodfuel: 19.12 Million Cubic Ton
365.1 TWH per year Coastal strip of 2832 Km with south-westerly wind 9 months, north-easterly wind 3 months 52,000 TWH per year 93 Locations

Wind

Solar Power Geothermal


Source: EPD, Ministry of Energy

14

Myanmar: The Last Growth Market Frontier in South East Asia

Healthcare Market
The legal market size of pharmaceutical products in Myanmar is estimated to be worth 366 million USD per year Beside the official market, there is a huge black market with drugs imported illegally from Thailand

The market has seen a growth rate of 20% from 2010 to 2011

15

Myanmar: The Last Growth Market Frontier in South East Asia

Tourism and Hospitality


816,369 visitors in 2011 comprising 38% foreign independent travellers, 26% package tours groups 21% business travellers and 15% other travellers. Increase of 3.3% y-o-y as compared to tourist arrivals in 2010 1.5 mn tourists are projected to arrive in 2012 Yangon received 364,743 tourists in 2011, up by 23% from 2010. Yangon is expected to receive approximately 675,000 tourists in 2012. Revenue collected from tourist increased by 25% in 2011 and was $319 mn compared to $254 mn in 2010

16

Myanmar: The Last Growth Market Frontier in South East Asia

Myanmar Stock Exchange


Myanmar Securities Exchange Centre established 1996 as a JV between Japanese Daiwa Institute of Research and Myanmar Economic Bank Two companies listed:
Forest Products Joint Venture Myanmar Citizens Bank

MOU between Central Bank of Myanmar, Daiwa and TSE to develop a modern Securities Exchange The Exchange shall be operational in 2015
17

Myanmar: The Last Growth Market Frontier in South East Asia

Investment Matrix
Investment Funds: Limited number of investment objects available or accessible Proper due diligence required Private Investors + Funds: Operational challenge running a business in Myanmar Restriction of sectors Foreign

Source of Investment

Domestic

Public Companies: Apart from companies created in 90s virtually missing Formation of a couple of Public Companies recently Portfolio Investment

Private Companies: The most common investment type for domestic investors Limited possibilities of funding Direct Investment

Type of Investment
18

Myanmar: The Last Growth Market Frontier in South East Asia

Foreign Investment in Myanmar


Foreign Investment

Local Company

Joint Venture

100% Foreign-Owned

Big Companies Operate as a Company under the Myanmar Foreign Investment Law

Small Companies Operate as a Company under the Myanmar Companies Act

19

Myanmar: The Last Growth Market Frontier in South East Asia

Incentives in Current MFIL


Corporate Income Tax
Three years minimum corporate income tax exemption, extendible on a caseby-case basis

Exemption from or Reduction of Taxes on Imported Capital Goods


Exemption from customs duty and other internal taxes on imported capital equipment and materials during the construction, exploration and development period of the investment project

Exemption from or Reduction of Taxes on Imported Raw Materials


During the first 3 years of commercial production and operational period, exemption from customs duty and other internal taxes on imported raw materials

20

Myanmar: The Last Growth Market Frontier in South East Asia

Incentives in MFIL (Cont.)


Other Incentives (i.e. Grants, Domestic Loans, Subsidies, etc.)

Exemption or relief from income tax on profits which are maintained in a reserved fund and re-invested within one year Right to accelerate depreciation Relief from income tax up to 50% on the profits accrued from exports Right to pay income tax on behalf of the foreigners employed and to deduct the same from the assessable income of the enterprise Right to pay income tax of the foreign employees at the rates applicable to the citizens of Myanmar Right to deduct the expenditures for research and development carried out within the state Right to carry forward and set off losses up to 3 consecutive years, from the year the loss is made

21

Myanmar: The Last Growth Market Frontier in South East Asia

Corporate Income Tax


Corporations incorporated in Myanmar are treated as resident and taxed at the rate of 25% on income accruing or arising in Myanmar and outside of Myanmar

Ownership
100% Myanmar JV 100% Foreign Branch

Residence Status
Resident Company Resident Company Resident Company

Relevant Law
MCA MCA MFIL MCA MFIL

Corporate Income Tax


25% 25% 25% 25% 25% 35% 25%

Non-resident Company MCA MFIL

22

Myanmar: The Last Growth Market Frontier in South East Asia

Tax Treaty Countries with Myanmar


UK India Korea Malaysia Thailand Vietnam Spore No DTA

Interests Dividend s Capital Gains


Services

0%

10% 5%

10% 10%

10% 10%

10% 10%

10%

8-10%*

15% 0% 40%** *
3.5%

10% 5-10%** 0 10%


0% if < 6 months

- Myanmar Myanmar Myanmar Myanmar Myanmar


10% 0% if < 6 months 10% 10% 10%

* 8% if beneficiary is bank ** 5% if beneficiary owns at least 25% of company ** Capital gains from Oil & Gas ranges from 40 50% dependent on size
23

Myanmar: The Last Growth Market Frontier in South East Asia

The Big Players in Myanmars Economy


Company Htoo Trading Myanmar Billion Group SPA, Yoma, FMI Business Timber, transport, tourism, construction, property development, palm oil, AGD Bank Kanbawza Bank, mines, cement, Myanmar Airlines, hospital, London cigarettes for Shan and Karenni states Owner U Tay Za U Aung Ko Win

Yoma Bank, real estate development, manufacturing, U Serge Pun technology, construction and real estate, automotive industry, healthcare (Pun Hlaing Hospital) Road and rail construction, rubber, import export of heavy machinery, hotel in Chaung Tha, Ayeyarwaddy Bank Construction, transport, communications, Traders's hotel, Myanma Apex Bank Oil and gas, agricultural products, timber, electrical substations, transmission lines, machinery in oil and gas industry, CNG filling stations, United Amera Bank Construction, transport, communications U Zaw Zaw

Max Myanmar

Eden IGE

U Chit Khaing U Pyi Aung U Nay Aung

Asia World

U Tun Myint Naing (Steven Law)

24

Myanmar: The Last Growth Market Frontier in South East Asia

General Remarks on Myanmar Market


Myanmar is not virgin land. There already are powerful incumbents (domestic and foreign) Investment is better protected for big players In recent years, Myanmar has seen market distortions in many areas: Car, land, telecommunication Social contacts play a significant role Rumor-based society Lack of skilled labor and unreliable infrastructure make productions costs not necessarily cheap in the short term Qualified workforce could be found in the Myanmar diaspora
25

www.thuraswiss.com info@thuraswiss.com

Sign up for our free weekly newsletter on Myanmar economics and politics at: http://www.thuraswiss.com/news/newsletter