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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

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

Major Vietnamese investments updates

- BDIV to lend USD30 million to Myanmar’s

SMEs

- Viettel Global to invest USD800 million in

Viettel Myanmar

- Dong A Ship building holds 49 percent

stake in USD175.4 million joint venture

GDP Growth (%)

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 2013-14’s 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

Myanmar’s 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.

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.

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

4.5

5.5

6.5

7.5

8.5

9.5

10.5

2010 2011 2012 2013 2014f 2015f 2016f

East Asia & Pacific (Developing only)

Myanmar

Vietnam

Myanmar Outlook Update March 6, 2015

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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

www.VPBS.com.vn Page | 3

MACRO-ECONOMIC UPDATE (APRIL – SEPTEMBER 2014)

Trade (USD mn)

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 (%) Major markets (USD mn)

Source: MNPED, VPBS Source: MNPED, VPBS

0

2000

4000

6000

8000

10000

12000

14000

16000

2009 2009 2010 2011 2012 2013 2013 (Apr-

Sep)

2014 (Apr-

Sep)

Export Import

4.8% 3.6%

3.3%

8.8%

10.1%

40.5%

28.8%

Rice

Matpe

Base metal and ore

Garment

Jade

Gas

Others

USD5.79

billion

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2012-2013 2013-2014 2014-2015 (Apr-Sep)

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'

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 2013-14’s export value. The recent plummeting oil and gas

prices will affect Myanmar’s 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)

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,

16.57%

11.15%

27.74% 5.63%

44.54%

Refined Mineral Oil

Base metals and

manufactures

Machinery non-elec. &

transport equip.

Electrical machinery

and apparatus

Others

USD8.25

billion

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,5002012-2013 2013-2014 2014-2015(Apr - Sep)

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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)

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 Vietnam’s import value from Myanmar

rose only 9.1 percent y-o-y to USD134.79 million, Vietnam’s export value to Myanmar

soared by 51.8 percent to USD345.86 million.

Vietnam’s 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).

Vietnam’s exported products to Myanmar 2014

(USD Mn)

Vietnam’s imported products from Myanmar 2014

(USD Mn)

Source: Vietnam General Custom Office, VPBS Source: Vietnam General Custom Office, VPBS

0

100

200

300

400

500

600Vietnam exports to Myanmar Vietnam imports from Myanmar

23.60%

8.95%

5.82%

3.80%

4.03%

53.79%

Steel and steel

products

Machinery and spare

parts

Plastic and plastic

products

Textile

Vehicle and spare

parts

Others

USD345.86

million

34.35%

43.03%

3.71%

18.91% Wood and Wood

products

Vegetable

Seafood

Others

USD134.8

million

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Meanwhile, import value of agricultural products from Myanmar more than tripled y-

o-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 Major investment sectors (USD mn)

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 2013-14’s 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 (%)

Source: DICA, VPBS Source: DICA, VPBS

67.47 19.31

18.74

8.74

1.62 Real Estate

Manufacturing

Construction

Hotel & Tourism

others

USD 115.9

mn

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.002012-2013 2013-2014 2014-2015 (Apr-Sep)

21.9%

9.9%

36.8%

9.6%

16.9%

4.77%

Oil and gas

Manufacturing

Transport &

communication

Hotel and tourism

Real estate development

Others

USD 3.67

billion

65.9%

4.2%

7.6%

6.2%

9.7% Singapore

Canada

The Netherlands

China

Others

USD 3.67

billion

www.VPBS.com.vn Page | 7

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 (%)

Source: Bloomberg Source: MNPED

Inflation

Even though Myanmar’s 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 country’s 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 country’s 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.

700

750

800

850

900

950

1000

1050

1100

03

/13

05

/13

07

/13

09

/13

11

/13

01

/14

03

/14

05

/14

07

/14

09

/14

11

/14

01

/15

3

3.5

4

4.5

5

5.5

6

6.5

Jan Feb Mar Apr May Jun Jul Aug Sep

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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 Country

1 ANZ Bank Australia

2 ICBC China

3 Bank of Tokyo-Mitsubishi UFJ Japan

4 Mizuho Bank Japan

5 Sumitomo Mitsui Banking Corporation Japan

6 Maybank Malaysia

7 OCBC Singapore

8 United Overseas Bank Singapore

9 Bangkok Bank Thailand

Source: VPBS collected

Vietnam’s BDIV to lend USD30 million to Myanmar’s SMEs

On November 19, 2014, Vietnam’s BIDV signed an agreement to lend USD30 million

for the development of Myanmar’s 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 Parliament’s 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)

Type of license Myanmar Vietnam Cambodia Laos

Securities Underwriting License 15 mn 7.7 mn 10 mn 12.5 mn

Securities Dealing License 10 mn 4.7 mn 6.25 mn

Securities Brokerage License 7 mn 1.2 mn 1.5 mn 3.75 mn

Securities Business Advisory License 0.03 mn 0.47 mn 1 mn 0.625 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.S-

headquartered 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.

Japan’s Marubeni will work with Thai PTT’s 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,

Myanmar’s telecom sector has attracted high attention of foreign investors. In a

public bidding in 2013, Qatar’s Ooredoo and Norway’s Tenelor trumped nine other

competitors (including Vietnam’s 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 Government’s 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 Japan’s

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 Ooredoo’s 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. Rowsley’s target is the Myanmar’s project, so capital

investment is expected to mainly go to Yangon to fund the next phrase of HAGL

Myanamar Centre’s 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 Vietnam’s 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, France’s Lafarge launched a small

factory in Thilawa SEZ, while China’s 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.

www.VPBS.com.vn Page | 12

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

Vietnam’s 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.

www.VPBS.com.vn Page | 13

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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