Reproduced by permission of The Edge Publishing Pte Ltd., Copyright © 2013 The Edge Publishing Pte Ltd. All Rights Reserved Worldwide.

18 • THEEDGE SINGAPORE | APRIL 1, 2013

| BY LEU SIEW YING |

Wearing a straw hat and sunglasses to protect himself from the sear-ing mid-morning Myanmar sun, Aung Win Khaing walks quickly across a desolate piece of scrub-

land. There is nothing but a few toddy palms and scattered herds of cows and goats as far as the eye can see. But the tea merchant-turned-industrialist is envisioning a modern indus-trial park linked by roads and waterways to the rest of the rapidly opening country and its neighbours.

On Jan 9, the Mandalay regional govern-ment released land for the development of the Myotha Industrial Park (MIP). Spanning some 11,000 acres and located 36 miles from the city of Mandalay, about one-third of MIP has been earmarked for industrial use. A fur-ther one-third of the land will be occupied by residential developments. Another 150 acres, just a tad smaller than the Singapore Botanic Gardens, is to be a nature reserve where the local flora and fauna will be allowed to flour-ish. The remaining land has been set aside for civic, recreational and commercial use, as well as for infrastructure such as utility plants and roads.

The MIP project is held by a corporate ve-hicle called Mandalay Myotha Industrial De-velopment (MMID), which is owned by Aung Win Khaing and his partners. MMID plans to raise 36 billion kyats ($50.9 million) from public investors in Myanmar, which it will use to de-velop the property as well as build a river port 11 miles away in an area known as Semeikhon. The port is scheduled to be completed and op-erating by 1Q2014. MMID is looking for a port operator to run the facility from 2017.

MMID intends to generate revenue large-ly from the sale of some 7,600 acres of land as MIP is developed. This will be done in three phases, over a period of 15 years. Un-der its deal with the authorities, a portion of revenues from the sale of land at MIP will be paid to the government. Phase 1, which will be launched in April, will cover 15% to 25% of the total saleable land at MIP. Meanwhile, MMID has plans for some US$440.5 million ($548 million) of infrastructure spending at MIP, which will also be done over three phas-es. It is proposing to spend some US$84 mil-lion under Phase 1.

In keeping with the ethos of a publicly owned business, MMID has provided detailed earn-ings forecasts for five years beginning from next year. It is projecting earnings of US$400,000 in FY2014, US$3.4 million in FY2015, US$17.7 million in FY2016, US$15.9 million in FY2017 and US$124.8 million in FY2018. It has also set a dividend policy. It plans to distribute 50% of its earnings for 2014 to 2017 and 60% for 2018 onwards.

The plan is ultimately for MMID to list in Singapore in order to reach international in-vestors. Officials at the company acknowledge that this is something that has not been done before, and that the matter is still being stud-ied. They add that they are open to a listing being done through a public offering in Sin-gapore, or through the reverse-takeover of a listed shell company.

For investors in Singapore, the listing of MMID here could mean having direct access to another interesting play on the opening-up of Myanmar. And, interestingly, this one would be focused on Mandalay’s latent potential to emerge as the country’s commercial hub. Man-dalay is at the centre of an agricultural area

with a population of 17 million. The area, which includes the regions, or administrative districts, of Mandalay, Sagaing and Magway, produces rice, beans, peanuts, sesame seeds, cotton, tobacco and timber. These agricultur-al products are transported by barges to mar-kets up and down the Ayeyarwaddy River as well as by lorries across the mountain rang-es to China.

In fact, Mandalay is a choke point of sorts for overland trade. Networks of highways link-ing Japan to Europe; Vietnam to China; and India to Singapore all pass through Mandalay. And, they aren’t starved of traffic. The wind-ing roads along mountain passes linking Man-dalay to China are perpetually jammed with smoke-belching trucks laden with everything, from watermelons and onions to plastic prod-ucts and building materials.

At Mandalay’s existing river port, barges and passenger ferries line the riverbank. Sacks of rice, beans, peanuts, sesame seeds, cotton and tobacco are piled haphazardly on the bank and sheltered from the elements by nothing more than tarpaulin sheets. At the far end, stevedores carrying sacks on their shoulders walk up a narrow plank to depos-it their load on a barge. Close by are dusty hovels where port workers live. It is a busy port, but it looks like it has been frozen in time for 200 years.

In the not-too-distant future, Aung Win Khaing hopes to see pontoons with cranes to lift containers and bulk cargo onto vessels plying the river. He plans to build warehous-es so that goods will not spoil under the sun or get soaked when it rains. He is even mull-ing an area for fuel tank farms to service pet-rol station operators. And, he sees a modern highway replacing the dirt track that currently

provides access to the whole area.Already, he and his partners have spent

some US$20 million to get the MIP project go-ing. The funds were spent on, among other things, building initial infrastructure and com-pensating farmers who were displaced. Some of the money also went towards hiring Singa-pore-based SCP Consultants, which drew up the master plan for the Suzhou Industrial Park, to map out the MIP project. Another consult-ing firm, Royal Haskoning, has been engaged to design the new port facilities.

Aung Win Khaing also had to work hard to help Mandalay’s government officials visual-ise the whole project and understand how it would enhance the economic potential of the region. That included taking them on visits to industrial parks in China.

Now, he is confident that the MIP project is gaining momentum and will soon change the landscape of the whole area. Pointing to the horizon as he explains the favourable to-pography of the land to a group of visitors, a brow-antlered deer suddenly wanders into a clearing and looks at him curiously. It’s a good omen, he figures.

From tea to industrial parksBurly, with a weather-beaten complexion, Aung Win Khaing, 65, was born in the Shan mountains near Myanmar’s border with Chi-na and belongs to the minority Kokang ethnic group. He started out in the local tea business and developed contacts that led to his becom-ing the local representative for foreign com-panies trading with Myanmar. Specifically, he represented a US-based frozen-shrimp com-pany as well as Thai and Indian timber com-panies. This foray into international trading enabled him to accumulate capital to even-

tua

I ued lanEdhisis citowly

inggoqupsfin kybil

spothaof tendutriaacrby

proflonitcoopto absamprosurscait j

smin foosteweIn 20loafouis buTec

Auficthecomeveacktagdefavne

COVERSTORY

A modern industrial park and river port are taking shape on the fringes of the strategically located city. Now, the man behind it all is tapping public investors in Myanmar to raisethe financing. And, if all goes well, he might eventually list the business in Singapore.

Road to Mandalay

A new port for Mandalay is taking shape in Semeikhon. It is scheduled to

be completed and operating by 1Q2014.

PICT

URES

: LEU

SIE

W Y

ING

/THE

EDG

E SI

NG

APO

RE

Au

Reproduced by permission of The Edge Publishing Pte Ltd., Copyright © 2013 The Edge Publishing Pte Ltd. All Rights Reserved Worldwide.

COVERSTORY

THEEDGE SINGAPORE | APRIL 1, 2013 • 19

ent go-her m-me ga-up rk,

ult-ed

to al-

w it he to

ect nge

to to-, a

o a od

on, an hi-nic ess m-m-he m-m-ng

en-

tually build up a business empire.“Every time I received my commissions,

I used the money to buy land. When I need-ed money to start a business, I sold a plot of land. Land became my cash flow,” he tells The Edge Singapore during a lengthy interview at his office in Mandalay. All land in Myanmar is owned by the government, but Myanmar citizens like Aung Win Khaing are allowed to own “land development rights” that essential-ly give them use of the property.

It was 1982, and land in Myanmar was go-ing for a song. Aung Win Khaing — who also goes by the name Nelson Hong — says he ac-quired land in Mandalay for less than 9 kyats psf at the time. He also recalls purchasing land in Yangon’s Mingaladon area for about 7,000 kyats an acre. “Now, when you sell it, it is 1.5 billion kyats,” he says.

In 1990, Aung Win Khaing went on a UN-sponsored study tour of Europe, an experience that opened his eyes to how the efficient use of land could unlock a country’s economic po-tential. On his return, he set up Myanmar In-dustrial Zone (MIZ), Mandalay’s first indus-trial park. The industrial zone covers 1,249 acres and he was allowed to pay for the land by instalments.

The businessman also opened a timber-processing factory at MIZ, where he produced flooring strips, ship decking and garden fur-niture for export. But he didn’t try to exclude competing timber-processing factories from opening at MIZ. In fact, he claims he sold land to them at a discount in order to encourage about a dozen of them to set up base in the same area. His reasoning was that his wood-processing business stood a better chance of surviving if it was part of an industry that had scale. “Nobody would come all the way to vis-it just one factory,” he says.

MIZ is now fully occupied, with some 1,500 small and medium-sized factories involved in everything, from beverage production and food processing to automobile assembly and steel fabrication. Aung Win Khaing himself went on to set up other industrial businesses. In 1994, he opened a cement factory. And, in 2005, he obtained a US$2 million interest-free loan from the government to set up a steel foundry. Except for the tea business, which is now run by his wife, Aung Win Khaing’s businesses are housed under his Royal High-Tech Group Co.

Much like most other Myanmar tycoons, Aung Win Khaing has come to know many of-ficials within the military government that ran the country until 2010, especially the military commanders in the Mandalay region. “What-ever they needed, I tried to support them,” he acknowledges. “But I would never take advan-tages that others could not have,” he adds. In-deed, he claims to never having benefited from favourable contracts or favours of any kind. “I never asked, and they never gave,” he says.

‘He told us we were dreaming’Aung Win Khaing wasn’t the one who came up with the idea for MIP, though. The idea for the project was conceived eight years ago by Singaporean Frankie Tan, while he was CEO of SPA & Associates (Myanmar), the private-ly-held business group linked to Serge Pun, the chairman of Mainboard-listed Yoma Stra-tegic Holdings.

A former investment banker who once worked for Rothschild and the Sun Hung Kai group, Tan, 62, had become fascinated by a United Nations Development Programme re-port on river ports in Myanmar written in the 1990s. He figured that the Ayeyarwaddy could play a significant role in the transportation of raw materials and finished goods in Myanmar. “I could visualise it becoming like all the other big rivers — the Mississippi, the Yangtze and the Chao Phraya,” Tan says. And, a thriving river port would do wonders for the value of the surrounding land.

Tan notes that while a lorry can carry only 20 to 30 tonnes of cargo, a river barge can move 1,500 tonnes in a single trip. Railways are, of course, capable of moving more car-go, and much faster too. Yet, Tan figures that river transportation will always trump rail-ways on costs.

Tan initially tried to persuade his boss, Pun, to look into building a river port, but the SPA group was focused on other priorities at the time. So, he shelved his idea until he retired from SPA in October 2010. Free to pursue his own interests, Tan began pitching his river port idea to a number of Myanmar tycoons in Yan-gon. “They gave me a blank stare,” Tan says ruefully. “I talked to a lot of people, and they thought I was crazy.”

Frustrated in Yangon, Tan looked north for a sympathetic ear. He eventually found it in Tun Tun Aung, 42, the third son of Aung Win Khaing. Tun Tun Aung, who has a medical degree but abandoned the idea of becoming a doctor after his houseman year, had spent a decade working at his father’s wood and ce-ment factories. He had since gone on to invest in his own construction and real-estate busi-nesses, and even built a hospital.

Tun Tun Aung tells The Edge Singapore that his father was initially sceptical when he and Tan brought the idea of a river port to him. “He told us we were dreaming,” he says. “But he was willing to support us. So, he took a 40% stake and Frankie and I each took 20%.” Over time, the duo’s plans ex-panded to the idea of developing MIP as well as the river port. Aung Win Khaing gradually warmed to the project, and asked his second son Nyi Nyi Aung, who was running restau-rants in the US, to return to Myanmar to help get the MIP project going.

Now, Tan says he couldn’t have found bet-ter partners than Aung Win Khaing and his family. He says they all share the same vision

for the MIP project and are focused on solv-ing any problems that arise instead of blam-ing one another. That will be important, as the MIP project isn’t easy to pull off. “We knew there would be a lot of obstacles and a high entry barrier, and people would not even want to think about it,” Tan says. Yet, Aung Win Khaing has shown a willingness to persevere through all the difficulties, he adds. “And, he entrusted two of his sons to me.”

Re-imagining MandalayThe word “Mandalay” tends to conjure up images of a mysterious old city filled with palaces, pagodas and elephants. In fact, the city was only founded in the 1850s, by King Mindon, who figured the location would put him beyond the reach of invading British gun-boats. He was mistaken. By 1885, Britain had annexed most of the country and sent Mind-on’s brother Thibaw, the last of the Burmese kings, into exile in India. The centre of ad-ministration and commerce was then shifted to Yangon, which is located some 575km, or about a 7½-hour drive, to the south. Manda-lay fell further into irrelevance during World War II, when it was all but flattened by Japa-nese bombers.

In the mid-1980s, commercial activity in Mandalay picked up strongly, following clos-er ties between Myanmar and China. Hordes of Chinese entrepreneurs have moved into the city, where they have set up small business-es and factories. Mandalay’s Chinese commu-nity now makes up a third of its population. Today, downtown Mandalay boasts shopping centres that are several storeys tall, such as Diamond Plaza and Great Wall Shopping Cen-tre. Its streets are swarming with motorcycles. And, while there isn’t a Starbucks or McDon-ald’s anywhere, there are local cafés serving excellent coffee and juices.

Yet, Mandalay is disappointing to visitors in many ways. For one thing, there aren’t many historical buildings or graceful struc-tures to see. The remnants of the old palace are walled off from view and surrounded by a tranquil moat. And, the few pagodas in the area aren’t any grander than the ones in Yan-gon. Moreover, commercial activity in Manda-lay is nothing compared with that in Yangon. Mandalay didn’t even have a taxi company until a month ago. In short, it is little more than a hot and dusty village, not unlike the small towns that dot the spine of Peninsu-lar Malaysia.

Sean Turnell, an economics professor at Aus-tralia’s Macquarie University who is an author-ity on Myanmar’s economy, says Mandalay’s industrialisation will be a function of Myan-mar’s economic progress, rather than a lead-er of it. “Mandalay will benefit from the coun-try’s transformation, but will not be a driver of it, I fear,” he says. “Likewise too, the river trade will surely be the first to feel any posi-

tive effects of increased economic activity, and be the avenue through which Mandalay can come to the fore.”

Is Mandalay destined to play second fid-dle to Yangon? Will that prevent Aung Win Khaing’s MIP project from being a winner? Or, is MIP just what Mandalay needs to vault ahead and get noticed by investors in Myan-mar’s opening economy?

Aiming to be competitiveAung Win Khaing casts his eyes over the near-ly completed double-storey port administra-tion building that stands at a bend in the Ay-eyarwaddy. Several boats are moored by the riverbank, and a small group of villagers are doing their laundry or fishing in its clear wa-ters. “The river has not changed its course for 150 years here. The villagers told us the British had picked this spot for a river port,” he says, explaining how the site was chosen.

Built of redwood, the port administration building includes a watchtower that has been reinforced with exposed steel stretchers, which Aung Win Khaing decides interferes with the clean lines of the structure. He orders a Chi-nese contractor at the site to find some steel plates to hide the nuts and bolts. “I was edu-cated in mission schools. I was trained to be neat and tidy,” he says. “I want things to be neat and tidy and of good quality.”

He is adopting the same fastidiousness in his approach to the MIP project, which he says will offer higher standards than people expect of Myanmar. Among other things, he is prom-ising factory owners a reliable power supply as well as good logistics and wastewater-treat-ment facilities. The electricity at MIP is likely to be supplied initially by power barges moored at Semeikhon. Later, it will come from a coal-fired plant that will be built to supply the site, using coal mined in Kalewa, near Myanmar’s border with India.

MIP will also peg its land prices below those of similar properties in Indochina and Malay-sia, rather than to Myanmar’s own inflated prices. Land sales will come with conditions to discourage flipping. Among other things, buy-ers will be bound by a clause requiring them to build their factories within five years, fail-ing which they will have to return the land to MMID at cost.

“It’s a pull-and-push factor,” Tan says, ex-plaining why he expects businesses and inves-tors to flock to MIP. Besides the competitive prices and good amenities, MIP will also offer them ample land to expand their operations.

Now, as MMID begins clearing the land and building roads at MIP, monks in the area have begun erecting a statue of Buddha that will tower over the undulating site that slopes to-wards the river. Just like the curious deer that appeared in the clearing, Aung Win Khaing takes this as yet another good omen for his new business venture. E

PICT

URES

: LEU

SIE

W Y

ING

/THE

EDG

E SI

NG

APO

RE

Aung Win Khaing: I want things to be neat and tidy and of good qualityTan: I could visualise [the Ayeyarwaddy] becoming like all the other big rivers — the Mississippi, the Yangtze and the Chao Phraya

BRYA

N TA

Y/TH

E ED

GE

SIN

GAP

ORE