Estate Management.Protecting your Real Estate Investment p.8

Myanmar and Naga p.11

INSIDeINSIDer

The judges have spoken: top market research and advertising agency specialist Millward Brown unveiled BrandZ Top 100 Most Valuable Global Brands 2013. Categories on the list include Technology, Fast Food, Telecoms, Tobacco, Credit Card, Retail, Cars, Global Banks, Luxury, Oil and Gas and Apparel, among others. The list is topped by technology giant Apple with an estimated brand value of US$185 billion, closely followed by Google (US$113.69 billion) and IBM (US$112.5 billion).

Most Valuable Luxury Brands p.3

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Peter Crowhurst is the Head of Real Estate Asset Management for Yoma Strategic Holdings Ltd and is based in Yangon. He has made a career in hospitality & real estate investment management for over 25 years.

Nagaland chief minister Neiphiu Rio has met several Naga leaders and policymakers there in an effort to boost the economic development of the Naga inhabited areas during his official visit to Myanmar.

A Privileged One On One with his excellency

U Htay aUng

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Welcome back to what we really do feel is another great issue of the Myanmar Insider - dare I say, an even better issue than the last one? Indeed, I will dare to say so, because I am certain that the next issue will be even better. And then the next…

The response from the community in Myanmar has been overwhelming; the number of readers that have stepped forward and asked to contribute to our fledgling yet groundbreaking publication has been most unexpected, as has the response from the country’s increasingly-sophisticated private sector.

With another impressive mix of articles, as well as our online Facebook/Twitter accounts that provide you with daily national and international news and ForEx rates, there’s really no excuse for being left out of the loop anymore.

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3 www.MyaNMarINSIDer.coMinsider LUXUrY

By Mae Anacay

By Lisa WongMost Valuable Luxury Brands

This year, four luxury brands are included on the list. The race for luxury brands is once again headed by French fashion house Louis Vuitton (LV), which is valued at an

estimated of US$22.7 billion. LV ranked 29th this year, dropping eight places from last year’s list after decreasing its brand value by 12 percent from 2012’s rankings. It is followed by Hermès, another French brand, with an estimated value of US$19.13 billion, which is unchanged from the previous year. With no vast improvement on its brand value, it is unsurprising that Hermès found itself in 40th place, dropping eight places on the list.

A new comer in the top luxury brands market is the Italian brand Gucci, which is considered one of the fastest growing brands on the list. It increased by 48 percent from its US$8.6 billion 2012 value, bringing in a staggering US$12.73 billion for 2013. This impressive performance puts Gucci at 68th on the BrandZ Top 100 list, a new entry for the company.

Another Italian fashion label, Prada, is considered to be the most promising luxury brand of the year, as it jumped 63 percent in brand value in 2013, making it the fastest growing brand on the Top 100 list. This means an increase from US$5.7 billion to US$9.45 billion, an astounding feat that left many fashion aficionados wondering if Gucci and Prada’s success is a sign of what is becoming known as “Italian supremacy” in the fashion industry. Despite this growth, Prada is secure in its position, as it plans to focus on promoting its sub-brand Miu Miu for 2014.

If you’re looking for what’s in and what’s hot, make sure to update your wardrobe with Louis Vuitton, Hermès, Gucci and Prada tags this year. Aside from these four brands, other luxury brands to watch out for 2014 include Rolex, Chanel, Cartier, Burberry, Fendi and Coach.

The judges have spoken: top market research and advertising agency specialist Millward Brown unveiled BrandZ Top 100 Most Valuable Global Brands 2013. Categories on the list include Technology, Fast Food, Telecoms, Tobacco, Credit Card, Retail, Cars, Global Banks, Luxury, Oil and Gas and Apparel, among others. The list is topped by technology giant Apple with an estimated brand value of US$185 billion, closely followed by Google (US$113.69 billion) and IBM (US$112.5 billion).

Come on, New York, move over! Shanghai has now overtaken the Big Apple as the global centre of wealthy consumers who

purchase high fashion and luxury labels, with the Chinese metropolis’ most fashionable residents far outspending their New York counterparts.

According to a Milan based study amongst luxury shoppers by digital direct marketing firm ContactLab, Shanghai’s shopaholics spent an average of US$1,000 on their last purchase - double that of the average New Yorker. In addition, four out of five Shanghai residents said they purchased at least one luxury item over the past 12 months.

On top of that, 91 percent of luxury shoppers surveyed in Shanghai said they plan on spending a similar amount in the next six months, whereas only 77 percent of such New Yorkers said they would be splurging on high end goods. Moreover, Shanghai’s fashion conscious plan to shell out, on average, 66 percent more on luxury items than their New Yorker counterparts.

These numbers aren’t so surprising, considering that Morgan Stanley estimated Chinese travelers will top the list of luxury spenders by 2015, thanks to their expanding middle class. But, luxury sales still aren’t what they used to be. The state run newspaper Global Times cited a report from China’s Ministry of Commerce that said, in the first four days of the Spring Festival holiday, marked by the beginning of the Lunar New Year, consumer market sales for luxury goods took a hit. Sales of luxury items like expensive alcohol, rare seafood and leather goods, which are often exchanged as gifts to coworkers or friends during the holiday, fell sharply. In one pocket of malls in Fuzhou, the capital of the eastern coastal province of Fujian, luxury alcoholic beverage sales fell by 70 percent compared to the year prior during the first four days of the holiday.

The slowdown in luxury purchasing is attributed largely to the central government’s year old austerity drive. At the beginning of his presidency, Xi Jinping cut back on unnecessary spending on luxury items and services that are typically the province of senior Chinese officials. With luxury spending now somewhat taboo at home, many Chinese have just resorted to spending their wealth while overseas. With more and more Chinese heading overseas for schooling, business or holidays, their money is still often spent on luxury items. In fact, in New York, many of the upscale stores that dot Fifth Avenue are employing Chinese speaking people on sales floors.

Separately, the ContactLab survey unearthed some other interesting differences between luxury shoppers in Shanghai and New York. “Fashion buying in China is closely linked to the display of one’s own spending capacity, while the New York consumers show greater affection for brands”.

shanghai out buys New york

Hermes

Prada

www.MyaNMarINSIDer.coM4government insider

Name: His Excellency U Htay AungAge: 62Government Agency: Ministry of Hotels and TourismJob Title: Union Minister

myanmar insider: How did you start your career as a civil servant and how did you end up in this position as Union Minister of Hotel and Tourism? U htay aung: Well, it was my choice and thereafter, I was selected to manage or lead different areas. Becoming a minister is also selection. I was selected to lead the Ministry by the present government. My education has also been in

tourism. I obtained my master of tourism from George Washington University, USA.

mi: How would you summarise the changes that the Myanmar Ministry has been implementing so far?ha: The fundamental changes were started by the present government, the President and his team. There have been political, economic and social, administrative and private sector reforms. Hotel and tourism falls under economic and private sector reforms. Our Ministry participated in the change process and, as we speak, we are still implementing these changes.

mi: Do you think the Government reform process so far is meeting the expectations of local and foreign enterprises, citizens, government agencies and NGOs? ha: It would be really difficult to fulfill all their expectations and needs. We are the very first government that started the reforms and we try our best to meet those expectations. In order to do that, our President has prioritised seven objectives during our national planning. They are generating sufficient electricity and power supply, provision of clean water to all the 60,000 villages in the whole country, development of the agricultural sector, creating job opportunities for all, development of

the tourism sector, development of the financial services sector and, finally, development of trade and investments. We would target the development needs in our country, based upon these seven objectives. Since tourism is in one of the seven, our Ministry tries our best to develop this sector.

mi: What are the main policies that your Ministry have changed or adapted to accommodate Myanmar’s new trends and its opening up to international markets and for foreigners to feel welcome in Myanmar, be it for business or pleasure?ha: I look at this from Myanmar’s internal perspective; the objective would be provision of job opportunities for locals, to increase their income and raise their standard of living. While improving the sector, we would get the necessary assistance and protection for our heritage and environment. From the visitor’s perspective, they would be expected to show mutual respect for our culture and history. In short, our overall motto would be “responsible tourism”. We would create, amend and remove policies with reference to this. Initially, our policies were aimed towards provision of good care and service for visitors. Later on it changed towards increasing the number of visitors and to increase the days of their stay in Myanmar. And of course, we would like to increase their spending here, too. These fundamentals are driving our policies.

mi: The booming tourism industries, hotel room availability and infrastructure access to tourism spots have been hot issues. What were the initial challenges and how did your Excellency overcome these challenges? ha: Due to the changes in our country that started in 2011, tourism became the first avenue of interest from the rest of the world. In the past, all the news that people outside of Myanmar received was all the bad news. Then, when our key leaders meet up with all the leaders from across the world, the whole world’s attention automatically shifted to Myanmar, resulting in increase arrivals of tourists. That is when the occupancy rates of the hotels began to rise, especially in the months of October to March, starting in 2011. Previously, most of the holiday makers here were on packaged tours arranged by tour agencies. They got reasonably cheap rates from the hotels. Up until 2011, hotels were chasing the tour agencies to sign contract with them. Then when the occupancy rates started to go up, the hotels reduced their reliance on the tour agencies. There were many walk in customers venturing solo in Myanmar, or business persons coming via internet bookings plus delegation after delegation coming in and filling up the vacancies. Due to that, there were some cases where the hotels did not honour their agreements with the tour agencies, based on the previously agreed prices. The Ministry has to set up education efforts to encourage understanding and finding an amicable resolution among industry members. We also had to implement a price ceiling for a while to ensure the tourist accommodation remained affordable, especially in superior and deluxe room categories.

a Privileged one on one with his Excellency u htay aung

By Charlie Greene

5 www.MyaNMarINSIDer.coMgovernment insider

That issue was somewhat resolved in 2013. Prior to 2011, hotels rented out their rooms as offices [because] the occupancy rates were very low at that time. Now, the offices are almost all gone and the hotels reconstructed the offices back into proper rooms. That is one way the supply has increased. Secondly, Myanmar hoteliers learned to improve their standards along the way. More tourist class hotels sprouted as a result. We now have a fine balance between supply and demand. In addition, many hotels are coming up this year. Even in Yangon alone, about an extra 1,000 rooms are expected this year.

mi: Are we ready for the ASEAN Summit Meetings to be held this year? ha: Yes, we are ready. We have more than 4,000 hotel rooms in Nay Pyi Taw. In addition, high quality guest houses for VIP guests have also been built. The first ministerial meeting for ASEAN foreign ministers was held in Bagan successfully about a month ago.

mi: From a country development standpoint, what do you feel are the biggest challenges facing the Myanmar Travel and Tour industry in the next one to three years?ha: The tourism business has been growing constantly. We have to be mindful of the service levels. Tourism is a service intensive business, involving human capital. We currently have significant soft skills training needs. Yangon University started offering BA in Tourism courses; now they are having a second intake. In addition there are vocational schools offering tourism related short courses. The second challenge would be infrastructure. With the development of new infrastructure, including telecommunications, this issue can be improved.

mi: What is the current supply and demand situation for hotel accommodation? What plans do you have to address that?ha: In the whole country, there are about 950 hotels, making up nearly 35,000 rooms. I believe it is sufficient for the current demand. There will be more upcoming hotels, especially by local entrepreneurs. We are also trying to expedite approvals and cut red tape within our Ministry. As long as the relevant regional governments have no objections, we will approve the hotel projects with ease. We need to take note that approvals are also required from other ministries, too; e.g., in the Bagan area, you are required to obtain approval for your project from the Ministry of Culture, in Inlay, you are required to get it from the Ministry of Forestry and Environmental Conservation.

mi: Currently, things like the hotel building frenzy seem to be taking care of the infrastructure hardware. What are the soft skills training programmes or initiatives that you have got to develop the software for?ha: Human capital is very important in this industry, not just in terms of sheer numbers, but also in terms of quality/skill set of labour. We had our own training schools in the past and we are starting new setups through foreign aid. In addition, we also have association of tour agencies here. We even included some foreign experts there and we are on track to develop the industry.

mi: Hotel accommodation is relatively expensive in Myanmar, compared to our ASEAN neighbors. How do you plan to address this issue?ha: If we look at our closest neighbor you will realise that there is excess capacity in terms of the number of hotels. We have to look at the carrying capacity needs. However, due to greed, so many people build hotels without considering that. It’s not that we are the only country with expensive hotel accommodation; London accommodation costs are also very high. In some regions of India, it is also very high.

mi: So far, tourists and visitors to Myanmar feel very safe with insignificant incidences of theft, robbery, etc. How do you plan to maintain this?ha: Of course, we do have our own share of these incidences. Overall, there are many countries who are significantly worse off than us. The increase, or rather publicity, is purely due to the increase in tourist numbers. We have started a tourism police force in the places of visitors’ interest to counter this threat. There is also help forthcoming from the residents of the region, as well as the members of the industry. In essence, the tourists really appreciated that everyone tried to assist during an incident and they were genuinely thankful to us.

mi: How do you see Myanmar’s inbound tourism sector comparing to its Asian neighbours in the short and long term future? ha: If you look at the tourism sector within ASEAN, in Singapore, they have 16 to 17 million visitors every year; 25 million in Malaysia, 24 million in Thailand, 7 million in Vietnam, 5 million in Cambodia and 3 million in Laos. We are really a late starter in the industry, even though our growth right now is well above anyone else. We now have a great opportunity to overtake our neighbours. Some of the countries are landlocked; there will be a plateau in visitor numbers for them eventually. Some countries are just city states and simply too small. You may see many visitors coming to such a small place, but if

you look at their visitors, the duration of stay is extremely short. Then the income earned from tourists may not be that significant. Our target is 7 million visitors by 2020. We believe we can achieve our 3 million visitors target in 2014. Last year there were a little over 900,000 visitors by air and another 1 million+ entered through our land borders. We are also starting air linkages with foreign countries, such as Japan, Germany. With that we expect to get more longer staying passengers.

mi: What are your plans for the next five years? ha: One of the targets is education; educating the public and everyone involved in the industry about the tourism sector. We reinforced the message of responsible tourism. We also highlighted the message of tripartite between community, the private sector and the public sector. The “Three Ps”: private, public and people. We published the basic guide for every tourist - dos and don’ts for visitors. In order to achieve sustainable development, we needed a master plan for the tourism sector. We have completed the plan for the years 2013 to 2020. We have completed strategic plans for the period. We have significant help from the governments of Germany and Norway and from Asian Development Bank in drawing up of this master plan. There are six specific areas in the master plan: 1. We have to review our organisations and policies and improve tourism planning and management practices. 2. Product development. 3. Destination planning and development. 4. People’s skill set and quality development. 5. Connectivity. 6. Nation branding. Last year, in connection with World Economic Forum, we featured Myanmar attractions on CNA, BBC, as well as CNN. We received significant positive feedback. If you look at the Wanderlust travel site, based on the traveller’s ratings, Myanmar is now the top tourist destination. We have a 98 percent satisfaction level from travellers. We need to continue this consistency.

mi: If you could make one major change to any government policy, what would it be?ha: From a tourism perspective, we need stability within the country. The tourism sector will increase leaps and bounds if the country is peaceful and stable.

mi: In your capacity as the Minister of Hotels and Tourism, how do you see your agency helping

to transform and speed up the development of Myanmar? ha: We are making everything easy to do, in general. E.g., a hotel licence or tour operator licence. We make it a one stop application and we set standards on approval times. In 2010, there were only about 15,000 hotel rooms in the whole country. Currently it is 35,000. It is significant improvement within a couple of years. Local hoteliers have benefited. We speed things up in approvals, permits, etc. We are also starting to introduce systems, such as e-government, but it has been slow due to our own capacity and efficiency constraints. Only if we are fast and efficient, the private sector will benefit. They will, in turn, get things done faster, and everyone benefits.

mi: What advice would you give to someone looking to start up or invest in a hotel business in Myanmar?ha: I believe the hotel business is quite a good investment. Based on my knowledge, there is no hotelier in Myanmar, who has returned their hotel licence to us. So I would still encourage investors to go into the sector. We assist them though coordination with other ministries and regional governments in getting the relevant approvals and land acquisitions. The main caution is not to be greedy. For example, some expanded their territories illegally, some even reroute the waterways to be nearer to water, some clear the large rocks at sea just for better views. All these things should be avoided. Eventually, they will get into trouble with the regulations.

mi: What are your plans to promote Myanmar as a visitor friendly and affordable destination, as well as for the visibility of the Ministry of Hotels and Tourism ?ha: We have publications and brochures, such as a responsible tourism policy, visitors’ dos and don’ts, policy on community involvement in tourism. We have also set up Myanmar Tourism Master Plan. We also have 38 implementation points for the master plan, but we cannot do it all alone. We need development partners from foreign countries. They are also keen to participate, so slowly but surely, Myanmar will continue to improve as an attractive tourist destination, as it becomes more well known. Private hoteliers and tour operators also participated regularly in travel fairs overseas. More and more people are now showing interests to visit Myanmar because of all this.

The Ministry of Hotels and Tourism Building

bUsiness insider www.MyaNMarINSIDer.coM6

Name: Dr Aung Kyaw WinAge: 47 Main Companies: Golden Palace Gold and Jewellery, Forever Gems by Golden Palace, Jewel Collection Manufacturing Co Ltd., Lush by Victoria Gems (Singapore)Profession: Medical doctor

The myanmar insider: When did you start your first business in Myanmar, and is it still operational today? If so, how has the business model changed from when you first started?dr aung kyaw Win: I was born into a family of entrepreneurs. My parents are major traders involved in trading of beans and pulses. I was youngest in the family and closest to my mother. My mother loved jewellery since she was young and consequently I also ending up liking jewellery and gem stones. When the schools and universities were closed after 1988 demonstrations, I did not want to waste time and I asked my parents help to open a shop for me in Bogyoke Market (formerly Scott Market). The shop was named “Pearl Jewellery”. When the schools reopened around 1992, I handed the shop over to my eldest sister. 1993 was the year I met my wife, who was also a student at the same medical school. She was from the city of Mogoat, the gems mining city. We had similar interests in jewellery and we discussed about opening another jewellery shop. 1994 was the turning point for me, where I got married, graduated and started my own very first

shop. I initially wanted to open in Bogyoke Market. My wife’s sound advice was Chinatown, where the shop will not be restricted by opening hours of the market and we can have longer business hours. I must also acknowledge the input of my late mother in naming the shop “Golden Palace”; she advised me to look forward to the very long term and choose a name that will withstand the test of time, as well as reflect the services that we provide. In terms of changes since then, the core of the business has not changed, driven by my love of jewellery. At the same time, I realised that I cannot purely do trading if I want to grow bigger; we ended up expanding up the supply chain in addition to opening new shops and adding brands to serve up market.

mi: What made you decide to diversify your business interests?akW: One or two years ago, our country started really opening up. I bought some land at the corner of Kabaraye Pagoda Road and Sayar San Road. I intend to develop the land into a high end condo plus service apartments. For the jewellery business, I have become a retailer, a wholesaler and a top manufacturer. For long term, I would like to enter into infrastructure, as Myanmar still needs a lot of infrastructure and will continue to need even more, if the country heads in the right direction, as it is now. I want to be a developer. One reason is for my only daughter, who is 14. She is keen on architecture and creative at the same time, so I

would like to pass something of her interest to her. Another reason is from a strategic perspective: if you want to grow faster, you must do something that deals with mass population, and everyone on earth needs a property to live in.

mi: Do you see any of your main business interests having to change or adapt to Myanmar’s new trends and its opening up to international markets?akW: When I started, we were purely in the retail jewellery business. I long recognised that the business is dynamic and change will eventually come. If we cannot create new products or services, we cannot achieve a leadership position. In addition to expanding up the supply chain, we brought in experts from Thailand, brought our factory up to international standards and upgraded the plant and equipment. In fact, our factory was ISO9001 certified in 2008 and we have also been awarded recently ISO14001 the Environment and International Health and Safety Award. We, including our senior staff, go to international jewellery shows regularly to learn about latest trends in jewellery. The jewellery market was already very competitive, even before Myanmar opened up. Consumer tastes and preferences are changing all the time, we have to constantly engage suppliers and yet, we are the market leader in Myanmar. We have the biggest international standard jewellery store in the country with nearly 400 staff. We have a retail presence in key cities of Yangon, Mandalay, Lashio and Taungyi. We know that we are the leader because Chinatown (in Yangon) is the top retail business area in the country, and if you are top in Chinatown, you are the top in the country. When we opened our second shop in Chinatown, we sold 8,000 pieces a day for ten consecutive days and people were queuing in front of the shop from early morning until midnight.

mi: With the benefit of hindsight, would you have done anything differently when you started your first business, and if so, why?

akW: I would not have changed anything. I do not have any regrets at all. It was my own choice not to practice as a doctor and enter the jewellery business. I have dedicated my life to this business. I am satisfied with my life as my decision and my life are the same. I am doing what I loved since I was young. I tried my best not to waste any time.

mi: How do you feel that foreign companies now entering into business here will affect the local workforce, and do you feel that they will bring new opportunities to existing local businesses?akW: It will certainly affect the local workforce. There are many graduates in Myanmar out there, but there was a skills mismatch. The quality is not there. Due to that, foreigners can get a job easily in Myanmar; even semi skilled foreigners. Of course, foreign companies can train locals and bridge the skills gap between foreign managers and local graduates. This gap has to be narrowed to increase the employment of locals. One good point for Myanmar is that its people are very easy to train and willing to learn. In terms of the effects on local businesses, it depends. There are both pros and cons: foreign companies definitely need good local partners, through mergers, acquisitions or JVs. Local companies need to be prepared for that. Competition cannot be denied. To protect local companies from foreign competition will just further isolate them, and not encourage them to improve to compete. We have tried isolationism for the past 50 to 60 years and it certainly did not work out!

mi: From a business standpoint, what do you feel are the biggest challenges facing you in the next one to three years?akW: One, technological changes and the need to constantly upgrade. Two, changes in customer lifestyles and fast changing tastes of consumers. Three, how to continually differentiate ourselves in the market. And four, foreign competition

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7 www.MyaNMarINSIDer.coMbUsiness insider

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and rivalry. Having said all these challenges, the foundation of the jewellery business is trust based. So, every jewellery business has to earn it.

mi: Hypothetically, if you were entering into business for the first time in Myanmar, what type of business would you consider as having the most growth potential?akW: Well, it depends much on the financial resources available. If you have access to capital and your finances are good, infrastructure or hospitality businesses would be good. If you have limited finances to start with, I prefer media, tourism and IT businesses, as they are still in their infancy and the industry has much to grow.

mi: How do you see Myanmar comparing with its Asian neighbours in the short and long term future?akW: It depends on the policies at the top and the leadership of the country. A country leader is the key; just simply look at Singapore. A country with no natural resources. Lee Kuan Yew leads them well and you can see the effects simply. If the country just once has a bad leader (don’t even talk about a successive generation of bad leaders), it would affect the country for the next 30 to 40 years, badly. Myanmar has plenty of natural resources. We need to simply stop selling our natural resources in raw form and start value adding. That would be a start to compete with our neighbours in the future.

mi: If you could make one major change in the country for any of your business ventures, what would it be?akW: I just wanted better implementation of government policies. The policies passed down from the top are great, but implementation has been slow. The top is changing, but at the operational level, there seems to be no change at all. A good example would be the land grabbing issues; the good policies were there, the investigative committee was there, the action was there, but there seems to be slow implementation across the board and, as a result, no solution in sight. In that sense, I would like central government to have more reference power, as a role model, in addition to possessing real power to implement change.

mi: What advice would you give to someone looking to start a business and invest in Myanmar?akW: I guess they would have to do an environmental analysis, PESTLE in management books. They will also need to understand culture and practices of the local population and examine the communication skills required of the business and trainability factors. Last but not least, they have to clearly understand the rules and regulations in place relating to their business.

mi: You are the owner and MD of Forever Gems and your wife is also part owner. How do you manage to separate business and home life? How do you sort out differences and ensure that business arguments aren’t taken home?akW: It’s about knowing each others strengths and weaknesses and trusting the other half in her area of strength. I know sales, marketing and communications better, so my wife only plays a supporting role in that area. My wife is better with HR, admin, internal audits, etc, so she leads the way in those areas. If we have different ideas or ways of doing things, we discuss it privately and we would normally evaluate and take a better

idea. By the way, we do not normally discuss work at home.

mi: In her interview with a local magazine, your wife has expressed political aspirations. What are your thoughts on that?akW: My wife reads and studies a lot. She wants to serve the community through her knowledge. With change taking place in the country, she wants to be a change agent. She is now the joint secretary at UMFCCI, as she wanted to affect changes in government policies and participate in the discussions. For myself, I do not have any political aspirations.

mi: Last but not least, what do your believe are critical factors to be successful in the gems business?akW: Know your customer, i.e., their tastes and preferences. Build trust; trust is embodied on the way you approach, the way you practice and your commitments. Keep in touch with customers; we used IT and communication tools to reach out to many of our customers and to the young and affluent group. As the Burmese proverb says, “Yay See Chaung Twin, Thaung Ma Tin Kyan Ke Yan!”, which means “You don’t want to be left grounded in a flowing stream”.

insider investing www.MyaNMarINSIDer.coM8

BAGANCAPITAL

Peter Crowhurst is the Head of Real Estate Asset Management for Yoma Strategic Holdings Ltd and is based in Yangon. He has made a career in hospitality & real estate investment management for over 25 years.

Buying an apartment to live in or invest for rental income is likely to be one of the largest personal investments you will make during your lifetime.

Apartment buildings, when new, look good, which combined with a fancy brochure presents a very nice promise, however, can that promise be kept, the building maintained, and still look good ten years later? It is important to ascertain what plans are in place for estate management or, in the case of a second hand unit, what management arrangements are in place?

Estate management has two main functions: firstly, the daily management of the building and the land that it occupies which includes security, cleaning, landscape and general maintenance; secondly, there is the ongoing maintenance of the property that includes support facilities, such as mechanical systems, lifts, air conditioning and maintenance of the structure (including walls, windows and communal space). You may think that this none of my business, however, if these vital

Estate Management.Protecting your Real Estate Investment

By Peter Crowhurst

items are not carried out, then the building and, not least its market value, drops very quickly, particularly if your apartment is on a high floor and the lift is not working properly.

The monthly estate management fees that you are charged go towards the operation of the building and some maintenance; however, they are unlikely to be sufficient when the time comes for more substantial upkeep of the building. The property manager needs to take steps to establish a sinking fund. This fund is not used for daily operation, but to build a reserve for future capital maintenance that includes, for example, painting of buildings, repairs and the replacement of capital equipment in the future. If the manager is smart, then this money is placed into an interest bearing account.

When looking for an apartment to buy, whether it be new or second hand, you should take a good look at the apartment, but also take a good look around the public area of the property, ask questions on the status of the finances of the building and how and who is running the property.

This list, whilst not a fully inclusive list, provides pointers on what to look for:• Exposed concrete When not protected will eventually rot

with the internal reinforcements rusting away.

• Down spouts, drains Need to be cleared to prevent flooding.• Boundary fences Should be painted at least every two

years, not only looks good but stops rust.• Leaking air conditioning Unsightly and creates damp patches If a centralised system then it needs to be

chemical dosed to prevent the build up of bacteria in the system (legionella to name just one).

Ducted air conditioning grills need to be cleaned.

• Window frames Do they sit nicely into the frame? So they

work properly?• Public area doors, corridors Regularly maintained and painted Lifts - is the operation certificate visible? Are all of the lights working properly? Attentive and helpful security and

building manager

• Fire fighting equipment In place, in date and operational? Are there regular checks?• Clear fire escapes For emergency access only and not store

rooms• Machine space Kept clear Not used for storage• Underground car parks Are they well lit? Access routes should be clean and clear Lots not being used for storage Abandoned cars are not a good sign• Store rooms Where possible, the developer should

place store rooms that can be rented by residents.

The estate manager is the guardian and can, collectively, help maintain the value of the apartment. Whilst there are fees involved they are very small in comparison to the investment made. Your investment will be serving your family for generations to come.

good corporate governance Means happy Investors

By Jeremy Kloiser-Jones, CEO, Bagan Capital

This month, I would like to talk briefly about a topic close to my heart: corporate governance. Having been deeply involved

with the capital markets for the majority of my professional career, I am watching with interest the discussions and developments relating to the new Myanmar Stock Exchange. There have been many articles discussing suitability for listing, without saying what this means. Most would think first about accounting and financial data, but reliability of these numbers is generally a result of focusing on good corporate governance.

Clearly, there is foreign investor appetite for exposure to Myanmar’s economic growth, but there are currently few ways to increase this. Until the new Myanmar Stock Exchange comes to life sometime during or after 2015, the only way to gain exposure to Myanmar equities will be through a private

equity fund or foreign listings of companies that have significant (or complete) Myanmar exposure.  

Yoma Strategic Holding’s back door listing on the Singapore Stock Exchange has turned out to be a true success story for a Myanmar company raising money externally. To a lesser extent, Interra Resources, listed on the same exchange, is a company with significant, although not total, exposure to Myanmar. There is yet to be a primary listing on any stock exchange of a pure play Myanmar business. 

Aside from other areas, such as ensuring that businesses have their accounts in order and that, for promoter, personal assets are appropriately cordoned off from corporate assets, stock exchanges (and investors) wish to see proper governance structures. 

There are numerous iterations of what constitutes good corporate governance, but the key principles include having a capable and responsible

board, respecting shareholder rights and being transparent about governance structures, ownership and financial performance - supported by sufficient disclosure.

But why should companies care about corporate governance? What’s in it for them? 

In a 2010 study of emerging market investors and their attitude to corporate governance conducted by the IFC, 100 percent of survey respondents mentioned being willing to pay a premium for good governance in an emerging economy. Some were prepared to pay up to a 40 percent premium for a company that had good corporate governance compared to one that lacked good governance. This suggests that a company could potentially raise its market capitalisation from US$100 million to US$140 million without any improvement in its fundamental business; by simply incorporating proper governance mechanisms. These numbers are substantial.

There are lessons here; not only for the courting of foreign investors, but lessons that could equally apply to local investors. There are currently dozens of registered public companies in Myanmar, and the number is growing. I use the term “public” here in its legal sense, as distinguished from private companies and having the ability to raise funds from the public. This does not mean “public” in the colloquial use of the term that often refers to a listed company. Although clearly becoming a public company is always a condition for becoming a listed company.

It is possible for Myanmar public companies to raise funds by issuing shares to the general

domestic public - the purchase of shares in domestic companies is still off limits for foreign investors. This process is quite straightforward and stock sales usually take place at the company’s own office. Currently, fairly limited information needs to be given to prospective investors. However, this need not be the case.

Myanmar public companies could improve their ability to raise funds from the public today, as well as better demonstrate their suitability for an eventual stock market listing, by putting in place good corporate governance structures and procedures - and telling investors about it. It is best to get in front of these developments.

But, corporate governance is not just about ticking boxes. Mistakes can still happen. There are many cases in developed markets that pride themselves on having high standards of regulation in this area, of major corporate cases - often ending in bankruptcy - where there was a failure of corporate culture to uphold not only the word, but also the spirit, of corporate governance regulation. One can include Enron, numerous financial institutions in the recent financial crisis, and Olympus, etc. The most important aspect of good corporate governance is having a strong corporate governance culture.

Should any readers be interested in knowing more about the above issues, please drop me a line.

For more information, please contact Jeremy on kloiser-jones@bagancapital.com.

9 www.MyaNMarINSIDer.coMinsider investing

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Unequalled Circulation

When I first downloaded the Skype Mobile app, I had a thought that was undoubtedly

shared by many in the same situation: if you can make calls via wireless internet, then is the traditional function of the phone rendered obsolete? Many of us, of course, soon discovered that Skype was far too data intensive to replace the native phone functions without high quality and stable WiFi. However, in the long term, the broader question posed by “Voice over Internet Protocol” (VoIP) technology, which allows conversations over internet rather than radio tower channels, remains.

The effect of "Over the Top" (OTT) applications that build on mobile networks to bypass native functions has already been felt in the SMS space. Messaging apps on phones cost carriers $26.3 billion in 2013, according to Ovum Consulting. Not only are carriers losing out on revenue, they are essentially paying for the capacity and bandwidth that allows such undercutting. Such developments have led some emerging market telecoms to stop offering SMS services altogether.

How will mobile operators protect their turf? One Horizon Group, headquartered in London, has devised a solution. The company's proprietary "SmartPacket" technology is ten times more efficient than traditional Session Initiated Protocol (SIP) systems, such as Skype, which were initially designed for static Ethernet connections. By approaching and working with carriers directly, One Horizon allows carriers to monetise their data channel and prevent cannibalisation. The process, which, as mentioned, is ten times more efficient than peer VoIP services because it uses fixed line infrastructure, is a natural fit

By Malcolm Macpherson

with mobile operators who have typically purchased the right to operate the fixed line from the government.

Of course, many people of today’s world are serial text messagers and may be scratching their heads at the idea that SMS is dying out, so it is perhaps a logical next step to point out that these developments are not happening in the North American mobile market, which is a more mature industry than in the areas in which One Horizon operates: namely China, the Philippines, and soon to be Russia, according to management. As smartphone penetration is not quite as widespread as in developed markets - China is in the process of retrofitting feature phone factories to accommodate newer smartphone demand - patterns of mobile development are actually responding more quickly to changes in technology.

One Horizon, whose customers include many high level operators in Asia, are at the forefront of many such changes with its software coded entirely in house. In addition, its proprietary voice application has innovative features, such as bandwidth adjustment, in which the quality (and thereby the data usage) of the call is changeable on the fly. The application is especially useful to migrant populations and travellers, who have to call outside the local area and are faced with either expensive calling cards, prohibitively expensive out of country minute rates, or existing VoIP applications that struggle to maintain signal clarity on the go.

The strategy so far has manifested itself in the aforementioned partnerships with tier one and tier two carriers, which include some of the fastest growing companies in the world in the emerging market telecom space. In addition, One Horizon has leveraged two

Chinese JV partners to engage the highly coveted mobile space serving the world's largest population. As such, the company is able to go top down by engaging operators and partner with organic local applications that have proven themselves on the ground.

How has this ambitious technology driven strategy translated? As of June 30, 2012 was the first period in which the company recorded operating revenue (US$5.2 million equivalent) although it was still operating at a net loss. However, by the end of the year, it was running a US$4.6 million net operating gain, and as of the most recent quarterly period of September 30, 2013, recorded US$5.27 million in net operating revenue. The shares currently trade at 13.7 times earnings, below the industry average ratio of 16.2 and has

under US$300,000 worth of long term debt, as opposed to over US$29 million worth of equity and a market capitalisation of over US$176 million.

Share growth, however, has been somewhat stagnant over the past year. The company, which currently trades as OTC, is, according to management, in serious negotiations to graduate to a bigger exchange by the middle of the year. Perhaps this move will allow the company to experience greater share growth off its promising story and solid numbers. In any event, One Horizon has the technology and the overall capacity to become a major global player in a relatively young sector and profit from development in one of the fastest growing regions in the world. It certainly warrants a look from small cap investors.

www.myanmarinsider.com10insider ArT

By Nathalie Johnston

One of a handful of artists creating superb digital artworks in a tech challenged Myanmar, Phyoe Kyi

believes that “various kinds of works may change according to the development of information technology”. What to expect from young artists throughout Myanmar is difficult to say. In the mean time, Phyoe Kyi continues to inspire with his keen sense of the contemporary in Myanmar art.

Formerly a painter at the University of Arts and Culture, he soon abandoned the medium. It could not contain all that he wanted to achieve. In an interview, he described his introduction to the digital world of art in five processes; five life determining moments in a young boy's artistic life.

The first process describes a small boy drawing vigorously by candlelight and, as the light fades, his coloured pencils emulate the hues of the yellow flame. When he wakes up in the morning, he is sad because the colours seem “out of place”. The second process introduces electrical lighting in the boy's home, and he is happy because he “feels free to draw until midnight”. In process three, he meets digital art at a friend's house, who “paints” on a monitor screen. In the same week he goes to purchase a computer. Processes

generation of Myanmar artists to come, whose lives will surely be consumed by the global technology wave arriving in the country.

It is not only his expertise in digital work, but his willingness to experiment with more unfamiliar mediums. Once Upon A Time There Was Nothing is a performance art homage to the past, or perhaps a push to accept its truth and what it can teach us. Since 2004, he has realised the art piece four times, in four different locations (Mingun and Yangon in Myanmar, Fukuoka in Japan and, most recently, in Berlin, Germany). The essential elements of the performance entail Phyoe Kyi dressing as an ancient Burmese king who walks about, blowing bubbles and posing for pictures. Once Upon A Time implies a fairy tale, but one that is never perfect. Through his costume and movements, he questions the way we look at what has been before us.

The diversity of Phyoe Kyi's last decade of work goes even deeper, with brilliantly colourful screen prints, impressive sculptures made of paper from his native Shan State and an endless collaborative effort to interact with spaces and the people in them. His childhood is a recurring theme, especially the relationship with his family. His self portraits send the viewer two opposing messages: one being that childhood is about innocence and freedom; the other that he was somehow neither free nor innocent, but longs for childhood nonetheless.

Of course, one could say that, since Phyoe Kyi is from Myanmar, his work relates to the volatile country in which he grew up. He has indeed approached the traumas of social isolationism, as well as increasing environmental damage. Perhaps more interesting is his being from Shan State, which also sets him apart from the rest. Without simplifying too much Phyoe Kyi's intentions or inspirations, it is best to say that he clings to a human message. It is about family and inspiration, our pasts in opposition with our futures, and creating situations in order to rehabilitate ourselves through expression. A friend described Phyoe Kyi's beliefs about art as such: “He believes art is easy, and should be easy... that everyone can make art.”

Artist Profile - Phyoe Kyi

Once upon a time

there was nothing

Mingun Museum of Contemporary Art

Conflict in Confluence

four and five see the boy become a man, and reinvent his life in colour. He also experiments with other mediums, such as performance. Finally, he uses a phone camcorder to create an animated short film. Years later, he would design a museum - the Mingun Museum of Contemporary Art. A fictional, digital wonderland, it holds artworks designed by Phyoe Kyi. It is revolutionary in its scale and approach to art making in Myanmar.

An artist’s influences are not easily described, but Phyoe Kyi's short story takes memories of life and colour, to a living artist's process of discovery for the seemingly endless opportunities the digital medium has to offer. Though he admits there are challenges to digital work, like the threat of copyright infringement or the difficulty in marketing the work, he continues to favour it over all others and uses it whenever possible - paving the way for a

www.myanmarinsider.com11insider invesTing

Myanmar’s border trade reached US$4.01 billion during the first 10

months of the 2013-2014 fiscal year. The country’s border trade in the April-January period was through 14 points with four neighbouring countries which are China, Thailand, Bangladesh and India.

Border Trade

Imagine taking out a loan for a new car, but then having to take another loan - twice as large - to buy a license plate on the black market. That’s

precisely what is happening in Beijing, where a government clampdown on license plates has fueled skyrocketing prices for plates on the black market.

In a bid to rein in its pollution and traffic jams, officials in the Chinese capital in 2011 instituted a license plate lottery that awarded plates to one in ten people who apply. This year, Beijing cut the new plate allocation by 40 percent to just 150,000, which means only one in 150 applicants will get a plate.

Such impossible odds have created a thriving black market where plates can draw an asking price as high as $33,000 - almost double the price of China’s best selling car, the Ford Focus. Even though it is technically illegal to buy, sell or rent plates, desperate drivers in Beijing have found few other options.

Another Beijing resident, Zhang Cheng, has been entering lotteries for the past two years, but to no avail. Most recently, there was a lottery in which 2 million participants vied for about 25,000 plates.

“The government is depriving us of our rights to enjoy a better life. Instead of restricting car plates, they should build more roads and improve infrastructure”, Zhang, who is now seeking to rent a plate, said.

Zhang is not alone. The practice of renting or buying car plates is now so widespread that it has become impossible to police, said Yang Lisha, a Beijing based lawyer.

The hot demand has caused a surge in prices. Just six months ago, a car plate could be bought for around RMB120,000, but this year’s cut in allocation prompted an increase to RMB200,000 a piece, according to a manager at Beijing Sunshine Aomei Asset Management Co., a company that says it buys and sells car plates on its website. Several other car plate dealers corroborated the figures.

Beijing’s Black Market License Plates

Myanmar’s largest border trade point, Muse, accounted for nearly US$3.12 billion of the total border trade during the period.

Official statistics show that Myanmar’s foreign trade came at US$15.27 billion as of September last year, with exports hitting US$7.43 billion and imports reaching US$7.84 billion.

By Lisa Wong

“I participated in every lottery over the past two years but have never won. I’m desperate”, said Han Kuilong, an office worker who last month

rented a car plate for RMB5,000 (US$830) a year. “I live on the outskirts but work in downtown. Life is very inconvenient without a car”.

www.myanmarinsider.com12insider business

N agaland chief minister Neiphiu Rio has met several Naga leaders and policymakers there in an effort

to boost the economic development of the Naga inhabited areas during his official visit to Myanmar.

The chief minister began his five day official visit on February 5th.

Rio, who was accompanied by several top officials of the state government, met chief ministers of Sagaing division Thar Aye and Mandalay division Ye Myint and other top officials of the Myanmar government.

Sources said the Naga officials met several top leaders of the Myanmar government and exchanged views on development in Sagaing division where Nagas live.

“We got calls from people in the interior Naga areas in Myanmar,” a source said.

The Naga officials met the Chief Minister, the Union Border Affairs Minister, the

T he US Export-Import Bank says it will start offering credit for trade with Myanmar, hoping to support

businesses against competitors in a market that has boomed since democratic reforms.

Officials say they hope to boost US exports and jobs by providing similar terms as credit agencies from European and Asian nations, whose governments have gone even further in ending barriers to trade with the once pariah state.

“Hopefully, with this announcement, we can level the playing field and we can compete on the basis of price and quality,

Myanmarand Naga

US Export-Import Bank opens to Myanmar

not terms”, said an official from the Export-Import Bank, who requested anonymity in line with agency policy.

Myanmar has undertaken sweeping reforms since former general Thein Sein became president in 2011, with the release of political prisoners, easing of censorship and a revamp of an antiquated exchange rate system.

President Barack Obama’s administration has heralded Myanmar’s changes as a success for diplomatic outreach, but critics say the United States has overlooked human rights violations.

The Export-Import Bank’s decision “is very much a reflection of [Myanmar’s] creditworthiness and it’s not connected to any particular event”, she said.

Foreign investors have been flocking to Myanmar, which has a large untapped consumer market, ample natural resources (including gas and oil), and a strategic location bordering China and India.

The Export-Import Bank is no stranger to the country. One of its first projects after its creation in 1934 was to provide US$22 million to build the Burma Road to supply China during its war with Japan.

By Shwe Sin Hnin

By Myint Thandar Kyan

Speaker of Parliament and other dignitaries and officials and visited Nay Pyi Taw, the capital of Myanmar, and other places, including Mandalay, Yangon and Monya.

The Chief Minister has been meeting the government officials for faster development and better trade opportunities in the Naga inhabited areas.

Nagaland has opened four international trade centres along the Indo-Myanmar border, but so far it has remained a white elephant. Several Naga organisations and Naga policymakers in Myanmar have appreciated the Nagaland government’s concern and initiatives for the development in the Naga areas.

Nagas in Myanmar said they were at a “crossroad” with the country adopting a democratic system of government recently and that the Nagas have been inevitably made to get involved in this transition.

13 www.myanmarinsider.cominsider business

Major Developments for Myanmar Airways International

IOSAMyanmar’s International Operational

Safety Audit (IOSA) recently registered Myanmar Airways International (MAI), which has had a 100 percent safety record since 1993 and, since 2013, has been flying the Yangon-Seoul-Yangon route since a code share agreement was made between MAI, Korean Air and Asiana Airlines.

On February the 21st, 2014, the very first MAI chartered flight from Pusan International

Airport, Korea, successfully landed at Yangon International Airport, and by the end of the year, Korea-Yangon daily scheduled flights are set to be taking off on a regular basis.

MOUMAI recently announced a tie up with

Japanese firm Hama Inc. Co., Ltd. and signed the official Memorandum of Understanding

(MOU) agreement on February 14, 2014, at the MAI Head Office in Yangon. According to the MOU, MAI is now a functioning joint venture with Hama Inc. and operates as Myanmar Airways International Japan Co., Ltd. in Japan. Simultaneously, this agreement allows for the expansion of the Japan-Myanmar daily scheduled flights and chartered flights.

MAI is currently the only international airline that offers direct flights to Cambodian destinations, such as Siem Reap and Phnom Penh, destinations which can now be added to the travel itineraries of Japanese travellers who might wish to visit Cambodia, as well as Myanmar.

As with any airline, safety is the top priority, and MAI have recently teamed up with world renowned Air France Industries with regards to obtaining the latest instruction on safety issues and technical support services.

“Modern Comforts and Gentle Traditions”

Operating with Airbus A320 (capacity of 180 seats) and A319 (capacity of 120 seats) aircraft, MAI covers various international destinations, such as Bangkok, Singapore, Kuala Lumpur, Guangzhou, Gaya, Phnom Penh and Siem Reap.

MAI is currently considered to be a private airline, despite the fact that only 80 percent is privately owned, with the state owning the other 20 percent.

www.myanmarinsider.com14insider business

Pinching Pennies, Losing PoundsThe High (Opportunity) Cost of Low Price

Serviced offices get a bad rap. They are perceived as “expensive”. In terms of sticker price, this can certainly appear

true, but what does sticker price actually tell us? Oftentimes, something that appears quite cheap is, in fact, cheap. That is to say, it is the dictionary definition of cheap, which means “inexpensive because of inferior quality”.

The truth is, one must consider the “opportunity cost” of an office. Opportunity cost is a powerful economic concept, and it’s particularly useful when considering the headaches associated with searching for an office in Yangon these days. A multinational company representative in Myanmar should not pinch pennies if it means losing dollars. If your time is valuable (and if you’re a foreign executive officer for a multinational corporation your time is definitely - even quantifiably - valuable) then it does not make sense to spend that valuable time scouring the streets of Yangon for a print shop or trying to evaluate which mediocre internet router is better than the next. It also doesn’t make sense to be working up in Hledan when half your meetings are downtown and you are attending events at the Traders and the Strand Hotel on a weekly basis.

So, do the maths and conservatively estimate your time per day. Even for a professional with a modest salary, wasting five to ten hours a week on common office dilemmas can easily add up to thousands of dollars per month in wasted opportunity costs for you alone and, of course, it’s likely not just you but wasted time for your colleagues and staff, as well.

This wasted time will take many forms, but all forms can be similarly headache inducing: hours searching for a reliable neighbourhood copy shop, calling your landlord to fix a toilet or door or your leaky ceiling, extra time spent in traffic for the “cheaper” uptown location, leaving to go to a hotel when your electricity fails, and any number of other common inconveniences. When you decide to run your office yourself... well, you have to spend a lot of your time concerning yourself with the mundane mélange of additional office stress. (Compounded severely in Yangon by issues related to traffic, electricity and communications).

At a business and serviced office centre, your office is yours to experience, not to manage. Indeed, just as most things in life

these days rely on the logic of specialisation, shouldn’t office management be allocated to professional office managers? This can be particularly useful in an environment like Yangon.

I confess. I spent my first 3 months in Myanmar blindly searching for a decent place to make colour photocopies. My embarrassment was only outdone by my frustration. Place after place presented issue after issue. Language, of course, was the biggest problem. After that was quality, followed by problems with consistency. When I finally found a copy shop that I liked, electricity was an issue. I needed 250 colour photocopies for an important event the following day, but the power was out at my preferred copy shop and I had to seek out yet another place.

Business centres are also designed to maximise the value of shared spaces. In a business centre, a client has access to their own office, as well as access to shared spaces, such as a lounge area, kitchen and pantry area, a coffee machine, a reception and conference and meeting rooms. When several businesses share facility space and service costs, they are able to engage in new types of business that

would not be possible if they were operating out of different offices. For instance, some business centres offer messenger services. This is something that can be a big time saver, but it is also an activity that would often be uneconomic for a business to engage by itself on a fulltime basis.

In Yangon, the serviced office market has seen a few new entrants over the last year. Responding to complaints about the lack of short term leases for Grade A office space, a few companies piled into this market. Everyone seems to know Sakura - a prominent location and one of Myanmar’s tallest buildings. UBC and Centrepoint are not quite serviced offices, but they offer Grade A accommodations with some services provided.

Hintha Business Centres in the central business district of downtown is an example a fully serviced, professional office facility with options ranging from individual “hot desk” space to a private office suitable for a staff of a dozen. Hintha’s primary approach is to offer comprehensive professional services and short term leasing options. This ability to “plug & play” allows clients the flexibility to start working immediately.

By Jacob Clere

insider business www.myanmarinsider.com15

All of this is to say nothing of Yangon’s burgeoning coworking scene. Project Hub Yangon was one of the earlier pioneers of coworking in Myanmar. With a comfortable atmosphere easily suitable for a dozen or more individuals in a collegial, activities and projects focused atmosphere, Project Hub has created something that jibes with those seeking collaboration and creativity.

Serv-Smart, another serviced office centre, offers a budget friendly alternative for companies who value their pocketbook more than a window or a convenient location. With a half a dozen offices, it offers a surprisingly nice kitchen and pantry area, given its small size. With a reception desk and one meeting room, Serv-Smart technically lives up to its promise of full services.

Therefore, evaluate more than merely the accounting ledger mathematics and sticker price as you setup your next Yangon office. A backup generator is immensely expensive. Internet hookups, building renovations, security guards, cleaners, YCDC signage fees - the expenses here are many and most are not readily apparent. Ask yourself: “What did I come to Myanmar to do?” I suspect it was not to engage in office management drudgery. Consider a business centre approach and reorient your focus back to your business development strategy.

Snapshot of some of the serviced offices and coworking spaces in Yangon:

Hintha Business Centres

Project Hub Yangon

Serv-Smart Offices

Sakura Tower

Union Business Centre

Centrepoint Tower

International Business Centre

••••Fully serviced professional office space in

Yangon’s central business district. Clients:

multinationals, corporate reps, SMEs, NGOs

and attorneys.

Coworking space for startups, NGOs and

individuals. Creative/collaborative.

Uptown serviced office space. Quite small

but good for companies on a tight budget.

Partially serviced office space in one of

Yangon’s more prestigious locations.

Partially serviced office space for companies

seeking large offices.

Partially serviced office space for companies

seeking large offices.

Not actually a business centre. More of a

functions hall for events.

BUSINESS CENTrE Or CO-wOrkING SPACE SHOrT DESCrIPTION

with high ceilings,

a spacious lounge

and one of the

fastest internet

connections in

Myanmar, Hintha

Business Centre

in downtown

offers a premier

professional office

option in Yangon.

www.myanmarinsider.com16insider business

Mandalay’s Ko-Thwe RubiesIt seems that nothing unpleasant can be

heard about Myanmar nowadays. Formerly known as Burma, this exotic Southeast Asian

country was once a jewel in the British Empire - a fascinatingly exotic land that was the world’s largest exporter of rice, a global supplier of oil, a nation rich with natural and labour resources, producing 75 percent of the world’s teak, and the wealthiest realm in this corner of the earth. Today, it is being called “Asia’s last frontier”.

One rare, shining glow the colour of ko-thwe (pigeon’s blood) is Myanmar’s ruby industry. Supplying 90 percent of world demand, rubies prized for their purity and hue comprise the biggest earner in the country’s total sales of precious stones, which include sapphires, pearls and jades. One of the country’s most viable industries that also includes agricultural goods, textiles, wood products, construction materials, metals, oil and natural gas, the trade in precious stones continues to flourish. In fact, several years ago, during the annual gem show traditionally held in Yangon, a total of 2,380 gem merchants, including 1,484 of 423 companies from 16 countries and regions, coughed up US$101 million in gem purchases, which at the time broke the record held since the show

… A Gem of an Industry

was introduced almost 50 years ago. It was the conduct of these gem shows, officially dubbed the “Myanmar Gem Trade and Pearl Emporium”, which has earned for Myanmar international renown as “Ruby Land”.

Needless to say, Myanmar’s previous military rulers depended on sales of precious stones to fund their regime; they had to release their stranglehold on the industry to ensure a continuous inflow of funds. In the early 1980s, the government started taking great strides towards enhancing gem and jewellery sales by opening up its activities through purchases of gems and jewellery from private dealers or owners at acceptable prices. Then, it encouraged privatisation by allowing private owners to exhibit their gems for sale at the annual emporiums, and those who attained substantial sales success were permitted to open foreign currency accounts with the banks. Also, it started quality inspections of private shops and allowed those who passed to sell their items in foreign currencies. Finally, gem trading centres were licensed to openly sell jewellery with 15 percent tax paid to the government. Private trading and export of gems has thus become simple and legal for the first time in

By Malcolm Macpherson

www.myanmarinsider.com17insider businessover 30 years. To drive the gem mining industry towards greater growth, Myanmar enacted the “New Gemstone Law” in 1995, which allowed local entrepreneurs to mine, produce, transport and sell finished gemstone and manufactured jewellery at home and abroad. Since 2000, the government has undertaken joint ventures with ten private companies in the mining of gems and jade on a profit sharing basis.

Myanmar has three famous gem lands well known for producing the country’s nine gems - ruby, diamond, cat’s eye, emerald, topaz, pearl, sapphire, coral and a variety of garnet tinged with yellow. One is at Mongshu in Shan State and another at Phakant in Kachin State. But, the temple of the very rare ko-thwe rubies is at Mogok, a most scenic area consisting of heavily petrified hills rising to a height of 2,347 metres above sea level. Mogok is within the district hosting the nation’s second largest city - Mandalay - Upper Myanmar’s economic hub and the centre of Burmese culture, the fabled city that inspired classic poetry by Rudyard Kipling, books and essays by George Orwell and songs by Frank Sinatra, the Beatles’ George Harrison, Robbie Williams and the Eagles, to

name a few. Just as Mandalay is legendary, so is Mogok’s ko-thwe ruby.

Gemological circles all around the world choose Myanmar as the one exotic country with the world’s choicest coloured gemstones, “Burmese” rubies are the standard by which any ruby is judged, as the case is with top quality sapphires, spinels, peridots and jadeite jades. Mogok rubies are readily regarded as being in a class of their own. As one gemologist described it, “The best Mogok stones actually glow red and appear as though Mother Nature brushed a broad swath of fluorescent red paint across the face of the stone. This is the carbuncle of the ancients, a term derived from the glowing embers of a fire… The colour most coveted today is that akin to a red traffic signal or stoplight. It is a glowing red colour, due to the strong red fluorescence of Burmese rubies, and is unequalled elsewhere in the world of gemstones… It must be stressed that the true pigeon’s blood red is extremely rare, more a colour of the mind than the material world. One Burmese trader expressed it best when he said: “Asking to see the pigeon’s blood is like asking to see the face of God.”

Old Problems

Be that as it may, Mogok’s ko-thwe rubies, alongside Myanmar’s prized coloured gemstones, had faced the threat of trade disruption from international powers. The US had branded Myanmar an “outpost of tyranny”, lambasted the ruling military junta for its “extremely poor human rights record”, and accused the military of murder, rape and other torture. Three of its presidents shunned Myanmar’s dictatorship, and then President Bush signed a law in 2003 banning the import of Myanmar products. On the other hand, some gem dealer members of the International Coloured Gemstone Association criticised the US sanctions as “depriving Myanmar’s citizens of economic growth needed to fuel an eventual democracy”, called the policy “duplicitous because it punishes Myanmar while the US runs trade deficits with more repressive regimes, such as China’s.” Meanwhile, neighbours in the Association of Southeast Asian Nations have advised Myanmar it risks putting the group’s cohesion on the line if political reforms aren’t made. Bulgari,

Tiffany and Cartier are among US and European jewellery companies that refused to import Myanmar gems based on reports of deplorable working conditions in the mines, while Human Rights Watch supported a complete ban on the purchase of Burmese gems based on these reports and because nearly all of the profits went to the ruling junta.

There is hope, though, at the end of long, dark Myanmar tunnel. Myanmar leaders showed willingness to open diplomatic talks with the US to resolve the issues brought up by Americans, especially in regard to political prisoners and human rights. It will be such a waste to stop the treasures of Myanmar drawing to them the businessmen of modern times, as it did the merchants of Venice centuries ago. To let this gem of an industry reach full potential will require the further opening up of the economy, a vital factor in the development of Myanmar in the years to come. Then, the world can truly cherish the magical experience of once more treading the open road to enchanting Mandalay.

Manufacturing could start at Thilawa by mid 2015

Manufacturing operations could get underway at the Thilawa Special Economic Zone as early as next year.

About 40 foreign manufacturers have expressed interest in setting up operations at the Thilawa project, which is located close to Yangon and is being developed with Japanese assistance.

Set Aung, chairman of the Thilawa committee, said that potential investors were involved in industries including garments, food, electronic appliances, toiletries and car parts.

Business News in Brief

Aeon to begin Myanmar operations

Japan’s biggest supermarket chain, Aeon, will become the first major Japanese retailer to begin operations in Myanmar.

The Japanese group is expected to open a representative office within the next few months, with plans to open a shopping mall in Yangon.

Aeon already has operations China, Malaysia, Thailand and Vietnam.

Two dozen new hotels granted licenses

Myanmar’s government has announced that 24 new hotels have been granted licenses to begin operations in Myanmar, looking to provide a sufficient amount of hotel rooms as the country continues to attract record numbers.

The announcement, made by the Ministry of Hotels and Tourism, said that the new hotels would provide almost 1,000 rooms around the country, but has not yet revealed the hotels’ locations.

Myanmar attracted 2 million foreign visitors in 2013, the first time it has recorded such numbers.

Baker & McKenzie opens Myanmar office

The world’s second largest law firm Baker & McKenzie has opened its first office in Myanmar to serve the increasing number of foreign companies looking to move into the previously isolated nation.

The office, which will be the company’s 16th in the Asia Pacific region, will be headed by Chris Hughes, a former Sydney based partner, and will be made up of seven lawyers, five of which are from Myanmar.

US firm to bring power to 6 million people in Myanmar

US based energy firm APR Energy has signed a contract with the Myanmar government to provide energy to 6 million people in a country where less than 30 percent of the population has regular electricity.

The company announced that it will manufacture a natural gas fuelled power plant generating between 82 and 100 megawatts, and work will begin on the project later this year.

State run entities to finance themselves

The country’s state owned enterprises will no longer be funded by the government and will be held accountable for their own expenses and funding as of the start of the 2013-2014 fiscal year, according to Minister for Finance U Win Shein, who was speaking during a parliamentary session in the capital Nay Pyi Taw.

Maersk to open Myanmar operations

Maersk Line, the world’s largest shipping line, will begin operations within Myanmar after it was announced that the company had been granted a permanent license.

“We are pleased to be granted a permanent business license to operate our own agency in Myanmar. Since the EU and the US eased sanctions in 2012, we have experienced a surge in interest in sourcing goods to and from Myanmar”, the company said in a statement.

By Isaac Malone

By Aung Ko Ko Chit

Special Economic Zones

Like many things in Myanmar, the rumour mill has spun wildly as to why the current

government decided to implement the much publicised economic reforms that have made the country the new darling of Southeast Asia.

Whether it was concern over a too close relationship with China or a genuine desire to improve the lives of its country’s citizens, it is clear that, whatever its initial intentions, the government has seen the benefits of forging closer ties with economic powerhouses like the US, the EU and even Japan, all who see huge potential in Myanmar’s strategic location on the cusp of Southeast Asia, as well as rich natural resources and an abundant - and cheap - workforce.

Those countries, and many others, have pumped much needed foreign investment into a previously stagnant economy, something that has been aided by the government encouraging foreign investment by implementing new laws and inviting business delegations from the world over.

One area that is seen as particularly key in proving the country can attract future foreign investment is in the area of Special Economic Zones.

In its simplest form, a Special Economic Zone (SEZ) is a geographic area that makes laws and practices favourable to the production and export of products, in turn creating new jobs, usually in the dozens of thousands, and pushing the economy further forward.

While other areas are being spokenabout around the country, three keySEZs are currently being implementedwithin Myanmar. In Rakhine State, work has begun on the Kyauk Phyu SEZ, and in the south of the country, Dawei in the Thanintharyi Region, could be key to growing Myanmar’s economy in the future. The third SEZ is that of Thilawa.

In the early days of the reforms, Dawei was seen as the most important SEZ in the country, but that has been beset by major issues from the initial investors and it is now the Thilawa SEZ, located a few hundred miles up the coast from Dawei - and just 20 kilometres from Yangon - that looks likely to be the first major project to go live, with a start date for Phase 1 possible as early as 2015.

Note that it’s had issues of its own to overcome, though. Residents displaced by the project have complained of land grabbing and inadequate compensation by the project’s developers. In January, dozens of the displaced families sent an open letter to the Japan International Cooperation Agency (JICA), which is involved in the project, to tell of their issues with the displacement that has left many without any livelihood in an area where many of the local population are employed in the agricultural sector and practically lost all their assets overnight.

There have been other reports of land grabbing, unpaid compensation and a surge in land prices at both Thilawa and Dawei, an issue intensified by the previous government’s lack of record keeping and complications regarding land ownership.

However, at least on an economic level, Thilawa is seeing much

optimism. When Myanmar signed a Memorandum of Understanding with Japan in 2012 regarding the project, the move was met with scepticism that both countries could provide the necessary funds and infrastructure for the project to go ahead - particularly as Myanmar continues to struggle to update its infrastructure to international standards and implement laws that will make the country a truly attractive place to invest for foreign investors.

Announcements in recent months suggest that things could be moving ahead as planned. In January, the Myanmar government implemented a Special Economic Zone law, which allows for tax exemptions for up to seven years for foreign and local investors, and is expected to allow companies interested in investing in the projects to bypass unnecessary bureaucracy - one major issue for potential foreign investors in Myanmar.

Myanmar’s Port Authority will also upgrade Thilawa Port later this year to make way for a deep sea port. Yoma Strategic Holdings, owned by local behemoth Serge Pun, has already opened Star City, a 135 acre residential housing estate located close to the Thilawa site which offers 9,000 residential units.

It was also revealed recently that the Myanmar consortium of the project, Myanmar Thilawa SEZ Holdings Public Ltd, will sell 2.145 million shares at K10,000, in order to raise an expected US$21 million for a project that is expected to fall in the billion dollar figure.

The Myanmar arm owns 51 percent of the project - 41 by nine Myanmar companies and 10 percent by the government - with the other 49 percent owned by a consortium of Japanese companies.

Thein Sein’s government has found common ground with Japan over the last two years, with Japanese companies gaining key contracts as the country opens up, particularly in the area of infrastructure development.

Japanese giants including Toyota, Marubeni, Toshiba and Panasonic are deepening their footprint in Myanmar - in a range of industries - while JICA is involved in key infrastructure developments in the country, most notably an urban development plan for greater Yangon.

Meanwhile, some criticisms have begun to be levied at Japanese companies involved in projects in Myanmar. Some of the companies involved in the Thilawa project have been accused of side stepping issues like land grabbing and compensation, while JICA and other Japanese agencies are seen in some circles to be reluctant to communicate with local communities and the media.

Despite that, Japanese companies are clearly in a strong position in Myanmar at the moment. While Japanese companies still lie 10th in total foreign investment figures, in the 2012-2013 fiscal, Japanese foreign investment in Myanmar leapt tenfold to US$54 million and, if the two governments can maintain close ties, then it is likely that other key contracts will be rewarded to Japanese companies.

18 www.myanmarinsider.cominsider BUsiness

By Naw Thee Zun

The stalled US$3.6 billion Myitsone Dam saga has left the area in a state of limbo.

Local residents are still in a determined mood to have the project completely shut down in a bid to save their local environment, but the dams Chinese developers are equally determined to have their project restarted. They reportedly lost US$50 million while the project was closed down last year. The project, started in 2011, is still only five percent completed and the continued delays are causing a great deal of tension between the two governments.

It is also fuelling a hot tempered power play between President Thein Sein and opposition leader Aung San Suu Kyi. The government is adamant that the project will not be restarted, but also refuses to totally cancel it. This has prompted the opposition leader to accuse the government of being negligent in its responsibilities to the nation and “not being brave enough” to make a decision on the project. When asked her own views on the project, she

What’s Happening with the Myitsone Dam

Power to the People

Percentage of population without access to electricity

Cambodia

Myanmar

Philippines

Indonesia

Laos

VietnamThailandMalaysia

Singapore

Source: International Energy Agency

60%

51

30

27

22

411

0

declined, just saying “Questions about the project should only be asked to the president”.

The dam’s developer is the state owned China Power Investment, and they believe the dam would greatly improve the quality of life by bringing hydropower to the nation and at the same time bring in US$54 billion in tax payments. Last December, the company made a statement in its CSR report saying that the project would not cause major environmental damage. It would also create in the region of 40,000 local jobs.

Local residents are quoted as saying that the dam would take away fertile farming lands in this predominantly agricultural community. Also, at least 90 percent of the electricity produced would be channeled to China’s Yunan state.

China Power Investment’s managing director, Mr Li Guanghua, was quoted as saying, “We have worked on hydropower projects in 12 countries… but have never faced anything like we have in Myanmar. Without electricity, there can be no development or international investment.”

Thursday the 13th February will go down in history as the day that the EU and the Organisation for Economic

Cooperation and Development (OECD) struck a deal to openly report to each other on your worldwide assets, including all bank accounts, investments, trusts and pensions, etc. The privacy and data protection laws will be waived in almost all cases, in which you will have no say, by the way.

This landmark agreement goes in front of the G20 finance ministers in September of this year for their further agreement and ratification.

If the G20 agrees, then the global nonG20 countries, such as Hong Kong, will concur and comply, as is normal in these matters.

What this means is that, for example, Inland Revenue in the UK do not need your permission to see what’s in your overseas bank accounts, trusts, companies, etc.

We have already seen something similar with the onset of FATCA (Foreign Accounts Tax Compliance Agreements), where information should be reported to Inland Revenue in some cases, but not necessarily on all assets.

This new Auto Information Exchange Agreement (AIEA) is quite odd, given that Canada, Hong Kong, the US and the UK only just reinforced their privacy laws. Don’t you find that quite contrary?

To understand this, we have Mr. Snowden to thank, after his revelations of the nefarious activities of certain “national security agencies”, so the strengthening of privacy laws is perhaps just a political action. However, the ability to breach these privacy laws has at the same time been waived.

How, though, will this new international snooping agreement be implemented? The answer is in the agreement. All 11 pages of it.

It simply says that if a country’s financial regulator asks a bank or financial institution (even a trust) what value and what precisely is owned by you, that institution will be obliged by law to hand over the information to the local regulator.

Then what happens is that the regulator will store that information on a database, so that if a foreign government simply requested that information, then it can and will be readily

handed over without your permission. No questions allowed about that bit, and that’s the whole intent of this new s/b AIEA.

If I was a betting man, and I am, I would take a wild guess at what’s going to happen next, which possibly will be the implementation of a US style global taxation strategy coming from the OECD countries and the G20.

No More PrivacyBy Simon Harrall

This last bit is a natural extension of the s/b AIEA, it would seem.

When does the s/b AIEA come into force? Possibly at the end of 2015. It’s going to be a tough task administratively, but be certain that it’s going to happen.

The “Under The Mattress Banking Corporation” may be launched soon after this.

19 www.myanmarinsider.cominsider BUsiness

Simon Harrall is Managing Director of Global Fiduciary Solutions Limited in Hong Kong

The Future of Food and the Business Solution to Malnutrition in Myanmar

20 www.myanmarinsider.cominsider BUsiness

By Rick Chase

Food Percent of protein

Rice 80%

Wheat 12%

Legumes 23%

Soy 40%

Milk 4%

Chicken 20%

Meat 18%

Eggs 13%

BackgroundIn Myanmar, the future of food is soy.

For Myanmar to achieve food security, it must strategically develop soya bean agriculture with improved inputs, and for Myanmar to become dairy independent, it must intentionally develop its soy dairy industry with new technology and infrastructure. To find sustainable solutions to protein malnutrition, it must judiciously seize the current opportunity to develop its distribution of soy products and encourage market expansion of value added products.

Soy is a super food that has been cultivated since the dawn of civilisation. Indeed, it is indicative of a civilised society. Soy food products are consumed all around the world and, from culture to culture, it is contextualised to create indigenous recipes, products and flavours. As such, it is a global and ubiquitous food second only to rice in terms of its universality, and first in terms of imaginative uses and versatility. Soy can be made into everything from automobile parts to nutritious dairy products, from wholesome snacks and health foods to meat alternatives for vegetarians. It is used to fuel cars and to both treat and prevent malnutrition related diseases, such as heart disease, diabetes and certain cancers. No other food on earth can claim such efficacy to human needs with the added benefit of being ethical and environmentally beneficial. When land once used to sustain cows is converted to soy cultivation, protein yields increase nearly tenfold. Moreover, food, such as beef, which once contributed more greenhouse causing emissions than automobiles, is replaced with food whose cultivation is actually removes carbon and requires nearly ten times less water, as well as other inputs.

History of Soy in MyanmarAlthough the scope of our current research

did not extend to the origin of soya bean agriculture and consumption in Myanmar, it is probable that soya bean has been cultivated in Myanmar for nearly as long as it has been in China, thus making soya a truly native crop to Myanmar. It is not unrealistic to assume that the food of the original settlers to Myanmar (who originated from the Yellow River and Mongolia) including the Karens, the Shans, the Kachins and the Pa’o people, was similar to that of the Chinese people who had been cultivating soya beans since as early as 2000BC. Soy is a staple in the diet of Shans and Pa’o and can be found in just about every Shan dish. New value added soy products are constantly appearing on the grocery shelves and research is being conducted into other uses for soy in Myanmar.

Current Market ConditionsIn spite of all of soy’s potential for the

Myanmar economy, environment and nutrition, the soy industry is struggling in Myanmar. In fact, the entire supply chain is embattled by low yields, global and regional market forces, low investment, foreign competition, substandard inputs and farming methodologies, lack of education, governmental indifference, disinformation and a lack of consumer awareness, among other things. If any interventions exist at all from NGOs or foreign investors, they are unfortunately inadequate, incidental and/or haphazard, despite the many needs and opportunities in this sector.

Indeed, nutritional and agricultural interventions that do occur on the part of NGOs and humanitarian organisations are generally focused in the area of carbohydrates production and consumption, but the issue of malnutrition in Myanmar is related more to a lack of protein than a lack of carbohydrates; rice and fruits and vegetables are in large supply.

Moreover, programmes that focus on protein nutrition are usually focused on livestock and fish. To provide the amount of protein needed by the majority of Myanmar’s population of 60 million, simply increasing the meat supply will prove to be unsustainable. The input to output ratio are poor. Most of what a cow or pig consumes is to sustain itself and livestock require land that could be used to cultivate soy (refer to pie chart) and they produce waste that can contaminate the water supply.

Also, many of Myanmar’s Buddhists are vegetarians, at least for the period of Lent from April to September. Soy is the best vegetable source of protein (and better than most meats) for providing all the essential amino acids required for human health (refer to chart).

My experience in the Myanmar soy industry over the past several years has also revealed that there is great cause for optimism for the future of the soy industry and that Myanmar might become the ASEAN Brazil of soy production. The latest statistics show that 316,000 hectares are being used to cultivate soya bean in Myanmar, up from about 114,000 hectares in 2000 to 2001. This is phenomenal growth with minimal investment and incentives. Current yields are at about 16 bushels per acre and harvest losses are as high as 45 percent due to a lack of technology and other inputs, but with an intentional investment strategy, better inputs, training and other incentives, Myanmar could rapidly transform itself from a net importer of value added soy foods to a net exporter, not only of high quality raw soya bean, but also a diversity of innovative value added products, as well as a bustling domestic consumer of all things soy. The Myanmar ministry of agriculture is showing signs of a growing interest in developing its soy cultivation and there was great support from our contacts for this research.

Moreover, growers are showing tremendous resilience to market forces and deep desire to improve their yields through improved inputs. Growers associations and middlemen are tenacious in their desire to improve their ability to compete with Thai and Chinese growers and to develop new markets and uses for soy. Entrepreneurs across the country are researching and innovating and trying out new products (such as the made in Myanmar Vitagoat soy milk processing machine) and markets for domestic use. Our assertion is that, if even a small portion of the investment that is put into rice were put into the soy industry, we could create an agricultural and market revolution that will positively and significantly impact GDP and create food security, sustainability, livelihoods and environmental benefits.

Major StakeholdersOver the past several years, I have interviewed

people from the ministry of agriculture, educators at the University of Agriculture, food processing engineers, growers associations in four states and divisions (including Shan and Irrawaddy), growers, middlemen, merchants, NGOs and consumers. One thing we discovered that was

clear and univocal was that Myanmar must strengthen its soy industry through investment and technological input, as well as through education and marketing. Every single stakeholder along the value chain and in the academic forum believed that it can be done and that it can be exceedingly successful and beneficial to the nation as a whole.

SOYBEAN DISTRIBUTION IN MYANMAR (2000-2001)

MAP OF MYANMAR

Project Finance: the importance of a CRD By Jaime Casanova, Legal Adviser DFDL Myanmar

www.myanmarinsider.com21insider BUsiness

It is not the first, nor the second, nor the third transaction in Myanmar that I have been involved where document registration related

matters have come up and one of the parties who is involved in such transaction does not see the importance of ensuring that any such documents are properly registered with the relevant authorities, or does not want to go through the hassle that such registration implies. And, in all honesty, their position is quite understandable from a business standpoint - the process is burdensome and many may end up exhausted walking down that road, notwithstanding the fact that substantial delays derive from undergoing such an exercise and this may exasperate even the most patient businessman who just wants to see the transactions materialised and finished. Yet, its importance is extreme, if not essential.

To put the matter in perspective, Section 109 of the Myanmar Companies Act, 1914 (“MC Act”) provides that “every mortgage or charge created by a company and being either: (i) a mortgage or charge for the purpose of securing any issue of debentures; (ii) a mortgage or charge on uncalled share capital of the company; (iii) a mortgage or charge on any immovable property wherever situated or any interest therein; (iv) a mortgage or charge on any book debts of the company; (v) a mortgage or charge, not being a pledge on any movable property of the company except stock-in-trade, or (vi) a floating charge on the undertaking or property of the company, shall be void against the liquidator and any creditor of the company unless the prescribed particulars of the mortgage or charge, together with the instrument by which the mortgage or charge is created or evidenced (…) are filed with the Registrar for registration within 21 days after the date of its creation (….)”.

At first sight, it would appear that compliance with Section 109 of the MC Act would exist upon the filing of the required documentation with the Registrar of the Companies Registration Office (CRO), but unfortunately that impression is not completely accurate and the creation of securities over movable and immovable properties requires at least one or two more twits. Indeed, as provided in Section 109 of the MC Act, the act of filing is not sufficient, per se, and applicants should seek registration of every mortgage or charge. Undeniably, Section 109 of the MC Act should be read together with Section 114 of the MC Act.

Section 114 of the MC Act provides that “the Registrar shall give a certificate under his hand of the registration of any mortgage or charge registered in pursuance of section 109, stating the amount thereby secured, and the certificate shall be conclusive evidence that the requirements of section 109 to 112 as to registration have been complied with” and, as it may be inferred, this is the step where many problems arise. Indeed, Section 114 of the MC Act requires the Registrar of the CRO to provide a certificate that would directly identify him or her, and would evidence that the mortgage or charge has been registered and is compliant with the laws of Myanmar - such certificate being the so called certificate of registration document (CRD). In this context,

considering that Myanmar is still in its early stages of development and that sometimes there is a gap between the letter of the law and the current practice, it is understandable that the Registrar of the CRO would not want to put him- or herself at an unnecessary risk. Yet, it is our obligation, as attorneys to our clients, to seek their maximum protection and to safeguard, as much as possible, that any such security may be enforceable down the line. Thus, obtaining such registration ends up being the key document to a somewhat long process, which typically requires liaising with the relevant authorities in order to get the deal through - and, even when doing, as with many things in life, there is never a guarantee of success.

Having said that, it cannot be forgotten that the ability of foreign companies in Myanmar to secure immovable property, or foreign banks located outside Myanmar to take security of immovable property for their loans or credit facilities, is limited. There is a law entitled The Transfer of Immovable Property Restriction Law, 1987, under which the following acts are prohibited: (i) transfer of any immovable property by any person to a foreigner or a company owned by a foreigner by way of sale, purchase, gift, acceptance of a gift, mortgage, acceptance of a mortgage, exchange or transfer, and acceptance of a transfer by any other means,

and (ii) transfer of any immovable property by any foreigner or a company owned by a foreigner by way of sale, purchase, gift, acceptance of a gift, mortgage, acceptance of a mortgage, exchange or transfer, and acceptance of a transfer by any other means. A foreign lender or borrower is, therefore, in principle, prohibited to take or make secured loans by way of transfer or sale and mortgage of immovable property.

However, if the project can be embedded under any of the categories that are promoted by the Myanmar Government under the Foreign Investment Law, 2012 (FIL), and many of the projects that require financing could well be, the said restriction on immovable property may be easier to overcome. Certainly, under Section 64 of the Rules to the FIL, mortgages may be allowed provided that prior consent has been obtained from the Myanmar Investment Commission (MIC), which, in turn, will scrutinise the request and decide thereupon. Thus, based on the particulars of each specific case, before proceeding straight to the Registrar of the CRO, it may be necessary to liaise with MIC and obtain their prior approval. Fortunately, an approval from MIC should help to expedite the registration of a mortgage over immovable property by the Registrar of the CRO, so it may end up being beneficial in the big scheme of the project finance. Yet, once again, there is never a guarantee of success.

There is, however, one more hurdle to be crossed. Section 112 of the MC Act provides that “the Registrar shall keep, with respect to each company, a register in the prescribed form of all mortgages and charges created by the company after the commencement of this Act and requiring registration under section 109, and shall, no payment of the prescribed fee, enter in the register, with respect to every such mortgage or charge, the date of creation, the amount secured by it, short particulars of the property mortgaged or charged, and the names of the mortgagees or persons entitled to the charge”, which would be “open to inspection by any person on payment of the prescribed fee”. Unfortunately, such a register is not fully “operating” as of the date of this writing, and there is no clear date as to when such a scenario may change. As with almost everything in Myanmar, it could be a matter of days or, most likely, it could be a matter of months, or even years - but it will happen eventually. Fortunately, some of us are currently working on this issue. Until then, if required, it is extremely necessary and prudent to include the relevant representations, warranties, covenants and undertakings in the relevant sale and purchase agreements in regards to existence or inexistence of mortgages, or charges, over the assets of a company. Be advised.

22 www.myanmarinsider.cominsider travelMYANMAR’S RAILWAY - CONNECTING A NATIONPart one of a two part feature

By Malcolm Macpherson

Dusk settling over passenger carriages in

the sidings at Yangon Central Station

Sagaing Hill viewed from across the Ayeyarwady RiverYangon Central Railway Station

The state owned Myanmar Railways (MR) first came into being in 1896, when the British consolidated and combined

all previous private railway construction and ownership into a single entity to form a state owned public undertaking, which from 1928 until 1989 was known as Burma Railways until the name was changed to the present Myanmar Railways. The network consists of a 1-metre gauge railway with main lines generally running north to south and branch lines from east to west.

Myanmar Railways GatewayLocated in downtown Yangon sits Myanmar’s

largest railway station, Yangon Central; an imposing building that is the gateway to the Myanmar Railways network that currently consists of over 5,400 kilometres of track. The first Yangon Central Railway Station, built by the British in 1877, was destroyed in 1943 during WWII. The present structure was completed in 1954; its prominent feature is its indigenous multi tiered roofs (known as pyatthat). The station has been a designated landmark building since 1996. It was designed by prominent Myanmarese architect and engineer Sithu U Tin, who was renowned for fusing features of Myanmarese and Western elements. Yangon’s High School No.2 Dagon and Yangon City Hall are good examples of his work where he has used this design process.

Running through the station is a double track circular railway that encompasses Yangon. Operated by MR, the system comprises of a 39-station loop system covering 45.9 kilometres, which takes approximately 3 hours to complete. The circular railway has 200 carriages and its trains circle the city 22 times a day, connecting satellite towns and suburban areas to the central part of Yangon; between 100,000 to 150,000 tickets are sold daily.

An Unusual Tourist AttractionLooking out from a carriage window while

travelling by train in Myanmar can be compared to watching a constant street theatre, providing views of every form and style of life, some of which have remained unchanged for many years. Amongst these glimpses of a bygone era that has disappeared in most countries is the spectacle of working steam locomotives; belching smoke, with hissing pistons beating out a rhythm as they push the huge driving wheels, these mechanical beasts driven by fire and steam still hold a fascination to many.

The sight of steam locomotives in a working environment, although not yet extinct, is becoming an ever increasing rarity throughout the world. In Myanmar there remain some 40 steam locomotives still in service, most of which are employed hauling freight. Despite the age of these locomotives, the MR engine works in the Yangon suburb of Insein keeps them running. The engineers at these works are experts in their trade; if a part on these ageing locomotives is broken beyond repair, their skill is such that they will fabricate a replacement in the workshop.

Repair and maintenance is an ongoing operation, and with three to four of these locomotives being completely overhauled each year, the future use of steam does not appear to be under immediate threat, enabling the country to continue providing a somewhat unusual tourist attraction, much to the pleasure of the many steam enthusiasts who come from all over the world. There are specialist companies in Myanmar who arrange tours to visit the Insein engine works and also negotiate with MR for the charter of steam locomotives for hauling special excursion trains for transporting these tourist groups from Yangon to various destinations across the country.

Out of YangonThe British first introduced rail transport

to Myanmar in 1877, with the opening of 262 kilometres of track running northwest from Yangon to Pyay, a town on the Ayeyarwady (Irrawaddy) River, which was established by the British Irrawaddy Flotilla Company (IFC) as a transhipment point for cargo, mail and passengers (especially British soldiers) between Upper and Lower Burma. The IFC grew into the largest fleet of river boats in the world, with over 600 vessels carrying some 9-million passengers a year, and was indispensable for carrying supplies

and heavy equipment to the oil fields up river at Chauk and Yenangyaung.

Kyaukpadaung DiversionLeaving Pyay, the line continues northwards through the river port town of Aunglan on the Ayeyarwady, afterwards calling at Kyaukpadaung, which is the main access point for Mount Popa, an extinct volcano a short distance from Taung Kalat, a sheer sided piece of volcanic rock that rises 737 metres above sea level. The Buddhist monastery at its summit can be reached by climbing a stairway consisting of 777 steps carved out of the rock. Due to the volcanic ash, the soil is extremely fertile, resulting in the surrounding area providing an ideal habitat for the proliferation of flowering plants, trees, shrubs and herbs; prominent amongst this fauna are Macaque monkeys, whose presence has become an additional tourist attraction, and Taung Kalat is now a designated nature reserve and national park.

Mount Popa is a solitary conical peak 1,518 metres above sea level, the inside contains a 610 metre wide caldera that drops to a depth of 914 metres so that the mountain, when viewed from different directions, appears to take different forms, giving the illusion of having more than one peak. Although Mount Popa is a tourist attraction, with numerous temples and religious relics, it is a significant place for Myanmarese pilgrims, many of whom walk the 16 kilometres from Kyaukpadaung to climb the mountain every year, particularly during lunar festivals and in April for the Myanmar New Year (Thingyan) festival.

There are many Myanmarese myths about the mountain stemming from ancient times, when it was believed that victory would be guaranteed to any army that assembled on its slopes. Today, by linking the cultural identification of life and prosperity with the mountain, that belief is translated to one of good luck and happiness, which can be achieved by such a visit. This exemplifies that Myanmarese people strongly retain ancient traditions in their daily life; they travel great distances to assure their good luck for the coming years by visiting Mount Popa, which hosts an immense festival on its summit during the annual Thingyan water festival that celebrates the Myanmar New Year.

BaganThe train journey continues to Bagan on

the banks of the Ayeyarwady River, where 800

year old temples and stupas stretch across a 42 square kilometre plain. King Anawratha unified the regions that would later constitute modern Myanmar under Theravāda Buddhism (the oldest surviving form and the closest to the earliest traditions of Buddhism, which today is still followed by 90 percent of Myanmar’s total population), making Bagan his central powerbase. From the 9th to the 13th centuries, it is estimated that 13,000 Buddhist temples, pagodas and stupas stood on the Bagan plains; Marco Polo described Bagan as “…a gilded city alive with tinkling bells and the swishing sound of monks robes.” In 1287, this golden age came to a close when the Kingdom was invaded and sacked by the Mongols, the monasteries were plundered, and its population was reduced to the size of a village that remained amongst the ruins of a once large city.

Approximately 2,200 temples and other religious buildings survived the Mongol onslaught and remain today, albeit in various states of disrepair; some of the larger temples are still well maintained, but a lot of the lesser religious buildings are overgrown with vegetation and have become tumbledown relics. However, all sites are considered sacred. The shape and construction of each is highly significant in Buddhism, with all components having a spiritual meaning. Being home to the largest and densest concentration of Buddhist temples, pagodas, stupas, relics and ruins in the world today, many of which date to the 11th and 12th centuries, Bagan remains unique.

From Bagan, the train travels to the Ayeyarwady River port of Myingyan, an important cotton trading centre with cotton ginning and spinning mill operations. It is also the head of a branch line that travels east, eventually connecting to Thazi, south of Mandalay. This branch line passes through Meiktila, which, due to its central strategic position, has a military air base that is home to the Myanmar Air Force Central Command, and also the Myanmar Aerospace Engineering University, making the city the country’s aeronautical engineering centre. After Myingyan, the journey ends upon the train’s arrival in Mandalay. Although this route that began in Yangon along the first railway track laid in Myanmar, it was another line out of Yangon that started seven years later that would be the first to reach Mandalay.

Part One of Two

and endangered wildlife. The Ministry of Forestry, which manages the site, collaborates with the UK based Botanic Gardens Conservation International to conserve the indigenous orchids in their natural habitat.

Not surprisingly, Pyin Oo Lwin is the centre of the country’s flower production; chrysanthemum, aster and gladiolus are grown and transported to every corner of Myanmar throughout the year. The town and surrounding areas are one of the country’s major supply sources for a large variety of high quality vegetables, deciduous fruits and strawberries. It also has well established local industries specialising in producing damson wine, together with fruit preserves and jams, and has recently become the main centre of Myanmar’s rapidly growing coffee industry, processing coffee beans for country wide distribution and a growing export market.

When George Orwell first visited Pyin Oo Lwin in the 1920s, arriving by train from Mandalay he wrote “…you step into a different hemisphere. Suddenly you are breathing cool sweet air that might be that of the countryside in England, and all around you are green grass, bracken, fir-trees, and hill-women with pink cheeks selling baskets of strawberries.” Today, the town still exudes a similar charm, and even though Orwell’s words were written over 80 years ago, they remain an apt description in part until this day.

Another British writer, Norman Lewis, deserving of far greater public recognition than he received, was an influential journalist and prolific author who, although having written 15 excellent novels, is best known for his travel writing. Fellow British writer, Graham Greene, who in his day enjoyed both serious worldwide literary acclaim and widespread popularity, described Lewis as one of the best writers of the 20th century. Lewis travelled around Myanmar at the beginning of the 1950s, compiling volumes about his experiences and, despite this being a time when the country was undergoing massive internal upheaval and unrest, he documented the overwhelming friendliness and kindness shown to him by the Myanmarese people, describing Pyin Oo Lwin as, “a simple blueprint for Utopia.” His book, Golden Earth, became an overnight bestseller, and, although published in 1952, it is still considered one of the finest travel books about Myanmar ever written.

Gokteik Viaduct and LashioContinuing by train from Pyin Oo Lwin on the scenic trip to

Lashio, and some 100 kilometres out of Mandalay, the line passes over the Gokteik Viaduct, which, when completed in 1900, was the largest railway trestle bridge in the world, stretching 689 metres from end to end. It is also Myanmar’s highest bridge; at its tallest point it stands 102 metres above the floor of the gorge that it spans and provides train passengers with stunning views of the surrounding countryside. The line terminates at Lashio, in Shan State, 286 kilometres northeast of Mandalay; this large sprawling market town straggles up a gently sloping valley that is ringed by small peaked ridges, abrupt hillocks and terraced vegetable plots.

Lashio played a pivotal role in WWII. It was the starting point of the old Burma Road, which was a critical route for war supplies into China for Chiang Kai-Shek’s Kuomintang army before the town fell to the invading Japanese in 1942; it was finally liberated by the Allies in 1945. The historic Burma Road forms part of the present day highway, rebuilt and upgraded for heavy traffic that links Lashio with the border town of Muse, which is the entry point into China through Yunnan Province.

23 www.myanmarinsider.cominsider travel

(Don’t forget to check back in next month for part two of this two part feature)

The old Ava Bridge -– the rail link across the Ayeyarwady River between Sagaing and Mandalay Taung Kalat Monastery – Mandalay Region

Yangon to MandalayIn 1884, a 267 kilometre line was opened, running alongside

the Sittaung River from Yangon to Taungoo via Bago. Taungoo is known for its Areca Palms that grow throughout the city. It also has its own circular railway that serves its various outlying districts. During WWII the British Royal Air Force built an airfield north of the city that served as a base for training and support of the 1st American Volunteer Group nicknamed the “Flying Tigers”.

On the 6th of November, 2005, the city of Yangon lost its status as Myanmar’s capital city when it was moved approximately 320 kilometres north to an area west of Pyinmana. The name of the nation’s new capital, Naypyidaw, was officially announced on the 27th of March, 2006, which is Myanmar’s Armed Forces Day. The move was necessitated by the old capital having become too congested and crowded with little room for future expansion of government offices, and which resulted in this railway track receiving an extension when the station of Naypyidaw was opened in 2009. Today, the new capital is one of the world’s fastest growing cities and is presently Myanmar’s third largest behind Yangon and Mandalay, which are now commonly and respectively referred to as the nation’s commercial and cultural cites.

MandalayIn 1885, after further annexation of the country by the

British, the line from Taungoo was extended to Mandalay in 1889. Mandalay, the second largest city in Myanmar, was the country’s royal capital during the reign of Thibaw Min, who became the last king of the Konbaung Dynasty and the last monarch in Myanmar’s history to date. Located 716 kilometres north of Yangon on the east bank of the Ayeyarwady River, Mandalay is the economic, commercial, medical and educational hub of Upper Myanmar, and is considered the centre of Myanmarese culture. Mandalay’s railway station is one of the country’s largest; in addition to being the terminus of the main line from Yangon, it is also the starting point for many branch lines serving some remote and unique destinations.

Amongst native English speakers, the name Mandalay invariably invokes memories of Rudyard Kipling’s famous poem of that name, which immortalised both the mighty Ayeyarwady (Irrawaddy) River, The Road to Mandalay, and the IFC, The Old Flotilla, with its’ huge fleet of paddle steamers regularly traversing the river, taking British troops between Mandalay and Yangon (Rangoon as it was then), on a 700 kilometre trip each way, which, with the railway following the path of the Sittaung River, remained relevant and useful well into the 20th century. In addition to Kipling, Mandalay has other connections with British literature; it was one of the places where Eric Arthur Blair, who would go on to achieve fame writing under his pen name George Orwell, was stationed when serving in the Indian Imperial Police, and John Masters, who, after retiring from the military with the rank of Lieutenant Colonel, became a best selling author. In addition to his novels, he also wrote an autobiographical trilogy, the second part of which, entitled The Road Past Mandalay, dealt with his experiences in Myanmar during WWII while serving in the British Army.

Pyin Oo LwinThe year 1903 saw the completion of one of Mandalay’s many

branch lines; this one provided a link from Mandalay to Lashio

in the northeast. En route, some 68 kilometres out of Mandalay and situated in the Shan Highlands, is Pyin Oo Lwin; established as a hill station during colonial times, it became Myanmar’s summer capital, 1,070 metres above sea level, its pleasant climate provides a welcome escape from Yangon’s heat and high humidity during the country’s hot season.

Despite the march of time, with British rule in Myanmar having ended 66 years ago, the town has retained a curious anglicised air; emphasised by the numerous red brick English style half timbered houses standing in gardens of flowering coloured blooms the year round. Pyin Oo Lwin is situated in a land of rich red soil, rolling hills with oak trees and pine woods, roads lined with eucalyptus trees and walls covered in bougainvillea.

In the town centre stands a clock tower erected in commemoration of the Silver Jubilee of Britain’s King George V (in 1934). It contains a four faced clock made by an English company established in 1844, which is still producing and maintaining similar large time pieces today. Before the striking of each hour, the clock chimes 16 notes, the sound of which is said to resemble the 20 note chime of the clock tower at the north end of the Houses of Parliament in London, commonly referred to as “Big Ben”. Another feature of Pyin Oo Lwin is its unique taxi service provided by small enclosed horse drawn carriages known as gharries; originally imported from India during the days of colonial rule, these brightly painted vehicles, resembling miniature 19th century stagecoaches, offer an alternative means of local transport that adds to the overall leisurely pace and ambience of the town.

Pyin Oo Lwin has a thriving Eurasian community, comprising mainly of Anglo Myanmarese and Anglo Indians, with approximately 10,000 Indian and 8,000 Gurkha inhabitants who settled there during the time of British rule when they established various military schools open to all ethnicities. The Gurkhas, who have a proud tradition for distinguished military service, were an effective part of the British Army (and remain so today) that was fighting in Myanmar during WWII, after which, most of them then joined Myanmar’s military once the country had gained its independence from Britain.

The town’s military connections continue to this day, being home to the country’s most prestigious military academy, the Defence Services Academy, which has a reputation for producing many of Myanmar’s top military officers, and the Defence Services Institute, the military’s premier technological establishment; one of the country’s most selective universities, its graduates are commissioned as Engineering Officers into one of the three branches of the Myanmar Armed Forces.

Pyin Oo Lwin’s Sericulture Research Centre, in addition to rearing silkworms, specialises in reeling silk from the cocoons and conducts intensive planting and harvesting of mulberry trees, the leaves of which are used for feeding the silk worms, and handmade paper is produced from the trees’ bark. The town has a large research centre for indigenous medicinal plants and has one of the country’s few pharmaceutical production facilities.

The National Botanical Gardens, now renamed the National Kandawgyi Gardens, is another unique feature of Pyin Oo Lwin. Established in 1915, the gardens (originally modelled after Kew Gardens in London) are surrounded by a protected forest area. The immaculately landscaped gardens cover some 176 hectares containing 514 species of indigenous trees and 74 foreign species, 80 species of bamboo, 75 species of crotons (flowering shrubs), plus 300 species of indigenous orchids, rose species and 6 species of land lily. The 28 hectare lake attracts a variety of waterfowl and the protected forest area surrounding the gardens is home to numerous species of birds

Myanmar: A Gold Rush in the Making?

By Art Villasanta

24 www.myanmarinsider.cominsider BUsiness

The gold glinting in investors’ eyes is, of course, the wide range of opportunities to make money in an underdeveloped

country that has been shut off from the rest of the world since the 1960s by a repressive military junta. Whatever the real reasons for relaxing its grip on power, the junta in 2010 allowed for the democratisation of the political process and the implementation of reforms to boost Myanmar’s economic development.

It’s these reforms that triggered the mad rush among western and eastern businessmen intending to stake their business claims in Myanmar’s vastly underdeveloped markets. Foreign investments in Myanmar jumped a massive 6,500% from US$300 million in the fiscal year 2009-2010 to US$20 billion in 2010-2011.

The economy is expected to grow 6.5 percent in the fiscal year 2013-2014 (ending March 31, 2014) and is projected by western analysts to improve anywhere from 6.8 percent to 7.8 percent in 2014-2015. Myanmar’s President Thein Sein is even more bullish about his country’s growth this fiscal year: he expects growth to hit 9.1 percent. If achieved, this improvement should make Myanmar Asia’s fastest growing economy in 2014.

Foreign direct investments (FDIs) are on track for a record year. FDI hit US$1.8 billion in the first five months of fiscal year 2013-14, according to the government. This compares with the US$2.7 billion for 2012-13, which was a 42 percent higher than 2011-12.

The government targets a ten percent rise in FDIs for 2014-2015 to some US$3 billion. Presidential Economic Adviser Zaw Oo expects these investments to boost the drive to grow agriculture and tourism. About three quarters of Myanmar’s workforce is in agriculture; a key reason the government is prioritising agricultural development.

The West Invests

Over a dozen US Fortune 500 companies are opening or have opened up shop in Myanmar. Among these are Coca-Cola, Ford, MasterCard, Visa, Caterpillar and General Electric.

Europeans are making their presence felt, too. Norwegian multinational telecommunications company Telenor and Qatari firm Ooredoo (formerly Qatar Telecom) will begin building Myanmar’s first nationwide mobile network.

European oil major Royal Dutch Shell and Norwegian oil and gas giant Statoil are among the more than 60 firms that bid in November 2013 for the right to develop 19 deepwater offshore fields

The East Leads

Impressive as this list of top western companies is, it’s Asia that dominates investments in Myanmar. The Directorate of Investment and Company Administration (DICA), which oversees foreign investments in Myanmar, reported that China, Hong Kong and South Korea were the top three investors in existing enterprises as of October 2013. The trio accounted for 94 percent (US$150.5 billion) of total investments (US$160.4 million).

China’s investments alone came to US$141.11 billion, or 42 percent of the total. Behind China were Hong Kong (US$6.37 billion) and South Korea (US$2.97 billion). The United Kingdom, in fifth place, had investments of US$2.51 billion and was the top western investor.

The UK and France were the only western countries in the top ten. The absence of the US seems to confirm analyst’s observations that US companies remain in a “wait and see” mode. US firms are being held back by uncertainties in Myanmar’s dicey political situation and a lack of real economic progress before the general elections scheduled for 2015.

While Japanese investments did not rank among the top ten, a recent survey by the Japan External Trade Organisation showed that over 80 percent of Japanese firms considering investments in Asia-Oceania see Myanmar as a country in which they want to open up shop in the next two years.

Japanese investments in Myanmar came to US$292.4 million in November 2013,

ranking tenth among foreign investors. Japanese multinationals Mitsubishi, Mitsui & Company and Sumitomo are expanding their presence in Yangon, the country’s former capital and largest city.

In January of 2014, Singapore became Myanmar’s largest foreign investor, said DICA. Singapore’s recent investments have largely been in energy, hotels and tourism and agriculture.

Hong Kong, South Korea and Japan were the next largest investors in January. Their investments focused mainly on the garments, manufacturing and communication sectors, among others. Some 43 percent of total investments in January went to the energy sector.

Prof. Aung Tun Thet, Economic Adviser to President Thein Sein and a member of the President’s National Economic and Social Advisory Council, recently said that western investments were still “very small” and were much slower than expected since the President took office in March 2011. He noted that excessive western caution increases the risk of the west losing out to Asian firms, especially to China, which accounts for over 40 percent of investments.

Anti Chinese Sentiment

China’s investing dominance is even more surprising in view of persistent anti Chinese sentiment among the Myanmarese.

The rise to power of pro democracy icon Aung San Suu Kyi presents a real risk that China will be sidelined in favour of non Chinese investors, especially since she will almost certainly want to contest the presidency in 2015.

Ms. Suu Kyi, however, has downplayed her anti Chinese sentiments, saying she does not “…want to choose between China and the west, because both will be necessary for the development of Myanmar.”

Her antipathy towards China is reciprocated by the Chinese who have, thus far, refused to deal directly with her or her political party, the National League for Democracy (NLD).

Since being set free by the military administration in November of 2010, Ms. Suu Kyi has been on a spate of visits to Myanmar’s neighbours. She has chosen not to visit China, which seems to indicate her frosty relations with the Chinese.

It is also unclear if the Chinese would ever invite her to visit China given her perceived pro western attitudes and lingering Chinese suspicions she will steer Myanmar towards the US if she becomes President.

Observers, however, feel the Chinese have no choice but to deal with her if she becomes President. Without a rapprochement with Ms. Suu Kyi, China stands to lose the influence she has traditionally wielded over Myanmar’s leaders. Such was the grip China had on Myanmar’s administration and on the current government that some Asian countries accused Myanmar of being a Chinese puppet state.

This perception is one Ms. Suu Kyi most likely wants to alter if she becomes President. The uncertainty, as to her assuming power, stems from the immense influence still wielded by the military.

Contrary to public perception, some of the generals that ruled Myanmar for five decades have not slowly faded away. They’ve morphed into the next best thing. They’ve become businessmen.

It’s the stranglehold on the economy wielded by these generals that makes the US government wary of Myanmar. A number of these generals and their cronies are on the US list of “Specially Designated Nationals,” or SDNs.

The US government has blocked the assets of these SDNs and US persons are generally prohibited from dealing with them. These individuals are off limits as business partners for US firms.

As the new economic elite, however, these generals and their cronies tend to dominate the growing economy. There is also the lingering fear the army could stage a coup if any civilian government were to seriously jeopardise its interests.

Not so long ago it was almost impossible to find out any information about Myanmar and even more difficult to visit the country, especially as a foreign journalist.

I was intrigued by different books that I had read about the old capital city, and recalled my mother’s uncle telling me stories when I was very young of his military exploits in Burma. One of my mother’s prized possessions was an old ivory statue of Burmese elephants walking across a bridge that her uncle had brought home with him.

I looked into the procedure of obtaining a visa, which is now quite simple, and decided to take my wife off for a short trip to Yangon via Singapore. There are no direct flights yet from Manila, so it’s either a transit stop in Bangkok, Kuala Lumpur or Singapore. The latter proved better for us, as the flight leaves early in the morning; a couple of hours walking around Singapore’s Changi Airport (easily Asia’s best) and arriving in Yangon just before 4pm local time was ideal.

Although there are over 200 hotels in Yangon, if you like a little bit of modern luxury and comfort, the choice at the moment is still rather limited to not many more than half a dozen. Seeing as I am well past the backpacking era of my life, I plumped for the Traders Hotel, situated in downtown Yangon and just a 30 minute taxi drive from the airport.

I was told by my old friend, the editor of this journal, that traffic in Yangon was equally as bad as in Manila, so I wasn’t surprised at the jams. What did surprise me is that no taxis had a meter; it’s a case of negotiating a fare with the driver beforehand, which is fine if you know your way around town and have some idea of what the fare should be. Luckily enough, they all appeared to be very helpful and quite honest - its about K7,000 from the airport to the downtown area. Most fares around town only cost just K2,000-3,000, so it’s pretty reasonable.

The city in general still bares the scars of four decades of being closed to the outside world. Its many buildings, although architecturally magnificent and mostly left over from the days of being a British colony, suffer from a lack of renovation and preservation. The people swarm around in busy groups and, generally speaking, are very pleasant. One thing lacking, for me anyway, is the general ability to converse in English.

My wife could find a place to shop if she landed on the moon, so I wasn’t surprised when she told me that we were off to an old two story building downtown that is full of jade, rubies, pearls and a host of other items of jewellery that had her beaming with delight. We both love markets; spending several hours turning over a wealth of small antique items at hundreds of different stalls can be fascinating. Bogyoke Aung San Market (formerly Scott Market), is a sprawling enclosure built in 1926 and is the place to buy the sarong-like longyi, which is still worn by the vast majority of the male population. For ethnic textiles, head upstairs to Yoyamay.

As well as the gemstones we found, there are also some really old items, such as antique coins, guns, plates and pictures - so much to look at. We had a ball. Luckily, we always travel very light and leave enough room in our luggage to fill them up for our return journey.

Needless to say, and thankfully for me, the prices at the market were of very good value - leading to one happy wife.

When the tropical sun goes down, 19th Street, between Maha Bandoola and Anawrahta Roads, still sizzles. Mounds of grill ready raw meat and fresh seafood, arrayed on outdoor tables along this lively pedestrian stretch, lie ready to meet their fiery fate. A grilled fish runs to about K5,000. Are you the squeamish type when it comes to street food? Then you’re in luck. There’s enough cheap draft beer and cocktails at places like Ko San Bar for a second happy hour. Other local dinner options featuring Burmese specialties from salads to curries, like Taing Yin Thar Myanmar National Restaurant or Khine Khine Kyaw, are a taxi ride away to an area near Inya Lake, a more residential area of town where once posh villas peek from behind mildew streaked walls and lush foliage. Dinner at either place will cost between K10,000 and K15,000.

I have always liked to explore outside my hotel in search of breakfast, and we came across a delightful little French style restaurant that served wonderful coffee and homemade fresh baguettes filled with tomatoes and salami. The alfresco terrace was a great place to sit, dine and watch Yangon come to life. The city certainly has a real charm to it.

The spiritual heart of Myanmar, the Shwedagon Pagoda’s bell shaped stupa, rises in golden splendor above Yangon. Give the tourist trail a miss by taking in the colourful pagoda neighbourhood first, beginning with a bowl of mohinga noodles - Burma’s breakfast - at the deli like Myaung Mya-Daw Cho on Yay Tar Shay Old Street for about K500. Then, wander through shops brimming with Buddhist religious items, papier mâché toys and herbal health remedies before climbing up vertiginous steps to the Shwedagon Pagoda’s eastern entrance. It’s a wonderful way to spend the morning.

A young French man that we spoke to at a restaurant in Chinatown last night told us to visit an English style pub on 50th

Three days in YangonBy Anthony Parker

Street, as the food there was great and it was a good place to meet people. So off we went for a mid afternoon late lunch, and sure enough it was full of the local expat crowd. The Yangon expat community is growing by the week and it wont be too long before more places like this are springing up everywhere.

Another good place to dine at is one of the first old shop houses to be restored for public use; the Monsoon Restaurant & Bar captures an updated rattan and fan vibe. Take a window table and enjoy the iced coffee, juices and try a panAsian lunch of beef Thai green curry for just K7,000 and Vietnamese spring rolls at K5,000. Then sit back and enjoy Yangon as the street life unrolls outside.

Before leaving, stroll past the many stands selling coconut and banana offerings (which are meant to appease mischievous Burmese folk spirits called “nats”) and down to the riverfront to watch ferries cross the tidal Yangon River waters as ships glide toward inland ports.

It was our last night in the city and our flight was leaving at 10am the next morning. We simply had to have dinner in what is widely regarded as one of Asia’s best known old heritage hotels, The Strand. The hotel is the epitome of British colonialism and architecture and just oozes luxury in this wonderful old city. Deep cushioned winged armchairs adorn the spacious lobby area; an art gallery can be found through one of the many large doors, along with several shops selling high end artifacts. The Strand Bar, which was the first stop off point for many Brits after their long and arduous journey from England many moons ago, is still a wonderful place for a cocktail. We reserved a table for dinner in the hotels magnificent Strand Café; the lobster and steaks were grilled to perfection, the selection of pastries were equal to anything found in Paris, and the service, impeccable.

50th Street Pub –Restaurant

Bogyoke Aung San Market

The Strand Caf–e

25 www.myanmarinsider.cominsider travel

Just a few short months ago a semi retired British journalist friend of mine and his Filipina wife, who both reside

in Manila, asked me what life is like in Yangon.

My simple answer with a smile was, “Come and see for yourself, you’ll love

it”.And they did…

-Vic Jeffery

www.myanmarinsider.com26insider travel

By Anthony Parker

Regal Luang Prabang

For travellers, historians and archaeologists, the Peoples’ Democratic Republic of Lao (Lao PDR or Laos) remains one of the

region’s most fascinating destinations. Its former royal capital of Luang Prabang, located at the confluence of the Khan and Mekong Rivers, is the most alluring destination in the country. The architecture of its historic heart is a unique blend of local and European styles and fortunately much of it has been retained. French colonial influences and the local cultural heritage combine to offer a very stylish town with complex traditions and contemporary sophistication.

World Heritage

With its ancient Buddhist temples and continued adherence to local traditions, Luang Prabang became the centre of Lao culture. Acknowledging its importance to the world, the town was designated a UNESCO World Heritage Site in 1995. Parts of the old town have since benefited from a detailed restorative effort to protect the urban streetscape.

The World Heritage protection has worked for and against Luang Prabang. It is now no longer a sleepy backwater visited by just a handful of travellers enjoying the pleasure of being one of just a few visitors in a foreign land. Yet, despite it now being a popular destination for many travellers in Indochina, the recent influx of tourists, the opening of dozens of restaurants and bars, internet cafés and smart boutique hotels, Luang Prabang has managed to retain much of its grace and charm.One of the great attractions of the old town is that it’s easy to explore on foot or by bicycle.

During the cooler months from November to February the climate is pleasant and the mornings are crisp and cool. Rise early and witness the age-old tradition of scores of Buddhist monks, resplendent in their orange robes, collecting alms from the faithful. Climb the stairs to the top of Phu Si, a small hill in the town centre, for panoramic views of Luang Prabang’s golden chedis (shimmering temple roofs), the Mekong River and mountains covered in mist.

Temple TownThe town has over 30 ancient temples, with

the most magnificent being Wat Xieng Thong. The oldest structure in the temple compound dates back to 1560 and there are numerous displays of colourful mosaics, detailed architectural features and beautiful gold-stenciled artwork.

Many of the temples in the town share a similarity in design with those in northern Thailand, as the two regions were once part of the same kingdom. The low sweeping roof lines and intricate design set Luang Prabang temples apart from many others in the region.

WaterwaysFloundering in the shallows of the Mekong,

various teak-hulled boats from China, Thailand and upriver Laos unload their cargo and await a fresh consignment before heading either back upstream or further downstream. This important waterway, known locally as the Mae Kong or “mother river” continues to give life and renew it. The 4,880 km long river is still used in ceremonies that follow cremation in which the ashes of the deceased are returned to its waters to be carried into the next life. For visitors, the river is the route to discovering other attractions in the region, such as the Pak Ou Caves.

Two hours upstream, the two cavernous limestone chambers of Pak Ou are located in a steep cliff face that rises from where the Mekong and the Nam Ou Rivers come together. The craggy mountain scenery is impressive and the strenuous climb to see dozens of Buddha images enshrined here is worth the effort. Tour boats often stop at the former pottery village of Ban Xian Hai, which is now better known for distilling the infamous rice whisky that is so popular with locals. Twenty minutes upstream from Luang Prabang is the potter’s village of Bahn Chan, the production centre for the jars that hold the strong elixir.

PalacesGood accommodation is abundant in Luang

Prabang and is quite cheap for the high standards offered. Budget accommodation can be obtained for as low as US$10 in some good guesthouses in the historic parts of the town.

Move up a little more upmarket and there are some unique boutique properties. A popular choice with design-conscious travellers is The Apsara, described as the chicest place in town. The Apsara offers a handful of spacious rooms decorated with local hill tribe textiles, four poster beds and period furniture. Corridors and rooms feature purple glass Buddhas and colourful hanging lights. The downstairs bar, restaurant and lounge are some of the town’s most desirable outlets.

Five minutes cycle away; Maison Souvannaphoum was once the official residence of Prince Souvanna Phouma. The minute you step onto the property, you know it’s anything but ordinary. The 24-room boutique hotel is

Xieng Thong Luang Prabang

Wat Xieng Thong Luang Prabang

Mekong River at Luang Prabang Mosaics Wat Xieng Thong Luang Prabang

managed by Angsana Hotels and Resorts (part of the Banyan Tree Group), so guests expect and receive the best in terms of facilities and services.

While retaining the residence’s architectural integrity, splashes of colour have been incorporated into the interiors. Bright orange is the colour of choice and the stunning orange perspex wall in each bathroom introduces contemporary style in rooms protected for their heritage qualities. The Angsana Spa is real luxury with treatments offered in air conditioned, tented pavilions in the Maison’s tropical gardens.

Dining

Many travellers come to Luang Prabang to simply chill out. For such people, taking time over coffee, visiting souvenir shops and dining are as important as seeing the sights.

Luang Prabang’s cuisine is distinctive and different from other Lao food. Again, it has more in common with northern Thailand than anywhere else. Rich in vegetables, the soups and curries are a healthy choice for diners.

Although the growth in tourism has brought with it a more universal selection of restaurants serving various international cuisines, the local food is what attracts most visitors. The delicious cooking of Malee Khevalat at her unassuming restaurant on Thanon Phu Vao offers the chance to sample some excellent local food.

The restaurant in the ultra chic Apsara serves an excellent selection of local and western favourites. Each evening they serve Asian and Western set meals which offer the best value in designer surroundings. Elephant Blanc in the Maison Souvannaphoun Hotel has a delightful open-sided poolside setting. Both the Lao and Western dishes are excellent and the surroundings are very refined - try Keng Som Pa (sour fish soup) with its subtle lemon grass flavour.

In the not too distant past, Luang Prabang nodded off by nine in the evening, but today, with the influx of cafés, bars and restaurants, there’s no need to retire so early, although most people are expected to be in bed before midnight. Clustered around Thanon Sisvangvong and pushed up against the Mekong, Luang Prabang’s bars and restaurants offer alfresco dining in the pleasantly balmy climate.

The royal city of Luang Prabang may have awoken from its slumber, but it still offers the opportunity to get a glimpse of a part of South East Asia that has changed little over time. Whether you like to travel in style or prefer the simple pleasures, Luang Prabang is well worth visiting.

Ngwe Saung - Myanmar’s Beach Destination of Tomorrow?

With Thailand just next door, it is hardly surprising that many Yangon dwelling expats look eastwards when considering their next beach holiday.

Even with the ongoing tensions in the city that have shutdown parliament and split the country almost entirely down the middle, Thailand, with its world class beach destinations, beautiful weather and reasonable prices, continues to attract an impressive number of foreign tourists (while Thailand’s tourism figures were likely to have dropped in 2013, in 2012, over 20 million foreign visitors arrived in Thailand, compared to 2 million in Myanmar).

However, Myanmar is developing beach destinations of our own. While accommodation and activity options remain limited at Myanmar’s beach destinations, that simplicity is all part of the charm. After all, why else would you go on a beach holiday?

While the resort laden Ngapali Beach in Rakhine State and isolated beaches of the Mergui archipelago are highly celebrated, it is Ngwe Saung, five hours west of Yangon, that attracts visitors due to its simplistic and calm lifestyle - and of course its location close, in relative terms, to the former capital.

Some groups hire a minivan to travel to and from the beach, but those without the numbers required for a van will be reliant either on private taxis or public bus. The former normally costs around K150,000 each way (shared between four, it works out quite well) and the latter leaves from the Hlaing Tharyar Bus Terminal in the west of Yangon, with buses leaving at 6.30am and 7.30am and arriving sometime around midday, which costs roughly K9,000.

With coconut trees lining the beach and basic huts sitting a few hundred yards back amongst the foliage, life is simple in Ngwe Saung. While Ngapali is seeing a surge in high end resorts and Chaung Thar, just a few dozen miles to the north, is a lively destination, life trundles by slowly here.

Along the beach itself, life doesn’t get much more strenuous than a quick dip in the ocean or a pleasant stroll along the practically untouched beach. During low tide, it is possible to walk to Lovers’ Island, a lush green retreat that lies a few hundred metres off the beach where it is possible to do some snorkelling, although reviews

are mixed. At the beach’s northern end lie two pagodas that sit atop a couple of large rocks.

It’s not much, admittedly, but some of the larger hotels that are opening in the area (even the high end hotels have been constructed tastefully and, as of yet, there are no ugly resorts ruining the shoreline) are beginning to offer fishing trips and cooking courses that include a shopping trip to the local market, and most of the hotels offer motorbikes for hire for US$10 a day that can get you to Chaung Thar in little over an hour.

Hardly surprisingly for such an underdeveloped destination, nightlife is relatively limited. In the main town itself, there are a number of basic restaurants serving up local seafood with some gems to be found, while a popular daytime trip involves the 45 minute journey to nearby Pathein.

During the country’s colonial days, Pathein was one of the most prosperous cities in what was then Burma. This was mainly due to the thriving rice industry in the area surrounding the town (at the time, Burma was the leading rice exporter in the region) but suffered due to the poor management of the rice industry during the socialist era. While much of Pathein has fallen into relative disrepair since

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Stunning views, unique to myanmar

those days in the early 20th century, there are a few sites worth seeing in the town.

There’s a scenic waterfront at Pathein that hosts a number of Buddhist temples, the most popular of which is the Shwemokhtaw Pagoda, which, according to legend, was built by King Asoka of India in 305BC. After many renovations it is now said to house over six kilograms of solid gold, as well as hundreds of diamonds, rubies and other precious stones.

Pathein is also home to the Pathein umbrella, the attractive, intricately designed parasols; visitors to the town are able to visit the factories where these are made using traditional techniques. Other industries in the area include pottery and the weaving of colourful baskets, and there are factories producing these items that can be visited.

Nearby Pathein is an Elephant camp where visitors can witness the country’s few remaining working elephants, who are said to be looked after and well trained. The camp also acts as a fundraiser for many of the families working in the elephant trade, which has struggled to survive with the influx of new technologies arriving in the country.

A beach front to rival the world’s best

Seashells on a beach near Ngwe Saung

Before the country began its current spate of reforms, foreign visitors to Myanmar were relatively few and far between - at least when compared with the current

numbers of arrivals. Pre-2011, the country was an extremely difficult place to travel to and around and, as such, visitors would mostly stick to the “Big Four” popular destinations - the vibrant streetlife of Yangon, the majestic temples of Bagan, the history and culture of Mandalay and the calm tranquillity of Inle Lake. Even today, most visitors see only these sites during the visits, but as more information becomes available about the country and it becomes an easier place to travel within, more and more tourist destinations are opening up, looking to attract visitors who are often looking for something different from the well worn path.

Shan State, which is said to be one of the most scenic of the country’s 14 states and regions.

Hsipaw’s main selling point, however, is the journey in by train. The trundling train from Mandalay crosses the surreal Gotheik Viaduct, a 700 metre long viaduct that was built by the British in 1900 and is one of the world’s most famous train journeys (it even got a mention in Paul Theroux’s legendary The Great Railway Bazaar book).

Options for activities remain fairly basic, but with the majority of islands being in close proximity, there are great options for exploring by boat or snorkelling, while there is potential for Mergui to emerge as a world class diving destination.

There are popular dive sites at Shark Cave and Black Rock and creatures known to dwell there include bull sharks, manta rays and a great variety of others.

5 Things - Some Upcoming Tourist Destinations

Hpa AnSitting on the eastern edge of the Thanlwin River is this

picturesque town with its bustling teashops, beer stations and restaurants.

Located 280 kilometres from Yangon, the main drawing point for most visitors to the town is the beautiful scenery on the outskirts and the impressive array of caves that are located in the town’s vicinity, including Yathaypan, Kawfun and Kaw Ka Tawng. The most famous, however, is the large pagoda filled Saddar Cave, which also includes a number of Buddha images.

Mount Zwekabin, located 16 kilometres outside the town, offers incredible views across the beautiful Karen State. The walk takes between three and four hours and the best views are offered to the early risers.

Hpa An’s emergence as a tourist destination has been helped by the opening of the border between Myanmar and Thailand at Myawaddy and makes a useful stopping point - to the likewise nearby Mawlamyine - on the way from the border to Yangon.

Mrauk UMrauk U (usually pronounced “Myow Oo”) was once a

thriving city that was part of the mighty Arakan Kingdom. During its heyday in around the 15th century, it would regularly attract traders from as far afield as Portugal and the Netherlands.

Evidence of this popular age continues to remain today, although in a slightly more dilapidated form, with impressive sculptures dotting the area (in fact, Mrauk U is sometimes referred to as more impressive and quieter than Bagan - itself, seen to be quieter and more impressive than Angkor Wat in Cambodia - but lacks tourism infrastructure and can be quite difficult to reach compared to Bagan).

The temples are roughly split into four groups, northern, southern, eastern and western, and it is the northern section that offers the most impressive; by far the most popular is the Shittaung Pagoda, which was built by King Min Bin in 1535. Others include Andaw, Ratanabon Zedi and Mahabodhi Shwegu.

Options for exploring the area include hiring a bicycle or a jeep, the latter of which costs around K25,000 per day, including a non English speaking driver.

The Mergui ArchipelagoThis more than 800 strong group of islands on the

Andaman Sea is being tipped as one of Myanmar’s hottest up and coming destinations, due to its practically untouched beaches and proximity to Thailand - although infrastructure remains an issue.

HsipawHsipaw (sometimes pronounced “Teepaw”) is a charming

town located close to the Chinese border, not far from the bustling border trade town of Lashio.

The town itself is relatively quiet and the majority of activities are based outside the city’s limits, with hiking a popular option. Walking guides are easy to find once you arrive in the city, but one good hiking option is Namhsan, known as the “Tea Capital” of Myanmar, which is also home to the Palaung people.

To the north is a collection of pagodas known as “Little Bagan”, offering beautiful views across the town and surrounding

The area is also home to the Moken people, sometimes known as “sea gypsies”, who live a nomadic, sea based life and have become masters of free diving.

Pyay (Prome)Pyay (named Prome by the British) was established in its

current form by the British Irrawaddy Flotilla Company in the 19th century due to its location on the eastern bank of the Irrawaddy River, making it a key trade point between what was then Upper and Lower Burma.

However, there is a much more ancient history surrounding the town. The original town was located eight kilometres from what is now Pyay, and was named Sri Ksetra. It was a thriving town and once capital of the Pyay Kingdom that stretched across much of what is current day Myanmar.

The remains of Sri Ksetra can still be seen today (and it is reported that it will soon apply for UNESCO Heritage Status) and makes for an interesting day trip for visitors. The ancient walled city, an 18 square mile area, was the largest walled city in the region at the time. Many of the city’s timings are heavily debated, but it is mentioned in recordings of seventh century Chinese pilgrims.

However, when the delta area around the town increased in popularity, the Pyay people abandoned the city and moved elsewhere.

In the modern town, one of the best views comes from a spot known as Custom Hills, where dozens of Buddha images have been carved into the wall overlooking the Irrawaddy and, as it takes almost an hour to get there by boat, it is usually a quiet spot to enjoy the view.

Hpa An

Mrauk U temples Pyay - The Irrawaddy River

Highland town of Hsipaw

The Mergui ArchipelagoBy Naw Thee Zun

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Climate ChangeRegaining Entrepreneurial Impetus

Conferences come and go with a whimper, the supporters and detractors in agreement about disappointing results. But, clearly ambitions must be raised significantly if we

are to hold the world to 2 °C variation in global temperature.While many fail to agree global targets for carbon dioxide (CO2)

emissions, I see this as an opportunity to regain entrepreneurial impetus in the approaches to address climate change. Science remains divided on technologies and the effectiveness of mitigation measures. As a result, business that seeks to commit funding to climate change investments - bearing any returns and risks - are looking for guidance that is of relevance to their decisions. Unfortunately, such clarity from science is unlikely to be available - not now or in the foreseeable future. Such is the degree of uncertainty that technologies that may prove effective in the next few years have yet to be developed.

In the face of this uncertainty, what are the options for business?

I do not see this uncertainty as an excuse for business not to take action. In fact, I see in the various strands of renewable energy technologies (RETs) cause for optimism that a CO2 free future is within our grasp. However, the route to this future may not rely on governments agreeing to implement global CO2

reduction targets, provide generous cash and subsidies, or create national champions out of known RETs. The solutions are likely to be local and driven by entrepreneurial prowess, rather than bureaucratic diktat.

Global climate debates are distracted from their economic merits by neo-Malthusian views on resource scarcity. For me, the aberration of a failed conference gives space for entrepreneurial impetus to reassert itself. We only need to be reminded of Stanley Jevons’ 1865 paper on The Coal Question. Jevons argued that British industrial pre-eminence was doomed to decline, given that coal could only be mined at ever greater depths and spiraling costs that would “cripple industries dependent on it”. He boldly declared that “it is useless to think of substituting any other kind of fuel for coal”. Since 1865, British industrial pre-eminence,

efficiency to deliver CO2 reduction. However, as higher reduction targets are implemented, the cost of reducing emissions becomes progressively prohibitive.

Political commitments notwithstanding, the diverging dynamics of national interests may have been underestimated, if not ignored. During the preparatory meeting in Barcelona, Spain, The Climate Group presented their findings on the impact on long term GDP and employment growth, based on a number of policy scenarios. For example, the European Union (EU) going it alone would gain the most in additional GDP and employment growth (i.e. compared to no action). What stops the European Union from going unilateral, however, is the potential pain inflicted on other countries, such as the United States, Japan, China, India and Mexico. In contrast, global coordinated action benefits all countries - with China gaining the most.

The rub in this analysis, however, is in the significant degrees of error. Thus, while directionally, the results give policy makers some guidance, the pain for inaction is insufficient for countries to take urgent actions. Thus, we are in a stalemate - while the benefits of coordinated actions appear attractive, inaction does not inflict harm, thereby allowing countries the luxury to take a “wait and see” stance. In fact, this is the position most countries took giving rise to a paradox - apparently strong political and consumer support failing to translate into policy actions.

Combine this with the heavy commitment for the early movers; rational decision makers are bound to keep their options open. That is, while there appears to be a consensus on the virtues of a cleaner environment, investors cannot put their faith on an outcome that is so uncertain and so far off in time and benefits.

An alternative approach - taxation and technology choices

Erik Rasmussen, founder of the Copenhagen Climate Council, may have identified a way for entrepreneurs to regain the impetus. Over the past two decades, the accelerating growth in renewable energy was because of a combination of generous public support and subsidies, where technological innovation quickens its pace with greater deployment. Thus, Rasmussen observes that “reducing the emissions that will now have been so linked to our economic growth and betterment will be an enormous, unprecedented global challenge, but will also provide significant opportunities for sustainable growth, green jobs, development and innovation”.

While the vision identifies the attractive opportunities, the remedies proposed are less visionary. The six point agenda proposed by business leaders can be summarised as follows: More incentives (i.e. subsidies, price support) to increase deployment of low emissions technology; more funding for communities to adapt and mitigate; and performance based monitoring of emissions reduction by business.

Subsidies and support for specific renewable energy technologies, under a rapidly changing technological environment, represent a high risk strategy. Our ability to predict which technologies will win - and deliver over the course of the next decade - is limited by existing science. In itself, science’s ability to predict technological changes that can meet future emissions reduction more effectively than present technologies is doubtful.

What gives entrepreneurial impetus to “green” opportunities?

In my doctoral research at Cranfield, England, I came to the view that getting the price of competing technologies to RETs is where we need to start. Specifically, coal, oil and gas emit CO2, with power generation and transport accounting for

By Jack Dixon

while eclipsed by the United States, remains in the company of prosperous nations. Coal ceded its predominance to technology and fuels that did not exist in 1865.

Copenhagen AccordThe Copenhagen Accord is a non-binding letter of intent

to avert the catastrophic consequences of climate change. The signatories agreed to take note of the following: a) to recognise a 2 0C threshold for global temperature variation by 2050; b) a review in 2015 for possible downward revision of the target to 1.5 0C; and c) to create a US$30 billion Copenhagen Green Climate Fund.

The Fund attracted most attention with donor countries offering to increase the size to US$100 billion by 2020. The Fund seeks to assist the most vulnerable developing countries to adapt and mitigate the effects of climate change. To monitor progress, recipient countries undertake to communicate efforts every two years on implementing measures to limit CO2 emissions.

Supporters of the Accord point out that Copenhagen was a major step forward, in spite of its disappointing results. In the first place, the United States is fully engaged - which is in contrast to its disinterested (if not hostile) stance in the past. With the inclusion of China, India, Brazil and other South America countries, any post-Kyoto Protocol (i.e. included only 30 percent of polluters) agreement potentially includes all the major polluters in the world.

Why the 2 0C solution… and its consequences?The framing of the Accord on reducing CO2 emissions to limit

temperature variation to 2 0C is part of the problem. Science is divided on the impact of temperature variation, much less on a precise estimate for 2050. For reasons unknown, political debate zeroed in on 2 0C as an objective. For people accustomed to seasonal temperature swings, a 2 0C variation is no big deal. However, to sustain such a range over a long term average temperature, the costs can be horrendously expensive.

To achieve the 2 0C target, existing technologies would rely on energy conservation and innovation in power generation

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significant parts of emissions. However, CO2 emissions are treated as externalities, because there is no easy way of pricing them. As a result, the politically expedient approach is to subsidise RETs, rather than price CO2 emissions in oil, coal and gas.

This approach results in pricing distortions that favour coal, oil and gas. With society paying for its CO2, hydrocarbon based power technologies and transport are favoured because they are seen, mistakenly, as the cost effective alternative. To realise Rasmussen’s visionary aspiration, pricing CO2 forms the critical mechanics to exercise technology choices between RETs and hydrocarbon technologies.

While future RETs evolution is uncertain, backing technological champions with subsidies based on what is known today can be shortsighted. This is, in fact, the equivalent of Jevon’s Malthusian stance. That is, by subsidising known RETs explicitly, government is making a choice as to which technology will deliver the results in a decade. Unfortunately, just like Jevon’s coal argument, a number of known RETs could be replaced by more advanced and cost effective technologies that are yet unknown today.

For this reason, I propose we start with what we aim to achieve with policy interventions.

There is sufficient political consensus that clean environment is what we as a society prefer to have. Whether we believe this as part of a crusade for global salvation, or plain and simple business opportunity, we can agree on this premise. In effect, what we want is a clean environment (as an objective) with reducing CO2 emissions as the means to achieve this. Seen in this context, the 2 0C solution may indeed appear to confuse the means with the objective.

To achieve this carbon-free future, we know what power and transport technologies contribute to CO2 emissions. Hence, by penalising through taxation and appropriate CO2 pricing, the appropriate costs of CO2 emissions become internalised. In the process, with hydrocarbon technologies no longer looking as “cheap”, innovations to replace them with RETs are given impetus. This is where the entrepreneurs come in to lend a hand in translating technological innovations into commercial opportunities.

An impossible dream? Banning Chlorofluorocarbons (CFCs) spurred the development of a viable alternative - not the subsidies to develop replacement technologies. So, how much in taxation do we need to add to hydrocarbon based technologies?

This is answered by comparing the “levelised” costs of energy, a method of estimating the comparable costs of different technologies. At an oil price of US$60/bbl, onshore wind operated in areas with high wind availability can compete with gas. Compared to coal, on a fully taxed basis (i.e. CO2 emissions), onshore wind is more competitive. Interestingly, hydro, geothermal and nuclear, all non CO2 emitting power generation technologies, are more cost competitive than gas and coal. The carbon tax (or cost) needed to achieve RETs grid parity is less than the marginal cost of carbon.

Contrary to the anti-tax arguments, RETs, such as wind power, can compete effectively by applying indicative prices for CO2 emissions associated with coal, oil and gas. Taxation has the virtues of being transparent, certain - and hits the wallet were it matters. For large scale users of hydrocarbon based energy, taxing CO2 represents an effective way of encouraging the search for alternative technologies and ways of generating CO2 free energy.

Now, we just need to find an agile politician to sell this proposition to their constituencies.

Public/private cooperation Official consensus is inclined to “socialise” funding through

subsidies and in the guise of employment creation. Deploying wide ranging tools - subsidies, portfolio standards, feed in tariffs, green certificates, incentives and taxation - governments have mixed records in delivering on their CO2 reductions under the RETs deployment. In fact, poor policy hinders rather than facilities adaptation. Examine for instance:

US periodic setting portfolio standards for RETs led to a boom/bust cycle in investments, given that regulatory uncertainly hinders commitments by firms looking for certainty.

1. Demand, costs and capex remain uncertain, notwithstanding the US government’s ability to regulate power tariffs. US tax incentives, applied from 1978 to 1985 failed to increase

energy conservation investments, given continued uncertainty on benefits that vary with power tariffs, costs, demands and capex (Dixit and Pindyck, 1994) - what Jaffe and Stavins refer as the “energy paradox”.

2. RETs declining capex and subsidies pose a dilemma on the merits of an “early movers” advantage that delays investments, unless generous subsidies (or threat of their removal) encourage an earlier exercise of investment options.

Government subsidies, however, when used with supportive transformational strategies by firms, facilitates technology diffusion. Spain and Germany’s transformation as global leaders are attributed to supportive regulation that firms use as a backdrop for developing their capabilities for RETs. In contrast, the UK’s uptake of renewal energy by utilities was less enthusiastic, in spite of a similarly supportive package of incentives.

Far from a need for global consensus to turn into a legally binding agreement, governments can play constructive roles by adapting policies that facilitates technology development and deployment. When one talks of aid and support, the mechanics for delivering such intervention is the local government –-not a globally binding agreement.

After all, the conferences failure may prove to be the entrepreneurs’ gain. With local governments pursuing policies that matter to them, working with the private sector, we may yet accelerate achieving a carbon-free future by applying the discipline of the market as opposed to “socialising” investments, as governments are inclined to do.

Will Google enter China?By Richard Bowles

GoogleAt Davos, Eric Schmidt, the current chairman of Google,

discussed how Google might be entering China, regardless of whether or not the Chinese government wants them to. Google have stated that they could utilise encryption technology to get around strict censorship rules that are in place in countries like China and North Korea. The mere fact the option is being discussed means there is at least a slim chance of the concept becoming a reality.

In coming years, companies like Google might be able to enter into the Chinese market under what might be considered more “normal” circumstances. Under the Shanghai Free Trade Zone project, Chinese authorities said that the Zone will eventually have “open internet services”, implying that Google would be available for Chinese internet users. Progress towards this end, however, seems to be removing rather slowly. .

While the concept might seem like a pipe dream, the chances of Google entering China over the next five to ten years are seen as high.

BaiduAs of this writing, Baidu is dominating the Chinese search

engine market with more than 63 percent of the share. If, as expected, however, Google enter the China market, it is widely accepted that Baidu would go on to lose a considerable portion of its current share. Moreover, it is likely that the market will begin discounting the impact of such a venture before it actually starts.

Following on from a magnificent rally, it may well be the right time to start taking profits on Baidu. The risk and reward payoff is far from as favourable as it was when Baidu was trading at half the forward PE ratio that it is now trading at. Based on valuation, Baidu is no longer considered to be attractive, so the possibility that Google could enter China could well be a major obstacle for Baidu shares.

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The continuing Asian economic boom all looks good in the media, and Asia is generally presented with its red carpet laid out well into the future. Meanwhile, Europe

falters under the collapse of Greece, and the USA tries to trick the world with spin about its boundless strength and world leadership qualities. It’s all jargon in the end.

The Western world may be suffering economically, but by and large they are a conscientious lot and play a big role with social welfare foundations by supporting their populations. Austerity measures, when applied by governments, are traditionally unpopular, and the violence and activities in Greece were evidence for all to see.

Asia Wealth

China, India and Russia in particularly are seen to be flying, and all of Asia seems to be hanging on to their coat tails and turning towards growth. In China, the success of capitalist wealth, carefully engineered by communism, is heralded as the perfect formula.

Beijing is undoubtedly booming, but rapid growth has brought with it big changes that are pitiful to behold. Household waste levels have soared and the city is struggling to limit and contain the pollution that it creates. The millions of new private cars on the pristine roads of the capital are snarled into traffic jams that run for miles from one end to the other. And this is only the beginning. Give the city five more years and the traffic will be intolerable. The Chinese think, like the old west, that a private car is the outward expression of success. In Hong Kong, where there are more Rolls Royces per capita than in any other place on earth, many people live in tiny highrise matchboxes with their whole families on top of each other, but drive around in a Mercedes Benz.

It is all to do with “face” in the end, referring to that intangible element whereby you give an impression of soaring high and mighty, avoiding the reality that is too lean and mean to reveal to others. In Asia, “face” is paramount, and all these essentially western inventions like the TV, the telephone, and the motorcar have a side to them that is quite honestly nonsensical.

Take the size of a Ford Expedition, with its massive levels of fuel consumption relative to a more practically sized car, and you have a gas burner par excellence to deplete our global resources even faster. Well, not literally, but you know what I mean.

There again, take a Ford Expedition, hollow it out and you have the perfect shell for a family of four to live in. This is no joke, and not directed against Ford or anyone else, but it just defines the kind of spaces that a lot of the urban poor live in in Asia.

The largest car market in the world is China, and the Ford Motor Company has a considerable presence in the country. What about pollution? What about carbon footprints? And what about saving the planet?? Toyota, Hyundai, Honda, Tata and many other Asian car companies are jumping on the band wagon.

The better educated are indeed getting richer, and getting there quicker than those before them. The old cliché rears its ugly head again - “The rich get richer and the poor get poorer.” How many thousands of dollar millionaires are there now in China? What about billionaires? Current figures indicate that there are over 100 dollar billionaires in China, which is second only to the US.

When one travels to the gleaning new airports all over Asia and stays in classy hotels in booming cities, it seems like there is no end to the development and the wealth.

“Is there anyone so wise as to learn by the experience of others?” - Voltaire

However, go to the edges of these cities, go to the country side, go to the farm lands, the nondeveloped areas and you see a different picture, which is often not a pretty one.

Asian PovertyThe individual, by and large, is driven by personal gain and

greed. Profit and growth are heralded as the benefits of this state of affairs. All over Asia there are pockets of such individuals, basking in the sunlight of a perceived success. In the shadows lurks another beast - the friend of poverty - the family who have no access to the “boom”. A strange magnetic effect takes place at the edge of every city. The country folk think the city has all the answers, and on every street corner is a job and a way to earn money. This perception is wide spread and contributes to the situation, which often leads to misery.

“East meets West”

The USA, despite its massive wealth, and its impoverished claim to use, annually, 40 percent of the world’s resources, still has appalling poverty, illiteracy, hunger and other socio-economic issues within its own borders. Can Asia learn from this failure and fight the good fight for the good of the people?

George Orwell noted, in his most famous book, Animal Farm, that “we are all equal, but some are more equal than others”. Herein lies the quandary: can social vulnerability be soothed by social responsibility, or will greed (fuelled by corruption) continue to take centre stage?

Novelties Wear OffSome parts of Asia are still in their economic infancy and

boisterously flashing new found wealth like a kid with a new gadget at school. Once the excitement has died down, will they be able to chew on their cud and milk the needs of the greater population who are not party to the mainstream changes? This population live their lives offstage, blinkered in an ancient routine where “every man takes the limits of his field of vision for the limits of the world” (Arthur Schopenauer). Only those who can break this mould will see the light of the new economic dawn. It may look like a simple formula, but can Asia make the grade and not be dragged down by the excessive obsession - nurtured in the West - with materialism?

Population Rotation

There are other ingredients that will infect the new found wealth. Remarkably, many moons ago, China saw the perceived dangers of a rapidly increasing population and closed the doors to couples having more than one child. In many other parts of Asia, the pendulum is at the other end of the spectrum, and large families are the norm. Population growth, whether governments like it or not, is a major issue. Not least is the ability to feed its people.

Today, the Philippines is a prime example. Decades ago, the Philippines could feed itself from its own rice crops. 30 years ago, it had the same population numbers as the UK - around 60 million people. Today, the UK population is pretty much still 60 million, while the Philippines has increased some 50 percent to an estimated 92,000,000. The imports of rice are up to 20 percent of its own production now, and with climate change and all, there is an increasing strain on the social fabric to survive and provide for the people. The International Rice Institute at Los Baños, close to the capital Manila, has created ways of massively increasing rice yields, but this is not enough, and these yield increases are now slowing down. All in all the poor are indeed getting poorer.

Worldwide there are an estimated 159 births every minute, which translates to 83,570,400 each and every year! Food and energy issues are burgeoning in conjunction with the trappings of wealth - materialism. As of May 2012, the human population of the world was estimated by the United States Census Bureau to be 7.144 billion. Leading food expert indicate that the earth could support perhaps 16 billion people, but throw in the current trends towards rampant materialism, and surely the world will spin off its axis and resign. The fact remains that it is not a lack of food that is keeping a ludicrous percentage of the world hungry, but the distribution of food, which comes back to the greed I mentioned earlier.

Other grand statistics boast of annual economic growth, skyscrapers galore, neon signs flashing and all those trappings that portray a canvas of Asia’s perceived success… but it all leads to the poverty of wealth in the end.

The Poverty of WealthBy Bruce Curran

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It’s probably not an unfair stereotype to say that, generally speaking, the French are pretty particular when it comes to food, and that is heightened all the more when it is their own

cuisine they are consuming. With that in mind, there are few stronger recommendations for a French restaurant in Yangon than one that is popular among the city’s French residents.

The Alamanda Inn, a peaceful and well designed restaurant bar nestled into leafy Golden Valley, wins that accolade.

The setting itself couldn’t be much further from Europe and feels much more like something from Bali than the centre of Paris. With its calm atmosphere and large thatched covering that offers almost total respite from the heat - and sometimes the rain - Alamanda is one of few options in Yangon that offers a break from the city without the unnatural hum of air conditioning.

The Alamanda InnBy Charlie Greene

Steak Tartare

Crepes with ice cream

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It’s not just the atmosphere that makes Alamanda such a good choice, as the food is impressive both in terms of its range and its quality. Starter options include Croque Monsieur (K3,000) and a range of hot and cold tartines (priced between K2,500 and K3,000), but, as a personal choice, their salads are an excellent starter with the Cretoise Salad (K6,500) - including marinated peppers, eggplant, feta cheese and black olives - the standout dish.

Hardly surprisingly given the French theme, the baguettes and crepes are enjoyable, too, with options of the latter including

blue cheese with potato slices, mushrooms with cream, as well as the more basic lemon and sugar, but where the Alamanda Inn really excels, particularly for dinner, is in its beef and fish dishes - again, a personal favourite is the Steak Tartare.

The restaurant also offers some small hotel rooms for a quite reasonable price and is a beautiful place to spend the day, either to have some lunch or for business meetings in the evening. Give it a try.

Inya Myain Road, Bahan Township, Yangon

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