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The Last Growth Market Frontier in South East Asia GES 2012
Dr. Aung Thura CEO Thura Swiss
About Me
Education Dr. oec. in Banking and Finance at the University of St. Gallen (2008) M.A. in Quantitative Economics and Finance at the University of St. Gallen (2005) M.Sc. in Mechanical Engineering at the Swiss Federal Institute of Technology (ETH) in Zurich (2003)
Professional Experience CEO Thura Swiss: Research, Consulting, Technology (2012) Quant with Zrcher Kantonalbank (2012) Exotic derivatives trader with Zrcher Kantonalbank (2008 2012) Business development with Credit Suisse (2005 2008)
Event
Independence Coup dEtat starting the Burmese Way to Socialism Student Protests
Sentiment
1991 2007
2008 2008 2010
2011 2012
2012 2014
The sentiment curve is purely our own view and not based on any statistics
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Strained relationship between Burmese majority and ethnic groups a legacy of colonialism Fear of secession
Xenophobia
State Economic Enterprises (SEEs) are a burden on the countrys budget Losses are covered up by an extra foreign exchange budget SEEs can buy foreign currency at the official exchange rate
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Next Steps
Foreign Investment Law (2012?) Tenders for Oil and Gas (2012?) South East Asian Games (2013) ASEAN chairmanship (2014) ASEAN Economic Community (2015) General Elections (2015)
Beside the main topics there are so many things to be done that require full attention
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Myanmar in Comparison
Thailand is a good peer to compare for Myanmar in size of population and area Myanmars GDP (PPP) is about 8 times lower than Thailands
Country Myanmar Thailand South Korea France
Population
60
66
49
66
Area
GDP (nominal in billion USD)
676,578
43
513,120
319
100,210
1,163
674,843
2,808
702
76 1,250
4,992
587 9,187
23,749
1,556 31,753
44,400
2,216 35,048
Comparison of FDI
Foreign Direct Investment in Myanmar is comparable to FDI in Thailand and Korea in the late 80s Both Thailand and Korea experienced a sharp rise of FDI within the coming decade
FDI by Sector
Sector Power Oil and Gas Mining Manufacturing Hotel and Tourism Real Estate Livestock & Fisheries Transport & Communication Industrial Estate Agriculture Construction Other Services Total
Data as of 31/07/2012
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Approved amount of investment (mln USD) 19,067.498 14,181.972 2,814.360 1,826.282 1,064.811 1,056.453 324.358 313.906 193.113 182.751 37.767 23.686 41,086.957
Percentage 46.41 34.52 6.85 4.44 2.59 2.57 0.79 0.76 0.47 0.44 0.09 0.06 100
4.6
4.2
4.4
The core scenario implies ongoing reforms with limited real structural change (60% probability) Golden era scenario implies rapid political and economic reforms (25% probability)
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Energy Sector
Energy Source
Crude Oil (Offshore & Onshore) (Proven + Probable) Natural Gas (Offshore & Onshore) (Proven + Probable) Hydro Coal
Potential
648.59 MMBBL 166.13 TSCF 108,000 MW 711 Million Metric Tons
Biomass
52.5 % of total land area covered with forest. Potential available annual sustainable yield of woodfuel: 19.12 Million Cubic Ton
365.1 TWH per year Coastal strip of 2832 Km with south-westerly wind 9 months, north-easterly wind 3 months 52,000 TWH per year 93 Locations
Wind
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Healthcare Market
The legal market size of pharmaceutical products in Myanmar is estimated to be worth 366 million USD per year Beside the official market, there is a huge black market with drugs imported illegally from Thailand
The market has seen a growth rate of 20% from 2010 to 2011
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16
MOU between Central Bank of Myanmar, Daiwa and TSE to develop a modern Securities Exchange The Exchange shall be operational in 2015
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Investment Matrix
Investment Funds: Limited number of investment objects available or accessible Proper due diligence required Private Investors + Funds: Operational challenge running a business in Myanmar Restriction of sectors Foreign
Source of Investment
Domestic
Public Companies: Apart from companies created in 90s virtually missing Formation of a couple of Public Companies recently Portfolio Investment
Private Companies: The most common investment type for domestic investors Limited possibilities of funding Direct Investment
Type of Investment
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Local Company
Joint Venture
100% Foreign-Owned
Big Companies Operate as a Company under the Myanmar Foreign Investment Law
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Exemption or relief from income tax on profits which are maintained in a reserved fund and re-invested within one year Right to accelerate depreciation Relief from income tax up to 50% on the profits accrued from exports Right to pay income tax on behalf of the foreigners employed and to deduct the same from the assessable income of the enterprise Right to pay income tax of the foreign employees at the rates applicable to the citizens of Myanmar Right to deduct the expenditures for research and development carried out within the state Right to carry forward and set off losses up to 3 consecutive years, from the year the loss is made
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Ownership
100% Myanmar JV 100% Foreign Branch
Residence Status
Resident Company Resident Company Resident Company
Relevant Law
MCA MCA MFIL MCA MFIL
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0%
10% 5%
10% 10%
10% 10%
10% 10%
10%
8-10%*
15% 0% 40%** *
3.5%
* 8% if beneficiary is bank ** 5% if beneficiary owns at least 25% of company ** Capital gains from Oil & Gas ranges from 40 50% dependent on size
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Yoma Bank, real estate development, manufacturing, U Serge Pun technology, construction and real estate, automotive industry, healthcare (Pun Hlaing Hospital) Road and rail construction, rubber, import export of heavy machinery, hotel in Chaung Tha, Ayeyarwaddy Bank Construction, transport, communications, Traders's hotel, Myanma Apex Bank Oil and gas, agricultural products, timber, electrical substations, transmission lines, machinery in oil and gas industry, CNG filling stations, United Amera Bank Construction, transport, communications U Zaw Zaw
Max Myanmar
Eden IGE
Asia World
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