Jul 29, 2016

Property market on the rebound in Myanmar

Myanmar’s residential property sector has thwarted concerns over slowed sales and investment last year, yet recovery has taken time to gain traction.

Although an oversupply of high-end properties and limited access to finance have underpinned the market’s slow bounce back, prospects are looking up for the second half of the year.

With Myanmar’s economy forecasted to expand by 8.4% this year, according to projections from the Asian Development Bank, property demand could also be further supported by political stability.

Report revelations

In its most recent report on the Myanmar market, real estate services firm Jones Lang Lasalle (JLL) said this year should see a stabilisation in the real estate sector after falls in pricing and rental returns in 2015.

While the first half of this year was expected to be somewhat muted, JLL noted that once the new National League for Democracy (NLD) government was settled in, the real estate sector could look to a stronger performance through to the end of the year.

Similarly, in June local conglomerate First Myanmar Investments (FMI) said a downturn in returns from its real estate arm had caused the group’s profits to dip.

This fall was a result of what FMI’s annual report describes as a stagnant real estate sector due to weaker market sentiment for the 12 months ending March 31.

At least some of the stagnation in the property sector in the 2015/16 FY was due to market uncertainty ahead of last year’s general election, FMI noted, with the company confident a rebound would mark FY 2016/17, which started in June.

Though November’s election did dampen activity in the property sector, the resulting cooling in residential sales should not be a long-term issue, according to Richard Emerson, founder of Emerson Real Estate, a local real estate company.

“It was as if someone turned the tap off leading up to the election as investors and buyers became hesitant towards the market, with the property market seeing a marked decline in demand,” Emerson told OBG.

Unbalanced supply and demand

While demand is set to be buoyed amidst a smooth power transfer, supply is spread unevenly across Myanmar’s real estate segments.

Developers’ focus on delivering lucrative luxury units over the past few years has led to an overstock at the top end of the market, with a shortage of low-cost and mid-range residential accommodations, in a country where 25.6% of the population live below the poverty line.

At the beginning of this year, there were more than 6650 vacant high-end residential units, more than double the total figure for 2014, according to Colliers International.

There are hopes that this glut may be cleared as a result of legislation that came into effect in the first quarter of the year that allows foreigners to purchase real estate in Myanmar. Under the new Condominium Law, foreigners may now buy up to 40% of a building.

Though there has been some take-up of properties as a result of relaxed ownership regulations, the liberalisation has yet to have the desired effect of draining the excess at the high end of the market.

Financing hurdles

Another proposal put forth to reinvigorate sales and spur new projects across the spectrum is the creation of a mortgage market, with increasing calls from realtors and developers to set the terms and conditions for mortgage finance.

Reforms to financial regulations as well as an opening up of key business sectors are fundamental to broadening the base of demand in Myanmar’s property market, according to Emerson.

“The future of the commercial real estate segment now depends greatly on future government policy as well the deregulation of key industries such as the financial and insurance sectors,” he told OBG. “For a mortgage market to be created, the government needs to substantially modernise the financial and legal systems.”

Regulatory controls

Though the government has yet to move on easing access to finance, officials in Yangon have acted to tighten regulatory control over the construction and property market.

In mid-May the newly installed Yangon regional administration ordered all work on high-rise buildings over nine storeys to be halted for inspection, affecting more than 200 projects.

This move marks a positive step in highlighting Myanmar’s commitment to professionalism, according to U Han Thein Lwin, managing director of High Tech Concrete, a Myanmar-based building materials company.

“The adoption of the review on high-rises shows that the new government has good intentions to employ policies that meet international standards and benefit the economy in the long run, although in the short run it may suffer a bit,” he told OBG.

Source: Oxford Business Group

Jul 27, 2016

Myanmar seeks to build on foreign-investment momentum: finance minister - Nikkei Asian Review

Myanmar aims to attract more foreign investment over the next five years than under the previous government, Finance Minister Kyaw Win told The Nikkei in a recent interview.

The country received about $28 billion in foreign direct investment over previous President Thein Sein's five years in office, driving rapid economic growth estimated at an annualized 8% this year. Kyaw Win said, "the new government, which came into power at the end of March, plans to attract even more money through such changes as making it easier for foreign investors to buy land."

Past investments focused mostly on natural gas and other resource development projects. "The government is looking to strike a better balance between industries, and will place more effort into drawing funds for the agricultural and manufacturing sectors," the minister said.

"Japan has a long history of friendship and understanding with Myanmar and is the country's most important partner," Kyaw Win said. He expressed hopes that Japanese companies would equip Myanmar workers with advanced training and technology, helping the government achieve a key goal of creating new jobs.

Trading on the Yangon Stock Exchange began in March, but foreign players remain unable to invest in the two stocks listed there. Kyaw Win stressed the importance of the new bourse as a way to funnel excess cash in the country to corporations, and said investors abroad will be given access to the exchange within the next year.

Myanmar has designated three special economic zones where foreign companies can operate under preferential tax treatment and receive other benefits. Sumitomo Corp. and two other Japanese trading houses have been involved in the development of the Thilawa zone outside Yangon. Over 70 companies, many of them Japanese, have decided to set up shop there.

"Thilawa is the most important outpost for Myanmar trade," Kyaw Win said. He stressed that he will continue to support the development of the industrial park, and said he is even considering setting up a new economic zone to build ties with India and Africa.

Regarding Myanmar's growing budget deficit, the minister said, "inefficient state-run companies must be overhauled. He said that the government is reviewing possible candidates to privatize these businesses, with a high priority on the manufacturing and logistics sectors."

As the first head of the Ministry of Planning and Finance, Kyaw Win is responsible for Myanmar's economic strategy, fiscal management and securities market.

Source: NIKKEI Asian Review

Exports up by $266 Million in first quarter

The National League for Democracy (NLD)-led government has outpaced its predecessor’s export totals during the first quarter of the 2016-17 fiscal year by $266 million.

At the beginning of previous fiscal year, the export volume for April through June reached $2.22 billion, but this year’s export volume has reached $2.48 billion, according to Ministry of Commerce.

“Agriculture and fishery products export volumes have increased while gas and garment exports have decreased since last year. The government is working on ways to raise export in each sector. We expect this year’s export to be higher than last year,” U Khin Maung Lwin, deputy secretary of the Ministry, told Myanmar Business Today.

Union Minister for Commerce Dr Than Myint has pledged to raise export volume threefold within five years of the new government and the Ministry is currently conducting research in agricultural products to penetrate the European market for better prices as well as placing a focus on quality products to match international standards.

“We are mainly focused on European markets because we can earn higher prices from those markets, but we have to work on producing quality products to match European standards,” U Khin Maung Lwin said.

Last year’s first quarter total import and export volume reached $5.54 billion and this year it reached $5.91 billion during the same period, according to statistics from the Ministry.

Source: Myanmar Business Today

Myanmar Switches Focus to Sustainable Development

Myanmar's economic policies under the current government are expected to focus on sustainable development and diversification into other sectors instead of resource-related business, says the Delegation of German Industry and Commerce in Myanmar.

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Jul 21, 2016

Foreign JVs cleared to trade construction materials

The Ministry of Commerce has eased trade restrictions for construction materials on local-foreign joint venture firms in Myanmar.

Previously, construction material trade was only permitted for state-owned and local firms.

“There are some processes that must be completed to start trading construction materials. Joint-venture companies must be registered under the trading category at Myanmar Investment Commission (MIC). They again have to apply for an import and export licence at the Ministry of Construction for materials import,” deputy permanent secretary of Ministry of Commerce, U Khin Maung Lwin, told Myanmar Business Today.

Any joint-venture company in trading category can import construction materials, but companies based in construction must apply to MIC to change their business category first.

The liberalisation aims to develop the construction industry by expanding access to quality construction materials amid a wave of foreign investment into the industry, according to the Ministry.

The imported materials have to meet MoC-set standards and also are allowed for retail and wholesale distribution in the domestic market, according to a Ministry notification.

The trading licence includes allowances for both exports and imports, but the construction industry in Myanmar has yet to develop to a point where they could export products. Imports have been increasing in recent years.

Myanmar’s construction industry grew 7.7 percent in the fiscal year 2014-15 and is expected to grow 8.3 percent in 2015-16, according to Oxford Business Group research. Foreign investment in the country’s construction sector amounts to $37.7 million as at the end of June.

With the relaxing of trade restriction for joint venture firms, prices of high-quality building materials will become more competitive in the domestic market, according to U Soe Min Naing, director of Shine Construction Company.

“The liberalisation of construction materials will impact international higher-standard materials’ availability in the domestic market and result in cheaper competitive market prices,” U Soe Min Naing Aung told Myanmar Business Today.

The Ministry announced that it will adapt the changes on the list of the permitted companies depending on domestic market demand, market situations and domestic business development as needed.

Regulations on agricultural product exports and imports like fertilisers, pesticides and seeds were eased earlier this year.

Source: Myanmar Business Today

Condo supply up, demand cooling, prices flat


There were 272 new condominium units completed for the quarter which led to a total stock of more than 4,400 units. The number is estimated to grow by 40% following the completion of 16 new residential projects in the remainder of the year.

Given the substantial project launches witnessed in the last two years, building completions should lead to a significant growth in stock going forward. Colliers estimates that there will be 10,118 units scheduled to complete in the next three to four years. However, with the recent weakening of sales, some of these projects may experience delays, with completion dates likely to be extended to a later date.


The number of sales launches dropped by 66% compared to the same period last year – an expected result given the lackluster performance witnessed especially in 2015. New project launches include Kanbae Towers and Tritone Towers, collectively consisting of more than 600 units.

The average take-up rate further declined albeit at a lesser magnitude by 3% QoQ to 51%. The rate is likely to improve should the number of project launches grow at a modest pace. Nonetheless, the mid-market segment appears to be resilient registering a relatively strong sales take-up of 56%. Meanwhile, the introduction of the condominium law is likely to stir further demand. However, the implementation of the law has yet to be initiated.

Sales Price

Despite the sluggish sales activity, there was no significant reduction in prices recorded. However, some sales offices which temporarily shut down are starting to review their sales price schedule. On the other hand, some of the recently launched projects are now aimed to sell between $1,500 to $2,500 per sq m, relatively lower than many of the developments introduced in the past.

[In association with Colliers]

Source: Myanmar Business Today

Jul 20, 2016

Ministry adds new items to re-export list

The Ministry of Commerce has approved 14 new commodities to be added to the re-export list in a bid to boost export figures as it plans to triple export amount during the current government’s tenure.

Previously, only three items: sugar, betel nut, and oil were approved for re-export. Now, tyres, sesame (white and black), dried chilli, groundnut, cotton, soy beans, textiles, fresh fruit, electronic materials, cosmetics, juices and other groceries, clothes, edible oil and garlic have been included.

Licence applications for the 14 items became available in late June, permanent secretary of the ministry, U Khin Maung Lwin, said.

“Re-export means that we import goods from abroad, process it in the country and then export to global markets. Its strength is that local businesspeople earn more money. They don’t have to be involved in the whole supply chain of value-added products, so it will save costs.

“Singapore also practices the re-export system as they don’t have natural resources. They import the materials and process them locally and re-export them to the international market. It is like a broker business,” he said.

Despite this, some of the products on the list will not have value added to them; rather, Myanmar will act as a middleman for items such as betel nut and cosmetics which it will import from other countries and ship to Northeast India through border trade, according to U Myint Soe from the Ministry of Commerce.

While India is capable of producing its own cosmetics and betel, the transportation costs to ship products to that region of the country are more than what it would pay to import the products from Myanmar.

Although the ministry allowed these items for re-export, there are some restrictions for tyres and groceries.

As for tyre trade, imports are only available through maritime importation and must be re-exported through the Muse border gate to China and also must be done during the raining season to protect rubber planters and procedures.

Juice and other groceries need the Food and Drug Administration’s (FDA)’s approval certificate for re-export licences, according to the Ministry’s statement.

“It happens in some foreign countries. They import Myanmar goods, process them in their countries and re-export them. However, Myanmar has to utilise its GSP benefits. If we face some problem with the re-export system, the goods will crowd the domestics market,” U Soe Win Maung, a consultant at Myanmar Pulses, Beans and Sesame Seeds Merchants Association, said.

Source: Myanmar Business Today