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Information about specific sectors in Myanmar
The sector breakdown of the Myanmar economy has changed little since the 1930’s. The Myanmar economy remains essentially primary product based (agriculture, forestry and fisheries) with trade related activity the second largest contributor to GDP. The individual sectors are examined below:
Table 9: Structural Changes of Gross Domestic Product by Sector in (%) (at 1985/86 constant producers’ prices)
|Particulars||1990/91||1991/92||1992/93||1993/94||1994/95||1995/96 *||1996/97 **|
|Livestock & Fisheries||7.2||7.6||7.3||7.2||7.1||6.8||7.1|
|Processing & Manufacturing||9.1||8.8||8.9||9.1||9.2||9.3||9.2|
|Social & Admin. Services||6.8||7.2||6.7||6.8||6.8||6.7||6.6|
|Rentals & Other Services||4.6||4.8||4.5||4.4||4.2||4.2||4.2|
|Gross Domestic Product (1+2+3)||100.0||100.0||100.0||100.0||100.0||100.0||100.0|
Agriculture is Myanmar’s major economic activity, having contributed more than 40% of the country’s GDP and employing 65% of the total labor force. Agricultural production during 1996/97 grew by 3.7% over the previous year.
The Government is presently focusing on the agricultural sector for growth in the present five-year plan. Much of the effort to increase productivity is largely through public rather than private sources. To date, there has been little foreign capital that has been applied to agriculture. Present Government initiatives include the following:
a. expansion of cultivated land under the management of the Central Committee of Culturable Waste and Fallow Land;
b. allocation of Government funds intended to increase the water supply to fields by way of irrigation and embankment projects, the development of wells and use of pump irrigation from waters and creeks;
c. increased use of fertilizer and pesticides;
d. increased use of agricultural equipment; and
e. introduction of higher yielding varieties of seeds.
Source: Review of the Financial, Economic and Social Conditions for 1996-97, Ministry of National Planning and Economic Development
Table 10: Production and Export of Major Crops 1996/97 (provisional)
(‘000 METRIC TON)
Source: Ministry of Planning & Finance: Review of the Financial, Economic & Social Conditions for 1996/97
Over 50% of the total land area of Myanmar is covered by forest which includes 80% of the world’s total teak reserves. The country supplies approximately 90% of the world’s current market for teak, which remains a Government monopoly. The annual allowable cut for teak is 630,000 cubic meters and 2.34 million cubic meters for other hardwoods. Teak, together with several other types of hardwood logs, constitute the country’s largest export earner (24% of total exports in 1996/97 valued at Kyat 1,276 million). Myanmar has refrained from practicing concessions and still adheres to the tendering system in which people who succeed in the tender bids are permitted to extract only those trees that have been marked. By far the major foreign involvement in this sector has been from Thai companies, which operate in both inner areas under the Government’s control and in border areas where they are forced to pay unofficial taxes to the minority groups in control. International pressure on the Government to reduce logging activity has resulted in a Government stipulation that concessions will be reduced and any foreign involvement will be confined to bartering for logs, the establishment of joint ventures or on the condition that logging must constitute part of a development project. The Government’s provisional data for 1996/97 indicates the following changes in major forest products over the previous year:
a. teak production declined from 0.24 to 0.22 million cubic tons;
b. hardwood production increased from 1.2 to 1.3 million cubic tons;
c. fuel-wood production decreased from 17.9 to 17.7 million cubic tons;
d. charcoal production was the same as in the previous year at 0.2 million cubic tons; and
e. bamboo production increased from 92.7 to 96.7 million nos.
Source: Ministry of Planning & Finance: Review of the Financial, Economic & Social Conditions for 1996/97
An Institute of Forestry was established in 1992 to train foresters in international practices/standards and experiments on the artificial insemination of elephants (the principal source of energy in extraction) is being carried out with a view to increasing the elephant population. Generally, forest management practices are good.
Significant increases in the population of livestock have been achieved as a consequence of widespread artificial insemination programs from pedigree livestock (cattle and pigs) and increased expenditure on veterinary services.
Myanmar has an 1800 km. coastline and 230,000 square km. of continental shelf rich in marine resources. Fresh water fish breeding has also been encouraged by the Government alongside rice paddies in inundated areas of the country. The Government is ill equipped to patrol the vast coastal areas effectively and some concern has been expressed over the possible over-exploitation of marine resources by illegal fishing boats, both domestic and foreign. Fishing concessions have been granted to a number of Thai companies and a recent four-way joint concession has been reported between the Myanmar Government and companies from China, Singapore and the USA.
A cultured pearl industry has been developed with the assistance of the Japanese government and oyster production has dropped back each year in favor of increased pearl production.
The Government’s provisional data for 1996/97 indicates the following changes in livestock and fishery products over the previous year:
a. draught cattle increased from 6.8 million heads to 7.0 million heads;
b. cattle excluding draught cattle increased from 5.6 million heads to 5.7 million heads;
c. pigs increased from 3.3 million heads to 3.5 million heads;
d. fowl increased from 32.7 million heads to 36.0 million heads;
e. meat production increased from 149.3 million viss to 162.7 million viss;
f. egg production increased from 1,101.7 million numbers to 1,232.6 million numbers;
g. fresh water fish production increased from 133.5 million viss to 145.4 million viss;
h. marine fish products increased from 278.9 million viss to 145.4 million viss;
i. marine fish production increased from 278.9 million viss to 389.2 million viss; and
j. pearl production increased from 3,971 mommies to 7,332 mommies.
Source: Ministry of Planning & Finance: Review of the Financial, Economic & Social Conditions for 1996/97
Myanma Oil and Gas Enterprise (MOGE) possesses the exclusive rights to explore, develop and produce oil and gas throughout Myanmar. Exploration activity has resulted in the development of both oil and natural gas reserves. The 1996/97 provisional data shows the take on crude oil to be 6.8 million barrels, up from 3.5 million barrels in 1995/96, and the collection of natural gas at 65,700 million barrels is up from 51,112 million barrels in 1995/96.
The prospects for Myanmar’s offshore natural gas potential looks very bright. The Gulf of Martaban, located in the Andaman Sea, is the area where much of the exploration and development has been conducted to date. Two fields in particular have been the locus of much activity. The Yadana field is being developed by a consortium of Total (31.24%), UNOCAL (28.26%), PTT Exploration and Production Plc. (25.5%) and MOGE (15%) under a profit sharing arrangement. The Yadana field is estimated to have 5.7 trillion cubic feet of commercial reserves of natural gas. The Government will use approximately 105 million cubic feet per day (MMcfd) for domestic use. Much of the initial domestic consumption will be directed toward a 300 MW gas fired power-plant and a fertilizer plant with an anticipated production capacity of 1,750 metric tons per day. Supply of 525 MMcfd of Yadana gas to Thailand is scheduled to come on line in mid-1998, though delays in the construction of the pipeline on the Thai side may push this date back. MOGE’s net share after expenses is approximated at US$150 million per year with one-third of the revenue being paid in kind.
The reserves in the Yetagun field are estimated at 1.14 trillion cubic feet. Production is scheduled to come on line in 1999 and will have the capacity to produce 210 MMcfd. It is being developed by a consortium including Texaco Exploration (Myanmar) (41.04%), Premier Petroleum (Myanmar) (24.62%), Nippon Oil and Exploration (17.16%) and PTT Exploration and Production Plc. has been approved for investment of up to 17.16% provided that MOGE waives its right to invest 15% in the project.
Myanmar has a wide range of mineral endowments although only small quantities are currently mined. Metallic deposits include gold, silver, copper, nickel, tungsten, tin, lead, zinc and iron. Non-metallic deposits include coal, manganese, gypsum, limestone and barytes. However, the country remains largely unsurveyed with little detailed prospecting having taken place.
Given that this is likely to be a significant sector if foreign investors are confident about the long-term stability of the country, we felt it appropriate to go into this area in a little more detail.
The most important mineral resources currently identified are petroleum, gas, coal, tin, tungsten, lead, zinc, iron, copper, silver, gold, jade and precious stones.
7.6.2 Government Structure
The basic principle is that all minerals are owned by the State and for many years all mining activities have been carried out by the State. However, as part of a strategy to encourage foreign investment in this sector, it is now possible for foreign investors to become involved in the mineral sector through production sharing or profit sharing arrangements.
The Ministry of Mines consists of two departments and six mining enterprises. The two departments are concerned with geological surveys and with planning and inspection. The six mining enterprises are responsible for different activities as follows:
7.6.3 No. 1 Mining Enterprise
No. 1 Mining enterprise deals mainly with the production of base metals such as silver, lead, zinc and copper.
The mining of lead, zinc and silver ores is carried out in mines at Bawdwin, Bawsaing and Yadanatheingi. The Bawdwin mine in the northern Shan State has been in operation for over 80 years and in the early part of this century was believed to have been the richest silver mine in the world.
No. 1 Copper Mine has been in operation for several years. It produces 8,000 tons of ore per day from an open pit mine and a flotation mill in Salingyi in the Sagaing Division. It has total ore reserves of about 130 million metric tons with an average copper content of 0.77%. There is another large copper deposit called Letpadaung which has only been partially explored and is believed to contain about 180 million tons of copper ore at about 0.66% copper.
7.6.4 No. 2 Mining Enterprise
Tin concentrates, tin and tungsten concentrates, tin tungsten and scheelite concentrates are the main products of this enterprise although gold and diamonds are also under its jurisdiction.For example, a small amount of gold is currently being produced from four gold deposits and the first major gold deposit at Kyaukpahtoe is being developed. In addition to the widespread occurrence of gold in lodes and placers throughout Myanmar, there is also the possibility of finding economically exploitable epithermal deposits. Diamonds of gem quality were also found by this mining enterprise whilst sluicing tin concentrates at Theindaw Mine in the Tanintharyi Division.
7.6.5 No. 3 Mining Enterprise
This enterprise is responsible for the production and supply of industrial minerals such as baryte, gypsum, limestone, dolomite and others for State owned industries as well as for its own manufacturing and processing plant. Pig iron, steel billets and steel grinding balls and mild steel rods are produced from No. 1 Iron and Steel Plant situated at Pyin-Oo-Lwin. This plant uses the direct reduction/electric arc furnace method to produce steel and pig iron and is supplied by local iron ore and coal. There is also Ywama Steel Mill in Yangon principally producing steel billets, wire rods, MS round bars, formed products and sheets. It can also produce galvanized and corrugated iron sheeting, wire nails, barbed wire and wire mesh. Most of the steel mill production is produced from locally available scrap.
7.6.6 Myanma Gems Enterprise
This enterprise is responsible for the mining of gems and precious stones. For example, rubies are produced in the Mogok area, north-east of Mandalay. Sapphires are also found in this area of Myanmar. The Mogok area also produces a variety of colored gems including spinel, garnet, peridot, tourmaline, aquamarine, amethyst, citrine, zircon, moonstone, iolite and danburite. Two new gem areas were recently discovered by geologists in the northern Shan States.
Myanmar is also famous for its jade which is classified into three groups according to their color, luster, texture and grain. The top category is Imperial Jade which is known for its emerald green color and is used to make jewelry. In descending order, the other two classes are Commercial Jade and Utility Jade. Utility Jade is particularly used for carving figurines and the making of ornaments. Jadeite is also produced and is found in a full range of colors from pure white to black.
7.6.7 Myanma Pearl Enterprise
This enterprise, as its name implies, produces cultured pearls as well as collects mother of pearl oysters from the sea.
Myanmar has a number of islands suitable for pearl farming in the Tanintharyi Division and Rakhine State.
7.6.8 Myanma Salt and Marine Chemical Enterprise
Once again, as the name implies, this enterprise is mainly concerned with the production, distribution and marketing of solar salt and associated marine chemicals.
7.6.9 Doing Business in the Mineral Sector
At present the effect of the State Economic Enterprises Law is that mineral resources may only be exploited by a State Owned Economic Enterprise (SOE) unless it is in the national interest that SOEs require foreign participation. The State appears to have made the general decision that SOEs should look to encourage foreign investment in the mineral sector.
The foreign participation may only be by way of production sharing or profit sharing and it is not currently possible for a foreign investor to own the rights to the mineral deposit.
7.6.9 (a) Profit Sharing
This method is intended principally to be used for existing mines. The philosophy is one of 50/50 so that, for example, if an existing mine is valued at US$ 30 million but needs upgrading by a further US$ 30 million then the foreign investor interested in participating will be expected to put in the extra US$ 30 million.
As many of the mines have a great need for capital, equipment and technology, there are clearly opportunities for foreign investors.
7.6.9 (b) Production Sharing
This method involves a joint venture contract being entered into between an SOE (such as No. 2 Mining Enterprise for say, diamond or gold exploration) and the foreign investor’s Myanmar subsidiary (possibly 100% owned). Thus, the project will be carried out through a contractual joint venture rather than a joint venture Myanmar company.
The Ministry of Mines will issue the mining permit to the contractual joint venture between the foreign investor’s Myanmar subsidiary and the relevant SOE. The background to the granting of the permit is that the foreign investor’s application for establishing its Myanmar subsidiary through the MIC will go to Cabinet for final approval and, upon approval, authority will be given to the Ministry of Mines to issue the permit.
Whilst the Ministry of Mines has developed a model production sharing contract, foreign investors will be expected to negotiate on a case by case basis in relation to most of the major issues such as share of production, royalty and so on. In this way, Myanmar does not yet appear to be following other Southeast Asian countries such as Indonesia where standard form contracts have been developed in consultation with foreign investors.
A production sharing arrangement can either include the possibility of recovering production costs or be a straight split on total production. A cost recovery arrangement may be considered for more valuable minerals and is usually carried out in a manner that reserves a total percentage before consideration of the recovery of production costs. The straight split form of arrangement is generally applied to large volume, low price and low cost of production types of minerals. The ratio of production split can either be fixed throughout the duration of the contract or vary according to the level of production.
We have reviewed the model production sharing contract and, whilst many of the matters dealt with are consistent with international practices, we believe there are a number of areas where there will need to be “give and take” if the Government is serious about attracting major foreign investment in the sector. The Ministry has certainly indicated a preparedness to be flexible and to negotiate such joint venture contracts on a case by case basis. However, it remains to be seen how much scope they will be given by the Government.
Table 11: Mineral Production During 1995/96 AND 1996/97
|Mineral||1995/96 (provisional/actual)||1996/97 (provisional)|
|Tin Concentrates (74%)||975 metric tons||708 metric tons|
|Tungsten Concentrates (67%)||92 metric tons||312 metric tons|
|Tin, Tungsten and Scheelite Mixed Concentrates||1,082 metric tons||1,450 metric tons|
|Refined Tin (99.9%)||310 metric tons||340 metric tons|
|Copper Concentrates||27,856 metric tons||25,864 metric tons|
|Refined Silver||0.14 million oz.||0.13 million oz.|
|Refined Lead||1,862 metric tons||2,250 metric tons|
|Zinc Concentrates||1,704 metric tons||2,532 metric tons|
|Pig Iron||1,368 metric tons||1,500 metric tons|
|Steel Grinding Ball||16,344 metric tons||21,000 metric tons|
|Coal||34,708 metric tons||42,000 metric tons|
|Jade||1.8 million kilos||1.1 million kilos|
|Gems||16.2 million carats||18.1 million carats|
Historically, the generation of power has been dominated by the Myanma Electric Power Enterprise (MEPE) which generated 74% of the 1,030 MW of Myanmar’s total installed capacity during 1996/97. MEPE relies largely on four main sources of energy production: hydro (32%); natural gas (51%); steam (9%); and diesel (8%). The remaining balance was produced by SOEs largely for purposes of internal consumption.
Much of the production of energy is intended to cover domestic consumption however potential exists for hydro-electric projects intended for export to Thailand, Bangladesh and India. Preliminary Government studies undertaken on 196 hydro-electric power projects indicate 38,000 MW of potential power supply capacity with the countries total potential for energy estimated at 100,000 MW. The Government has signed a Memorandum of Understanding with Thailand for the purchase of 1,500 MW of electricity by 2010.
There are two ministries responsible for the administration of this sector. Ministry of No. 1 Industry covers primarily light industry. The light industrial sector is fairly diversified and includes enterprises producing textiles, foodstuffs, pharmaceuticals, ceramics, rubber, leather, paper and chemicals. Ministry of No. 2 Industry is concerned mainly with heavy industry. Heavy industry tends to be resource based with little value added. Much of the large-scale enterprises consist of SOEs. Though an initial privatization program launched in January 1995 intends to gradually privatize existing SOEs through leasing arrangements and joint ventures in which the Government retains the majority interest.
Local private enterprises consist largely of family owned and cottage industries. Although the overwhelming majority of these enterprises employ less than ten workers their contribution to the country’s production value is estimated to be greater than that of the SOEs.
Foreign investment in manufacturing has been increasing in recent years and presently ranks second behind investment in the oil and gas sectors. Lack of proper infrastructure has inhibited the growth of this sector. Though, there have been several consortiums that have received approval to move forward with industrial estate projects. Cheap labor, high literacy rates, abundant natural resources and Government incentives in Myanmar will create a competitive base for manufacturing regionally as well as internationally.
Though average income levels remain low, roughly Kyat 15,302 per person, the estimated forty seven million population represents a vast market for consumer goods which domestic manufacturing could take advantage of. The developing consumer market creates opportunities to develop local brand names for domestic manufacturers. Many of the essential consumer products are produced domestically but these lack variety and brand name recognition is often non-existent.
The Department of Human Settlement and Housing Development (DHSHD) has been delegated the responsibility, by the Ministry of Construction, to incorporate industrial zones throughout Myanmar. Presently, there is no legal regime that grants a company privileges by virtue of the company’s physical presence within a given industrial zone. The DHSHD has developed, or is in the process of developing the following industrial zones:
Table 12: Industrial Zones Developed By DHSHD
|Industrial Zone||Completion Date||Size (ha)|
|Zone 1 and 2||1994||350.0|
|Zone 3 and 4||1996||250.0|
|Dagon Port 2||1999||150.0|
Seminar lecture prepared by U Win Myint entitled Industrial Parks and Free Zones, presented in October 1997.
In addition to the above mentioned industrial zones, DHSHD has developed several industrial zones in partnership with foreign investors such as Mitsui & Co., (Mingaladon), a Singaporean consortium (nearby the Thilawa Port) and Rojana Industrial Park Plc. (Hlaingtharyar). The industrial zones developed jointly with foreign partners tend to have improved power and water supplies, waste water treatment facilities and telecommunications.
The provisional data for 1996/97 indicates an increase in overall construction to Kyat 59,285 million from Kyat 44,489 million. The State sector accounts for 74.3% of the aggregate 1996/97 figure while the co-operative and private sectors accounted for 0.4% and 25.3% respectively. The value of construction in the State sector consisted of Kyat 5,458 million for construction of roads and bridges, Kyat 18,321 million for factories, workshops, schools, hospitals and residential buildings, Kyat 5,726 million for irrigation and embankment projects, Kyat 468 million for power transmission lines, Kyat 5,570 million for rail tracks, air strips jetties and other related works, Kyat 85 million for mine development works, Kyat 2,374 million for maintenance works and Kyat 6,019 for miscellaneous projects (Source Ministry of Planning & Finance: Review of the Financial, Economic & Social Conditions for 1996/97). In the absence of multi-lateral financing for public infrastructure projects, the Government has turned to bi-lateral sources or has required many of the consortiums developing the infrastructure projects to secure the financing for the respective projects.
The administration of the transport sector is handled by four ministries. The Ministry of Transport oversees river, maritime, air transport and supervises the Inland Water Transport, Myanma Five Star Line, Myanma Port Authority, Myanma Shipyards, and Myanma Airways. The Ministry of Rail Transportation manages road and railway transport and oversees the Road Transport and Myanma Railways SOEs. The Ministry of Construction is responsible for the maintenance of roads and bridges. Finally, the General Administration Department of the Ministry of Home and Religious Affairs participates in the administration, development and maintenance of local township roads and bridges.
The north-south corridor connecting Yangon with Mandalay and Myitkyina is the main transport artery which is serviced by air, river, rail and road. The Government’s border development programs incorporate the extension of basic transport services to remote areas, many of which are currently poorly serviced.
7.10.1 Road Transport
Road transportation is the primary method by which passengers and cargo are transported within Myanmar. There are 31,430 km. of classified roads and 5,600 km. of unclassified earth roads. Although road transport is the primary mode of transport, lack of investment and maintenance has left much of the road network in poor condition. Moreover, 90% of the road network is single lane and many important sections have not been upgraded since the 1950’s. Lack of multi-lateral financial assistance for infrastructure has encouraged the Government to permit the construction of roads and bridges on a build operate and transfer basis. In 1996/97 two local enterprises were granted such concessions between Lashio-Muse and Naungcho-Lashio.
The State owned Road Transport Enterprise operates 1,025 passenger buses, 140 taxis and 2,016 haulage trucks. Private road transport is taking up the excess freight transport that the State does not have the capacity to handle. In fact, the provisional data for 1996/97 indicates that 178,252 private vehicles and 36,183 private haulage trucks have been registered. This represents an increase of 18,210 and 4,385 respectively for vehicles and haulage trucks over the previous year.
7.10.2 Rail Transport
The major railway artery runs from Yangon to Mandalay with a series of branch lines. There are 3,388 miles of rail track much of which was originally built as an extension of the Indian rail network. Myanma Railways present fleet cannot adequately meet the needs of growing demand for passenger and cargo service. Much of the fleet is outdated with some 60% of the locomotives acquired prior to 1970, 46% of the four-wheel wagons are forty years or older and 71% of the passenger coaches are more than twenty years old. Myanma Railways presently operates 277 diesel locomotives, 42 steam locomotives, 689 passenger carriages and 3,896 wagons on poorly ballasted rail track that makes slower speeds obligatory.
7.10.3 Maritime Transport
Transportation of cargo and passengers through inland waterways is handled through a combination of the Inland Water Transport (359 powered barges and 362 non-powered barges), an SOE under the Ministry of Transport, the co-operative transport services (208 powered crafts, 105 non-powered crafts and 117 cargo vessels) and private operators. There are four main rivers that constitute Myanmar’s inland waterways. The Ayeyarwardy and its tributary the Chindwin runs North to South and cuts through central Myanmar, the Thanlwin flows from the central coast of the Mon State up to the northern section of the Shan State and the Kaladan runs from the northern section of the Rakhine State and winds its way into Bangladesh and back through the Chin State.
Myanmar Five Star Line, which presently maintains a fleet of twenty three ocean liners and vessels, is responsible for overseas and coastal shipping services. The bulk of the cargo is handled through the ports located around Yangon. The wharves handling general cargo are located along the Strand Road in Yangon City. However, these facilities are inadequate to cope with the increasing amounts of cargo thus the Government developed additional wharves 30 km. south of Yangon in Thilawa. There has been a soft opening of these facilities as of the date of this publication however the facilities are not scheduled to be fully operational until sometime in the mid or later part of 1998. In addition to these wharves, there are specialized berths located north-west of the city center on the Hlaing River that handles rice, copper concentrate and liquid bulk.
7.10.4 Air Transport
Myanmar’s international gateway is through the airport located in Yangon. Though the Government anticipates that it will have an additional four gateways that possess international standards within five years: Mandalay, Hanthawady, Pagan and Ngapali. The Government anticipates that Hanthawady airport in Bago Division, located some 90 km. north of Yangon, will replace the present airport in Yangon as the main international gateway though some view the distance as a serious obstacle towards achieving this goal.
The Government has entered into joint ventures both domestically and internationally in order to inject much needed capital to update the respective fleets and maintenance facilities. Myanmar Airways (MA) joined with Krong Sombat Company Limited in October of 1996 to carry out internal flights. Myanmar Airways International (MAI) is the product of a joint venture with parties from Brunei and Singapore and is presently operating flights to Hong Kong, Bangkok and Singapore. According to the 1996/97 provisional data, MA handled 730,000 passengers and 3,200 freight tons while MAI handled 220,000 passengers and 7,000 freight tons.
The Myanma Posts and Telecommunications (MPT), under the control of the Ministry of Communications, Posts, and Telegraphs, is responsible for the development and operation of all telecommunications activities. Presently, Myanmar possesses one of the lowest ratios of telephone lines to population worldwide. Moreover, there is a disproportionate allocation of phone lines in urban centers where it is estimated that only 25% of the population lives. However, MPT has developed a master plan spanning the years 1990 to 2010 in order to upgrade its telecommunications system. As a result, the number of lines servicing major urban centers has increased. International telephone circuits have been increased to 757 channels linked directly to thirteen countries and there have been several cellular networks established in Yangon and Mandalay. However, the improvements and increased capacity have not been sufficient to meet rising demand. The cost for a local phone line is approximately US$2,000 though a recent venture promises to deliver wireless lines at approximately US$800 in Yangon. The Government does not have the financial resources required to address the growing demand and thus has permitted foreign participation in the telecommunications sector on a revenue sharing basis.
The Government views tourism as one sector that has the potential to generate badly needed foreign exchange. Consequently, it passed the Myanmar Hotel and Tourism Laws in June 1990 in order to encourage private participation in this sector. In addition, the Ministry of Hotels and Tourism was established in September 1992 in order to formulate policy, co-ordinate marketing activities and regulate the private sector. While the Tourism Development Management Committee was formed in April of 1994 in order to further assist the development of tourism. The current flow of tourist into Myanmar is estimated to be at around 250,000 to 300,000 arrivals annually.
Foreign investment in hotel projects is generally on a BOT basis with thirty year leases containing an option for three five year terms for management as an operator. A land use premium and annual lease amounting to 5% of gross revenue are characteristic of most projects. Present capacity stands at approximately 2,000 rooms in Yangon, 1,600 rooms in Mandalay, 343 rooms in Bagan and 360 rooms in the Inle Lake area.
Myanmar Insurance (MI), previously known as the Union Insurance Board, operated as a monopoly since February 1964. It remains the only established insurance company in Myanmar with thirty-four branches nationwide. MI underwrites all classes of life and non-life insurance and cedes a portion of its liability to foreign re-insurers under a tender system in which foreign reinsures are permitted to bid on the fire, marine, engineering, oil and gas and aviation portfolios. The insurance policies underwritten by MI provide for payments in freely convertible currencies provided that the premiums are paid in like currency. MI has been enjoying success as estimated annual turnover is placed at more than US$100 million.
There are several forms of mandated insurance. Any entity that could cause loss to State property, damage to life or property of the public or possesses a threat to the environment will be required to maintain general liability insurance. In addition, organizations receiving benefits under the Foreign Investment Law must comply with mandatory insurance requirements which include machinery, fire, marine and personal accident insurance.
The Government is presently in the process of liberalizing the insurance industry and this fact is reflected in the Myanmar Insurance Law of 1993. The first round of steps towards liberalization intends to privatize the industry with domestic participants and capital. Under this plan, several consortiums have submitted bids for the first round of licenses and as of the time of this publication MI was in the selection process. The next stage of liberalization that is contemplated is the participation of foreign companies. However, there have been two foreign groups that have already managed to secure a position in the market. The first is Japan’s Yasuda and Marine Insurance Fire and the second is Jerneh Asia Berhard from Malaysia.