SBC: September 2012

Sep 29, 2012

China - China manufacturing contracts for 11th straight month

BEIJING: China's manufacturing activity shrank for an 11th straight month in September, HSBC said on Saturday, adding to pressure on Beijing to provide fresh stimulus to boost the world's second largest economy.

The final reading of the purchasing mangers' index (PMI) released by the British banking giant hit 47.9 this month, a mild improvement from a final reading of 47.6 in August, HSBC said in a statement.

The index is closely watched as it gauges nationwide manufacturing activity, a key sector of the Chinese economy. A reading below 50 indicates a contraction in manufacturing, while a reading above 50 indicates expansion.

China's official PMI figure for August released earlier this month hit a nine-month low of 49.2.

The final HSBC reading was slightly above the preliminary PMI of 47.8, announced on September 20, and may ease concerns over China's sharp slowdown.

The latest figure marked nearly a year of continuous contraction since November last year, underscoring broader economic weakness and shrinking demand in key overseas markets.

New export orders fell at the fastest rate in 42 months, HSBC said, indicating that economic weakness in major export markets such as the United States and Europe were continuing to weigh on the Chinese economy.

Qu Hongbin, HSBC's Hong Kong-based chief economist for China, said that manufacturing was probably hitting its low-point but that Beijing still needed to introduce further stimulus to help the economy.

"Chinese manufacturing growth is likely to be bottoming out," he said in a statement.

"However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment," he added.

"Fiscal measures should play a more important role in the coming months".

Authorities this year have tried to boost the economy with interest rate cuts and by lowering the amount of cash banks must keep on hand in a bid to spur the kind of lending that could stimulate stronger growth.

There are expectations that the government will take the upcoming week-long public holiday as an opportunity to introduce a new round of stimulus.

China's economic growth slowed to 7.6 percent in the three months through June, the sixth straight quarter of weakening expansion and the worst result since the height of the global financial crisis.

Weak economic data in the current third quarter have raised fears China's growth may have slowed for a seventh straight quarter when gross domestic product figures are released next month.

Problems in the broader global economy, including Europe's prolonged debt crisis and a sluggish recovery in the United States -- both major trading partners for China -- have been a drag on growth.

Premier Wen Jiabao said this month that China is still likely to achieve its annual economic growth target of 7.5 percent. Even so, that would mark a significant slowdown from 9.3 percent growth in 2011 and 10.4 percent in 2010.

The commerce ministry said this month that China faced "enormous difficulties" in meeting its target to maintain 10 percent growth in trade this year, citing weak overseas demand as the world economy remains under pressure.

- AFP/al

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Vietnam - Valedictorians refuse the “red carpet”

VietNamNet Bridge – A lot of excellent university graduates refuse to go on the “red carpet” laid by the local authorities to attract talented workers.

The students who come first at the university graduation exams are called the “talents,” while their names are glorified at the conferences held every year at the Temple of Literature.

Vietnamese have a saying: “Hien tai la nguyen khi quoc gia” (Talented and righteous people are the (life-sustaining element of the nation). However, a lot of the “talented and righteous people” refuse to serve in state agencies.

The policies lag behind the times

Right after Nguyen The Ninh, a student of the Trade University, successfully defended the university graduation thesis, he was informed that his name had been found in the list of the valedictorians who would attend at a ceremony to glory talented university graduates.

Ninh said he took pride of the high achievements he has obtained and he felt happy when standing among the most excellent university graduates. However, he keeps indifferent to the recruitment preferences offered to him.

“At that moment, I still did not hear anything about the city’s policy on prioritizing to recruit valedictorians for the state agencies,” Ninh explained.

“The job preferences were offered just two months after the graduation. However, I did not care about that, because I had been following my way for the last many years already,” the valedictorian of the Trade University in 2007 said.

Majoring in marketing, Ninh once planned to take a job at an import-export company in Hanoi. But he changed his thoughts later. Ninh decided to become a university lecturer, the job that would give him more chances to study and upgrade his knowledge.

Ninh has been following the way he chose for the last few years, and he believes that he made a right decision when refusing the opportunity to work at Hanoi’s state agencies.

Ninh has obtained the master degree in marketing, and he now prepares to continue studying for a doctorate.

The preferences valid for one year only

Do Thu Trang, the valedictorian of the Hanoi Open University, has been succeeding in both study and works. Graduating the university with the “excellent grade” degree, Trang got a good job as an auditor of a finance consultancy firm which offers high pay and friendly working environment.

However, Trang still wishes to learn more and obtain bigger achievements. She is now attending a training course to obtain the master degree in business administration. Trang has also left the auditing firm for a foreign company, which offers better pay and high promotion opportunities.

When asked about the job preferences offered by the city authorities, Trang said she feels the preferences do not fit her. “Accountancy – my major – is not among the branches the city prioritizes,” she explained, adding that she nearly cannot see any opportunities.

Talking about the talent glory ceremony at the Temple of Literature, Trang said it was a wonderful event and the memory about which would exist for ever.

“After the ceremony, we were delivered a “decision to reward talented university graduates,” which were considered the “admission tickets” to state agencies,” Trang recalled the event.

“However, the decision would be valid for one year only. Meanwhile, I do not need the preferences,” she added.

Nguyen Hien

Vietnam - Bad debt restructuring moves slowly because sellers demand high prices

VietNamNet Bridge – The State has been urged to put a hard pressure on enterprises, forcing them to speed up the debt settlement. However, at first, it needs to perfect the legal framework on the debt assessment.

Banks don’t want to sell debts

“A friend of mine, a businessman, has revealed that the bad debt of his bank has been higher than the bank’s chartered capital. However, when discussing the debt sale, he said he would only sell the debts if the buyer accepts to pay 100 percent of the value of the debts”.

This is the story related by Pham Manh Thuong, Deputy General Director of the Debt and Asset Trading Corporation DATC, an arm of the Ministry of Finance.

Valuating debts and fixing the prices of debts proves to be the biggest problem that hinders the debt trading now.

“Some banks demand 100 percent of the value of the debts, others demand 80 percent. The overly high requirements have kept DATC away,” Thuong explained.

In most cases, DATC only accepts to pay 30 percent of the face value of the debts, which means that DATC would enjoy the discount of the other 70 percent of the value of the debts once they are successfully settled.

Meanwhile, the 30 percent level proves to be lower than the level expected by most commercial banks, which are taking on bad debts.

While commercial banks complain that DATC pays too low for the debts, DATC argues that even with the low buy prices, it still cannot make high profits.

By August 31, 2012, DATC had bought the debts of 74 enterprises which were under the restructuring process. The book value of the debts was 6520 billion dong. The prime cost for the debts was 1647 billion dong, or the average debt purchase ratio of 25.6 percent. Meanwhile, to date, only 1536 billion dong has been recovered, which means the low recovery ratio of 93.23 percent.

Thuong has admitted that commercial banks do not want to sell debts to DATC. In general, DATC has to make payment in cash. Meanwhile, banks, when selling debts at low prices and receive cash, would see a big loss item on books, which would “spoil” their capital adequacy ratio.

Banks are not forced to sell debts

According to Thuong, there are some 20 operational asset management companies (AMC) belonging to commercial banks, but the companies just have the functions of recovering debts by liquidating mortgaged assets.

The current laws stipulate that banks have to make provisions against the bad debts. However, in fact, banks do not bear the pressure of having to settle bad debts quickly to make their financial situation healthier.

Analysts believe that the Ministry of Finance and the State Bank of Vietnam should set up a regulation that forces all credit institutions which have bad debts exceeding the safely line and cannot settle debts themselves, must sell the debts or transfer the debts to DATC. If not, banks would bear some limitations in their operation until the debts can be settled.

Nguyen Thi Mui from Vietinbank, said AMCs have more favorable conditions to deal with the bad debts, because they better understand both the creditors and debtors. However, Mui thinks that it is necessary to set up a mechanism allowing to monitor the debt settlement process in a transparent way. If not, it may happen that the books show “beautiful figures,” while in fact, the bad debts still exist.

Meanwhile, experts have doubts about the debt settlement feasibility of DATC. To date, DATC has just dealt with 8 trillion dong worth of debts, a very small figure if compared with the current bad debt worth 200 trillion dong.

Pham Huyen

Vietnam - Cabinet meeting discusses major tasks for three remaining months

VietNamNet Bridge – The Cabinet has identified four key tasks for the last quarter of this year, including keeping inflation rates at less than double digits, restructuring businesses and banks, creating jobs, and reducing poverty.

On September 27, Prime Minister Nguyen Tan Dung chaired the monthly cabinet meeting. It concentrated on the socio-economic situation in September and over the last nine months

Cabinet members discussed why the consumer price index (CPI) in September hit a record high of 2.2 percent, the highest since the beginning of 2012.

According to the National Financial Supervisory Committee, the CPI increase in September stemmed from petrol, healthcare, and education price hikes. Healthcare costs suffered the highest rise of 23.8 percent.

The Ministry of Planning and Investment (MoPI) reported that the country’s GDP grew at 4.73 percent during the past 9 months. If GDP growth is maintained at a level between 6.-6.5 percent for the rest of the year, the whole year total of 5-5.2 percent, predicted by some international organisations, will be reached.

PM Dung said despite efforts to ensure economic growth and social welfare, there were limitations in socio-economic development caused by unsteady macroeconomic growth and large inventories.

Mr Dung asked relevant ministries and sectors to submit possible solutions to year’s remaining tasks, emphasising the priority of stabilising the macroeconomic situation and curbing inflation.

Mr Dung also underscored the need to help businesses alleviate snags in production and boost exports of key products like rice, seafood, garments, textiles, and footwear.

He added greater attention should be devoted to restructuring State-run businesses and banks, creating more jobs, developing tourism, improving the financial, telecommunication and aviation sectors, and removing difficulties for the real estate market.

Cabinet ministers also discussed a report on solutions for value-added tax, the draft law on public investment, the ordinance on regulations relating to the “heroic mother” title, and a plan for public health insurance.

VietNamNet/VOV

Vietnam - SOE equitisation still at a snail’s pace

Delays in the state-owned enterprise equitisation push is again under the microscope.

Hanoi is yet to approve any equitising plans of seven Hanoi businesses in the list of 93 businesses to be equitised in 2012 aired by the Ministry of Finance in June, according to a Government Office source.

In fact, when the list of 93 firms to be equitised in 2012 was declared, concerns over their progress were voiced rooted in the fact that only six businesses wrapped up their equitisation plans in 2011 and the first five months of 2012.

Vietnam National Textile Garment Group is likely to drop its target to finalise its equitisation in 2012 despite its early preparations and the leadership’s strong commitment, according to a Ministry of Industry and Trade representative.

A sliding stock market, worsening economy and investors’ finite financial sources were key reasons behind firms’ delayed equitisation path.

However, looking back on enterprises’ equitisation process in the past five years it is apparent that delay has seemingly becoming a ‘chronic disease’.

For instance, during 2007-2010 only 30 per cent out of 900 businesses bound to be equitised reached their targets. One should remember that the stock market was still in good shape in 2007.

Besides, firms with over 51 per cent state capital ratio still held a large proportion among equitised firms.

Experts involving in the draft project on furthering enterprises reforms to boost operational efficiency which was presided by the Ministry of Planning and Investment pointed out that the efforts to restructure businesses in key sectors and areas have reported limited results.

Of 1,039 enterprises with 100 per cent state capital 29 per cent of them operate in agriculture-forestry-fisheries areas, 19 per cent engage in industrial production, 10 per cent in transport, 9 per cent in construction and up to 36 per cent work in trade, services and tourism areas which are believed do not need to raise state capital.

Since a big share of state capital was put in trading areas, it was impossible to say delay in equitising enterprises in the past mainly stemmed from market difficulties.

The experts, however, attributed the delay to problems relevant to policies and mechansism on enterprises equitisation.

Irrespective of high bad debt rates at existing enterprises which hinder firms’ equitising schemes, current mechanism on setting enterprise value, particularly their stock starting price is impractical as the price is often much higher than their actual value, putting firms and relevant state management bodies in a fix as they fear of causing losses to state coffers in the face of sliding stock market.

Second, guiding regulations to define land use rights, setting advantage values and sourcing strategic partners are not in place, making investors to turn to different state bodies for permission, then delaying the process.

Third, cumbersome operations of some state groups and corporations is a problem. There are cases state groups and corporations are bound to equitise, but some of their member companies operate in areas the state needs to take ruling.

“Mechanism-related impediments need to be soon tacked on the basis of ensuring transparency and protecting national interests to facilitate the process,” said head of Vietnam Institute of Economics Dr. Tran Dinh Thien.

Bao Duy | vir.com.vn

Vietnam - London Stock Exchange an opportunity for Vietnamese enterprises

Vietnamese entrepreneurs, stock investors and financial experts from the UK took part in a seminar in Ho Chi Minh City on September 26 to share their experiences of the opportunities and challenges faced in the international financial market via the London Stock Exchange.

The Lord Mayor of the City of London, Alderman David Wootton said that the London Stock Exchange has more than 3,000 listed enterprises, including 600 overseas companies, and can create more opportunities for Vietnamese companies to issue international bonds.

Moreover, the fact that the London Stock Exchange is now open to Vietnamese enterprises will help increase access to foreign capital.

Nguyen Thi Hong, deputy chairperson of the HCMC People's Committee, said the London Stock Exchange takes up 30 per cent of the international foreign currency exchange contributing 12 per cent to London’s GDP and 2 per cent to the United Kingdom’s GDP.

However, participants also said that taking parting in the London Stock Exchange will bring challenges to Vietnamese enterprises. Representatives of PricewaterhouseCoopers Vietnam (PwC Vietnam), with its headquarter in London, said Vietnam’s auditing standards are different from international standards while the London Stock Exchange requires enterprises’ financial reports to adopt the International Financial Reporting Standards for Small and Medium sized Enterprises, which provide a substantially simplified set of internationally recognized accounting principles specifically for private firms.

In addition, investors normally rely on any company’s internal management control. Hence, enterprises should promote transparency in financial reporting and strong internal management control or investors will turn their backs on the company. Financial statements are the primary means of communication between management and shareholders, banks, and other interested parties.

Another barrier is that enterprises have to adopt legal requirements including restructuring, business plans and financial statements, and laws on bribery and corruption when joining the London Stock Exchange.

On being asked how Vietnamese enterprises can access capital resources easily, Dang Quoc Tuan, Director of Capital Markets Services of PwC Vietnam, said they should maximize profits, enhance management control, and show transparency and detailed plans at first bond issuance to people overseas, before asking for capital support.

Meantime, Stephen Revell, from Freshfield Bruckhaus, said Vietnamese enterprises should employ lawyers who will take part in listing procedures and tighten management and be very careful in first bond issuance to the public.

A new Memorandum of Understanding is being signed in HCMC on September 26 between UK Trade and Investment Vietnam (UKTI) and the British Business Group Vietnam (BBGV), to cooperate more closely to boost trade and investment between the UK and Vietnam during the visit to Vietnam of the Lord Mayor of the City of London, Alderman David Wootton.

Under the three year MOU, UKTI and BBGV will provide high-quality support to UK businesses with an interest in Vietnam, both for establishing in the country and for exploring opportunities. They will also work together to encourage more Vietnamese companies to consider investing in the UK.

The Lord Mayor is presently heading a business delegation to Vietnam from September 22-26. The main focus of the visit is to promote the expertise of the City of London in Vietnam and to support UK’s commitment under the Strategic Partnership Agreement between UK and Vietnam.

SGGP

Vietnam - Shining a light on related party disclosures

KPMG Vietnam audit partner Tran Hang Thu writes that it is time to cut through the complexity of related party disclosures.

With financial markets’ evolvement, the process of identifying and disclosing related party transactions has developed through time.

However, it still centres around the principle of encouraging transparency and market best practices with regards to related party transaction disclosures for informed decision making.

Related party transactions have been highlighted as a feature of a number of financial scandals in recent years. This prompted the financial statements user the importance of adequate attention to information disclosed by companies in their financial statements in this respect.

Accounting standards are in place to monitor disclosure requirements for related party transactions. Whilst there have been significant developments in International Financial Reporting Standards to amend the original standard on Related Party Disclosure (IAS 24 Related Party Disclosures), in Vietnam, the currently effective Vietnamese Accounting Standard No. 26, which was based on the original IAS 24, has not been amended. The lack of attention by management to financial statement disclosures and related party disclosures, further weakens the disclosure practice in Vietnam. There is also a serious lack of systems to capture related party transactions for disclosure purposes.

While accounting standards require only significant related party transactions to be disclosed, when the term “significance” is mentioned, it is quite common for accountants to go into autopilot and judge items in relation to percentages of turnover, profit before tax and gross assets. In such cases, it is worth revisiting the definition of materiality: “Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.” (Paragraph 30 of Framework for the Preparation and Presentation of Financial Statements issued by the International Accounting Standard Board).

Relevant factors for assessing the significance of related party transactions include:

- Significant in terms of size

- Carried out on non-market terms

- Outside normal day-to-day business operations, such as the purchase and sale of businesses

- Disclosed to regulatory or supervisory authorities

- Reported to senior management

- Subject to shareholder approval.

Apart from disclosure requirements imposed by accounting standards, countries such as Malaysia, Singapore and Hong Kong impose regulations for listed companies to set up controls over related party transactions:

- Thresholds established for making announcements to shareholders

- A circular is tabled at annual general shareholder meeting for revenue and recurring items to be approved by shareholders.

Vietnam’s 2005 Corporate Law provides the same rules where different rules are specified depending on whether it is a one-member limited liability company, limited liability companies with two or more than two members, or a joint stock company. However, again, the level of attention paid by managements to these related party transactions still plays a key role in preventing abusive transactions among related parties.

The real question is whether reported transactions, if not identified as being with a related party, might distort the economic reality of the company’s financial position and performance.

Arm’s-length or not arm’s-length

The “arm’s-length principle” basis underlying related party transactions is another area that might be overlooked. While it can be understood as the amount charged by one related party to another for a given product must be the same as if the parties were not related and is therefore what the price of that transaction would be on an open market, determining the arm’s-length price can sometimes be a technically complicated matter, especially when it relates proprietary goods and services or intangibles.

Even though there are terminology differences between how related parties are understood by accounting standards and tax authority, one must be able to see the linkage between the appropriateness of such basis within their company’s related party disclosures and the compliance aspect of transfer pricing regulations. The Vietnamese transfer pricing regulations have been applied since 2006 with the current Circular 66/2010/TT-BTC dated April 22, 2010 and auditing corporate taxpayers’ transfer pricing matters active in tax authorities’ audits since early 2012.

Types of collectively significant transactions to be disclosed if they

- Purchases or sales of goods (finished or unfinished)

- Purchases or sales of property and other assets

- Rendering or receiving services

- Leases

- Transfers of research and development

- Transfers under licence agreements

- Transfers under finance arrangements (including loans and equity contributions in cash or in kind)

- Provision of guarantees or collateral

- Commitments to do something if a particular event occurs or does not occur in the future, including executor contracts (recognised and unrecognised)

Disclosing related party transaction: Whose responsibility?

Realising it or not, by acknowledging their responsibility of preparing the financial statements, company’s managements is abiding to their responsibility for identifying and disclosing related party transactions. In order to do so, many try to establish systems and processes to facilitate the identification and disclosure. Best practices in more advanced economies highlight an audit committee’s role and responsibilities in monitoring abusive related party transactions by imposing mandatory audit committee reviews of areas such as possible failure to identify related parties and related party transactions, inadequate examination of related party transactions, improper disclosures of related party transactions.

External auditors, on one hand, are required to comply with auditing standards when auditing related party disclosures (International Standard on Auditing No. 550 Related Parties, Vietnamese Standard on Auditing No. 550 Related Parties). On the other hand, external auditors rely on the systems and processes established by management in assessing the identifying and disclosing related party transactions and their representations as to the completeness and adequacy of such disclosures. In fact the lack of such systems and processes creates concerns among market participants about the appropriate monitoring and auditing of these transactions.

Even if the auditors have performed their job properly in auditing related party transactions as required by auditing standards, the auditor would not be able to give a clean opinion on the entity’s financial statements due to the potential deficiencies in related party disclosures.

Identifying related party relationships can be a challenging and costly exercise particularly for large organisations. It requires the ability to identify and evaluate all types of relationships up and down the organisational chart including those among and between subsidiaries, associates, investees and any other entities that might be influenced by a common set of owners or key management.

Challenges also arise where there are transactions between entities that are controlled, jointly-controlled or significantly influenced by the government. In some respects, the original definition of what a related party relationship represents has not helped improving disclosure transparency due the complex and cumbersome structure of the definition itself. In response, the standard setters around the world introduced amendments to the previous standard, for example IAS 24 Related Party Disclosures amendment has been made effective for annual periods beginning on or after January 1 2011, in an effort to simplify the identification of such relationships and re-balance the extent of disclosures of transactions between related parties based on the costs to preparers and the benefits to users in having this information available in financial statements.

In view of the amended IAS 24, regulatory agencies, in particularly the Ministry of Finance, should make reference to the approach adopted by International Accounting Standards Board and revise the current Vietnamese Accounting Standard No. 26. Apart from providing more clarification for the definition of related parties while maintaining the fundamental approach to related party disclosures, such revision if introduced will allow addressing issues surrounding the disclosure of related party transactions among government-related entities, which are common in Vietnam.

Identifying and disclosing related party transactions may continue to be a timely and costly exercise. However, due to the importance of such disclosures for financial statements users, financial statement preparers need to ensure that they work with the right groups within their organisations to capture the necessary information. On the other hand, let’s not forget a famous quote by Sir David Tweedie, former chairman of the International Accounting Standards Board: “The requirement to disclose related party transactions can never be a complete safeguard against deliberate dishonesty”.

The views expressed by the author here do not necessarily represent the views and opinions of KPMG.

vir.com.vn

Vietnam - UK investors need complete PPP legal framework - Mayor

UK firms are eying projects under public-private partnership (PPP) form in Vietnam, but they will only participate in these projects when the legal framework for this format is completed, said the Lord Mayor of London.

Speaking at a press briefing in HCMC on Wednesday, David Wootton said UK firms want to join PPP projects in Vietnam. They have showed keen interest in Long Thanh Airport and Thu Thiem New Urban Area, said the Lord Mayor of the City of London.

Many UK companies currently active in Vietnam are experienced in developing PPP projects abroad. They are operating in the fields of consultancy, technology, and project management, such as Foster + Partners, RICS Vietnam, Arup Vietnam, Knight Frank, and Savills Vietnam.

Nevertheless, the legal framework for PPP must be perfected, a prerequisite for the UK-based firms to join such projects, stressed Wootton.

Vietnam is an attractive destination for UK investors thanks to its large market with 90 million people and strong economic growth. However, the country needs to improve the legal system, reform State-owned enterprises and restructure the banking sector in order to lure investors, said the visiting Lord Mayor of London.

Wootton is heading a business delegation to Vietnam from September 22 to 26. The main focus of the visit is to further develop bilateral trade and investment opportunities between Vietnam and the UK.

UK companies highly appreciate the efforts of Vietnam to improve the investment environment as well as stabilize the economy.

Nick Holder, chairman of the British Business Group Vietnam (BBGV), said Vietnam is one of the nations where UK investors are doing business well.

“As for the firms currently operating in Vietnam, they see the strengths and the positive supports of the Government, and they will carry on their businesses.”

“But as for those intending to enter Vietnam, they often compare Vietnam with other countries in the region, so Vietnam has to try more attract these investors,” said Holder.

He was speaking on the sidelines of the signing ceremony for a memorandum of understanding between BBGV and the UK Trade & Investment (UKTI) in HCMC on Wednesday, under the witness of Lord Mayor David Wootton.

Many big UK companies have invested in the financial sector in Vietnam, such as HSBC, Standard Chartered, and Prudential, along with those active in real estate, production and service.

However, Holder said the advantage of cheap labor cost will soon fade away once the living standard of citizens is improved, plus the competition with the emerging markets like Cambodia and Myanmar.

Therefore, the Government should pay attention to infrastructure, intellectual property, technology, and high value-added sectors, considering them as the nation’s competitive advantages.

Douglas Barnes, UK consul-general in HCMC, said UK investment in Vietnam had exceeded $3 billion. The two countries are aiming at a two-way trade of $4 billion in 2013, after achieving $3.5 billion in 2011.

SGT

Myanmar - Myanmar Awaits Sanction-Lift Effect

The U.S. decision to lift a ban on exports from Myanmar could give the country its best shot at becoming the world's next low-cost manufacturing hub as well as firm up the fragile political reforms now taking place.

But business leaders say it will be a long time before T-shirts and hoodies made in the Southeast Asian country are ubiquitous in shopping malls and years before meaningful benefits reach its archaic industrial infrastructure and low-income households.

With Wednesday's action, Washington has lifted nearly all of the economic sanctions imposed against Myanmar in recognition of its reforms over the past 18 months. Secretary of State Hillary Clinton said the most recent move is the next step in normalizing commercial relations between the two countries. Bans on investment and financial services were lifted earlier.

"By lifting the sanctions we can now see real changes in Burma,'' said Nyan Win, spokesman for the National League for Democracy, using the country's other name. "It will bring a lot of benefits to the country and we will support the government using the benefits for the people of Burma." The NLD is led by Nobel Peace laureate Aung San Suu Kyi.

Resource-rich Myanmar, a country of 60 million people, is coming to be seen by many international investors as having potential both as a source of raw materials and a large consumer market following a series of wide-ranging reforms implemented in the past year after long isolation under military dictatorship.

However, economic stagnation following the imposition of a number of trade and investment sanctions by the U.S. and other countries since the late 1990s means the country lacks even some of the most basic economic infrastructure required to compete with other frontier, low-cost manufacturing nations such as Cambodia and Bangladesh.

Maung Maung Lay, vice president of the Union of Myanmar Federation of Chambers of Commerce and Industry, doesn't expect to see any tangible export volumes to the U.S. until the beginning or the middle of next year. Even then, he expects shipments to be just a trickle.Myanmar is essentially starting back where it was more than a decade ago while its competitors—from Cambodia to parts of China—have surged ahead.

"We have lost many markets," Mr. Maung Manug Lay said. "We have to compete in the new world order, so there are more challenges than opportunities."

The biggest expected beneficiary should be the country's textiles and garments industry, which had exports totaling $558 million in 2011, according to Myanmar's Garment Manufacturers Association, representing 200 factories in Myanmar. Other industries that could gain include the timber sector.

Aung Win, vice chairman of the garment association, said it could take up to a year for garment makers to rebuild capacity, with local manufacturers needing to import equipment and machinery and source the necessary financing for such operations.

"Now, we only have mostly Japanese orders and Korean orders—they are not enough to go around for the industry in Myanmar," Mr. Aung Win said. "Most factories are struggling—we hope this obstacle will go away when American orders come in."

In Washington, senior State Department officials told reporters in a briefing that the process of easing sanctions would require congressional consultations and waivers from the administration on different products or sectors. The intent is to help Myanmar's economy grow beyond extracting minerals and timber and to be able to create manufacturing jobs, the officials said.

In one of the first reactions from the U.S. garment industry, the American Apparel & Footwear Association, which represents U.S. clothes makers, said it welcomed the easing of restrictions in light of the country's reforms. It said it would work with local stakeholders to ensure clothes were made under appropriate working conditions and workers "are treated with fairness and respect."

Myanmar President Thein Sein, speaking during a panel discussion at the Asia Society in New Yorkon Thursday, said: "We have got developed countries to relax their restrictions on our economy. We believe there will be an increase of foreign investment and that will allow our citizens to improve their living standards."

The prospect of an effective low-cost manufacturing hub has caught the attention of some manufacturers and trade groups.

Mr. Aung Win said his garment association meets potential foreign buyers on a daily basis. Fast Retailing Co., the Japanese operator of the Uniqlo clothing chain, meanwhile, has flagged Myanmar as a potential manufacturing base alongside Bangladesh as part of its capacity expansion.

Myanmar should have a competitive edge in labor costs. A Japan External Trade Organization report this year showed the average monthly wage of a factory worker in Yangon at 61% of that in Hanoi and 83% of average wages in Phnom Penh, Cambodia.

While a handful of multinationals such as Coca-Cola Co., PepsiCo Inc. and General Electric Co. are making earnest moves into Myanmar's domestic market, caution and a degree of skepticism prevails among many companies about Myanmar.

A spokeswoman for Hennes & Mauritz AB said the Swedish fashion retail giant is watching developments but hasn't made any decision about using goods from Myanmar until the situation becomes clearer. H&M and other foreign manufacturers have been bound by the U.S. rules against exporting goods with Myanmar-originated materials to the U.S.

Adam Sitkoff, the Hanoi-based executive director of the Asia Pacific Council of American Chambers of Commerce, said many U.S. businesses are looking to see how Myanmar can fit into their future supply-chain plans.

"In the near term, however, American consumers probably won't see many 'Made in Myanmar' labels in their favorite stores as the country lacks key infrastructure, legal certainty, and skilled labor," he said.

A protracted debate in the country's legislature about how to allow foreign investment also clouds the investment outlook.

While some probusiness politicians—including Mr. Thein Sein—are calling for faster economic reforms, some lawmakers and local business leaders are concerned that an overly aggressive pace of change would give foreign companies too big a share in the local market at the expense of domestic companies.

SAM HOLMES and CELINE FERNANDEZ

http://online.wsj.com/

Myanmar - Myanmar Leader Seeks Flexibility for Foreign Investors

Myanmar's president is pushing to give overseas investors greater flexibility in their holdings in joint ventures with local businesses in certain sectors, as both reformist and protectionist elements of the nation's legislature debate proposed foreign-investment laws, an official in the presidential office said Tuesday.

President Thein Sein over the weekend formally delayed approval of long-awaited foreign-investment legislation, which is seen as crucial to opening the country to global companies following decades of isolation. The president's delay followed criticism by some local business investors and entrepreneurs about the latest version passed by parliament that restricted foreign ownership to 50% in some politically sensitive industries.

In unrestricted sectors, foreign investors are required to hold at least a 35% share in joint ventures with local partners.

Zaw Htay, a director with Mr. Thein Sein's office, told The Wall Street Journal Tuesday the "president does not want a specific ratio" for joint-venture arrangements in unrestricted sectors.

"He wants it to be worked out between the foreign investor and local investor, according to the agreement between the two of them," Mr. Zaw Htay said.

More specifically, he said the president wants to make changes to the language in the draft legislation related to four of the 11 restricted sectors to clarify in which industries foreign investors should play a greater part and in which industries local businesses should be more active.

These four sectors are production and services, agriculture, livestock and fishing. He didn't say to what extent the president wanted to see greater or lesser foreign or local involvement in each sector.

Parliament next meets in October, when revisions to the legislation are expected to be submitted for approval.

The resource-rich country of 60 million is seen by many international investors as a frontier market following a series of wide-ranging democratic changes implemented in the past year, ending a long period of global political and economic isolation under military dictatorship.

The initial version of the law passed earlier this month amounted to a compromise between those calling for fast economic overhauls—such as Mr. Thein Sein—and more-conservative lawmakers and local business leaders concerned that an overly aggressive pace of change would give foreign companies too big a share in the local market at the expense of domestic companies.

"It's clear that Thein Sein is currently in a bit of a tussle with the legislature, and not only over this issue, which suggests power struggles behind the scenes," said Jan Zalewski, a South Asia analyst at IHS Jane's.

Mr. Zalewski now sees a real risk that a new foreign-investment framework could be held up again as different interest groups seek to make their voices heard on the matter. "This could increase the clout of those wanting more guarantees and safeguards for local businesses," he said.

SAM HOLMES And CELINE FERNANDEZ

http://online.wsj.com/article/

Myanmar - Suu Kyi Faces Tough Questions at Yale, Harvard

BOSTON — Burmese pro-democracy icon Aung San Suu Kyi enthralled students and journalists on Thursday at Yale and Harvard university’s where she re-emphasized her position on the importance of the rule of law in Burma, but avoided getting involved in a debate about the conflicts in the country’s ethnic areas and the controversial crisis in Arakan State.

“Once we can say that we have been able to re-establish rule of law, then we can say that the process of democratization has succeeded,” Suu Kyi said at Yale. “Until that point I do not think that we can say that the process of democratization has succeeded.”

Calling the current system of judiciary “practically non-existent,” Suu Kyi continued: “Until we have a strong, independent, clean judiciary, we cannot say that Burma is truly on the road to democracy.”

She introduced her new role as the chairperson of the Rule of Law Committee at the House of Representatives in Naypyidaw, saying she deplored that rule of law is “fundamentally lacking” and that corruption is “endemic” in Burma. She said that the restoration of rule of law is the most important and urgent task ahead for her country.

The two lectures she delivered on Thursday underscored both Suu Kyi’s strengths and vulnerabilities. Her extraordinary skills as a public speaker were clearly on display. Above all, it is her ability to speak with passion and in plain terms about basic principles of democracy that makes Suu Kyi an exceptionally appealing democracy campaigner.

It is also characteristic of her to advocate democracy in moral terms. Indeed Suu Kyi’s voice is most confident when she talks about normative values such as responsibility and duty. She concluded her talk on rule of law with the remark that education and training would not be enough, because ultimately the goal would be achieved only when citizens’ “attitude and mind-set” changed.

While many of the Ivy League students drew inspiration from her moral philosophy, it was also evident that Suu Kyi was not going to be simply adored and worshipped, and several questions focused on Suu Kyi’s perceived reticence on Burma’s majority-minority issues.

“It is explicitly feared by some that she might effectively end up reinforcing majority rule,” said one Harvard student.

Despite attempts by Harvard students to debate the topic of the Kachin, the Rohingya and other ethnic issues, Suu Kyi repeated the same answers that she had been giving for weeks: that she would not take one side over the other, and that she is opposed to all human rights abuses.

She went a step further in suggesting that there were “people trying to make political capital” by fueling an international outcry about the plight of minorities.

Yale’s president introduced Suu Kyi as “a great unifier.” But immediately after her talk an undergraduate student wrote an article titled “Promise still to be filled in Burma” for the school newspaper The Daily Yale, which criticized Suu Kyi’s for “remaining largely silent” on issues of ethnic minority.

Masao Imamura

http://www.irrawaddy.org/

Brunei - Brunei sees need for structural adjustment at United Nations

Crown Prince affirms nation’s commitment to universal values of tolerance and respect

BANDAR SERI BEGAWAN: Brunei Darussalam affirmed its commitment to universal values of tolerance and respect while upholding the institutions, structures and due process of international affairs the United Nations (UN) embodies, Borneo Bulletin reported.

His Royal Highness Prince Haji Al-Muhtadee Billah, the Crown Prince and Senior Minister at the Prime Minister’s Office, on behalf of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam, underscored the Sultanate’s stance in an address at the 67th Session of the United Nations General Assembly in New York on Thursday.

In a craftily worded speech, HRH said the UN doesn’t need to adjust itself fundamentally but in the structure of the organisation there are some things that need to be “adjusted”.

Drawing a parallel between the UN and Asean and how the latter has adjusted despite being one of the most unstable regions on earth four decade’s ago as a confrontation point for the national interests of great powers and a focal point of the Cold War, HRH said Asean has adjusted. It will continue to operate in the interest of its community of 600 million citizens, not by conflict or confrontation and not by compromising national values, but by peaceful consensus.

In the same way, HRH hoped the structure of the United Nations can be gradually and carefully “adjusted”.

Earlier, HRH said Brunei welcomes the five-year action agenda UN Secretary-General Ban Ki-Moon set out and the common vision it offers us.

“At its heart, this vision is of tolerance, respect and understanding between nations. Sadly, over the last two weeks, we have witnessed events that present a very different vision,” HRH said, noting that the Sultanate, in considering them, has stated its unreserved condemnation of their cause.

“We have equally strongly advised all our people, of our government’s absolute rejection of the violence and extremism that have been their result.

“Here at the United Nations, we congratulate the Secretary-General on his statement about the matter. In doing so, we reaffirm our commitment to universal values of tolerance and respect.”

HRH added that Brunei upholds the institutions, structures and due processes of international affairs that this great organisation embodies.

Touching on the theme for this year’s General Debate, HRH pointed out that the key word here is ‘adjustment’.

“I think it is well-chosen. It suggests change that is carefully and gradually done. It does not invite confrontation,” HRH said.

According to HRH, this matches the main purpose of the annual meeting.

“It is in the structure of the organisation that we see a need for some things to be ‘adjusted’. The reason (for a structural adjustment at the UN) appears clear to many of those of us who are small both physically and politically.

“The current structure appears far too often to be the deep-seated cause of the headline news I referred to.

“We see it as a 20th Century structure designed to meet 20th Century realities. It is personified in the 64 years of suffering by the ordinary people of Palestine and in all other desperate situations in which the root causes of conflict and confrontation are still buried in the last century”

According to HRH, this must change, as “in our globalised world, we are all equally inter-dependent and equally responsible”.

“Like many other members of this Assembly, we believe that the current structure does not truly reflect this,” HRH added. “As such, it needs adjusting so that ancient political fault lines are repaired. The form we hope it will increasingly take will be like some regions today that operate from a basis of consensus, rather than compromise and confrontation.”

That is what we have accepted in our own region of Southeast Asia, HRH said.

“It is the spirit behind Asean’s present focus of building a peaceful and mutually respectful community of nations regardless of background, economic resources or national preoccupations. It is why we greatly appreciate the strong support and goodwill that is constantly shown to us by our many partners from outside the region.

“It is also why we in Brunei Darussalam, the smallest of all the members, feel honoured and privileged to be the Asean Chairman next year. It is an association of neighbours who have deliberately chosen to ‘adjust’ their region’s previous identity

“Until 45 years ago, it was one of the most unstable regions on earth, a confrontation point for the national interests of great powers and a focal point of the Cold War. Now, it has ‘adjusted’. It is determined to operate in the interests of its community of 600 million citizens.”

HRH expressed his confidence that it will continue to do so, not by conflict or confrontation and not by compromising national values, but by peaceful consensus.

“In the same way, we hope the structure of the United Nations can be gradually and carefully ‘adjusted’,” HRH concluded.

Fadley Faisal

http://www.theborneopost.com/