Hitachi forms joint venture to make and export transformers

Japanese company Hitachi Industrial Equipment Systems (HIES) will invest US$45 million to build a transformer factory, through a partnership with local company Soe Electric and Machinery (SEM), said the president of Hitachi, Masakazu Aoki.

He made the announcement at a press conference in Yangon on July 7, where a joint venture between the two companies was also signed. Together, they will make power and distribution transformers – SEM is the only company that makes transformers in Myanmar.

Hitachi and SEM have had a technical collaboration related to amorphous transformers since 2012. The new company, known as Hitachi SEM Company, will now apply to the MIC, and aims to start business operations by March 31, 2016.

“As businesses are developed, electricity demand in Myanmar will grow. At the moment, as the electricity transfer and distribution networks are extended, the demand for high-quality transformers is increasing,” said Mr Aoki.

HIES will take a 51 percent share in the new company and SEM will own 49pc, said U Kyaw Min Tun, director of SEM. He added that 100pc of production will be in Myanmar and that the joint venture business will hire around 400 workers. “Creating job opportunities is a priority in Myanmar and we plan to hire many local workers. I want to help improve the skills of young people,” he said.

Hitachi is a market leader in Japan, producing domestic electrical appliances such as washing machines and refrigerators as well as electrical materials related to generating and supplying electrical power.

“We will produce higher quality products with the technological assistance of Hitachi and we also plan to export our products,” U Kyaw Min Tun said, adding that in the past, SEM exported transformers for the electricity distribution industry to ASEAN countries, but high export taxes forced an end to overseas sales.

“We were exporting to Vietnam until 2013 but despite a high quality in our standards we had to stop for a while because of the taxation system. Now that we have help from Hitachi we will begin exporting again in a year,” he said.

Initially SEM Hitachi will export to countries such as Laos, Cambodia and Vietnam before considering expanding to other markets, said Mr Aoki.

“Commercial taxes were levied on export products in 2013, but exemptions have since been introduced for the purpose of increasing exports,” said the director of the Internal Revenue Department, Daw Khin Yamone Aung. “For imported goods, under the 2015 Taxation Law, several types of products have been granted tax exemptions.”

The value of the Myanmar kyat has fallen by 9 percent compared to the US dollar since the start of the year according to the official Central Bank rate and more than 17pc according to the informal market rate.

This is partly due to a weak exports sector, local businesspeople told The Myanmar Times. Myanmar needs to come up with a national exports strategy in order to become a country that supports and encourages the sector, said consultant to the Ministry of Commerce U Maung Aung.

Myanmar’s international trade volumes have risen since 2011, but over the same period the country’s trade deficit has soared. In fiscal year 2012, a surplus of $100m was recorded. In FY2013, the deficit was $91 million, rising to $2.6 billion in FY2014, according to statistics published by the Central Statistical Organisation. In FY2015, the deficit jumped another 88pc to over $4.6 billion. In the first three months of FY2016, trade has totalled more than $6.2 billion and the deficit is already over $1bn.

Source: Myanmar Times

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