Dirty petrol: Yangon govt backtracks on secretive fuel deal

The Yangon Region government appears to be backtracking on a secret deal to lease 26 sites to a private company, Yangon Petrol, following widespread public criticism and pressure from regional lawmakers.

By HEIN KO SOE and THOMAS KEAN | FRONTIER

FOR NEARLY a year, Yangon Region Chief Minister U Phyo Min Thein has been floating the idea of government intervention in the fuel market, arguing that retail prices are higher than they should be.

How he might do that remained a mystery until January, when documents were leaked to Facebook that appeared to show that the government planned to lease 26 sites in Yangon to a private company, Yangon Petrol Company Limited, at a price far below market rates. The documents showed five of the 26 sites had already been leased. Of these, two stations have already opened, with two more under construction.

The documents were leaked by a Facebook account, “Su Su”, that has since been reported and removed by Facebook, apparently for being inauthentic.

After details of the documents were reported in Myanmar-language media, Phyo Min Thein confirmed the plan to reporters at an event to mark the second anniversary of the Yangon Bus Service on January 16. He said that by leasing land cheaply to a private company, consumers would benefit from lower prices.

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But his method has proved controversial, with critics from the Yangon Region parliament, media and business community questioning how the government selected Yangon Petrol and what agreement it had reached with the company on fuel pricing. For nearly three years, critics say, the regional government has blocked new fuel stations from opening, and some have accused the government of “anti-competitive” behaviour that undermines the free market by giving one company an advantage over its rivals.

“We don’t want business to be done like it [was done] under the previous government and the military,” Daw Sandar Min, a National League for Democracy lawmaker for Seikgyikanaungto-1 who chairs the Yangon Region Hluttaw Finance, Planning and Economic Committee, told Frontier. “We have to fight it.”

Backtracking

Under pressure from its critics, the Yangon Region government appears to already be backing away from its original plan.

Sandar Min said that at the Invest Myanmar Summit in Nay Pyi Taw in late January Phyo Min Thein had told prominent businesspeople from the fuel industry that Yangon Petrol would only get the five sites that have already been leased. According to Sandar Min, the chief minister told businesspeople that “the rest [of the 26 sites] will be open to other competitors”.

The Yangon Region government could not be reached for comment.

Meanwhile, the chief minister told industry representatives and government officials during a meeting at the Yangon Region government office on January 23 that he would support any company that wanted to open a new fuel station or depot in the city, according to U Win Myint, who attended the meeting as secretary of the Myanmar Petroleum Traders Association.

Win Myint said this would represent a significant change of policy for the regional government, as since Phyo Min Thein took office it had not allowed any new stations to open in Yangon Region

Phyo Min Thein said any company was welcome to submit proposals to lease land, but Win Myint said the offer was short on detail.

“We don’t know what land he is referring to – is it the 26 plots that the Yangon government planned to lease to Yangon Petrol?”

The meeting was called to discuss the private sector’s concerns about the Yangon Petrol deal. Win Myint said the chief minister justified the Yangon Petrol deal by saying it was necessary to reduce the fuel price in Yangon, but had not explained how the company was selected or what terms the government had agreed with it.

The deal

In early 2018, Yangon Petrol proposed to the Yangon Region government to lease 26 sites for fuel stations across Yangon. The sites were under the management of Yangon City Development Committee, Myanma Railways and the Department of Urban and Housing Development.

According to the documents leaked to social media, in May 2018 the Yangon Region government agreed to lease four sites to Yangon Petrol for K2,000 per square foot, and a fifth site for K2,700 per square foot. The documents do not specify whether the amount is per month, per year or a one-off payment. Similarly, the length of the lease is unclear.

Sandar Min said a sixth site had also been approved but she was unsure of the location. According to the documents leaked on social media, the remaining 20 sites are “in progress” or being “negotiated”.

Two Yangon Petrol stations have already opened, in Thaketa and Dagon Seikkan townships, while two others, in North Dagon and Shwepyithar townships, are still under construction. The status of the fifth station, in Thingangyun Township, is unclear.

The Thaketa and Dagon Seikkan stations are selling 92 RON petrol for K40 to K50 a litre less than most of their competitors. Since they opened, prices in Yangon have also fallen; in October 2018, a litre of 92 RON fuel was about K1,085 but was being sold for as little as K645 at the start of January.

However, Win Myint from the MPTA said the fall in fuel prices over the past three to four months was not related to Yangon Petrol entering the market. He noted that the price of oil had fallen from around US$75 a barrel at the start of October 2018 to $45 at the end of December.

But Win Myint said the leasing deal between the Yangon Region government and Yangon Petrol was “anti-competitive” as it gave the company an unfair advantage over its competitors.

Under presidential notification 1/2017, government bodies are required to conduct a tender for most procurement and the sale or lease of state assets. The tender requirement does not apply to public private partnerships but the structure of the deal between the Yangon government and Yangon Petrol remains unclear.

Eleven Media has reported that applications for permission to open the fuel stations state that the applicant is “Yangon Petrol Company Limited, in cooperation with Yangon Region government for mutual benefit”, indicating that the deal might be some form of public private partnership.

Questioned about the agreement with Yangon Petrol, Phyo Min Thein said at the January 16 ceremony that the government was not investing any money but would get 20 percent of the profit. He has not provided further information on the contract terms.

Documents leaked to Facebook that purport to show the shareholding of Yangon Petrol do not list the Yangon Region government as a shareholder in the venture.

Sandar Min said her committee had been collecting information about Yangon Petrol and would submit a question to the Yangon Region Hluttaw during the current session, which began on February 5, in order to force the government to reveal more information. She questioned whether the deal was really mutually beneficial.

“The chief minister has not been transparent about this leasing deal and who is benefiting from it,” she said. “He also hasn’t informed the assembly but we have to ask him because the land is owned by the state.”

Who is Yangon Petrol?

Registered with the Directorate of Investment and Company Administration in August 2017, Yangon Petrol has six directors: U Aung Shwe, U Win Swe, U Aung Maw Thein, U Aung Myo Zaw, U Tin Naing Soe and U Zin Min Aung. Its registered address is 50 Sayar San Road in Bahan Township.

DICA records show that all of the directors except Tin Naing Soe are also directors of PT Power and Best Oil Company. The PT Power website states that both companies are part of PT Power Group.

PT Power operates 20 fuel stations in lower Myanmar, mostly in and around Yangon, while BOC operates 14 stations in upper Myanmar, mostly in and around Mandalay.

However, the PT Power website says that 85 percent of its business is in selling wholesale imported fuel to other retailers. The company operates depots in Thilawa, Thaketa and Hlaing Tharyar in Yangon, as well as Bhamo in Kachin State, Thabeikkyin and Mandalay in Mandalay Region, and Ywar Thit Gyi and Myinmu in Sagaing Region.

Several of its directors were originally involved with Denko, another large fuel importer and retailer, but are no longer listed as directors of Denko, according to DICA records.

Tin Naing Soe is associated with several companies, including Yangon Pioneer Petro Consultancy Co Ltd.

Win Swe, the Yangon Petrol director, declined to comment when contacted by Frontier. “At the moment we don’t want to say anything to the media about PT Power and Yangon Petrol.”

Big plans

DICA records suggest that the same core group of directors from PT Power and BOC have plans to grow their fuel business across the country.

Since late 2017 they have registered companies named Mandalay Petrol, Shan Petrol and Mon Petrol, the latter together with other investors.

In at least one case, these companies appear to have lobbied regional governments for a leasing deal similar to Yangon Petrol.

Sandar Min said that she met recently with the Shan State minister for finance and planning, who told her that the directors of Yangon Petrol met him recently seeking permission to lease land and open fuel stations. The minister said he rejected the proposal.

But the investors’ ambitions extend beyond fuel, DICA records indicate.

In February 2018, they registered a company named Yangon International Multipurpose Terminals Co, Ltd, several months after the Yangon Region government announced a plan to build a deepsea port southwest of the city. A senior NLD official in Mandalay Region familiar with PT Power and BOC’s activities said the Yangon International Multipurpose Terminals project was intended for Kawhmu Township. Frontier could not confirm that the company is seeking to develop the port proposed by the Yangon Region government.

In June of last year, Yangon Region Minister for Rakhine Ethnic Affairs U Zaw Aye Maung told the Yangon Region Hluttaw that a “multipurpose terminal” would be built at Thayet Taw village, Kawhmu Township.

Speaking to the hluttaw, he said the terminal would facilitate exports of rice, wheat, beans and industrial products, and the import of raw materials. But the minister particularly emphasised the terminal’s importance for importing fuel.

“By shipping oil directly from the exporter countries will further adjust the local oil prices with international prices and reduced cost in logistic will keep the prices stable while the project makes the nearby area develop,” Zaw Aye Maung was quoted as saying by Myanmar Business Today.

State media reported that the terminal would be developed on 1,053 acres of land in two phases, and would have a 2.2 kilometre waterfront. The port would have a 9-metre-draft – significantly deeper than existing ports at Yangon and Thilawa. The reports said a feasibility study was being conducted by Royal Haskoning of the Netherlands and Singapore’s Surbana Jurong.

The shareholding documents leaked to social media show that Zin Min Aung is the largest shareholder in Yangon Petrol, with a 30 percent stake. He also holds 50 percent of Yangon International Multipurpose Terminals and 42.5 percent of Mon Petrol Co, Ltd, according to the documents.

A copy of his Citizenship Scrutiny Card that was also leaked online appears to show Zin Min Aung to be 32 years old. Frontier was unable to confirm the authenticity of these documents, but the number on the CSC matches DICA records.

Sources in the fuel import and retail business said little was known about Zin Min Aung.

“We know the other members of the board of directors of PT Power and Yangon Petrol – they have been in the fuel business for a long time. But we don’t know much about Zin Min Aung,” said a businessman who owns several fuel stations in Mandalay Region and asked not to be named.

TOP PHOTO: A Yangon Petrol fuel station in Thaketa Township built on land leased from the government. (Thuya Zaw | Frontier)

By Hein Ko Soe

By Hein Ko Soe

Hein Ko Soe is a Myanmar reporter. Prior to joining Frontier he worked on staff at Mizzima.
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