HAG, Rowsley call off $550m Myanmar project
Vietnamese real estate developer Hoang Anh Gia Lai Co (HAG) and Singapore-based Rowsley Ltd, which is partly owned by billionaire Peter Lim, decided to call off their agreement to build a US$550-million mixed-use development in Yangon, Myanmar, the two companies told media.
While the Singaporean company said they would not enter the proposed joint venture because "the conditions precedent under the Heads of Terms Agreement have not been satisfied," HAG said the reason for the contract's termination was tax differentials.
In February HAG reached an agreement with Rowsley, under which the Singaporean company would invest $275 million for a 50 per cent stake in Hoang Anh Gia Lai Land, the mother company of HAGL Myanmar Co Ltd. Meanwhile, the Vietnamese firm would have made the remaining investments and undertake construction of the entire project.
However, Rowsley asked the Vietnamese group to allow direct investment in HAGL Myanmar Co Ltd instead of indirect investment through purchasing stakes of Hoang Anh Gia Lai Land.
According to HAG, due to a high tax of up to 40 per cent imposed on capital transfers in Myanmar, as opposed to 22 per cent in Viet Nam, the company declined the proposal and the two companies agreed to discontinue the contract.
"The Singaporean company wants a direct investment in Myanmar in order to reduce risks," HAG's acting general director Vo Truong Son said. "They hope to take account risks only in Myanmar instead of including risks in Viet Nam while executing the investment."
Son said HAG was in talks with a number of foreign real estate companies, including firms in Hong Kong and Singapore. As the negotiations are going on, Son refused to disclose more information about potential investors.
"HAG's partner must have strong financial capacity and share the same development vision with the company in operation and management of the complex, including pricing, marketing and product development strategies," Son said.
He said he was confident that the price of the future deal would be at least equal to the Rowsley's purchase.
According to Son, the breakdown of the contract between the two companies will not have negative impacts on the complex's development in Myanmar. The office building and hotel are still slated to open this June, while the shopping centre will likely open in September.