Western Firms Dither on Burma Infrastructure

Burma’s antiquated transport system requires investment. (Photo: Steve Tickner / The Irrawaddy)

Burma’s antiquated transport system requires investment. (Photo: Steve Tickner / The Irrawaddy)

After the initial hype of a “last frontier” economic boom for Burma in the wake of recent dramatic reforms, nervous Western companies appear to be hesitating to invest.

US companies are pegged back by restrictions imposed by Washington, European Union countries seem preoccupied with their own economic problems, and all the real and likely big investment is being marshaled by Asian business.

Some of this hesitancy may be political, but it’s becoming clear that severe underlying weaknesses in Burma are playing a part. Basic infrastructure such as roads, electricity, wired communications, accommodation and worker skills are missing, say experts. And so far, Western money is reluctant to invest in plugging those gaps.

“Mobile [phones] and internet penetration rates are both below five percent; rolling blackouts occur on a daily basis … the streets, without adequate drainage, regularly flood to knee-high levels during the rainy season,” says Michael Lwin, a Rangoon-based consultant to the Myanmar Medical Association.

“Public health is very poor, with high malaria and HIV rates and a Ministry of Health that is understaffed and under-skilled to deal with all of these issues,” Lwin told Al Jazeera television.

“There is a concrete fact that cannot be ignored: the people of [Burma] lack the skills, capacity and experience” needed to speedily push economic growth forward, he said.

Another specialist worker inside Burma paints a similar picture. “There is a lack of internationally educated and English-speaking local talent, driving salaries up for those who do have relevant skills and qualifications.

“Then there’s high inflation and a lack of hotel rooms or good quality accommodation for offices and international staff,” says Marie Lalle, an aid specialist with Rangoon-based Myanmar Egress, a local NGO.

“All-in-all, setting up a new business venture in [Burma] will be neither cheap nor easy,” she told The Global Times, a Chinese government-linked newspaper.

All of this contrasts with the hype being put out with the help of Burmese government ministries desperately seeking Western investment.

Organizers of a second Rangoon conference this year to promote the oil, gas and energy industries assert “there has never been a better time to invest.”

Burma “is the last frontier market in Southeast Asia and the [Burmese] government aims to accelerate growth by encouraging foreign direct investment,” says a statement by the Ministry of Energy in a bid to lure Western foreign firms to the Sept. 3-6 forum.

But while the first such conference earlier this year attracted a lot of curious interest, no Western businesses bid for the exploration oil and gas licenses on offer.

“Burma is a very complex place and if you’re going to invest, you have to do a lot of due diligence,” US Under Secretary of State for Economic Growth, Energy and the Environment Robert Hormats told a trade conference in Washington last week. “This notion that there’s going to be a rush of American capital coming in there—there probably won’t,” he said.

Hormats, who visited Burma in July, cited infrastructure and a skills shortage among problems which could stymie US investors’ interest in the short term.

And there is the no small matter of the US Congress’ decision to renew a ban on imports from Burma for one more year despite a recent decision to allow US businesses to invest in the country. The continued ban is intended to push the Burmese government to implement more human rights reforms.

The continued import ban will have a particularly damaging effect on prospects for reviving and expanding Burma’s garment manufacturing industry, the Brussels-based International Crisis Group has warned.

Before the ban was introduced in 2003, clothes and textiles were Burma’s biggest export to the US.

“At this stage in the reform process, it is indeed hard to see how retention by the US of its import ban could in any way serve the interests of the [Burmese] people or assist the democratization process,” the group said in a report.

It criticized Washington for talking about action to push the Burmese government into more democratic reforms to end the power of a military-business elite while at the same time undermining jobs prospects for ordinary people.

The gap between Western and Asian business links with Burma is underlined by the statistic that exports from the US to Burma in 2011 were less than US $50 million—a fraction of the trade with neighbor Thailand which was worth $36 billion.

Thailand is emerging as one of Burma’s biggest potential investors, albeit with Bangkok’s economic interests foremost. So far, along with Japan, the Thais plan to invest not only in consumer prospects but the more basic infrastructure which Burma so desperately needs.

Aside from the extractive natural resources sector, big Thai firms are eyeing construction, refining, electricity, banking, petrochemicals and agriculture.

The Thai state-owned oil and gas group PTT alone is planning investment of up to $3 billion.

While the US and EU countries pontificate about faster and deeper reforms but have actually done little to date beyond political statements of support, Japanese firms are committing to major but basic aid in restructuring key sectors such as the financial institutions and wiring Burma for the 21st century.

The Japanese technology firm Daiwa is spearheading a $380 million program to build a computer system which will link up government departments and separately help start the development of a wired economy in areas such as banking.

Japanese firms are investing in much-needed new electricity generating plants and banking infrastructure. Economic reform needs to ensure that the bulk of the population “recognizes it is better off as a result,” says the International Crisis Group report.

The report warns: “While the intention is clearly to open the economy and shift away from restrictive licenses and permits, the necessary reforms to achieve this in practice have not yet been instituted. Much business activity still requires political approval. Conducting successful business is still very much about who you know.”

That’s a situation which greater involvement by Western companies, imbued with some sense of corporate responsibility, might help to change sooner rather than later.

12 Responses to Western Firms Dither on Burma Infrastructure

  1. They found that the soil has been very much degraded to make investment. The military has destroyed the skills of the country, the morality of the peoples, the disciplines of the peoples. No skill peoples anymore, poorly trained peoples with low morality with ready to steal whenever there is opportunity. Even under the rule of Aungsan Sukyi, the country will take at least 50 years to replenish the human resource and fertile atmosphere destroyed to the ground by the Military. (If the Thai army were allowed to rule this country, the situation might be much much better than Newin’s rule).

  2. A country which has been governed by a regime closed to the rest of the world is not going to attract a lot of foreign investment. It may have to wait for another ten years, assuming the civil or tribal war will not erupt. It takes a long time to build a rudimentary infrastructure and above all, educate the people. I have seen that in among emergent markets, like China.

  3. Many costs are much higher than in neighbouring countries. There’s very little housing of the standards that expats demand, and these same expats are busy gazumping each other to get the place that they do want. He’s paying you $5000 a month? OK, I’ll give you 6. It makes no difference to them (usually part of foreign delegations) it’s part of the package – housing allowance up to $x per month. For expats who might come and do something more useful than push pieces of paper around & go to ‘high-level’ meetings, such as local NGO workers and teachers, who tend to spend money in smaller local restaurants and who don’t walk around with their head in the clouds… for these people, it’s very difficult to find anywhere decent that’s affordable.
    (Apologies for such a middle-class comment)

  4. The usual solution for quick infrastructure is to bring in foreign specialists, who don’t pass off much of their skills and earnings to the locals.

    Burma has many of its people working in foreign lands. Where specialized skills are required, bring in companies from these foreign lands. And bring back the Burmese workers who are currently working there. These are the people who will be most capable of transferring the skills of the foreigners to the local Burmese. If you’re going to develop the infrastructure, you should get as many of the side benefits as possible.

    Thailand is particularly well positioned to help in this way.

  5. George Than Setkyar Heine

    “Burma is a very complex place and if you’re going to invest, you have to do a lot of due diligence,” US Under Secretary of State for Economic Growth, Energy and the Environment Robert Hormats told a trade conference in Washington last week.
    “This notion that there’s going to be a rush of American capital coming in there—there probably won’t,” he said.
    Of course Robert Hormats is SHOOTING STRAIGHT and TRUE no doubt.
    And this ILK of GUYS KNOW BEST in these matters as well.
    A question in regard to Thailand’s investment in Burma: WHERE DOES/WOULD THE MONEY to INVEST in BURMA COME FROM?
    From the US of course if I hit the bull’s eye.
    Thailand’s EXPORT is ONLY WOMEN as I know after spending time in that country for more than half a dozen years.
    Thais have been LIVING OFF the BLOOD and LIVES of the BURMESE MIGRANT WORKERS and BORDER TRADE as well since DECADES AGO until today.
    They have been PLAYING A DOUBLE GAME as well since day one and in the first place as known worldwide.
    And they have the BLOOD DEBT of the BURMESE STUDENTS and DISSIDENTS on THEIR HANDS since 1988 not to mention Burmese migrant workers’ in the millions SELLING their LIVES and SOULS for MERE SURVIVAL (SLAVES) in Thailand until today: NO THANKS to Than Shwe and his lackeys RUNNING BURMA TODAY FOR THAT MATTER.
    Hence, VULTURES like Thais, RUSHING into BURMA to INVEST or MAKE A FAST BUCK or TWO for that matter WILL RUE the DAY one way or the other I say.
    Remember ROME WAS NOT BUILT IN A DAY guys!
    Now Burma is on its ROAD/WAY to DESTINY/DEMOCRACY no doubt.
    ONE CRUCIAL and VITAL INGREDIENT WARRANTED to CHANGE the WHOLE PICTURE or STATUS QUO – politically, economic wise and socially – is the DILIGENCE/WILL of the PEOPLE of BURMA for a FREE and BETTER FUTURE and of course POSTERITY for their COUNTRY as well no less.
    And they have a CHARISMATIC, COMMITTED, COMPETENT and CREDIBLE not to mention a COURAGEOUS leader to LEAD THEM and MAKE THINGS HAPPEN in that DIRECTION and ACHIEVE that OBJECTIVE as well and of course a younger generation of student leaders who have PROVED their METTLE and WORTH and READY to LEND their SHOULDERS as well for that MATTER since DECADES ago and MORE to COME as well.
    Of course the GOOD WILL, EXPERIENCE and EXPERTISE of FRIENDLY and FREE (China and Russia excepted no doubt) NATIONS of the WORLD RENDERING ASSISTANCE and HELP in this matter would be certainly SPLENDID and A PLUS and a case MUCH DESIRED and in turn would be GREATLY APPRECIATED by the people of Burma as well.
    Nevertheless Burma will ACHIEVE its DESIRED OBJECTIVE, ARRIVE at its DESTINY and CLAIM its RIGHTFUL PLACE among NATIONS on EARTH no less in its OWN STRIDE and SPACE as well trust me.
    And lastly, NOTHING IS IMPOSSIBLE for BURMA WITH/WITHOUT HELP from OTHERS at this time and juncture lest ye all LOSERS/LAZY LOT forget!

  6. The Bus in the picture outlasts any other buses in the world. This is proof of Burmese quality.

  7. Daiwa’s move is very forwarding looking, the remaining infrastructures will develop using this IT network, the Japanese have always been there to help all these years, and they understand the situation and know what to do, where to star, not a fair-weather friend.

  8. I just want to ask one thing that are we spending next 10, 15 years by blaming military instead try to sort out the problems with unity. The politicians and the NLD should take the blame too. Last two decades they are asking sanction and sanctions and sanctions. Protest at the embassy, Westminster, house of parliament even the western countries said they should release some sanctions which not relating to the military materials. I’m not surprise after communicating those good for nothing Chinese and ASEAN governments who only knows how to take as much as possible benefits from our motherland, we are left with below the average level of infrastructure. All thanks to those sanctions including garment import sanctions to US. Are those politicians really know how many girls became prostitute after the garment factories shut down in Dagon. If I’m wrong, I apologise. But this is my opinion.

  9. It is not just a matter of infrastructure. People’s morality got screwed up living under an authoritarian regime for too long. Look at Russia and China. It takes more than one generation to get their basic morality up to acceptable level.

  10. Stop blaming U Ne Win and the regime.
    Morality is personal.It is up to the individual.
    Myanmar is full of good people.
    I think morality is very high.
    The people of Myanmar have the sense of justice and fair plIt is the outsiders who are Taking advantage of the poverty of the people.
    Not to worry. The people in Myanmar are as good as anywher else even better
    As soon as the ethnic conflict is solved we will progress.
    Get rid of the insurgency created by the colonist.
    We will prevail.

  11. Western companies only invest after they have done risk analysis. What can Burma offer now? Many investors understand the First Wave concept. The first group to go in get slughtered unless they are either infrastructure builders with financing provided by say the World Bank or natural resources exploiters who just take and seldom give. Even the government, assuming it is rather incorrupt, have to choose whom they should partner with or allow to come in.

  12. Burma needs to prove that their political situation is more stable to attract more investors outside the country.

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