Burma Business Roundup (June 1)

By William Boot 1 June 2013

Blacklisted Tay Za Takes Over Import-Export Services at Rangoon Airport

A company owned by former Army regime crony and US-blacklisted Burmese businessman Tay Za has been given control of all import and export cargo handling services at Rangoon International Airport.

Mingalardon Cargo Services, a subsidiary of the Htoo Group of Companies, was awarded the concession by the Civil Aviation Department, which said there had been bids from three companies.

Mingalardon was already handling export cargo at the airport and the director general of the Civil Aviation Department, Tin Naing Tun, said this week that it would be more efficient if the same company handled imports as well.

A state enterprise had been processing imports until now.

“If we separate the two functions, complications will arise in balancing the business and investments,” Tin Naing Tun said in a media statement.

The concession is likely to be carried over to the new Hanthawaddy International Airport after its scheduled completion in 2017, Tin Naing Tun said.

The Htoo Group’s business interests are growing under Burma’s economic reforms and now include mining, farming, hotels, an airline and banking ventures.

Tay Za was placed on a US government blacklist for his close links with the former military regime of Than Shwe. In the past, he has been accused by the United States of involvement in weapons and drug trafficking, and money laundering.

Chinese Firm Renews Interest in Sagaing Coal Power Station

One of China’s big five state-owned electricity firms, China Guodian Corporation, has renewed its interest in building a coal-fueled power plant in northwest Burma.

Guodian won a concession in 2010 to develop a large 600-megawatt power station in the Kalewa area of Sagaing Division, plus a hydroelectric dam at Mawlaik.

There has not yet been any development on either project, with the local authorities canvassing for support for the coal power station.

However, according to the local National League for Democracy (NLD) office, no environmental impact assessment studies have been conducted for the projects.

A coal mine at Kalewa operated by a Burmese government agency produces about 13,000 tons per year, according to a recent US Geological Survey. Industry analysts say this would not be sufficient to fuel a 600-MW capacity power station.

Tourism Boom Leaves Burma Short of Skilled Hotel Managers

Burma is facing a shortage of experienced middle- and senior-level hotel management staff as the country’s tourism expands faster than anywhere else in the 10 Asean countries, a senior industry official said.

“Representatives from [Burma] and Cambodia have urged other member countries to supply professionals in the hotel segment to play a training role as well as fill vacancies in mid to top management,” the president of the Thai Hotels Association, Surapong Techaruvichit, was quoted by the travel trade publication TTR Weekly as saying during an industry meeting in Bangkok.

Surapong said similar but smaller problems were being felt throughout Asean and called for closer cooperation between countries to avert a region-wide skills shortage.

He urged travel agency associations in Asean countries to avoid doing business with illegal hotels—those not registered with national health and safety agencies.

Industrial Revolution in Burma ‘Could Bring 10 Million in from the Fields’

Burma has enormous economic potential but will need to embrace massive change, including bringing in up to 10 million people from the fields to fill jobs in factories and become a leading workshop of East Asia.

That’s the conclusion of a study by the US business consultancy McKinsey Global Institute, which suggests that Burma’s economy could quadruple in value over the next two decades—provided the country moves away from its agrarian base and embraces 21st century technologies.

It forecasts that Burma’s economy could quadruple to an annual value of more than US$200 billion in 2030 compared with $45 billion in 2010.

Burma’s gross domestic product (GDP) is currently only 0.2 percent of Asia’s overall GDP—that’s about the size of cities such as Delhi and Johannesburg.

“For much of the 20th century, [Burma] largely missed out on the spectacular growth seen across most of the global economy and most recently in its Asian peers. It now has the potential to be one of the fastest-growing economies in emerging Asia,” said Richard Dobbs, a director of McKinsey, quoted by CNBC news.

Manufacturing industries will be a key part of economic growth and could create 10 million jobs, McKinsey said.

The manufacturing sector has the potential to expand sevenfold by 2030 to contribute $70 billion a year to the gross domestic product.

Kyaukphyu Oil Storage Bigger than Burma’s Annual Refining Capacity

The oil terminal being built by a Chinese state company at Kyaukphyu to tranship crude from the Middle East and Africa to southwest China will have storage capacity for 7.6 million barrels when completed.

That’s more than Burma’s three dilapidated refineries can process in one year.

The China National Petroleum Company (CNPC) said it is building 12 large storage tanks at Kyaukphyu on Burma’s central coast, which will hold crude oil brought in by giant ocean bulk tankers.

The oil will be transferred to a pipeline currently being built across 950 kilometers from the coast to China’s Yunnan province and due for completion by the end of this year.

Reuters quoted CNPC saying the oil pipeline construction, and a twin pipeline that will carry natural gas from Burma’s Shwe field in the Bay of Bengal, is proceeding as scheduled. The firm denied reports that ethnic conflict in northern Burma was delaying the pipelines’ completion.