Burma Business Roundup (Nov. 16)

By William Boot 16 November 2013

Burma’s Electricity Shortage Rises to 5,000 MW as Demand Grows

Financial “difficulties” have prevented construction of several planned new power stations, leaving Burma with its biggest-ever electricity shortage, Minister of Electric Power Khin Maung Soe admitted.

Electricity demand in the country is now running at the equivalent of 8,929 megawatts, he said, but there was a shortfall of at least 5,000 megawatts, the state-run New Light of Myanmar newspaper reported.

Burma’s electricity generating capacity this year should have been about 4,900 megawatts but only reached 3,600 megawatts on average, the minister said.

“He called for local and foreign investment in [power station] projects, saying that the government alone cannot afford to implement them,” the Global Times reported.

A number of foreign companies from Malaysia, South Korea, Japan, Thailand and Indonesia have undertaken feasibility studies into proposals for natural gas or coal-fueled power plants.

Meanwhile, Parliament has suspended plans to raise electricity prices following a succession of public protests and also postponed a decision on whether to accept a US$150 million loan from South Korea’s Economic Development Cooperation Fund. Two-thirds of the loan was proposed to finance a 117-mile-long, 500-kilovolt power grid transmission line between Taungoo and Pegu northeast of Rangoon.

German Firm Among Contractors in State Cement Production Plans

German, Thai and local businesses have won Naypyidaw government contracts to form joint ventures to help more than double Burma’s production of cement—one of the building blocks of the growing new economy.

The Ministry of Energy named 13 firms to join state-led factory construction projects, among them the large Ferrostaal GmbH of Essen in Germany. The companies were chosen from a larger group of bidders for government tenders, said Eleven Media.

The new factories, details of which have yet to be announced, plus projects already under way, will increase Burma’s annual cement production capacity from 4 million tons at present to 10.5 million tons, said international industry website CemNet.

“[Burma’s] cement sector is set to expand with the prospect of several new state-led joint ventures coming into existence after the government gave the go-ahead to … boost the country’s cement production,” CemNet said.

No timetable for the state-led projects has been announced.

Thailand’s Siam Cement Company has separately already been awarded a contract to build its own cement factory in Burma.

Thai Firm Wins Contract for Burma State Paper Factory at Thabaung

Thailand’s leading paper maker, Double A, has won a multimillion dollar contract to take over the running of Burma’s state-owned pulp and paper factory at Thabaung in Irrawaddy Division.

The Bangkok firm beat four other local and foreign companies in a tender bid to operate and modernize the factory, said Eleven Media, quoting the Ministry of Industry.

Double A secured a 30-year contract and will pay the government US$2 million per year to operate the factory, which produces about 70,000 tons of pulp and 15,000 tons of paper annually, said Eleven Media.

Double A won the contract because it offered the best prospects for local employment and may also build a new pulp plant.

The Indian paper-making firm JK Group was last year named by Mumbai’s Economic Times as being on the verge of clinching a deal to manage the Thabaung plant, but the deal fell through.

Brewery Ownership Tussle with Army ‘Could Affect Foreign Investment’

The outcome of a secret legal battle between a Burma military company, Union of Myanmar Economic Holdings (UMEHL), and ThaiBev for control of the country’s biggest brewery could affect investment plans by other foreign businesses.

Bangkok-based beer-to-spirits firm ThaiBev’s purchase of a majority stake in Myanmar Brewery is being challenged by UMEHL. ThaiBev, owned by one of Thailand’s richest men Charoen Sirivadhanabhakdi, acquired the brewery when it bought Singapore’s Fraser & Neave earlier this year.

But UMEHL, which is partnered with Fraser & Neave at the Myanmar Brewery, is now insisting it should have been given the opportunity to buy the Singapore’s firm’s 55 percent stake first.

“Foreign investors will be keeping a close eye on the dispute: If the arbitration is seen to be handled unfairly, many will likely reconsider investing in [Burma],” said the Bangkok Post.

Although Burmese at present drink on average less than four liters of beer per year, the market potential is considered to be large.

By comparison, Thailand’s annual per capita beer consumption is 25 liters and in Vietnam 30 liters.

Thai Budget Airline Offers US$50 Fares to Rangoon to Boost Business

Nok Air, the budget airline subsidiary of Thai Airways International, is offering one-way fares between Bangkok and Rangoon for just US$50 in a bid to fill planes as competition for Burma business heats up.

Nok is offering the same cut price fare for its flights between the Thai Burma border town of Mae Sot and Rangoon and Mae Sot and Moulmein, said the Bangkok travel industry magazine TTR Weekly.

The discount flights can be taken any time between the middle of December and October 2014, but they must be booked by Nov. 17.

The $50 fares include airport taxes, said TTR Weekly.

Travelers to Burma still need entry visas but the Naypyidaw government said it still hopes to finalize visa-free agreements with all member countries of Asean before the end of this year. The agreements would permit visa-free travel for up to 14 days.