Burma Business Roundup (Saturday, April 28)

By William Boot 28 April 2012

Japan Bids to Put the Lights Back on in Burma

President Thein Sein’s visit to Japan may have set wheels in motion for Japanese companies to play a leading role in rejuvenating Burma’s inadequate electricity grid.

The president not only visited Japanese thermal power plants—systems which produce electricity from gas or coal—he also met senior managers of several major firms which build them.

Thein Sein held talks with people from Mitsubishi, Itochu, Marubeni and Sumitomo.

Japanese companies are also likely to play a leading role in development of the Thilawa Special Economic Zone next to Rangoon. Planning experts from both Marubeni and Sumitomo will join a team to conduct a feasibility study for the Burmese government.

Marubeni and Hitachi played a leading role in developing some of Burma’s existing power infrastructure before Japan began winding down its business activities in the country as economic sanctions took hold.

That situation is now rapidly changing with a succession of Japanese business delegations visiting the country in recent months, including one led by the Japan External Trade Organization, known as Jetro, in March which included representatives from almost 40 firms.

Jetro said another 60 businesses missed out on joining its oversubscribed delegation.

Marubeni also expressed an interest in rebuilding Burma’s limited and rundown railways network, according to a Wall Street Journal report this week.

Top Economist Warns of Instability Risk if Burma Grows Too Quickly

A former World Bank chief economist has put forward a five-point priority agenda to restart Burma’s economy, while warning that over-rapid development could be counterproductive and trigger instability.

Vikram Nehru, now a senior adviser and analyst with the Carnegie Endowment for International Peace in Washington, said: “A big risk is that you can have macroeconomic instability and the desire for example to liberalize too rapidly.

“We’ve seen that in a number of other countries where if things are done too quickly you can have existing firms go under because of the sudden change in relative prices,” he told Radio Australia in an interview on April 25.

“You can have the banks suddenly experience a lot of trouble if their loans go bad. So these things really need to be done carefully orchestrated.”

In a study on Burma for the Carnegie Endowment think tank, Nehru put forward a five-point agenda which he said is important to ensure stable reform of the economy.

The five points are: establishment of a financially viable government; private enterprise free from state or military patronage, giving banks increased freedom to lend, especially in agriculture; eliminate restrictions on imports and exports and promote foreign direct investment; develop natural resources, especially natural gas, hydropower, timber, and gems without creating environmental and social problems; and fifth, clear debts owed to the Asian Development Bank and World Bank so that the country can regain access to financial aid from those institutions.

Dawei Uncertainty Pushes Thailand to Opt for New Andaman Sea Port

Thailand is to build a new port on its Andaman Sea coast which the Bangkok government said could “supplement” the planned Dawei port development further north on Burma’s Andaman coastline.

Approval for a new Thai port, at an isolated fishing village called Pak Bara, has been given because of uncertainty about the Dawei project, said Deputy Transport Minister Chadchart Sittipunt this week.

A group of Thai firms led by construction specialist Italian-Thai Development (ITD) won a concession from the Burmese government at the end of 2010 for a multi-billion dollar oil transhipment and petrochemicals base at Tavoy (Dawei), which is meant to be the focal point of a new economic development zone.

However, progress on the project has stalled since Burma blocked plans by ITD and its partners to construct a huge 4,000-megawatt power station there—twice as big as Burma’s entire electricity-generating capacity at present.

The reason given for the block on the power plant was environmental: ITD intended to fuel it with coal. It emerged later though that Thailand wanted to transmit much of the electricity across the border for Thai consumption.

“One reason for the decision to push on with Pak Bara is the continuing uncertainty over the Dawei mega-port,” the industry magazine Port Strategy reported this week after interviewing Chadchart. “The [Thai] government believes if Dawei does go ahead, Pak Bara can supplement it and if doesn’t happen it will be a useful port in its own right.”

Thailand is keen to open up a trade and transhipment route, especially for energy resources such as oil, linking the Indian Ocean with the greater Bangkok region and its port at Laem Chabang on the Gulf of Thailand.

A rail link will be built to Pak Bara, which is in Thailand’s deep south near the Malaysian island of Lankawi .

World Bank Plans Return to Rangoon after 25-Year Absence

The World Bank is to open an office in Burma for the first time since it closed shop there 25 years ago.

The bank said it will re-establish the office in Rangoon in June with a country manager charged with collecting data to help support a new financial aid program.

“We’re now preparing a strategy to guide our work with the government to improve services for the people  and assist in tackling the country’s development challenges,” the bank’s vice president for East Asia and the Pacific, Pamela Cox, said on April 26.

However, Cox cautioned that Burma’s debts with the World Bank needed settling in some way before it could take full benefit of all aid programs.

Burma has accrued nearly US $400 million in debt to the bank and another $500 million to the Asian Development Bank and similar institutions, a mix of original loans and accumulated interest since 1987.

Canada to Resume Trade after Suspending Sanctions

Import and export trade with Burma plus the right to invest in Burmese business activities has been reinstated by Canada, the latest Western country to lift draconian economic sanctions.

The suspension of the sanctions, rather than termination, is in line with action taken by the European Union, Australia and New Zealand.

Foreign Minister John Baird said the sanctions suspension was in recognition of the “major” change in direction by Burma’s reform-minded government.

Canada has a number of specialist gas exploration and production companies which might be tempted to now join the international queue to bid for new offshore and onshore licenses expected to be offered by the Myanmar Oil and Gas Enterprise.

A ban on Canadian weapons trade with Burma will remain.