Economy

Burma Business Roundup (Saturday, Aug. 25)

By William Boot 25 August 2012

Two Big Western Oil Firms to Play Leading Roles at Rangoon Energy Conference

Two major Western multinational oil companies are to play a leading support role in the Rangoon oil and gas industry forum planned for September by the Ministry of Energy and MOGE, the state-run Myanmar Oil & Gas Enterprise.

The Dutch-British group Shell will present an assessment of Burma’s offshore deep-water “new frontier” for oil and gas exploration, and ConocoPhillips of the United States will talk about onshore prospects.

The second oil, gas and power conference to be held in Rangoon this year has been extended from two days to four, and will now take place from September 3-6.

Other major industry speakers include senior managers from Essar Oil of India and Unocal, which is part of the US’s Chevron Corporation, say the conference co-organizers, the Center for Management Technology (CMT).

Unocal and the Chinese state oil giant CNOOC are sponsoring lunches at the conference.
The conference will be opened by Energy Minister Than Htay, who will outline opportunities for investors in the sector.

The ministry has previously said about 40 gas and oil exploration blocks will be put up for international auction before the end of this year, and details could be unveiled at the September conference.

Twenty-five offshore blocks will be offered and up to 18 onshore sites, the ministry’s assistant director of planning, Aung Kyaw Htoo, has previously said.

The first oil and gas conference in March attracted 150 companies, according to CMT, but failed to find takers for half of 18 onshore exploration blocks.

Industry insiders say the greatest interest will be in the offshore blocks, where large volumes of natural gas have already been found.

More Transparency Needed in Business Law Debate, Says US Ambassador

Potential foreign business investors in Burma need clearer evidence that the country’s economy is becoming more open and not drifting towards over-protection of some domestic businesses, the new US ambassador said.

“I hear about momentum moving toward protection of certain industries, certain companies,” Ambassador Derek Mitchell told The Wall Street Journal this week. “It’s understandable to some degree, but is that really going to get you the sort of investment and development you really want over time?”

Mitchell, speaking to the US business newspaper this week also voiced concern about delays in the promised new foreign investment law and the lack of transparency in its preparation.

“Recent media reports have indicated that the government is now considering restricting foreign involvement in some sectors, including agriculture, but recent drafts of the law haven’t been available,” The Wall Street Journal reported on Aug. 20. “A government official in the capital of Naypyidaw declined to comment.”

Mitchell said that despite numerous encouraging changes and promised reforms, Burma’s emergence from decades of isolation remains fragile.

“There are going to be lots of bumps, lots of setbacks, and not a clear path forward,” he said.

Twenty Years for Burma to Match Asean Neighbors’ Standard of Living

It will probably take the best part of two decades for Burma to become a middle-income country with per capita income in Burma reaching US $3,000 a year, the Asian Development Bank (ADB) said.

At present Burma has the lowest per capita GDP in Asia, the ADB said this week in an assessment of the country’s economy and prospects in the wake of political reforms and promised economic liberalization.

Burma’s economy could expand by 7 percent to 8 percent a year “if it can surmount substantial development challenges by further implementing across-the-board reforms,” the ADB study “Myanmar in Transition: Opportunities and Challenges” said.

“[Burma’s] strategic location, rich natural resources and abundant labor force leave it perfectly positioned to prosper from Asia’s dynamic economic growth,” said Stephen Groff, ADB’s vice president for East Asia, Southeast Asia and the Pacific. “[Burma] could be Asia’s next rising star, but for this to happen there needs to be a firm and lasting commitment to reform.”

Investment in education, health and social services is needed to reduce poverty and strengthen social cohesion, the report recommends.

“Although more than half of [Burma’s] people rely on agriculture for a living, less than 20 percent of the country’s crop land is irrigated. “Investment in irrigation and other inputs could dramatically expand crop yields and boost incomes.”

Other keys to the country’s potential are improvements in infrastructure in transport, power and telecommunications services, plus modernization of the financial sector.

“[Burma’s] economic base must also broaden beyond agriculture to the manufacturing and service sectors to meet a growing demand for jobs,” the report said.

The ADB re-opened an office in Burma after an absence of 24 years.

Thai Government to Seek Japanese Help to Push Dawei Port Forward

The government of Thailand is keen to push forward the Dawei port and economic zone on Burma’s southeast coast and is preparing to seek financial support from Japanese state loan agencies, The Financial Times of London reported.

“The Thai government has established a Dawei secretariat to oversee government involvement in the project and is creating a high-level team, led by Kittirat Na-Ranong, finance minister, to help secure funding,” the newspaper said in a report on Aug. 23. “It will soon initiate discussions with Japan about Dawei-related infrastructure projects.”

The Bangkok government will seek aid from the Japan International Co-operation Agency and the Japan Bank for International Co-operation for a “strategic corridor” of transport infrastructure to link Dawei with the Thai border, said The Financial Times quoting managing director of Dawei Development, Somchet Thinaphong.

Dawei Development is a subsidiary of major Thai construction firm Italian-Thai Development, which has the concession from the Burmese government to develop Dawei.

But the huge US $50 billion project has been in limbo for over a year, triggered by environmental restrictions imposed by Burma’s first post-military junta government and subsequent difficulties by ITD in securing investment partners.

The Burmese president banned ITD plans for a massive 4,000 megawatt electricity generating station in Dawei because it was to be fueled by coal.

Somchet told The Financial Times that his company hoped to finalize agreements with the Burmese authorities within the next month, and if that happened ITD could “have the first phase accomplished by the end of 2015.”

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