Burma Business Roundup (Saturday, Dec. 1)

By William Boot 1 December 2012

Business Land Grabs to Persist, says Risk Assessor

Land theft for commercial developments and poor work health and safety standards “will remain significant at least for the next one or two years” in Burma, a business risk assessment firm warns in the wake of Thursday’s violent suppression of land protests at the Monywa copper mine.

“In the medium term, issues such as land grabbing are likely to reduce in scale although they will continue to persist as a phenomenon. For ordinary citizens, access to legal recourse against land grabs and other abuses will continue to remain practically non-existent for the foreseeable future,” the principal Asia analyst at Maplecroft told The Irrawaddy on Nov. 29.

Maplecroft of the UK advises companies of the risks associated with investing in developing countries.

“The new foreign investment law does bring some level of regulatory certainty to protect the investments and assets of investors,” Maplecroft’s Arvind Ramakrishnan said. “However, local and state-owned companies will still remain dominant in key sectors, most notably oil and gas.

“These companies, for example Myanmar Oil and Gas Enterprise, are unlikely to give up their long-standing unethical practices, such as arbitrary seizure of land and poor adherence to health and safety norms. As a result, reputational risks for investors in [Burma] will remain significant at least for the next one or two years.”

In its latest Country Risk Report on Burma, Maplecroft welcomes the new foreign investment law but warns of a “near-complete lack of transparency or consultation with stakeholders.”

The report says potential investors in the natural resources development industries should prepare for more stringent regulations in a new environment conservation law, but “the investment climate should ultimately be strengthened by such moves.”

“The state use of violence against protestors, including Buddhist monks, at the Monywa copper mine illustrates that [Burma] has a substantial distance to go in ensuring uniformity in the enforcement of law, and respecting human rights,” Ramakrishnan told The Irrawaddy.

But the avoidance of lethal firearms suggested the government was anxious “about the potential for international condemnation that could lead to a reversal of growing international aid, diplomatic support and promises of investment of the past two years.”

Under-investment ‘Keeps Burma in the Dark’

Lack of cash is preventing more electricity flowing through Burma’s cities and rural communities and there is unlikely to be much improvement soon, says the Asian Development Bank (ADB).

The country has great potential energy stocks from natural gas and hydro-dams but development has been “hampered by limited capital, a lack of qualified personnel, poor legal and regulatory frameworks, and a lack of coordination and planning among seven energy-related ministries,” according to an ADB assessment published this week.

The study recommends international investment focusing on “rehabilitation works in power generation, transmission and distribution; the construction of gas power plants in [Rangoon]; the construction of a 500 kilovolts transmission line from the north to [Rangoon]; an integrated, comprehensive plan for hydropower development; and the rehabilitation and upgrading of coal and gas-fired generation plants, refineries and natural gas pipelines.”

However, the ADB said it was essential that “strong, enforceable environmental and social safeguards” are firmly in place beforehand. As things stand, two thirds of Burma’s population gets primary energy from wood fires and charcoal burning.

Rangoon, Mandalay to Get Thai Water Management

Two Thai engineering firms say they will spend US $65 million in Burma on water infrastructure improvement projects in Rangoon, Mandalay and other urban areas.

Bangkok’s Universal Adsorbents and Chemicals (UAC) and Hydrotek Plc will form joint ventures with as yet unnamed Burmese companies, UAC Chief Executive Kitti Jivacate announced this week.

A water supply assignment for Rangoon will cost $26 million, said Kitti, and one for Mandalay $13 million. A development timetable was not announced, nor any details of other water projects elsewhere in the country.

UAC, which is also noted as a biodiesel manufacturer and distributor, said it will raise money for its Burma ventures via an issue of new shares on Bangkok’s Market for Alternative Investment stock exchange.

The firm is also engaged in equipment supplies for the oil and gas industry.

The commercial risk assessor Maplecroft of the UK said in a new report on Burma this week that there is “urgent institutional and legal reform needed within the country’s water sector, which may impact on water-intensive sectors,” referring to industries such as mining which use large volumes of water.

Burma’s environment has little legal protection from industrial pollution for key issues such as ground water.

Crony Zaw Zaw Signs Japanese Bank Deal

A bank controlled by one of Burma’s so-called crony capitalists, Zaw Zaw, has teamed up with a large banking group in Japan to offer services for Japanese investors, according to the Kyodo news agency.

The Juroku Bank has linked up with Ayeyarwady Bank to “provide client firms with information on the investment environment and the legal and tax systems” in Burma, said Kyodo quoting bank officials.

The Ayeyarwady Bank, under the auspices of the Max Myanmar Group controlled by Zaw Zaw, was established only in 2010 as Burma first started to open up.

Max Myanmar Group has let it be known that it wants to move away from its previous construction and industrial emphasis and focus more on service industries which are still in their infancy in Burma.

For instance, Max Myanmar is reducing its involvement as the main Burmese partner in plans for the large Dawei port and special economic industrial zone on the southeast coast.

More Foreign Investors Eye Burmese Telecoms

Singapore-based mobile phone retailer and accessories provider MDR Limited is positioning itself to enter Burma’s fledgling telecoms market.

The firm has signed a non-binding provisional agreement with Burmese firm Be-Well Corporation and Avitar Enterprises, another Singapore phones company, the Business Times of Singapore reported.

The trio plan to provide mobile retail services and associated equipment and gadgets for what is one of Asia’s last undeveloped markets in a region saturated with wireless telecommunications.