Burma Business Roundup (Saturday, June 23)

By William Boot 23 June 2012

Tax and Ownership Incentives Seek to Lure Wary Foreign Investors

Foreign investors are to be lured with a five-year tax holiday and be permitted 100 percent ownership of firms registered in Burma.

Foreign businesses will also be allowed for the first time to lease privately owned land.

The incentives are part of the government’s next phase of reforms to help open up the country for development.

“Our investment policy should be competitive,” the deputy minister for national planning and economic development, Kan Zaw, told a business conference in Rangoon.

However, in key industries such as energy outside investors will be required to take on a Burmese partner.

The government has also said it intends to strengthen investment and finance laws to provide more confidence for foreigners.

But a new study suggests that many outsiders remain nervous about committing capital in Burma.

“The prevalence of corruption, a fairly unsophisticated legal system and a less-than-robust political structure which potentially underlies the threats for civil unrest top the list of concerns among multinational corporations and international financial institutions,” according to a survey by Trust Law, a service of Reuters which spotlights corruption and rights issues.

“Because it is considered to be the third most corrupt country in the world, then everything that sits under the government structure has to be questioned,” the executive director of Deloitte Forensic in Singapore, Peter Coleman, told the survey, which was published on June 21.

Coleman was referring to Burma’s current ranking of 180 out of 182 countries on Transparency International’s Corruption Perception Index 2011.

The Trust Law survey also quoted dispute resolution lawyer Alastair Henderson in Singapore saying many business in the United States and Europe would be hesitant about Burma for the time being because of the bribery and corrupt practices laws in their home countries.

Big Firms Tipped to Bid for New Offshore Gas Exploration Blocks

More than 40 gas and oil exploration blocks will be put up for international bids before the end of this year, according to a Ministry of Energy official this week.

Twenty-five offshore blocks will be offered and up to 18 onshore sites, the ministry’s assistant director of planning Aung Kyaw Htoo told a Rangoon investment conference.

No timetable for presentation of the block was given, although it’s widely expected they will be unveiled at an oil and gas forum to be held in Rangoon on Sept. 4-5.

“I expect international interest in the offshore blocks to be high because the big prizes, especially for gas, are thought to be under Burma’s territorial waters,” Bangkok energy industry analyst Collin Reynolds told The Irrawaddy on June 21.

“Interest in the onshore blocks is less hot, mainly because finds are anticipated to be relatively small,” he said.

Of 18 onshore blocks put up for auction in August last year only about half found takers, mostly small foreign businesses. Those which failed to attract interest are likely to be offered up again.

“Government officials have previously said that no blocks will be awarded to local companies in the [next bidding] round,” the oil industry magazine Upstream reported on June 20.

Fish Factories Forced to Import Stock as Domestic Catches Decline

Burma’s fish processing industry is suffering from a fresh fish shortage which threatens the viability of dozens of small factories, said the international fish trade website FIS.

The shortage is forcing at least 10 factories to start importing fish, some from as far away as Argentina, in order to stay in business.

FIS quoted one factory owner saying the industry has been suffering decline for several years, partly due to poor currency exchange rates. It’s not clear why fish catches in Burma’s offshore waters are poor.

With liberalization under the Thein Sein government, the Ministry of Livestock and Fisheries is to issue fresh fish import licenses.

Ten factories have applied for reprocessing licenses out of the 13 which meet European Union  standards, the chairman of the Crab Entrepreneurs Association, Hnin Oo, was quoted by FIS as saying.

The fish importation and processing will be known as CMP, for cutting, manufacturing and packaging—similar to the system which has been in use in Burma’s garment industry for some time.

Dawei Port Project Prospects ‘at the Crossroads’

The prospect of Burma’s sleepy southeast coastal town of Dawei becoming a regional industrial and oil transhipment port is “very much at the crossroads,” says the international industry magazine Port Strategy citing government officials in Bangkok.

The officials said that if the main contractor for the multi-billion dollar project, Italian-Thai Development (ITD), could not attract sufficient investment for its plans, the Bangkok government would have to review its promised contribution.

Thai oil and gas monopoly PTT Group is among several state-owned entities which had expressed interest in investing in Dawei.

“The news came as little surprise to sources in Bangkok where there has long been skepticism about Dawei’s viability, especially now that political reform in Myanmar is gathering pace,” said Port Strategy.

ITD published a blueprint for an oil port, a refinery and a petrochemicals complex, all powered by a massive coal-fueled electricity plant. But the plans ran into trouble when the Burmese government refused permission for a coal plant on environmental grounds.

ITD said in April it would be announcing details of investors and alternative power generating plans in June, but the firm has been silent since.

Instead, fugitive former Thai Prime Minister Thaksin Shinawatra was in Japan this week trying to drum up financial investment support for the Dawei project, saying it was of strategy importance—but for Thailand, rather than Burma.

Gulf States Show Interest in Ports Construction, Tourism Services

A Dubai industrial infrastructure company which specializes in port construction has expressed interest in investing in Burma.

“We see great potential in [Burma]. It has old infrastructure and has active trade with China and other countries that require port and marine services,” Al Marwan Group general manager Ziad Attar told the New York Times on June 20.

Another Gulf state company, Qatar Airways, has expressed interest in investing a hotel in Rangoon, said the newspaper.

The airline plans to restart flights to Rangoon in October and is planning to expand its international business into tourism services.

“Gulf investors are particularly attracted by the opportunities offered by [Burma’s] underdeveloped infrastructure, swathes of arable land that could provide food security for the arid Gulf States, and the country’s proximity to China, the world’s No.2 oil consumer,” said the Times.