Burma Business Roundup (Saturday, March 30)

By William Boot 30 March 2013

Rooms Shortages, Rip-off Prices Pose Threat to Tourism Business

Burma’s foreign visitor accommodation shortage is worsening, putting the country’s potentially lucrative tourism business at risk, an industry analysis said.

“Travel companies complain they are facing skyrocketing hotel room rates at every tourist destination, nationwide, while the actual services and facilities are not up to standard,” said the report by Bangkok-based travel trade publication TTR Weekly.

It said a survey showed that Burma had a total of only 27,000 rooms in all quality categories, compared with 42,000 registered short-stay rooms in Bangkok alone.

The number of visitors to Burma rose above 1 million-a-year for the first time in 2012, but many are disappointed to find they are being overcharged for poor-quality accommodation.

“Hotels are really greedy. They charge US $150 a night for a room that’s worth only $40,” TTR Weekly quoted one tour operator complaining.

Complaints from travelers about poor facilities are increasing, “causing potential damage to the image of the country,” said the trade publication.

In the short term, Rangoon may suffer a loss of income from tourists as tour operators cut back the days spent in Burma’s biggest city in favor of cheaper locations up country.

The accommodation problem is becoming particularly acute in popular destinations such as Bagan, Mandalay and the Inle Lake district.

Burma is Southeast Asia’s Budget Airline Battleground

Despite the shortage of accommodation more regional airlines are adding services into Burma to add to the country’s inward travel boom.

The latest airline to put Burma on its route map is THAI Smile, the budget line of Thai Airways International.

THAI Smile said it is introducing five flights per week between Bangkok and Mandalay from March 31.

The Bangkok operator said it decision to add Burma to its routes was to tackle rising competition from Malaysia-based Air Asia, which also operates a subsidiary service in Thailand, known as Thai Air Asia.

THAI Smile is now just one of almost 20 airlines big and small, regional and intercontinental, flying to and from Burma. One year ago only a handful of airlines offered regular international services.

Yet another Thai budget airline, Bangkok Airways, has applied for a license to operate flight between Bangkok and Mandalay, possibly from the third quarter of this year.

THAI Smile’s start-up promotion fare Bangkok-Mandalay is only US $149 return for stays of up to four weeks, compared with Air Asia’s price of $218.

Sectarian Strife a Business Risk but ‘Unlikely’ to Halt Reforms

Outbreaks of sectarian violence in central Burma “serve to highlight the fragility of [Burma’s] business environment as the country undergoes a period of political transformation,” an assessment of the trouble said.

The violence in the commercially important region of Mandalay will bring the army back into the forefront of the community but it is “unlikely” to destabilize the government of President Thein Sein, said the analysis by UK business risk assessors Maplecroft of the UK.

“Political and economic reform is set to continue in the medium term, despite the resistance of powerful hard-line elements of the former military junta,” Maplecroft said. “However, a recent resurgence in violence between Buddhists and minority Muslims illustrates the fragile nature of the peace in many parts of [Burma].”

But despite this the new Foreign Investment Law seems certain to heighten international interest in Burma’s potential oil and gas sector.

“With the promise of further auction of oil and gas resources and 100 percent foreign ownership for deep-water offshore projects, the development of the oil and gas sector is likely to see much greater foreign participation over the medium- to long-term,” Maplecroft said.

The Ministry of Energy has recently indicated that an auction of exploration blocks in the Bay of Bengal could happen in April or May.

Emerging Burma Poses ‘Challenge’ to Thailand’s Asean Prowess

European business leaders have warned the Thai business community that “challenges lie head” as a result of the emergence of Burma from decades of economic isolation.

“[Burma’s] emergence poses both positives and challenges for Thailand, so the country should enhance its competitiveness by increasing connectivity with neighboring countries,” Germany’s ambassador to Thailand Rolf Schulze told a business forum in Bangkok.

Germany is the European Union’s biggest individual country trading partner with Thailand but German companies are increasing eyeing Burma as a new destination for investment, Schulze said.

Thai Prime Minister Yingluck Shinawatra told the forum, hosted by the German-Thai Chamber of Commerce, that poor internal infrastructure had “reduced” Thailand’s competitiveness and said this was a continuing problem as its neighbor Burma emerged as an alternative center of investment.

Thailand planned to regain its leading position as a major business transit hub within the Association of Southeast Asian Nations by diverting from road transport to build major railway routes, Yingluck said.

$6.5 Billion Invested in Burma in Last 24 Months

Foreign investment in Burma totaled about US $6.5 billion in the two years between February 2011 and February this year, according to figures from the Directorate of Investment and Companies Administration.

One of the biggest single months for investment was February this year, which saw a total of $253 million incoming from five countries: China, Japan, Singapore, Britain and Vietnam.

Most of the investment in February, a total of $190 million, went into Burma’s oil and gas sector, said the directorate, and the biggest single country investor was former colonial power Britain.

Another surge in oil and gas sector investment is expected when the government puts up for auction a series of exploration and production licenses for as many as 20 offshore undersea blocks in the Bay of Bengal.