Burma Business Roundup (Saturday, May 18)

By William Boot 18 May 2013

Investors in Burma’s Oil, Gas Industry Face ‘Substantial Risks’

Acquiring one of the 30 offshore oil and gas exploration blocks being offered by the Ministry of Energy presents “substantial risks” for foreign investment companies, a business risk assessor said.

Oil and gas production must be shared with local firms, predominantly the state-owned Myanma Oil and Gas Enterprise (MOGE).

“Commercial operations of these large state-owned enterprises (SoEs) lack transparency, which fosters corruption, nepotism and cronyism,” senior Asia analyst Dr Guo Yu at Maplecroft in the UK told The Irrawaddy this week.

“In addition, senior members in government and military have vested financial interests in many of the SoEs commanding Myanmar’s resources. As a result, cooperation with local entities in lucrative petroleum exploration holds elevated reputational and complicity risks for foreign oil and gas companies.”

The business advisory comes at the same time as a survey by the US-based Revenue Watch Institute placed Burma bottom of a list of 58 oil and gas producing countries in terms of transparency.

Burma scored lower than notoriously corrupt Turkmenistan, Equatorial Guinea and Zimbabwe.

In Burma “almost no information is available on the management of the extractive sector. [Burma] has no freedom of information law, and environmental and social impact assessments are not required,” the institute survey concluded.

“Companies operating in a country that is experiencing rapid political and economic transformation are exposed to high levels of regulatory uncertainties over the short- to medium-term,” Maplecroft’s Guo told The Irrawaddy.

‘Small Bird’ Airline Flies Small Town Routes between Burma and Thailand

Thailand’s tiny airline Nok Air—meaning small bird—intends to offer new routes linking provincial Thai and Burmese towns.

The airline said it will start services between Mae Sot on the Thai-Burma border and Mawlamyine, also known as Moulmein, from September.

There will also be flights between Mae Sot and Rangoon, and Nok Air said it will link Thailand’s northern capital Chiang Mai with Mandalay and Bagan.

Nok Air is owned by Thailand’s state airline Thai Airways. It has stuck to Thai domestic routes since an earlier venture overseas, linking Thailand with India and Vietnam failed commercially in 2008.

“By staging their flights to [Burma] from cities other than Bangkok, Nok Air hopes to capture the market segments that its arch rival Thai Air Asia cannot,” said the Bangkok Post.

Nok Air is the latest of more than a dozen small and large airlines which have started up regular flights in and out of Burma over the past 12 months.

It’s the third Thai airline to link with Burma, a trend helped by the fact that Thais along with Chinese are the biggest nationality groups visiting Burma.

European Beer Giants Battle for Burma’s Still Modest Drinking Market

A second major global beer company has signed an agreement to build a new brewery in Burma in a sector which is moving faster than most other industries as the country opens up.

Heineken of the Netherlands has teamed up with Burma’s Alliance Brewery Company to brew and market the Heineken brand.

The partnership, which will be dominated by Heineken via its Singapore-based Asia Pacific Breweries Limited, said it intends to invest US $60 million and created 400 new jobs in a new brewery. It hopes to begin brewing at the end of 2014.

Earlier this year, Carlsberg of Denmark formed a partnership with Myanmar Golden Star Breweries, which has links with the Burmese military.

Carlsberg says its partnership will distribute its brands in Burma, but there are plans also to build a new brewery.

The two European brewing giants vie for market dominance across Asia.

The big Thailand brewing company Thai Beverage is also investing in Burma, buying a majority stake in Myanmar Brewery whose other major shareholder is the army linked Union of Myanmar Economic Holdings.

These companies are banking on Burmese becoming big beer drinkers as their incomes rise with a growing economy, but at present Burmese are among the region’s most modest drinkers. They consume on average less than four liters per year—that’s only about 10 small bottles—compared with per capita annual consumption of 25 liters in Thailand and 30 liters in Vietnam.

Yoma Spreads from Tourism to Telephones and Now Store Retailing

One of the most active and rapidly diversifying Burmese companies, Yoma Strategic Holdings, has moved into household retailing.

Yoma, controlled by businessman Serge Pun, has formed a joint venture with Malaysia’s Parkson Retail Asia to open department stores in Burma. The first one, over four stories, has just opened in Rangoon.

Yoma is also one of the partners in a joint venture led by Irish-owned Digicel to acquire one of the two mobile telephone network licenses on offer by the Burmese government. That partnership includes Quantum Strategic Partners, owned by American billionaire speculator George Soros.

Earlier this year, Yoma announced it was forming a partnership with Chindwin Holdings Private Limited to develop tourism facilities and services inside Burma.