Burma Business Roundup (Saturday, May 5)

By William Boot 5 May 2012

New Oil, Gas Exploration Licenses in August

More oil and gas exploration licenses will be offered to foreign companies in the second half of this year, the Ministry of Energy has announced.

A number of onshore blocks, as yet undefined, are expected to be put up for sale in August, with offshore blocks being offered before the end of the year, the ministry’s Director General of Planning Htin Aung said.

However, despite the government’s professed keenness to expand development of the sector, progress has been slow so far.

Of 18 onshore blocks put up for licensing last year only nine found takers and signed agreements have been reached on only four of these, Htin Aung told Reuters news agency on May 2.

Malaysia’s state oil firm Petronas has signed up to explore two blocks, while deals are confirmed with EPI Holdings, of Hong Kong, and Geopetrol International, a company registered in Panama.

Talks on five blocks are still continuing with Thailand’s PTTEP, CIS Nobel Oil Company of Azerbaijan, PT ISTECH Resources Asia of Indonesia, Jubilant Energy of India, and Tianjin New Highland of China.

Apart from Petronas and PTTEP, all the firms are small.

Under new rules, all foreign license holders must have a Burmese partner other than the state Myanmar Oil and Gas Enterprise.

Local firms linked with the nine blocks under planning are Aye Myint Khine Company, A-1 Mining Company, and UNOG.

EU Firms Want ‘Rule of Law, Investment Security’

European businesses will likely hesitate to invest in Burma even though sanctions have been suspended, European Union Foreign Policy Commissioner Catherine Ashton said.

“Companies need the rule of law to exist. They need to know that if they invest in this economy, it will be well looked after and secured,” Ashton told Reuters news agency during a visit to Burma at the end of April. “They want stability and a workforce that is trained.”

The EU suspended sanctions for one year on April 23, but fell short of cancelling them altogether until there is more evidence that recent reforms are permanent.

Ashton opened an EU office in Rangoon and held talks with both President Thein Sein and Aung San Suu Kyi.

“We are very keen to support the rural community. The President has the ambition to reduce poverty in line with the Millennium Development Goals in the next two years,” Ashton said in a statement on May 2. “We want to be a part of these efforts. [Thein Sein] talked about education and health, the need to develop small businesses, which will be the backbone of the economy.”

The EU has already given 150 million euros (US $197 million) in aid for the 2012-13 financial year.

US Business Says Burma Sanctions Kill American Jobs

American business organizations have stepped up pressure on the US government to relax Washington’s economic sanctions against Burma.

Maintaining sanctions will “simply ensure that our competitors fill the void, as they are already doing,” a letter to President Barack Obama said. “Jobs which could be given to American workers will go to workers in Asia and elsewhere.”

The letter, signed by the US Chamber of Commerce, the American Petroleum Institute and the US-ASEAN Business Council, criticized Washington’s response so far to the reforms in Burma.

The US government has lifted several financial curbs, allowing US credits cards to be used in Burma for instance.

But the business groups’ letter to Obama said: “Permitting certain US sectors to invest while excluding others will not prevent those sectors from being developed in Burma.”

The letter calling for change follows a statement by the US Chamber of Commerce after the European Union suspended sanctions.

“The EU’s announcement … adds urgency.  Failure by the United States to take similar steps will do more than put American companies at a commercial disadvantage vis-a-vis their competitors; it will harm the [Burma] reform process itself by undermining those in Myanmar who have supported reform,” said the Chamber.

South Korea Keen to Invest in Energy and Infrastructure

South Korea wants to invest in Burma’s energy and mineral resources and contribute to infrastructure developments such as ports and special economic zones.

That was the view expressed by Seoul’s Foreign Minister Kim Sung-hwan during a two-day visit to Burma this week when he met President Thein Sein and other government leaders.

It was the first visit by a senior South Korean government minister for more than 20 years, although Korean firms have invested heavily in Burma during that time.

“About 100 Korean firms are currently operating in [Burma] with a heavy focus on the garment industry, according to the Ministry of Knowledge Economy,” the Korea Herald reported on May 2. “Bilateral trade neared US $970 million last year, up more than 50 percent from a year before.”

South Korea’s Daewoo International and the Seoul government-owned Korea Gas Corporation, known as Kogas, are leading developers of Burma’s biggest offshore gas find to date, the Shwe field on the west coast near Sittwe.

“[Kim] had an in-depth discussion on the state of affairs surrounding Myanmar and the Korean peninsula, as well as ways to boost personnel exchanges and practical cooperation on trade, investment, development, energy and resources,” the Korean Foreign Ministry said in a statement.

Rice Growers Aim for One Million Tonnes Export

Burma’s rice association is targeting exports to rise to one million tonnes in the 2012-13 financial year as the industry begins to invest money into farms for the first time in years.

Burma exported around 850,000 tonnes last year with a value of US $324 million, said the Myanmar Rice Industry Association (MRIA), although much of it was low quality and 25 percent was broken grain.

The MRIA said in a policy statement  that it was obtaining loans from the Myanmar Agricultural Development Bank to “expand our efforts in contract farming that helps farmers to boost yields by improving their techniques and giving them more inputs of fertilizer.”

Japan has also promised to provide financial and technical aid to improve key areas of agriculture. Burma was the world’s biggest rice exporter in the first half of the 20th century, but will have to expand the industry greatly to compete with Thailand and Vietnam in the current climate.

Thailand exported 10.5 million tonnes in 2011, according to the Thai Rice Exporters Association, but forecasts say this could slip to under seven million tonnes in 2011, with Vietnam or India claiming the top export slot.