Burma Business Roundup (Saturday, Oct. 27)

By William Boot 27 October 2012

Japanese Investors Worried about Power Blackouts

Many Japanese businesses are eyeing up Burma as a new consumer market with the likelihood of an emerging urban middle class, the chief of the Japan External Trade Organization (JETRO) said.

After a visit to Rangoon and other cities JETRO chairman Hiroyuki Ishige told Japanese newspapers: “I get the impression that many [Japanese] companies were seriously thinking about investing” in Burma.”

Ishige led a Japanese business delegation tour of Burma, including an inspection of the planned Thilawa special economic zone.

He cautioned that one of the major problems raised by potential investors is the shortage of electricity in the country. They were concerned about the effect of blackouts on business activity and the apparent need to install expensive alternatives such as diesel generators and whether there would be sufficient diesel fuel available when needed.

JETRO is a government-funded foreign business promotion agency based in Tokyo.

Chinese Fuel Pipelines Have Big Transhipment Capacities

The oil and gas pipelines being built through Burma will be capable of transporting huge volumes per year—while the host country remains starved of power supply.

The oil pipeline, running from a port on Burma’s west coast into China’s Yunnan Province, will handle up to 22 million tonnes per year, said the official Chinese news agency Xinhua. The gas pipeline, drawing gas from Burma’s Shwe offshore field in the Bay of Bengal, will pump 12 billion cubic meters per year.

The figures were disclosed when Xinhua announced that a key bridge built over the Mekong River in Yunnan for the twin pipes has been completed.

“The bridge is a key part of the pipeline and one of the most difficult engineering projects, given the complicated geographical conditions,” said Hu Hanzhou, general manager of China Railways Major Bridge Engineering Group Company.

The pipelines are of “great significance for the economic development of west China, Myanmar and southeast Asia,” Xinhua quoted Hu as saying.

Opponents of the pipelines, the construction of which has disrupted communities across Burma, say they will be of little benefit to Burma.

Rush to Mandalay Forces Visa-on-Arrival Expansion

The visa-on-arrival system now in operation at Rangoon’s international airport is to be extended to Mandalay as the growth in international passenger traffic to Burma’s second city overwhelms immigration staff.

The instant visa system was introduced in Rangoon in June but has yet to apply in Mandalay, where a number of foreign airlines are now planning to fly direct.

From Nov. 1, Myanmar Airways International will begin direct flights between Mandalay and Gaya in northeastern India, which is increasingly seeking to forge business links with Burma.

Airlines are switching to Mandalay because Rangoon is becoming overloaded with flights. Between January and September there were over 357,000 visitor arrivals in Rangoon.

More Foreign Oil Firms for Burma Projects

Offshore services company IKM Subsea Singapore is to work on the Zawtika offshore gas project in the Gulf of Martaban.

The Singaporean specialist has been hired by Indian offshore contractor Larsen & Toubro which is building US $200 million worth of well heads.

The main developer at Zawtika is the Thai government-owned firm PTT Exploration & Production Ltd.

Zawtika is estimated to hold at least 50 billion cubic meters of gas, most of which is to be exported to Thailand under an agreement signed with the Myanmar Oil and Gas Enterprise.

A Chinese firm has been hired to build the export pipeline from the field, which is expected to begin operating before 2014.

Oil Firms ‘Face More Risks’ in Post-Military Regime Era

Agreements on oil and gas exploitation and export made between foreign oil companies and the former military regime seem certain to be honored but future deals could pose problems for investors, a risk assessment says.

“One of the biggest risks for energy companies is the possibility of Domestic Market Obligations being imposed on producers of oil and natural gas that would oblige them to meet domestic demand in [Burma], prior to being allowed to export,” said the UK business risks assessor Maplecroft.

Foreign operators will also have to be more aware of environmental and human rights issues than in the past, it said.

“While formal regulations on sustainability requirements for investment do not yet exist, the government is responding to intense domestic and international scrutiny over its environmental and human rights violations, which increases the necessity for investors to be aware of and plan to mitigate the adverse socio-economic and environmental impact of their projects in [Burma],” said the Maplecroft study.