Burma Business Roundup (Saturday, Sept. 1)

By William Boot 1 September 2012

Japan Raises its Profile in Rangoon’s Restoration and Growth

Three big Japanese firms are to spearhead the development of an industrial complex on the edge of Rangoon which will be powered by its own electricity plant.

The development in the district of Thilawa adjacent to the sea port was signed even though details of a new law on economic zones have still to be finalized and approved by Parliament.

Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation will take a 49 percent stake in the development with the government and the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

The joint venture, to be largely financed by the Japanese, will include factory facilities and a natural gas-fueled power station to generate electricity for the estate.

“We will set up a public consortium so that the general public can invest there,” the chairman of the UMFCCI, Win Aung, told Reuters on Aug. 28.

No details of cost or a timetable for completion have so far been disclosed.

Japan is also involved in drawing up a redevelopment program for Rangoon to improve transport, water and drainage infrastructure.

The city of six million people is facing increasing problems of traffic congestion and water shortages, as well as a severe lack of electricity.

A draft redevelopment plan is being prepared by the Japan International Cooperation Agency and is scheduled to be completed sometime in 2013.

Western Oil Giants Face ‘Spectrum of Risks’ in Consorting with MOGE

As numerous foreign firms including Western oil multinationals prepare to gather in Rangoon for a four-day resources forum, a risk assessment company has underlined the perils of associating with a tainted Burmese government agency.

The oil, gas and power conference being held Sept. 3-6 is being hosted by the Myanmar Oil & Gas Enterprise (MOGE), which has been black balled by both the US government and opposition leader Aung San Suu Kyi for its dubious links with military leaders and lack of transparency.

The Dutch-British group Shell, ConocoPhillips of the US, and Unocal, which is part of the US’s Chevron Corporation, are among major industry players taking part in the forum, said the the event’s organizer, the Singapore-based Center for Management Technology.

It’s expected that a number of exploration and production contracts for onshore and offshore blocks will be put up for auction at the gathering.

However, despite recent reforms state-owned enterprises such MOGE are likely to remain dominant.

Foreign investors “will continue to have to form joint ventures with MOGE, exposing them to a whole spectrum of risks, ranging from poor labor, environmental and safety standards to corruption, forced labor and other human rights violations,” warned the risk assessor Maplecroft in a new report this week.

“A strong network of strong cartels with vested interests in fuel import and distribution and close ties to the military elite also present very high barriers to entering the downstream business,” the UK’s Maplecroft noted.

The risk assessor added: “In the short term, the biggest concern for anyone considering investing in [Burma] is the government’s dependency on foreign expertise to manage administration, infrastructure, energy and finance projects. This is considerably slowing the introduction of reformist policies and implementation of regulations.”

Canadian Trade Minister to Visit Burma in Search of Business ‘Opportunities’

Canada’s Trade Minister Ed Fast will visit Burma on Sept. 2 at the end of a week-long Southeast Asian tour which has taken in Vietnam, Thailand and Cambodia.

It will be the first by a top Canadian trade official since Canada suspended sanctions against Burma in April.

Fast flies to Rangoon and Naypyidaw after co-chairing the first ministerial-level get-together between Canada and the Association of Southeast Asian Nations in Phnom Penh.

Asean is Canada’s seventh-largest trading partner with bilateral trade last year of US $15.5 billion.

“Canada can help anchor and expand Burmese reforms while positioning our companies for future opportunities,” Fast said earlier about his forthcoming Burma visit.

Foreign Investment Law Faces Further Delay as Opposition Grows

Burma’s much-debated and amended draft foreign investment law could be delayed yet again unless a final parliamentary agreement is reached this weekend.

The current session of Parliament is close to ending and will not reconvene until October.

“The intensity of debate suggests it could be delayed yet again. If so, it could be another six weeks before Parliament returns to it,” the Financial Times reported this week.

The draft law has been undergoing revision and amendment for the last eight months, and the result has been a “slow-growing backlash over the very notion of foreign investment incentives,” the newspaper said.

Domestic businesses have objected to all the incentives originally being offered for potential foreign investors, such as tax-free start ups and low taxation once in operation.

Early government proposals included 100 percent ownership of businesses by foreign companies moving into Burma, but this has since been watered down to 49 percent, along with tougher minimum requirements such as a US $5 million investment.

ADB Urges Thai Govt to Kick-Start Dawei Port Project

The Thai government has been urged by the Asian Development Bank (ADB) to stop prevaricating over plans for a major port and industrial complex at Dawei on Burma’s southeast coast.

The Bangkok government should invest in road and railway infrastructure from the Thai border to Dawei which would act as an incentive for other investors currently nervous about the viability of the development. The project is also in need of its own electricity source and is still negotiating with Naypyidaw after the Burmese government blocked plans for a large coal-fueled power plant.

“It doesn’t need to be a massive investment, just an initial amount that can get the Dawei project off the ground,” the ADB’s Thailand country director Craig Steffensen was quoted by The Bangkok Post as saying.

The ADB supports the overall US $50 billion because it will benefit Thailand, Burma and Asean as a whole, he said.

Steffensen spoke at a conference in Bangkok this week ahead of a two-day visit to Burma by Thai Prime Minister Yingluck Shinawatra on Sept. 13 in an effort to push the Dawei idea forward.

The Thai government sees Dawei as part of a grander regional trade transport project, linking the Indian Ocean with Thailand’s main port of Laem Chabang at the head of the Gulf of Thailand, but has done little beyond encouraging the main construction contractor, Bangkok-based Italian-Thai Development.