Burma Business Roundup (Saturday, Sept. 22)

By William Boot 22 September 2012

Burma will become a member of the Extractive Industries Transparency Initiative in order to give international oil companies more confidence in the country, the Energy Ministry said.

The initiative is a “globally developed standard that promotes revenue transparency at the local level,” says the Norway-based non-governmental organization.

The ministry’s planned September announcement of a new bidding round for potentially lucrative offshore gas and oil exploration blocks has been postponed, reportedly after pressure from Western oil firms concerned about an alleged lack of transparency in state agencies such as the Myanmar Oil and Gas Enterprise (MOGE), linked with the former military regime.

“As Myanmar’s upstream petroleum sector has now started entering the international community, it
will need time to make many considerations before launching any more international bidding rounds,” Deputy Energy Minister Htin Aung was quoted by Bloomberg as saying this week.

Over 60 exploration blocks remain open for investment, including 34 onshore, eight in shallow water and 20 in deep water, Htin Aung said.

Meanwhile, the former managing director of MOGE, San Lwin, claimed in an interview with Bloomberg that the state agency had always been honestly run and had to answer to government ministers.

“MOGE alone doesn’t have the authority to sign a production-sharing contract. How can you say MOGE is not transparent?” said San Lwin, who now works for the China National Offshore Oil Corporation (CNOOC) in Burma.

CNOOC itself has been accused by human rights groups of collusion in transgressing land rights along the route of its oil and gas pipelines through Burma.

Russians Join Queue to Seek Gas in Burma

The major Russian company Gazprom says it is in talks with the Burmese Ministry of Energy about a possible investment in the hydrocarbons sector.

The Moscow-based firm says on its website it is involved in “discussions with the Myanmar government to participate in energy projects in the country” but gave no details.

State-controlled Gazprom is one of the world’s biggest producers but has so far made few inroads into Southeast Asia. It has business links with Vietnam’s state oil company PetroVietnam but is mainly focused on supplying gas to Western Europe.

The joint venture Vietgazprom is engaged on offshore exploration and development.

Foreign Investment Law ‘to be Sent Back to Parliament’

The new foreign investment draft law is “likely” to be sent back to Parliament by President Thein Sein for amendment, according to the Myanmar Investment Commission.

The draft is still awaiting the president’s signature to be passed into law but there have been a number of criticisms of its content, some domestic business arguing it is too weak, while Western companies have said it is vague on investment terms.

Burma’s Federation of Chambers of Commerce and Industry, among others, is reportedly petitioning the president for amendments to what an Associated Press report termed “widely misunderstood legislation.”

“Investors have criticized the legislation… Some fear it contains measures that will scare off much-needed foreign investment,” said AP, which interviewed officials of the commission.

New Airport Development to ‘Start in 2013’ but No Construction Timetable Set

Work on a new international airport for Burma will begin in 2013, according to media reports quoting government officials.

The airport, at Hanthawaddy 75 km north of Rangoon, will be able to handle 10 million passengers a year when completed, the reports say. However, apart from interest being shown by a number of foreign construction companies, notably from Japan and South Korea, there is no development timetable or cost structure.

An airport at Hanthawaddy was first proposed in 1994.

With a huge rise in business and tourism visitors, pressure is mounting on Rangoon airport, which can handle less than 3 million passengers annually and has limited parking facilities for airlines.

Western Union to Start Remittances Service for Burmese Working Abroad

Burmese working abroad will soon be able to send money home more formally via the services of the Western Union Company.

The US business is to start up an inward-forwarding service in collaboration with Myanmar Oriental Bank (MOB). At a later unspecified date remittances out of Burma will also be possible.

Until now, Burmese abroad have had to use informal and sometimes uncertain methods of sending money home.

The MOB has branches concentrated in Rangoon and Mandalay but is reportedly planning to expand into other parts of the country.

Meanwhile, India’s state Export-Import Bank is the latest foreign bank to plan starting up business in Burma. The Exim bank has provisionally agreed to offer credit of up to US $500 million to the Burmese government to help with infrastructure developments, said executive director Prabhakar Dalal.

British Risk Managers Predict 6 Percent Burma Growth in 2012

The AKE Group in London has lowered is financial security risk rating on Burma to “cautious optimism for business” and predicts economic growth for this year of 6 percent.

But the company also advises that there are still concerns about longer-term reforms and their effect on investment from outside the country.

“After five decades of military rule there is still a risk that the military elites could seek to slow, halt or even roll back reforms, which will doubtless prove very damaging to the country’s image as an attractive emerging market,” said AKE Asia specialist Alex Storrie. “However, most key power brokers have been largely supportive of the reform agenda so far, making this less likely.”