Burma’s Neighbors Knocking at the Business Door

By William Boot 26 June 2012

While many companies in Western countries continue to ponder the potential problems of investing in a country fresh out of pariah status, Burma’s next-door neighbors are dropping in for tea and business.

The state oil and gas companies of Malaysia and Thailand have bought into exploration and production agreements while the likes of Shell and ConocoPhillips sit on the fence.

The Indian prime minister has led a big-name business delegation to Naypidaw, and now Bangladeshi business teams are visiting Burma to petition for an easing of border trade restrictions and other favorable changes ahead of President Thein Sein’s visit to Bangladesh in July.

“If Thais wait for clear-cut rules and regulations, we may be unable to compete with others and lose the chance to grow with Myanmar from the very first step,” was the clarion call from the director of the Thai Trade Centre in Rangoon, Prajuab Supinee, which seems to sum up the new positive attitude of Burma’s next-door neighbors.

This is in stark contrast to a study by the London-based Financial Times newspaper, which found that many big Western companies are holding back on investing in Burma because of uncertainty about Burmese laws and mixed signals from their own governments and opposition leader Aung San Suu Kyi.

Some Western firms, said the Financial Times, were disturbed by the longer-term implications of US and European Union sanctions being only suspended and subject to review in a year.

The biggest potential opportunities for Thai investors are in agriculture, processed food and energy, according to the Thai Trade Centre but it said Thai businesses should intensify their efforts after Thailand slipped to second place behind China for foreign direct investment.

Thailand’s biggest bank, Bangkok Bank, has already opened a representative office in Rangoon ready to begin trading when banking laws are reformed, said Prajuab. The Siam Commercial Bank, which has also opened a Rangoon office, last week led a trade group on a cross-border visit.

The biggest potential Thailand-Burma cross-border development is looking increasingly uncertain, however. Plans by the big Bangkok construction firm Italian-Thai Development to lead a major port project at Dawei on Burma’s southeast coast appear to be faltering—due to a lack of foreign investors.

The Thai Trade Centre in Rangoon, which is operated by the Department of International Trade Promotion of Bangkok’s Ministry of Commerce, declined to answer questions about Dawei.

Meanwhile, Thein Sein will visit the Bangladeshi capital Dhaka for three days from July 15, during which the two governments will discuss improving trade and investment, notably in the energy sector, and upgrading transport links including direct flights between major cities.

The settlement of a decades-long dispute about overlapping territorial claims in the Bay of Bengal has smoothed the way to a steady improvement in relations.

“Bangladeshi businessmen are getting prepared to invest millions of dollars in Myanmar as the country has opened its markets,” Dhaka’s Financial Press said on June 21.

“A good number of Bangladeshi businessmen under the banner of Bangladesh-Myanmar Chamber of Commerce and Industry and the Bangladesh Myanmar Business Promotion Council have already visited the country to assess the post-reform situation,” the paper said.

Bangladesh exports cement, pharmaceuticals and electric cables to Burma and imports rice, nuts, fish, and timber.

While foreign direct investment by major Western international firms may be on hold pending further reassurances that the reforms initiated by the Thein Sein government are irreversible, border trade between Burma and its neighbors is becoming increasingly important.

For the financial year just ended, border trade increased 58 percent to a total of US $3.36 billion, according to government figures. More than $2 billion of this was Burmese exports and agricultural produce was the biggest component.

China remained by far the biggest border trade partner, accounting for over $2 billion of the total. Thailand was in second place and India third.

India has made its biggest noises yet about investing in Burma and has announced a target of achieving cross-border trade worth an annual $3 billion by 2015. The Indian government-owned United Bank of India has opened an office in Rangoon and wants to speed up cross-border transport communications to help facilitate trade.

To date there is only one road which can handle commercial traffic between Burma and India along the two countries’ 1,500 km-plus border length.

Dreams of developing a freight railway route into Burma from India’s landlocked northeast states wedged between Bangladesh and China remain just that, dreams. But Prime Minister Manmohan Singh has initiated renewed top-level talks between New Delhi and Naypyidaw on reviving the 1,360-km Trilateral Highway project intended to run between northeast India and Thailand through Burma.

“This road is vital for improving trade not only between India and Burma but with several countries of Asean,” said Centre for Policy Research in New Delhi.

“Most trade out of India going east is by sea. The Trilateral Highway would not only speed trade up by also expand and diversify it.”

For the moment, though, there is little likelihood of India usurping China’s position as Burma’s No.1 business neighbor, even though Beijing has maintained a low-key response to the business-diversifying reforms streaming out of Naypyidaw.