The Irrawaddy Business Roundup (August 9, 2014)

By William Boot 9 August 2014

Inflation Forecast to Hover Around 9% if Market Reforms Continue

Burma’s rate of inflation will stabilize at about 9 percent “in the medium term,” a financial assessment of the country has forecast.

Although food price pressures will ease with the secondary harvest, inflation will continue speeding up throughout this year, said Mantis, a Netherlands-based economic forecasting company specializing in frontier markets.

Inflation will be driven by consumer price increases and depreciation of the kyat, said Mantis.

Investment inflows worth about 9 percent of gross domestic product (GDP) in the first quarter of 2014 “came just in time to help finance the country’s highest merchandise deficit ever, which reached 7.3 percent of GDP” in the quarter.

“While imports remained elevated, exports dropped to 12.5 percent of GDP in 2014Q1, down from their peak of 21 percent in the previous quarter and somewhat below their five-year average of 15.5 percent. We expect the drop in exports to be of a temporary nature and thus the merchandise deficit to moderate soon,” Mantis said.

“Myanmar’s complex socio-economic transition process entails large uncertainties. If the reform momentum accelerates, investment inflows may strengthen, leading to appreciation of the currency,” the assessment said.

“On the other hand, if financial markets are not liberalized or the government resorts to borrowing from the central bank, there will be faster depreciation of the kyat.”

India, Burma Plan a Large Power Plant to Aid Cross-Border Trade

India and Burma are negotiating to jointly build a 400-megawatt power plant in Sagaing Division close to the border between the two countries, Indian media reports said.

Financial support and equipment would be supplied by India’s Manipur State, said The Times of India, reporting on a meeting between the two sides at Tamu this week.

A site for the plant, which would be fueled by natural gas or electricity, has still to be decided, said the paper. One of the aims of the plant would be to provide electricity to improve cross-border trade via Tamu and Moreh.

“The power situation in Sagaing Division is reportedly bad and Tamu town, which plays a major role in the Indo-Myanmar border trade through Moreh, is currently lit by [diesel] generators,” said Calcutta’s Economic Times.

“The Indian team assured its Myanmar counterpart that once the site was selected India was ready to provide the necessary equipment. The power generated by this proposed plant will light up, among others, Tamu town.”

Labor Campaigner Wins Support From 20 Countries

Leaders of Thailand’s fruit canning industry have been urged by almost 100 labor and rights organizations in 20 countries to stop the criminal libel case against a British campaigner who has spotlighted the plight of Burmese workers.

The Thai Pineapple Industry Association (TPIA) has been sent a letter signed by the groups calling for the case against Andy Hall by the Natural Fruit Company to be dropped.

The letter’s signatories include the International Trade Union Confederation, European Coalition for Corporate Justice and Human Rights Watch, said Finnwatch, the NGO that commissioned Hall to investigate the conditions of Burmese migrant labor in Thai factories.

Hall’s report for Finnwatch alleged that Natural Fruit illegally used child labor, violated Thailand’s minimum wage standards, confiscated Burmese workers’ travel and work documents, and the failed to provide legally mandated paid sick days and holidays.

Frances O’Grady, General Secretary of the British Trades Union Congress, representing 6 million workers in Andy Hall’s home country, said: “Vulnerable workers need people like Andy Hall—working with trade unions in Thailand and internationally—to stand up against exploitation and abuse.”

Burma Faces Tourism Bottleneck as Airport Development Remains Stalled

A travel industry newspaper has warned that Burma is facing a potential logistics crisis as it rushes to increase annual tourist arrivals in the country without any firm timetable for a new international airport.

The country’s biggest airport, Rangoon, is nearing its capacity while the proposed new airport at Hanthawaddy is “nowhere in sight,” said Bangkok based TTR Weekly.

“The Ministry of Hotels and Tourism is targeting [to attract] more than 3 million foreign tourists this year, up from about 1.05 million in 2012, and 2.04 million last year,” said the industry paper.

Hanthawaddy is meant to have an annual capacity of 12 million, but failure by the Naypyidaw government to appoint developers means an opening date has slipped from 2016 to 2020, it said.

South Korea’s Incheon Airport Consortium was originally named the preferred bidder in a competitive tender to build the new airport, but talks broke down over funding for the project with an estimated cost in excess of US$1 billion.

Incheon is still in the running to build the airport, alongside Singapore’s Changi Airport Planners and Engineers (Cape) and two other firms, under new terms that may involve the Burmese government guaranteeing development loans for half of the project’s cost.

Major Foreign Firms Show Interest in Ministry of Energy Advisory Role

Ten foreign legal and engineering companies have expressed interest in obtaining a consultancy contract to advise Burma’s Ministry of Energy on oil and gas exploration and pipeline construction.

The firms showing interest include two British legal consultancies, Jones Day and Berwin Leighton Paisner, plus Germany’s engineering business Fichtner GmbH and Schlumberger Business Consulting, the world’s biggest oilfield services company based in Texas, said Eleven Media quoting the ministry.

The bid to appoint international advisers comes as Burmese government agencies continue to negotiate with a number of big international oil companies over the terms of contracts on 20 offshore development blocks. The contracts were provisionally awarded last March.