The Irrawaddy Business Roundup (February 22, 2014)

By William Boot 22 February 2014

Myitsone Cancellation Would Have ‘Financial Consequences’ for Burma

Permanent cancellation of the huge Myitsone hydroelectric dam on the Irrawaddy River in Kachin State could be very expensive for Burma, an analyst has warned.

The Naypyidaw government will face “legal, financial and diplomatic consequences,” said Yun Sun of the East Asia program at the Washington-based Stimson Center, a non-profit think-tank.

Construction of the US$3.6 billion project by the Chinese state-owned China Power Investment company began in 2007 but was suspended in September 2011 by President Thein Sein responding to public opposition.

Work was ordered halted until the end of his presidency on 2015 but the Burmese government is now under pressure from the Chinese to permit its resumption.

Among objections to the dam is the fact that its development was agreed by the previous military regime and 90 percent of the electricity generated would be transmitted to China.

If Burma is to permanently cancel the massive project, “the reasonable next question is the legal and financial liability associated with the disbursed investment, collateral damage and compensation,” said Yun Sun writing in Asia Times.

“Beijing needs to reconsider whether it is wise to let the destiny of one commercial project sway and affect the future of broader Sino-Myanmar bilateral relations. Indeed, since the suspension of the Myitsone dam, China has not only suspended almost all new major investment in [Burma], but also let Myitsone become a festering thorn in bilateral political relations.”

International Finance Corp to Aid Burma’s Import-Export Trade

Burmese firms involved in exports of goods and materials are to receive financial help from the World Bank’s International Finance Corporation (IFC).
The aid will be in form of a US$5 million credit facility to Myanmar Oriental Bank (MOB), one of the IFC’s partners in Burma, to help underwrite trade financing for small-to-medium sized Burmese companies engaged in export and import markets.

“By boosting MOB’s capacity to deliver trade-finance solutions, IFC is helping improve trade flows that are vital to enterprise growth as the economy opens up,” said the IFC’s representative in Burma, Vikram Kumar, in a statement.

The MOB will also be assisted by the IFC in improving its corporate governance and trade finance operations. The bank is the first in Burma to join the IFC’s Global Trade Finance.

The IFC is part of the World Bank, which re-opened an office in Burma in 2013 after ending liaison with the former military regime.

In January the World Bank announced a long-term US$2 billion aid package for Burma, aimed at helping to expand a national electricity system, improve health care, and provide loans and grants for economic development.

Reforms Bring Better Working Conditions in Burma, Says Global Survey

Burma’s position in an international working conditions table has improved considerably in the past year, a survey says, although the country remains in the “extreme risk” category.

In the list of 197 countries surveyed, Burma’s position has improved from 1st in 2013 to 14th place in this year’s Working Conditions Index, which ranks nations in terms of minimum wage levels, working hours, and health and safety in the workplace.

The survey by the British business risk consultants Maplecroft ranks the worst countries highest in terms of numerical position in the table.

“Improvements due to political reforms have been noted in China, which climbed from 6th in 2009 to 37th in 2014, and [Burma], from 1st in 2013 to 14th in 2014, but both remain in the ‘extreme risk’ category,” said Maplecroft.

This year, three countries share the No. 1 slot for the absolute worst conditions—Eritrea, North Korea and Syria.

Burma’s neighbor Bangladesh is in 5th position.

“In 2013, nowhere were the risks posed by substandard working conditions more evident than in Bangladesh,” Maplecroft said.
“Occupational fatalities and excessive working hours in the country reveal a significant lack of capacity and political will to enforce labor laws.”

Among fellow members of Asean—the Association of Southeast Asian Nations—Indonesia takes 20th place, Vietnam 24th and Cambodia 26th.

Quick-Build Hotels Bid to Meet Burma Tourism Surge

Burmese companies are planning to build and operate scores of medium-sized, middle-ranking hotels to cater for the rapidly expanding foreign tourist business, a regional trade magazine said.

Hotels with 50 to 60 rooms which can be built quickly will form a large part of government plans to provide 20,000 additional rooms in the Rangoon region, said Bangkok-based TTR Weekly, quoting the Myanmar Hoteliers Association.

Accommodation is struggling to meet growing demand and many popular tourist areas are short of rooms, the association said.

Although there will be more rooms available for visitors in 2014 than last year, tourists in the big cities will have to compete with large numbers of delegates from Asean attending conferences during Burma’s year of chairmanship of the regional organization.

Earlier this month, Singapore businesses were identified by the Directorate of Investment and Company Administration, as the biggest foreign investors on new hotel construction.

Bangladesh Beats Burma to Draw on Bay of Bengal Oil and Gas Licenses

As international oil companies await the award of 30 offshore exploration blocks in Burma’s Bay of Bengal waters, neighbor Bangladesh has signed a contract with Indian state developer ONGC Videsh to explore two offshore blocks also in the bay.

The award of licenses for Burma’s blocks is due to be announced in the next few weeks.

The two neighbors rowed for years over territorial rights in the Bay of Bengal until they accepted settlement recently by a UN adjudication court.

The Bangladesh industry newspaper Energybangla said two more offshore contracts were due to be signed next week between the state agency Petrobangla and the US’s ConocoPhillips and also with Santos of Australia.