The Irrawaddy Business Roundup (Nov. 29, 2014)

By William Boot 29 November 2014

Burma Is Still an ‘Extreme Risk’ for Business Investment, Survey Says

After all the investment hype showed on Burma in recent years, with the Southeast Asian nation dubbed Asia’s last “frontier market,” the country has failed to make a top 10 slot in a new survey of the world’s best investment prospects.

Instead, the 2015 Growth Opportunities Atlas produced by business risk analysts Maplecroft has listed Burma as an “extreme risk” location for foreign investors.

“Despite advances in encouraging foreign investment, [Burma] remains among the world’s most difficult countries in which to establish a business, ahead of countries including Guinea, Somalia, Angola, Congo and Venezuela, all of which are considered ‘extreme risk,’” Maplecroft said.

But nine of the top 10 best places to invest next year are in Asia, the British assessors said, and include China, Malaysia, Sri Lanka, South Korea, Hong Kong, Vietnam, Singapore, the Philippines and Indonesia.

“A combination of prudent fiscal and monetary policies, rapid gains in education and digital inclusion and favorable demographics, including higher proportions of working age adults, have provided a solid base for the [top] economies to advance steadily up the global income and value chains,” Maplecroft said.

In Asia, only North Korea is also ranked as an extreme risk for business in the survey.

Chinese State Firm to Help ‘Strengthen’ Burma’s Oil & Gas Industry

China National Petroleum Corporation has signed an agreement with Burma on “expanding oil and gas cooperation.”

“CNPC and [Burma] will strengthen communication in energy policies, technology, oil and gas projects and trade, in order to seek for more cooperation opportunities to promote the development of [Burma’s] oil and gas industry,” a report by Oil and Gas Technology magazine said.

“The two sides will deepen cooperation in oil and gas exploration and development, refining, and chemicals, and carry out preliminary studies on natural gas utilization and refinery construction projects.”

CNPC is the majority owner of two controversial oil and gas pipelines built through Burma into China’s neighboring Yunnan province. The oil line is a conduit for crude oil shipped from the Middle East and Africa to a specially built terminal at Kyaukphyu on Burma’s west coast.

Chinese companies were not among the foreign businesses that won licenses earlier this year to develop 20 offshore oil and gas blocks off Burma’s coast.

The CNPC cooperation agreement was signed with Naypyidaw’s Ministry of Energy.

Major Japanese Banking Group Teams Up With Burma Bank

Resona Holdings of Japan is joining up with Rangoon’s Myanmar Apex Bank to provide banking services for Japanese firms operating in Burma, a report said.

Resona is Japan’s fourth largest lender with more than 600 retail branches spread among three banks.

Myanmar Apex Bank was established only four years ago and is part of the Eden Group Limited. It has 47 branches in Burma.

“[Resona Holdings] can provide management systems for bank branches, technical skills for operating retail banking business, and other banking services,” Mizzima news quoted Resona’s president, Kazuhiro Higashi, as saying.

“The collaboration will help to service Japanese companies looking to borrow in the local currency,” Mizzima said, quoting a joint statement by the banks.

Burma’s Progress to Market Economy in Danger ‘If Reforms Slow Down’

Burma’s transition from a state-controlled to market-based economy “poses significant risks,” a financial study said.

“If reforms lag and financial markets are not liberalized, the government will be handicapped in effectively financing its deficits. Lagged reforms or sustained pressures on [Burma’s] current account would lead to faster depreciation of the kyat,” said Mantis, a Netherlands economic forecasting company specializing in frontier markets.

“If recent reforms are successful and [foreign direct investment] remains strong, then appreciation of the kyat is possible.”

Mantis said more action was needed by the Naypyidaw government to establish market-based monetary and financial systems, which are necessary to “maintain the momentum.”

The study forecast that Burma’s kyat will follow a gradual depreciation path in line and inflation will remain in the upper single digits.