Outgoing Government Hands Port Deals to Well-Connected Regional Firm
The administration of President Thein Sein has given concessions to operate two dry ports to a regional logistics giant, the latest contract to be awarded after the election defeat of the ruling Union Solidarity and Development Party in November.
According to a report in the Wall Street Journal, leaders of the National League for Democracy are concerned that projects are being rushed through before power is handed over in the coming months. The opposition party won an overwhelming majority at the polls and is set to lead the next government, which will inherit projects approved by the outgoing administration.
The government announced last month that Chinese firm CITIC would build a port and industrial zone as part of a special economic zone development in Kyaukphyu, Arakan State. The supposedly open tendering process, which was repeatedly delayed, ended up awarding the deals to a consortium led by the state-owned Chinese firm that had long been involved in the SEZ plan.
“One losing bidder complained that the government delayed the tender, without providing any updates to companies in the running, but sped it up in recent weeks,” the Wall Street Journal reported. “Two other businesspeople said contracts for other projects, including for road construction and energy production, are being passed through only now, in the last weeks of the administration.”
This week, it emerged that the Ministry of Rail Transportation’s Myanma Railways awarded the rights to two potentially lucrative port developments—in the country’s major economic centers of Rangoon and Mandalay—to a company that has high-level links in Burma and the region.
The firm, Kerry Logistics, announced on Monday that it had won the contract, which it said was part of the Burmese government’s efforts to “seize new opportunities for cross-border trade upon entering the ASEAN Economic Community,” referring to the regional integration scheme that officially began at the start of the year.
“The inland ports will serve as container and cargo terminals linked by railway to major routes in the country, and as hubs for the exporters, importers and domestic logistics service providers of cargoes in and out of Yangon and Thilawa Ports, as well as for cross-border cargoes from neighboring countries such as China and Thailand,” Kerry Logistics said in its statement.
The firm is part of the Kuok/Kerry Group, founded by Malaysian-born billionaire Robert Kuok. Kuok’s business empire also includes Shangri-La Hotels and Resorts, which owns and operates the upscale Sule Shangri-La hotel and Shangri-La Residences in Rangoon.
According to a U.S diplomatic cable released by WikiLeaks, the hotel, formerly known as Traders, was built in a partnership between Kuok Singapore Ltd, and Steven Law, the US Treasury-blacklisted head of drug-trafficking linked local firm Asia World. Asia World’s sprawling operations include running Rangoon’s main port and its airport.
The new dry port concessions were officially awarded to Kerry Logistics’ Singapore-based subsidiary KLN (Singapore) Pte Ltd, part of Kerry Logistics Network, which has its headquarters in Hong Kong. That company is chaired by George Yeo, formerly a senior official in the Singaporean government.
Yeo served as Singapore’s Foreign Minister from 2005 to 2011, and during that time argued publicly against regional and international sanctions against the Burmese military regime. That regime ceded power in 2011 to the government led by the military-backed USDP, headed by retired General Thein Sein.
In Kerry Logistics’ statement, Yeo thanked the Burmese government for its “trust” in the company.
“Given Kerry Logistics’ presence in ASEAN, our goal is to further strengthen the linkage among countries in the region and seek accelerated growth by developing an integrated Greater Mekong Region platform covering Thailand, Cambodia, Myanmar and Laos,” he was quoted saying.
Burma Finance Official Welcomes New China-Led Bank
Finance Minister Win Shein is set to attend the official opening Saturday of the Asian Infrastructure Investment Bank (AIIB), a Chinese-led initiative that is seen as an effort to shake up US dominance of global financial institutions.
The Chinese state newswire, Xinhua, said in a report that Burma “anticipates good prospects” from the bank’s opening, which will be attended by Chinese President Xi Jinping and Premier Li Keqiang.
The report cited Burma’s Deputy Minister of Finance Maung Maung Thein, who said that Win Shein will personally attend.
“Our expectation and view on the opening of the AIIB are good and clear, that was why we participated as a founding member,” Maung Maung Thein was quoted saying. “The AIIB is assumed as a dependable bank which supports regional development.”
Burma will contribute US$264.5 million to the bank’s capital, but the country could turn out to be a major beneficiary of the bank’s largesse—at least $50 billion.
While Burma is in desperate need of more investment in infrastructure developments, its relationship with China is complicated. The bank is officially multilateral and involves a number of Western nations, but China will have a veto over funding decisions, and is the biggest financier of the bank.
Prior to the political and economic opening that began in 2011, China was by far the largest investor in the country, and was backing major projects in sectors from mining to energy.
Thein Sein in 2011 suspended work on the Chinese-led Myitsone hydropower dam, and new Chinese investments all but dried up.
More recently, however, Chinese interests were given a boost by the awarding of the contract to build a port and industrial zone at Kyaukphyu to a Chinese state-run firm last month. But it remains to be seen how a new government led by the National League for Democracy will deal with the domestically controversial issue of Chinese investment.
Historian Thant Myint-U wrote in an article for Foreign Policy this week that Burma needs to “reset its engagement with its giant neighbor.” As well as realizing that development cannot take place at the expense of peace with ethnic armed groups, Burmese leaders should be more active in directing Chinese investment.
“[R]ather than letting China take the lead, Burma should formulate its own comprehensive plan for the multi-billion dollar infrastructure development it needs to revitalize its economy,” Thant Myint-U wrote. “China should be invited and encouraged to play a major role, but only within a framework set by the Burmese government in close consultation with the affected communities.”
Towers Company Gets Backing From European Development Financiers
Mobile phone tower company Irrawaddy Green Towers is getting $122 million of funding from a group of European development financing institutions, amid growing competition in the telecommunications infrastructure sector.
The Netherlands Development Finance Company, known as FMO, announced last month that it had arranged the funding, which also involves other European state-linked financial institutions.
A $109 million loan and a smaller “subordinated” loan of $13 million, over periods of eight and nine years, respectively, will help Irrawaddy Green Towers toward its goal of building more than 2,000 towers as Burma’s mobile network expands, the announcement said.
“The senior loan is syndicated among European Development Finance Institutions with following participations: Deutsche Investitions- und Entwicklungsgesellschaft mbH DEG (Germany), Proparco (France), CDC Group (Great Britain), BIO (Belgium) and OeEB (Austria),” the statement said.
Irrawaddy Green Towers’ website says it is the only company building phone towers in Burma with any local ownership. Its “sponsors” include local firm Barons Telelink, as well as executives from Dubai-based Alcazar Capital Limited and M1 Group, a investment firm based in Beirut.
In March 2014, the company announced that it had been selected by Telenor to build and manage 1,438 towers for the Norway-based company’s mobile phone network in Burma.
A number of companies are competing for tower-building business in the mobile telecoms sector, including Apollo Towers, Pan Asia Towers and Myanmar Infrastructure Group. After Malaysian conglomerates Axiata and OCK Group also entered the market late last year, analysts at BMI Research predicted that the sector could be set to see consolidation, with larger players buying up smaller competitors.
A report this month in Global Trade Review, noted that the latest injection of investment comes from development lenders, rather than from commercial banks. The World Bank’s International Finance Corporation is also lending up to $150 million to Ooredoo Myanmar to finance the roll-out of its network.
“[T]he fact that there are no commercial banks on the latest deals suggests that they may be continuing to act cautiously towards Myanmar, amid confusion over ownership of assets which could result in banks lending to sanctioned individuals,” the magazine reported.
Study Completed for Mon State Gas Power Upgrade
A Norwegian consulting firm has announced that it has completed a feasibility study for a World Bank-funded gas power station in Mon State, making way for the plant to be up and running on less than two years.
A combined cycle gas turbine plant will be installed to replace an existing, and less efficient, gas turbine power station in Thaton Township. Funding of $140 million for the project was approved by the World Bank in 2013.
In a recent announcement, Norconsult said it had conducted the study for the Myanmar Electric Power Enterprise, with the consulting services paid for by the Norwegian government.
The firm said the new plant would be producing power in less than two years, and would provide cheaper electricity than other deals the government has signed recently with private firms. The government has been rushing to sign contracts with independent power producers, including a number of other gas-fired power stations, to address the chronic shortfall in power supply that has been a drag on industrial development.
“The new plant will be substantially more fuel-efficient than the old plant, with a thermal efficiency more than twice as high as the old plant,” the Norconsult announcement said.
“The new plant will therefore generate more than twice as much power per year with the same fuel consumption as the old plant.”
China’s Sino Great Wall Wins Burma Construction Contracts: Report
Chinese company Sino Great Wall has reportedly been awarded two construction contracts in Burma by a local company.
According to its website, Sino Great Wall International Engineering has worked closely with the Chinese government on domestic construction projects, and is also involved in building hotels and other luxury developments in Sri Lanka, Cambodia and Kuwait, among other locations.
A Reuters brief on Thursday cited Chinese media saying that Sino Great Wall’s “engineering unit wins bid for two construction contracts by Maha Land Development Co Ltd in Myanmar for a combined $200 million.”
Maha Land Development appears to be part of local conglomerate Mottama Holdings, which has interests in metals and retail.
