Burma Business Roundup (Saturday, June 30)

By William Boot 30 June 2012

US Business Group Says Suu Kyi View on MOGE is ‘De Facto Ban’

The call to international oil companies to boycott the state Myanmar Oil & Gas Enterprise (MOGE) until it becomes open and accountable is a “de facto investment ban” on Burma’s energy sector for American businesses, the US Chamber of Commerce has declared.

The chamber statement was made as some US Congress politicians urged the Washington government to speed up cumbersome legislative changes needed to free American companies to do business in Burma.

The call for speedier White House action was made at a confirmation hearing for the appointment of Derek Mitchel as the first full US ambassador to Burma for 22 years.

Mitchell said the government is still considering the terms of a general license to permit a resumption of business with Burma following the decision to suspend wide-scale sanctions against the country and its former military regime.

Mitchell said he shared Suu Kyi’s concerns about MOGE, the Associated Press reported from Washington.

The US Chamber of Commerce, which represents three million companies, also criticized Washington’s slow action to validate the suspension of sanctions announced on May 17. It also said that proposals requiring American firms to report their activities in Burma would be “burdensome”.

Financial Reform in Burma ‘Dogged by Lack of Skills and Technology’

The Asian Development Bank’s chief representative in Burma, Craig Steffensen, says the pace of change being set by the reforming government is so fast that “they’re getting to the point where they are overwhelmed.”

Too many new ideas are being embraced too quickly and too few qualified people are in place to handle it, he told Reuters this week.

This problem was illustrated during a first visit by foreign journalists to the Central Bank headquarters in Naypyidaw this week.

“The Monetary Policy Department has just three computers, about the same as the Bank Supervision Department. A training department has fewer than five,” Reuters reported.

The news agency said many desks were empty and deputy central bank governor Nay Aye told Reuters the lack of skilled people was a general crisis.

“The staff shortage is not just a problem at the central bank but also at many other institutions in our country,” said Nay Aye.

Among other things, the bank is supposed to be coordinating the establishment of a national stock exchange by 2015 as more foreign banks seek to open offices in Rangoon ready to do business when restrictions are lifted.

The bank is being helped by joint venture partners Japan’s Daiwa Securities Group and Tokyo Stock Exchange.

This week, the Wall Street Journal quoted a Japanese adviser, Shigeto Inami, in Rangoon as saying that more than 20 Burmese firms are being groomed to list on the new exchange.

Stability of Investor Neighbor Thailand is ‘Fragile’ Says Risks Study

A study by a business risk assessor has concluded that Burma’s immediate neighbor and potentially big investor Thailand is economically and politically “fragile”.

“Given Thailand’s vulnerability to external shocks and the on-going high costs of flood-recovery programmes, investors face an uncertain and unpredictable macroeconomic environment,” say UK-based assessors Maplecroft.

Continuing friction between government and the constitutional court over proposed national reconciliation legislation linked to a pardoning and return of exiled former Prime Minister Thaksin Shinawatra ensured that “stability remains fragile.”

That problem is compounded by costly populist policies which could lead to unsustainable borrowing.

“This spending is also unlikely to tackle systematic problems within the economy, namely a lack of skilled human capital, which has direct implications on businesses looking to invest in Thailand as well as hinder long-term economic growth,” the Maplecroft study concluded.

Thai firms are meant to be spearheading a multi-billion dollar special economic zone on Burma’s southeast coast, centered on Dawei, but the port-industrial complex project has been on hold for nearly one year amid persistent reports that lead construction company Italian-Thai Development lacks both the capital and investor support.

Tax to be Suspended on Farm Machinery, Fertilizer Imports

In an effort to speed up improvements in the efficiency and productivity of Burma’s agriculture the Ministry of Finance is suspending all payment of tax on imports of equipment and key basics such as fertilizer.

The tax waiver begins on July 1 and will stay in force at least until the end of next March, the government announced this week.

It will allow the cheaper importation of farm machinery and other equipment as well as fertilizer and pesticides.

Burma’s agricultural sector is poorly equipped and suffers from low productivity through decades of neglect, although before World War II it was the world’s biggest rice exporter—a position now held by neighbor Thailand.

Export tax on a range of agricultural products from rice to rubber is currently suspended because of currency fluctuations which hit producers a year ago, but this is due to be re-introduced from July 14, unless the government decides to continue the waiver.

Japan Joins List of Asian Countries Flying Direct to Rangoon

Japan’s biggest airline, All Nippon Airways (ANA), will begin direct flights between Tokyo and Rangoon for the first time in 12 years from September.

The date was announced after airline officials visited the Burmese capital Naypyidaw earlier in June and met several senior government officers, including Ministry of Tourism officials.

ANA might also add link flights from Rangoon to the capital.

At present, Japanese businesspeople and tourists have to fly via Bangkok, involving a change which adds hours to the journey.

ANA will join airlines from Thailand, China, India, Malaysia, Singapore and Vietnam which have already resumed direct flights since economic and political reforms began.