Burma Business Wrap (January 23, 2012)

The EU foreign ministers are scheduled to meet in Brussels on Monday, and an EU diplomat told the AFP that they would most likely provide some reward to Burma for reforms to date by announcing a willingness "to consider initial steps in February" as a start to the lifting of sanctions, which otherwise come up for an annual review in mid-April.

Asian Firms Looking to Increase Their Head Start

With at least an easing and possibly a lifting of sanctions beginning to sound almost inevitable in the first half of 2012, Asian countries and businesses are wasting no time getting into Burma.

China

The Rangoon-based Eleven News Journal confirmed last week what most Burma business observers had already surmised—that China has become Burma’s leading investor. Burma’s giant neighbor to the north has now invested nearly US $14 billion in Burma, mostly in oil and gas, hydropower and mining.

Despite Thein Sein’s suspension last year of the China-backed Myitsone hydropower dam project, this trend looks to continue.

China’s Guangdong Zhenrong Energy Co, an oil and commodity trader partly owned by state-run Zhuhai Zhenrong Corp, told Reuters that the Dawei Special Economic Zone is the leading potential location of its proposed US $2.5 billion, 100,000 barrels-per-day refinery.

The company’s CEO said that it would partner with the Htoo Group of Companies, run by Burmese business tycoon Tay Za, and an unnamed military-affiliated company. Burma currently imports almost all of its domestic refined fuel needs, and the proposed refinery could meet 60 percent of the country’s demand, he said.

Thailand

Thailand now ranks as Burma’s No. 2 investor, and Thai companies are following the trail into Burma being blazed by Italian-Thai Development PCL, which is in charge of developing Dawei.

As the Burmese business environment opens to foreign investment, infrastructure is one of the sectors that observers believe will be immediately targeted, and the Thai engineering firm Hydrotek, which is looking to expand in Southeast Asia, is already making a move into Burma’s waste-treatment and water-management business.

The Nation newspaper, based in Bangkok, reported that Hydrotek views Burma as an attractive market because the country lacks a wastewater-treatment system to serve its industrial sector—which will most likely grow by leaps and bounds if sanctions are removed—and also lacks sufficient tap-water supplies. The Burmese government is reportedly planning to issue a regulation on restricting wastewater from manufacturers in a few months, making such systems a necessity in the future.

Hydrotek told The Nation that it will initially establish a joint venture between local Burmese partners, Thai partners with experience doing business in Burma, and Hydrotek, and the company has already set up an office in Burma.

In addition, Siam Cement PCL, Thailand's top industrial conglomerate which is looking to expand its business in Southeast Asia, told Reuters on Tuesday it was looking to invest in a new cement plant inside Burma, with the final decision resting on the investment promotion and mining policies of the Burmese government.

Foreign Investment Laws in Focus as Burmese Parliament Set to Convene

During Thein Sein’s interview with The Washington Post, he was asked about further steps that may be required to attract foreign investment, such as a strengthening of the rule of law in Burma. The president responded that changes have already been made and all that was left to do was to lift sanctions.

This statement, together with his claim that Burma’s economic woes are solely the result of Western sanctions, could be viewed by the investment community as a troublesome denial of the need for further economic and investment reforms that will be required to attract the kind of foreign direct investment that creates jobs and opportunities for the Burmese population as a whole.

More than likely, however, Thein Sein’s claims will be viewed as a negotiating position rather than statements of true belief, as the Burmese president has displayed an understanding that internal changes need to be made in the economic arena if Burma is to progress.

However, there will be much work to be done in this area when the Burmese Parliament convenes on Jan. 26, and Thein Sein still faces some resistance from powerful entrenched interests.

In a report titled “The Time Has Come for Economic Reform in Myanmar [Burma]” delivered on Jan. 12, Bradley Babson, a former World Bank official and UN Consultant on Burma, argued that the economic underpinnings needed for a successful democratic transition in Burma have not yet been addressed.