The Irrawaddy Business Roundup (April 26, 2014)
BUSINESS

The Irrawaddy Business Roundup (April 26, 2014)

Burma on Course to Regain Top Garment Exporter Status, Says Study

The economic re-opening of Burma is creating “immense potential” for the country’s return to its former glory as a leading global garment producer and exporter, a business study said.

Despite exports plummeting in the last 20 years due to isolation, renewed access to Western and Japanese markets should enable the industry to regain some of its former status, said the study by Business Monitor International (BMI).

“The US, EU, and Japan combined account for nearly 80 percent of the world’s garment demand. In light of [Burma’s] enormous wealth of human capital, with a population of approximately 53.3 million and a young median age of just 29, as well as its extremely low economic base, we believe that potential for growth is immense,” BMI said.

The revival will be from a low base, however. By 2010 the value of Burma’s garment exports had slumped to just one twentieth of Vietnam’s industry. Burmese exports began to recover in 2012 but with a value of US$909 million they represented only 1.5 percent of GDP, said BMI.

The biggest challenge facing the industry’s revival will be attracting sufficient foreign investment, it said.

Reforms Bring Risk of ‘Poor Jobs, Bad Housing’ in Rangoon and Mandalay

Naypyidaw’s reforms threaten to push people into low-paid jobs and overcrowded housing in Rangoon and Mandalay, said a report on Burma’s economic rebirth and foreign investment.

“The government’s agricultural reforms—designed to drive people towards the ‘poles of growth’ of Mandalay and [Rangoon]—pose enormous risk in a country with an already strained infrastructure,” said the report “Trade, Development, and the Smokescreen of Corporate Social Responsibility,” published by the Burma Campaign UK.

“It is not difficult to imagine swelling urban populations, competing for poor quality jobs, living in squalid conditions as the scarcity of affordable property is exacerbated by ‘responsible’ businesses directing investment to places with a reliable electricity supply. The specter of inequality that must accompany this economic transformation will only exacerbate already existing social cleavages,” author David Baulk said.

His study alleges that while courting Western governments and transnational corporations with notions of putting in place fair practices, or corporate social responsibility, the Naypyidaw government has enabled military-owned or -linked businesses to thrive.

“To the relief of those who feared that ‘development’ might imperil the base upon which their superstructure of consolidated power rests, the international community has made an unequivocal commitment to prioritize trade and investment over human rights—under the name of corporate social responsibility,” Baulk said.

Burma ‘Ripe for Investment’ in Southeast Asia Coal-Power Boom

Burma is one of the emerging economies of Southeast Asia that look set to offer Japanese businesses a market for technology to keep the region’s electricity flowing, an industry report said.

“With demand for coal-fueled power generation forecast to grow more than six-fold in Southeast Asia alone the focus of much technology will be aimed at cleaner coal burning systems,” said Asia Power Monitor.

Most of the new coal-fired power plants are expected to be built in Burma, Indonesia, Malaysia, the Philippines, Thailand and Vietnam, it said.

The industry magazine said the Sumitomo Mitsui Banking Corporation is preparing a $2.5 billion loan to fund a 1,280 megawatt coal-fueled power station using ultra super-critical (USC) technology.

USC technology burns coal more efficiently than other systems and reduces air pollution, it said.

The plant is planned to be built in the Thilawa Special Economic Zone by the Toyo-Thai Corporation, a partnership between Japan’s Toyo Engineering Corporation and the Thai construction company Italian-Thai Development.

“This would be the biggest single power project, as well as the most expensive, in [Burma],” the Monitor said.

Meanwhile, another major Japanese business, Mitsui, has won a multibillion dollar contract to supply USC technology and oversee construction of a 2,000-megawatt coal-powered plant at Jimah, south of Kuala Lumpur, which is expected to cost $3.5 billion.

Russians Tap New Source of Natural Gas in Bangladesh

As Burma hopes for more natural gas and oil discoveries from the government’s recent award of exploration licenses, an explorer in neighboring Bangladesh has reported a significant find.

Gazprom of Russia said its onshore drilling at Semutang in southeast Bangladesh had discovered sufficient gas to deliver more than 10,000 million cubic feet per day, industry analysts Platts reported.

To tap the gas, however, Gazprom said it was drilling down to depth between 2,900 meters to over 4,000 meters [9,500 feet to 13,100 feet].

Bangladesh suffers from industry-crippling electricity shortages like Burma and struggles to produce enough domestic natural gas to meet demand.

Both Bangladesh and Burma have begun issuing exploration licenses for offshore blocks in their respective territorial sectors of the Bay of Bengal.

Hotel Numbers Mushroom as Burma Prepares for 3 Million Visitors

The Mandalay region leads the way in new hotels development to cater for the surge in foreign visitors to Burma, an industry magazine said.

Between last July and February this year, 302 hotels or approved guest accommodation opened in the Mandalay area, said TTR Weekly, the Bangkok-based travel publication, citing Ministry of Hotels and Tourism figures.

In Rangoon, the number of new hotels totaled 238 for the same period, it said.

“Over 2 million tourists visited Myanmar in 2013, a performance that has been consistently doubling every year since the government initiated a series of political and economic reforms in 2011,” said TTR Weekly. “This [calendar] year the country expects to attract 3 million visitors.”

Singapore remains the leading investor in Burma’s hotels sector, followed by Vietnam, Thailand and Japan, said the magazine.

US Fellowships on Offer for Budding Burmese Economists

American business consultancy Nathan Associates is offering two US fellowships for Burmese economists to “better contribute to [Burma’s] future development.”

The Virginia firm, which has links with Burma going back to the 1950s before the Ne Win regime, first offered fellowships last year after all US legal sanctions were lifted.
One of the 2013 Nathan fellows is now working for the Myanmar Development Resource Institute, helping the Naypyidaw government improve the management of Burma’s developing oil and gas industry in readiness to join the international Extractive Industries Transparency Initiative (EITI).

EITI is a Norway-based non-government organization dedicated to promoting “revenue transparency at the local level.”

Applicants for the 2014 fellowships must be Burmese citizens with an existing qualification in economics. The deadline for submitting a bid is May 31. A fellowship includes a grant to cover living expenses, housing, and travel costs.


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