THE NATION February 20, 2012 1:00 am

Bracing for an expected increase in wage costs at home, Thai corporations are responding to the Burmese government’s moves to make things easier for foreign investors.

“A friend of mine in a labour-intensive industry is looking at investment opportunities in [Burma],” said Areepong Bhoocha-oom, permanent secretary for Finance. He said he met his friend by chance during a recent trip to the country.

Areepong said the government fully supports Thai investors looking for business opportunities in the neighbouring country, which is rich in resources such as gas and oil reserves.

He sees mutual benefits for both sides, and for all Asean citizens, who in future will be able to travel freely in the region, similar to how Europeans can take advantage of the EU’s economic integration.

The 10 Asean states will launch the Asean Economic Community (AEC) in 2015, enabling free movement of goods, services and labour.

Bhongbhichai Bhitakburi, general manager of the Chatrium Hotel in Rangoon, said there are a great many opportunities for Thai operators to open new hotels in Burma as demand for rooms has increased sharply recently. The supply of rooms is currently limited, he said. Chatrium is run by Bangkok Bank.

The spa business is also promising, as his hotel has many high-income customers, Bhongbhichai said.

Siriphong Fuenglikhit, external relations manager of PTTEP International Ltd’s Rangoon office, said PTT group has been investing in oil and gas exploration in the country for 15 years.

“Currently most gas production is supplied to Thailand, but in the future the gas supply may go to the domestic market as foreign investors set up manufacturing plants in the country,” he said.

Executives at Charoen Pokphand Group, meanwhile, have warned that Thai investors must deliver on their promises, and that Burmese people must benefit from their investments. CP Group has already invested in feed-meal and food businesses.

Diplomatic sources in Burma said Europe, the US and their allies were expected to lift trade and investment sanctions in March or April after recent progress in policy reforms and moves toward democracy.

Looking to create jobs, the Burmese government plans to woo labour-intensive industries.

Nuttasit Thienprasid, senior researcher at the Fiscal Policy Research Institute, warned Thai investors that relying on old connections may not be adequate, as the Burmese government was changing many old rules to accommodate fresh foreign investment.

The government has put in place a foreign investment law, a special economic zone law and the Dawei special economic zone law. The latter is designed to accommodate investment from Thailand in particular.

Nuttasit said Burmese ministers recently sent signals that more tax incentives would be offered. These were likely to be much more enticing than those offered by Thailand’s Board of Investment, he said.

Areas with strong investment potential include agriculture, fisheries, wood products, rubber plantations and products, precious stone cutting, energy, metal ores, cement, food, textiles and garments, leather, shoes, machinery and consumer electronics, Nuttasit said, citing the Union of Myanmar Federation of Chambers of Commerce and Industry. Myanmar is Burma’s official name.

But there were still big challenges – the unstable exchange rate, political stability, minority issues, logistics and infrastructure constraints, he said.

The International Monetary Fund is currently working with the government to put in place a new exchange-rate regime that will facilitate modern economic development.

Thai diplomats in Rangoon said the government is very keen to install a new exchange-rate regime. With the influx of tourists and the fast pace of political opening up, the kyat has strengthened against the US dollar, and land prices in Rangoon are already soaring, they said.

Rose, a middle-aged woman who sells jewellery to tourists in Bogyoke Aung San market in Rangoon, expressed confidence that her business would benefit from the country opening up.

Speaking fluent Thai and showing off her Thai mobile-phone numbers, she said Thai and Chinese tourists were her main customers. Tourists are buying jewellery made from Burmese jadeite, which is known for its high quality, she said.

The Nation

A new report, “Crude beginnings: An assessment of China National Petroleum Corporation’s environmental and social performance abroad” by Adina Matisoff, Friends of the Earth, released this month profiles the Shwe Gas Project and Shwe Gas Movement’s work. The report also features case studies from other countries from northeast Africa, Central Asia, Russia, the Middle East and South America.

To read the complete report, please click here.

To read the press release for the report, please click here.

Global Day of Action Demands

• Stop abuses, harassment and intimidation of local community members including those who are actively campaigning against the SGP
• An equitable benefits sharing system
• An environmental law that requires Environmental and Social Impact Assessments to mitigate the kinds of environmental damage SGP has cause
• Transparency in SGP revenue made available and accessible to the general public

The Shwe Gas Project should be SUSPENDED until the above conditions are met

Potential global actions

• Organizing a peaceful protest at your local Burmese, Chinese, South Korean or Indian embassy demanding the Shwe Gas Project be postponed
• Organizing your local network to send open letters toBurma’s President Thein Sein (through your local Burmese embassy) demanding the Shwe Gas Project be postponed
• Circulating the open letter and/or a press release about the Shwe Gas Project to local journalists
• Featuring information about the Global Day of Action on your organizations website

Campaign materials

Sample letter to President Thein Sein – download Document download PDF

Global Day of Action flyer - download

Shwe Gas Project factsheet - download

Cartoons – link

Photographs from the project area – link

Link to Shwe Consortium Divestment – link

To get involved and for more information contact global@shwe.org    

MANDALAY, Myanmar- When officials first turned up demanding Chen Ching-feng remove the Chinese sign above her clothing shop in Myanmar’s biggest northern city, she ignored them.

“When they came back a few days later and asked why the Chinese was still there, I said I had been busy,” the ethnic Chinese resident of Mandalay said, speaking in Mandarin. “They made me take them down immediately and sign an undertaking not to put them back.”

Other ethnic Chinese shop-owners report similar requests, though enforcement is patchy.

Government officials in Myanmar’s capital, Naypyitaw, say there is no official ban on Chinese advertisements, but demands to pull them down in Mandalay, a city dominated by Chinese merchants, illustrate mounting unease over Beijing’s expanding influence.

As Myanmar pursues dramatic reforms, its relationship with China — the Southeast Asian nation’s biggest investor and second-biggest trade partner — is changing. In some cases, long-festering resentment is flaring into the open.

During decades of isolation, the former Burma relied on China as its closest diplomatic and military ally. Wide-reaching Western sanctions put in place after a bloody crackdown on pro-democracy demonstrations in 1988 forced Myanmar to deepen economic ties with China.

But as Myanmar embarks on the road back to democracy, a once-muffled debate about China’s role is growing louder. The reforms are also taking place as the geopolitical rivalry between the United States and China has sharpened since the Obama administration’s “pivot” toward Asia after preoccupation with wars in Iraq and Afghanistan the past decade.

HISTORICAL FRICTIONS

China’s expanding economic influence was never that popular anyway in a country historically suspicious of foreign powers — memories linger of Beijing’s alleged support for the Communist Party of Burma in the 1960s and ’70s. China has its grievances, too. Clashes between Myanmar soldiers and various insurgent groups dotting the border with China have killed innocent Chinese and sent refugees streaming across the frontier.

“The government has tried to ban foreign influences before. It seems to be happening again,” said Hu Chieh-chi, a restaurateur in Mandalay, who is an ethnic Chinese and a Myanmar citizen, just like clothes store owner Chen.

A two-hour drive away, a grass-roots campaign is forming to halt China’s most strategic investment in Myanmar: twin pipelines that will stretch from the Bay of Bengal to China’s energy-hungry western provinces, bringing oil and natural gas to one of China’s most undeveloped regions.

In interviews with Reuters, the activists say they were emboldened by Myanmar’s surprise decision on September 30 to shelve the $3.6 billion Chinese-funded Myitsone dam under public pressure. U.S. officials told Reuters that responsiveness to a public demand was a crucial factor in Washington’s historic rapprochement with Myanmar late last year.

Much is at stake. Myanmar provides populous and landlocked southwestern China a crucial outlet to the sea. A friendly Myanmar helps reassure Beijing, which is increasingly worried about being “encircled” by the United States and its allies, from Japan to Australia and India.

TALE OF TWO PIPELINES

From his home overlooking a colonial-era golf course, Kyaw Thiha is clear about what he sees holding back reforms: China.

“This is a democracy. The Chinese ordering us around is not democratic,” said the former political prisoner who will contest an April 1 parliamentary by-election as a candidate for the opposition National League for Democracy, the party of Nobel Peace Prize-winner Aung San Suu Kyi.

The soft-spoken university history tutor, jailed during the failed 1988 uprising, wants the government to stop the 790-km (490-mile) pipeline project that will cut across the country, including near his town in the old British hill station of Pyin Oo Lwin.

Human rights groups say the pipelines will displace thousands, damage livelihoods of farmers and fishermen, and benefit China more than Myanmar, where power outages are chronic.

To Beijing, the pipelines are a vital energy security asset that will reduce its reliance on shipping through the narrow choke-point of the Malacca Strait. Thousands of Chinese workers have been enlisted to build them.

“We want parliament to stop the pipeline. It was not given permission by the people,” Kyaw Thiha said in an interview.

A year ago, such talk was dangerous in a country whose critics were regularly locked up by generals who had ruled since a 1962 coup. But reforms led by a year-old nominally civilian government have begun to unwind years of authoritarianism and self-imposed isolation.

The government has relaxed some media censorship, allowed trade unions, begun peace talks with ethnic rebels, freed hundreds of dissidents and showed signs of pulling back from the powerful economic and political orbit of China. It was rewarded in December when Hillary Clinton made the first visit to the country by a U.S. secretary of state since 1955.

GRIEVANCES ON THE INTERNET

Myanmar Energy Minister Than Htay acknowledged public concerns over the pipelines but said they would be completed on schedule next year.

“We solved each and every problem along that pipeline route, and we give compensation for land use much more than previously,” he said in a recent interview. “I consider all the potential issues that will be raised by the anti-government groups. I see every day on the Internet many groups raise the problems and the issues to disturb our project.”

For many in Myanmar, the pipelines embody all that is rotten about China’s influence: environmental destruction, land grabs, cronyism and accusations of corruption.

Thant Lwin is one of many farmers who simmer with resentment when asked about them. Chinese bulldozers have sliced his rice-paddy field in half to make way for the pipeline and service road in his small village.

“We are facing real hardship because of the Chinese,” he said from his farm in the countryside near Pyin Oo Lwin, known in colonial times as Maymyo.

“I would be extremely happy if the pipeline gets canceled. But I don’t think that will happen,” he said. “It is not a matter of hating China. I can only accept the situation. I have no power. Most people are scared to talk out against the project as it is a government project.”

Venerable Candobhasa, a Buddhist monk whose land was bisected by one pipeline outside of Pyin Oo Lwin, scoffed at claims that the project, led by China National Petroleum Corp, parent of PetroChina Co Ltd, would bring much-needed money and development to affected villages.

“These are our natural resources. We should keep it for ourselves to help us develop, not sell it to China. We don’t have enough power,” he said, sitting cross-legged on a sparse floor in his monastery.

“The government does not share the money from the pipeline with us. We want to know where it has gone.”

Others appear to be almost chafing for a confrontation with China.

“China is going to be shocked as we alone among the Southeast Asia countries are going to stand up to them,” said Khon Ja, a human rights campaigner from northern Myanmar who likes showing visitors a map on her computer outlining exactly why Myanmar is coveted by China, detailing potential road and rail links that could connect southwestern China to the world.

“We have lots of natural resources, are in a very strategic location, and have a long border with China, more than 2,000 km,” she said in a Yangon café.

MYANMAR NEEDS CHINA, TOO

China’s pervasive influence will not be easy to roll back.

Though rich in natural resources, Myanmar is one of Asia’s poorest countries. Its new entrepreneurs need the booming border trade and China’s investment money. And the army needs China’s help in ending the unrest along their shared border.

China and its companies pledged more than $14 billion of investment in Myanmar’s 2010/11 (April-March) fiscal year, taking total foreign direct investment pledges to $20 billion from $300 million a year before, according to official data.

“Myanmar really cannot afford to damage its good relations with China,” said Lin Xixing, a Myanmar expert at Guangzhou’s Jinan University.

Ethnic Chinese are not the only ones who have prospered from China’s largesse.

In Lashio, a town four hours by car from the Chinese border, the matriarch of a large Indian family beamed with pride as she showed a reporter her large, well-appointed house, and then presented a faded picture of a thatched shack where they lived a decade ago.

She explains the change with a single word: “China.”

“They give us very good business,” she said of her auto repair shop. “Lots of trucks go to trade with China. We repair them. Business is very good.”

Lashio’s markets heave with Chinese-made goods, and Chinese is the dominant language of commerce thanks to decades of Chinese immigration, mostly from neighbouring Yunnan province.

With almost no industry of its own, even the most basic goods are usually imported in Myanmar from China or Thailand — from laundry powder to soy sauce. Competing local products are often more expensive.

A large bottle of China’s Dali brand beer costs 500-600 kyat in Lashio, for instance, more than half the price of a similar bottle of Myanmar brew. China’s massive economy of scale and well-oiled logistics mean its products can easily overwhelm their local rivals.

CHINA’S SUPPLY TRAINS

On Lashio’s main road to China, trucks rumble by all day. Those from China are packed with refrigerators, televisions, and other consumer goods. Those leaving are clogged with timber, bags of cheap coal and other resources. Smugglers run drugs, jade, and gems into China and beyond.

Many wonder whether this will change if Western sanctions are lifted. Could trade with Europe and the United States elbow out China?

That’s unlikely, said Aung Zaw Win, who builds machinery in Mandalay and who does most of his business with China and Chinese people.

“China will remain an important market for us. China has well-established supply chains and infrastructure. We cannot substitute for them within the space of only a few years,” he said from his office in central Mandalay.

But he is making preparations just in case. An American diplomat stopped by recently to ask Zaw Win about the impact of sanctions on his business. A Japanese company inquired about doing business together.

“I am ready for the sanctions to go. I am building a new factory to export to the United States and Europe. I cannot buy directly some U.S.-made components. I have to go to China and get them from street vendors.”

His friend, Sein Win, believes the market will decide who is better for business in Myanmar: China, Europe or the United States.

“Everyone knows that U.S. and European products are expensive compared with those made in China. Market forces will talk and we will still trade with China as Chinese goods are cheap,” he said in pitch-perfect Mandarin.

Manoj Vohra, an Asia analyst at the Economist Intelligence Unit (EIU) in Singapore, agrees that easing sanctions won’t make much of a difference initially. “We’re not going to see an huge flow of investments by American and European companies immediately, so Myanmar’s dependence on China as a regional ally for economic development and investment will continue.”

However, shoddy treatment of local workers by Chinese companies has caused “huge resentment and discontent,” said Vohra, who thought stiffer competition from Western countries would eventually encourage China to “make the deal sweeter” when doing business on Myanmar. Post-Myitsone, he added, the message to Chinese investors had changed slightly: “Yes, we welcome you — but you have to do more.”

WAVES OF IMMIGRANTS

Chinese have been a formidable presence in Myanmar for centuries.

Immigration swelled during British colonial rule from 1842 to 1948. The end of China’s civil war in 1949 brought another wave of migrants. When Chinese Communists expelled the Kuomintang, many fled to Myanmar and Thailand, and then fought with the Burmese government before settling in Taiwan.

Those who stayed behind faced brutal discrimination under the rule of General Ne Win who barred ethnic Chinese and other foreigners from owning land, banned Chinese-language education and stoked anti-Chinese violence.

In Myanmar’s commercial capital Yangon, memories are still vivid of bloody anti-Chinese riots in 1967. Deadly flames engulfed a school. Chinese shops were looted.

“It was a terrible time. Everything changed for us after then,” said shop owner Wu Yan-shun, whose father arrived in Yangon in 1949. Wu fears the recent political changes could weaken the government’s ties with China, making him and other Chinese vulnerable.

“You can’t rule out that some of the anger people feel against the Chinese will be turned on us again. Relations with China are not so bad now. That could change as Myanmar opens up and there is more debate about ties with China and its influence here.”

Backlashes against Chinese have flared before in Southeast Asia, most notably in Malaysia in 1969 and in Indonesia in 1998 before the fall of former President Suharto.

Perhaps with this in mind, the Chinese community in Yangon seems strangely un-Chinese, especially when compared with other Southeast Asian cities. Its “Chinatown” has almost no Chinese restaurants, no Chinese pop music blaring from shops, few Chinese bookstores and limited use of the Chinese script.

There are no government-approved Chinese schools, unlike in Malaysia or Thailand. The city has a few privately run “bu xi ban,” a Taiwanese expression meaning “cram” school, but are actually just language academies.

Teacher Lin Lee, 30, born in northern Myanmar to Chinese parents, said it was hard just to get text books.

“The government is very strict about imports of Chinese text books,” she said from her classroom above an old shop-house. “We have to use photocopies. We ask people who are going to China to try and sneak back in a few copies of new books.”

Many feel deeply attached to Myanmar.

“I have made great efforts to get on with my neighbours,” said Tsai Tun-heng, the owner of a cluttered convenience store. “If anyone comes to burn down my store I want them to know that they will also be destroying the Burmese-owned businesses all around me.”

In Mandalay, the ban on Chinese advertising also revived memories of anti-Chinese violence during the Ne Win-era.

It also recalls a similar ban on Chinese signage and publications in Indonesia that remained in effect for years after an abortive 1965 coup blamed on the China-backed Indonesian Communist Party. Myanmar’s new government has sent officials to Indonesia to study its road to democracy.

“What can you do about it? It’s their country,” said café owner Liu Kui-you, a Myanmar citizen who can trace his ancestry to Yunnan province.

Bein Nei Tha, a Burmese motorbike dealership worker, laughed when asked why his company also comes under the ban, despite having no Chinese ownership and had previously used just a few small Chinese characters next to an otherwise English-only sign.

“It seems a little silly,” he said. “I suppose the government wants to limit foreign influence, but then why leave the English?”

(Additional reporting by Andrew R.C. Marshall; editing by Jason Szep and Bill Tarrant)

Reuters

As the new regime embarks on reforms after years of authoritarian rule, billions of baht are ready to pour into the neighbouring country.

Burma is now becoming one of the world’s most sought-after countries after its democracy started blossoming, signalling that it is ready to open up and woo foreign investors.

Burma’s democracy icon Aung San Suu Kyi recently said “political reforms are as important as economic reforms that are slowly taking place”. She also advised foreign businesses to adopt a “wait-and-see” attitude “for their own good as well as that of the country” before investing.

The recent visit of US Secretary of State Hillary Clinton is helping to improve the situation in Burma. The upcoming by-election for Aung San Suu Kyi also signals that Burma is opening up and seeking foreign investment, Somchet Thinaphong, managing director of Dawei Development Co, said recently.

U Soe Thein, Burma’s industry minister, told international journalists at an economic forum in Davos, Switzerland last month that the tax incentive law could be passed by the end of the parliamentary session convening next month.

Efforts are also underway to boost international business confidence in the kyat – the Burmese currency – in consultation with the International Monetary Fund.

There are plenty of opportunities for doing business in Burma. Investors from China, Japan, Singapore, India and Asean, including Thailand, have been rushing into the country. Burma has potential as a production base in the region for giant manufacturers. It has abundant natural resources, especially energy, and a sizeable population of 60 million people.

Apart from the massive Dawei project with overall investment of US$8 billion or Bt240 billion, for which Thailand’s largest contractor Ital-Thai Group was granted the concession by the Burmese government last year, more than a dozen Thai firms have explored expansion there.

About 80-90 per cent of Thailand’s investment in Burma is for energy while the rest is for manufacturing, trading, services and tourism.

Though the actual investment figure has not emerged, billions of baht from Thai investors are expected to pour into Burma.

According to a CIMB economic update, foreign direct investment in Burma has been surging. Investment pledges had soared to nearly $20 billion as of March 2011 from $172.7 million in fiscal year 2007-08. Investor interest is mostly concentrated in Burma’s extensive offshore reserves of natural gas and hydropower.

PTT Exploration and Production, a subsidiary of Thailand’s largest energy conglomerate, will pursue more gas exploration and production in the western neighbour. Thai Oil, another PTT subsidiary, is aiming to establish a refinery and will tie up with PTT to invest in the energy business in neighbouring countries, of which Burma is one target. The overall investment budget was set as high as hundreds of billions of baht.

SCG, Thailand’s largest building materials conglomerate, and Siam City Cement, its second largest cement producer, plan to invest in a cement plant in Burma.

Berli Jucker, a leading trading house, will set up a glass factory and Thai President Food, producer of “Mama” instant noodles, is looking to establish an instant-noodle factory and biogas power plant.

Thai hotel operators are also securing a foothold in Burma, including Baiyoke of Panlert Baiyoke and Chatrium Hotel of Chatri Sophonpanich, a major shareholder and executive of Bangkok Bank.

Bangkok Bank is already operating a representative office in Rangoon, while Siam Commercial Bank and Krungthai Bank are planning to follow.

Thailand was Burma’s largest foreign investor in the past decades. However, the Kingdom lost the crown to China in 2010, according to the Thai-Myanmar Business Council.

Thailand has invested $7.41 billion in Burma from 1988-2009, making it the top player in the country in investment value during that period.

Last year, cumulative investment from Thailand to Burma reached Bt20 billion, making the Kingdom the second-largest foreign investor there after China, followed by Hong Kong and South Korea. On average, Burma’s gross domestic product (GDP) expanded by 7.7 per cent from 2001-10. Its economic growth is projected at 5.6 per cent per year for 2011-15.

While oil and gas, mining and timber are the most productive industries in Burma, they have few economic linkages to the wider economy, so multiplier effects are low, CIMB Research said. Heavy dependence on the oil and gas industry exposes the economy to volatility in commodity prices.

Other industries such as manufacturing, services and tourism are lagging behind due to inadequate infrastructure, unpredictable economic policies and tough trade and economic sanctions.

Despite some boost from expected normal cereal production in the current fiscal year, its agricultural sector’s potential remains constrained by low yields, fixed pricing and state requisitioning, CIMB Research said. Agricultural output accounts for about 40 per cent of Burma’s GDP.

China and Thailand are among the major investors in its hydrocarbon and energy industries.

The Nation

DAWEI, Myanmar – Dusty roads and makeshift offices are the only hints of the ambitious US$50-billion project slated for the thick jungles near Myanmar’s southern city of Dawei, billed by its developers as the “new global gateway of Indo-China”.

Big questions surround the far-reaching plans by Thailand’s largest construction firm, Italian-Thai Development, to transform 250 square kilometres (97 square miles) of scrubland in Tanintharyi Region into Southeast Asia’s largest industrial complex.

“There is very little activity around here related to this project. A lot of us wonder if they are really confident enough about it to go forward with it,” said U Kyaw Naing Oo, 40, a trader in Maungmakan, whose white-sand beaches would border the project.

That comment is echoed by other villagers, industry analysts and even the government.

In a country where a third of the 60 million people live on less than $1 a day, Dawei is striking in its scale and ambition.

Super-highways, steel mills, power plants, shipyards, refineries, pulp and paper mills and a petrochemical complex are part of it, as are two golf courses and a holiday resort – all strategically nestled in Southeast Asia between rising powers India and China.

But just over a year since the former government signed a deal to create Myanmar’s first and biggest special economic zone (SEZ) at Dawei, the project has made little headway, despite the dramatic political reforms sweeping the country and the prospect of a gradual lifting in Western sanctions.

Italian-Thai has yet to secure $8.5 billion to finance construction of its first phase – roads, a telecoms network, utilities and a port – after building a dirt road of more than 100km (62 miles) to neighbouring Thailand. Its executives hope to find a strategic partner by year-end and plan to present the project to potential investors in South Korea this month.

Energy Minister U Than Htay told Reuters last week that at least two other SEZs would be developed more quickly than Dawei: the Thilawa project near the commercial capital, Yangon, and Kyaukpyu, where the China-Myanmar pipeline starts and a deepsea port is nearly finished.

“It is faster than the Dawei zone,” he said of Kyaukphyu. “Now we are considering supplying the electricity at Kyaukpyu,” he said.

Securing a stable source of electricity has been at the heart of Dawei’s problems since the government abruptly halted construction of a 4000 megawatt coal-fired power plant in the area on January 10, citing environmental concerns.

Somchet Thinaphong, managing director of Dawei Development Co Ltd, controlled by Italian-Thai, told Reuters on January 23 that its power plant partner, Ratchaburi Electricity Generating Holding, would decide on a fuel type within three months, including the possible use of natural gas funnelled to the site via a 50km (31-mile) pipeline from fields within Myanmar.

But U Than Htay ruled out using natural gas to fuel Dawei.

“Up to now the electric power supply for that project is not sure,” he said.

In a country beset by chronic electrical outages, powering even a home can be difficult, let alone an industrial zone. Blackouts are common across the country, even at Yangon’s international airport.

That puts pressure on Ratchaburi, whose involvement is limited to a feasibility study as “a preliminary step”, it said in a November 16 statement.

U Than Htay stressed other ministries would decide Dawei’s future, not his. But he offered his personal view of what the government will do: “My guess is sell out, according to the contract made by the previous government.”

Italian-Thai , which signed a 60-year concession to develop Dawei 14 months ago, has brushed aside those comments. Somchet of Dawei Development Co insists the project will go ahead. “It’s at the point of no return. They can say whatever they want but the final decision will depend on the special committee chaired by Myanmar’s president,” Somchet told Reuters on January 27.

He has a powerful local partner. A quarter of Dawei Development is held by Max Myanmar Group, owned by tycoon U Zaw Zaw.

Thailand’s top lender, Bangkok Bank, is advising on the power project and Siam Commercial Bank on the whole project.

Companies that Italian-Thai has identified as possible investors include Malaysia’s Petroliam Nasional, Japan’s Mitsubishi Corp, Mitsui & Co and Sumitomo Corp, and South Korea’s POSCO.

Japanese Trade and Economy Minister Yukio Edano discussed the project with the Myanmar and Thai governments when he visited both countries last month.

“This project is huge and is getting a lot of interest from foreign investors,” said Somchet, who personally met Edano and sees Dawei as a possible location for Japanese firms to build parts for use at car manufacturing plants in Thailand, as well as a low-cost location for industrial production for Thai companies.

He expects much of the infrastructure, including a proper road to Thailand, to be completed within three years, creating a stable route for cargo sent to Dawei from the Middle East and Africa for shipping to Bangkok and beyond in Southeast Asia, bypassing the congested Strait of Malacca.

Brokers appear less sure.

In a recent note to clients, Singapore stock brokerage DBS Vickers Securities highlighted the risks.

“Despite potential to bring economic prosperity to Myanmar, the project is still in its infancy and clouded with risks,” it said. “The sudden call to halt the 4000MW coal-fired power plant project would make it difficult for Italian-Thai to secure strategic partners to help fund the project.”

It described Dawei Development Co’s plans to sell land in the area to raise funds for the project as “optimistic” and stressed that without strategic partners and firm funding, Dawei Development would remain a drag on Italian-Thai’s earnings this year.

In the year to date, Italian-Thai shares have underperformed those of its peers and the overall market due to uncertainty over the Myanmar project. The stock has risen just 0.1 percent in the past 12 months.

Italian-Thai has an “Analyst Revision Score” of 14 under a model by earnings-tracker StarMine which ranks stocks according to changes in analyst sentiment, with 100 representing the highest rank.

Kanit Sangsubhan, director of the Thai Finance Ministry’s Economic and Financial Research Institute, told Reuters Dawei would need heavy government involvement or state enterprises to co-invest.

Whether that will happen is unclear. U Than Htay of Myanmar’s Energy Ministry said the government wanted to promote more private involvement. “Regarding the petroleum refineries or the downstream plants, now most of the plans will be taken charge of by the private sector. Up to now, I have no plan to participate in that area because I need to mind existing jobs.”

PTT Exploration and Production, Thailand’s top state-controlled oil and gas explorer, has shown little interest in the project, and neither has its parent, PTT, Thailand’s biggest company.

“It is still very early days on Dawei,” said Sean Turnell, an expert on Myanmar’s economy at Macquarie University in Sydney, Australia. “They are better off having a special economic zone near Yangon. Dawei mainly benefits Thailand. There are not a lot of benefits to Myanmar from that one.” – Reuters

The Myanmar Times

Burma risks being exploited by foreign investors keen to plant an early stake in the country as it transitions away from military rule, the head of the regional ASEAN bloc has warned prior to a visit there next week.

Surin Pitsuwan, who is nearing the end of his tenure as secretary general of the Association of Southeast Asian Nations, will travel to Burma on 20 February. There he will assess the quality of change in the country, which is due to take the ASEAN chair in 2014.

But in an interview with the Myanmar Times, he said that unless properly managed, a looming rush for Burma’s riches by overseas companies risks bringing “more inequality and more disruption”.

“I’m worried about all these people who are already gathering in Bangkok and Singapore and who are bent on exploiting Myanmar’s [Burma’s] resources and opportunities,” he told the paper.

“We have to ensure that there is a human face to the management of the country’s resources and opportunities. The entrepreneurial spirit must not overshadow the need for schools, hospitals, utilities, clean water and so on.”

Burma has vast natural energy capabilities, including gas and hydropower, but scant legal mechanisms to monitor or avoid any harm to the local environment and communities.

Many focal points for energy investment are in the border regions, which have bountiful hydropower potential but which are home to ethnic minority populations that for long have been denied the profits from these projects. Moreover, thousands have been displaced to make way for large-scale dam developments and to clear routes for oil and gas pipelines.

Kraisak Choonhavan, vice president of the ASEAN Inter-Parliamentary Myanmar Caucus (AIPMC), said that competition for these resources would increase as Burma enacts various economic reforms aimed at making it a safer and less controversial investment environment.

He warned however that there is “great concern” for ethnic groups, and huge tasks ahead to prevent Burma from the threat of being “swallowed up by global capitalism”. He pointed to Nigeria as an example of how a wealth of energy can be disastrous for the local population.

“Poverty there is mind boggling. [In Nigeria] you have what we call a weak government, and I don’t want to see Burma become like that. It’s all about whether it [the government] is socially and environmentally conscious – that is how long-term investment will benefit the country.”

Burma’s chairing of ASEAN will come a year before the 2015 target for full economic integration of the bloc, but analysts have expressed concern that allowing in a country whose own economic and governance record has been so tainted by decades of military rule will be an over-ambitious challenge.

Others say however that the prospect of chairing the bloc could spur the reform process, given the humiliation for Burma if by 2014 it still holds hundreds of political prisoners and abuses by the military against civilians continue.

Democratic Voice of Burma

Over 100 local youths who were organized by a local campaign group known as the Ray of Arakan or “Rakkha Ahluntan” were said to have participated in competitions of their traditional tug-of war held from 3 to 7 February, between the urban wards in Sittwe wearing the t-shirts that read “Stop the Shwe Gas Project” and “Give 24-hour Electricity in Arakan”.

“We started our campaign wearing the t-shirts on the first day of our traditional game in Sittwe. There were police but they had not disturbed us. But on second day they forcibly stripped the t-shirts off our youths. Some of the youths who did not want to take off their t-shirts had to run away from the game”, said Daw Mar Mar who is one of the leaders of the campaign.

Daw Mar Mar said the “Ratha Swe Bwe” is one of the most popular traditional games in Arakan State and they launched the campaign with the game to raise wider awareness among their own Arakanese people who are being deprived of their rights in their own region.

Ma Khine Khine, another leader of the campaign who is a resident of Shwebrar Ward in Sittwe, also said she was warned by the organizing committee of the game not to launch the campaign using the game.

“Eight of the organizing committee of the game came to my residence on the day before the game started and told me not to launch the campaign with the game as they had signed agreements with the authorities not to do anything affiliated with political activities. We understood that they had difficulties with the authorities, but we had to continue what we had decided to do for the cause of our whole Arakanese people, who have been starving for electricity for development in their homeland”, said Ma Khine Khine.

She said her group had organized a team of youths from her own ward to compete in the game wearing the t-shirts of the campaign, but the committee members of the game and police had not allowed them to compete in the game and confiscated their t-shirts.

She also said she and other leaders of the group have to hide away from their residences, as the authorities are closely watching them after they had launched the campaign.

The group have distributed the pamphlets that urge all Arakanese peoples to demand their rights from the Shwe Gas Project as part of their campaign in the traditional game as well.

Many old army officers popped up in civilian clothes as members of parliament and ministers, and the new President, Thein Sein, was a newly retired general who had been the former regime’s prime minister.

Six months later, Thein Sein delivered a stunning surprise, announcing the suspension of the massive Myitsone dam across the upper Irrawaddy River being built by China Power International, a state-controlled company, and a local partner, Asiaworld.

Residents of Rangoon, the biggest city, say the remote figure of the President was suddenly catapulted into widespread popularity. ”On a straw poll of taxi drivers and office workers you meet, he would have had a 70 per cent approval rating,” a foreign company representative said.

The decision, meeting concerns about displacement of population, river flows, fish stocks and the diversion of most of the dam’s hydro-electric power across the border, was a shock to China, used to having its way in Burma.

”Of course it was a dilemma for the state leader,” said Ko Ko Hlaing, a retired military officer who is a political adviser to Thein Sein. ”The situation was so intense, in public opinion and the media, with … undesirable outcomes if we neglected these issues, so the President made a bold decision.”

Other sources close to the government say the President was extremely fearful of China’s reaction and was talked into the decision by civilian advisers. In the event, Beijing has had little recourse but to accept the suspension – though China Power International is said to be biding its time to seek a resumption of work.

For more than a decade, China has had the financial resources and expertise to move quickly ahead with plans to open a frontage on the Indian Ocean through Burma, constructing 2000-kilometre oil and gas pipelines from Burma’s Arakan coast into its Yunnan province.

India, its main rival for Burma’s offshore natural gas reserves, has not been nimble enough. When bidding for the massive Shwe field opened in 2004-2005, India should have been in the front seat.

Instead it got caught up in a complicated four-nation deal. The seabed of the Bay of Bengal is a plastic mass of silt from the Ganges and Brahmaputra rivers, too unstable for laying pipelines. So a pipeline to India would have to transit Bangladesh, which then demanded a land corridor through India for power from hydro schemes in Bhutan.

”My Burmese counterpart was saying: ‘We don’t want to become too dependent on China, but unless you can come up with a deal we have no choice’,” Mani Shankar Aiyar, India’s Petroleum Minister at the time, told the Herald in Delhi last week.

India’s sniffy Foreign Ministry could not put an offer together in time, he said. ”It’s shooting oneself in the foot as if it were the highest form of diplomacy,” Mr Aiyar said. ”But that’s what we were doing. It’s a great pity.”

China will complete the gas pipeline next year, opening production that could yield up to $US3 billion ($2.78 billion) in annual revenues for Burma, with the oil pipeline later taking Middle East and African crude from supertankers berthed at a new port. It is talking of bigger schemes, such as a railway line alongside the pipelines.

Burmese diplomats say China is still an indispensable partner. ”China is a permanent member of the Security Council and its veto power [is] important to us,” one diplomat said. ”For the time being China has the advantage.”

Last month, President Thein Sein also vetoed a four megawatt coal-fired power plant proposed for a new special economic zone in the south of the country by the scheme’s Thai promoters. This is being projected to show the Myitsone decision was purely on environmental grounds, not a gesture against China.

Criticism of China is still suppressed by government censors, but the Myitsone decision seems to have unleashed a torrent of pent-up grievances against China’s presence in this fiercely independent country.

A former central bank deputy governor now with the newly licensed Kanbawza Bank, Than Lwin, said that because of Western sanctions Burma had had no choice but to turn to neighbouring countries including China.

”In one way we are grateful to China, but in another they also take advantage of our position,” he said.

When seeking to defer repayments of Chinese loans and credits – now put by economists at between $US2.5 billion and $US5 billion – Mr Than had found Chinese creditors harsh, unlike European lenders. ”Sometimes when we say: ‘Why don’t you reschedule so we can work better in the future?’, they say: ‘You’re insincere’,” he recalled. ”It’s very rude. They don’t want to back down. With us it’s a very bad experience.”

Mr Than said the Burmese public was concerned about several issues with China, including the unusual width of the corridor across the country for the pipelines and the use of Chinese workers instead of local labour on projects.

Another is the trafficking of Burmese women into China, drawn by its gender imbalance, with lurid stories circulating about their fate.

”This is a very serious issue,” he said. ”Our women are being trafficked to China to become the wives of Chinese. We are going to lose a lot of womenfolk to China. In the long run this is the same as colonising our country.”

Many Burmese are now welcoming the prospect of American, British and Japanese investment and aid returning with an improving political climate. Japan will shortly announce a rescheduling of $US5.7 billion in debt arrears from several decades ago, essentially amounting to debt forgiveness.

An official close to President Thein Sein said foreign dealings would now have to be more accountable.

”With the Chinese it was like going around as a single,” he said. ”Now we are married to democracy, we have to go home at 10 or 11 to our family. We can’t party on to 5am like the Chinese.”

On the surface, it looks like change started since government introduces reforms by letting some political space for Aung San Suu Kyi. In fact, reforms in the country continue uncertain, even with hopeful achievements made by President Thein Sein recently.

In an interview with Lally Weymouth of The Washington Post, President Thein Sein said his government has already fulfilled with Western demands, including freeing most political prisoners, setting up elections in April and allowing key opposition leader Aung San Suu Kyi and others to participate in political process.

President Thein Sein told Lally Weymouth, “I believe we have accomplished these steps already. What is needed from the Western countries is for them to do their part.”

But, the question is not such easy. People convince that president’s soft move is a motivation for the West to lift sanctions. Although Thein Sein puts on show of his soft stance, vice-president Tin Aung Myin Oo’s conventional faction is on his way. Tin Aung Myin Oo himself has been linking in the Myitsone-dam’s project in order to gain financial advantages via his cronies’ businesses.

The difficulties of ending the war against the Kachin Independence Organization (KIO) are intertwined with the natural resources benefit in the Kachin State. Tin Aung Myin Oo and his conservative faction support continuation of the offensive in Kachin frontline since the group involved deeply in the energy projects including the Shwe-gas twin pipe-line, a multibillion dollar project that expected to do good to vice-president and his cronies’ quarter.

President Thein Sein had released orders two times, on December 10 and again on January 13, to halt fighting so as to cease the Burma Army’s Kachin offensive. Regardless of the president’s visible wishes, the government’s armed forces have continued waging the aggressive war against the KIA, killing many soldiers and civilians unnecessarily.

According to Kachin News Group, officers based in the KIA’s Laiza headquarters estimate that more than 20,000 combat soldiers from nearly 200 battalions have been assigned in the anti Kahin operation, the biggest military offensive in Burma in more than 18 years.

Several Kachin citizens believe the reason of renewing the war after a 17-year cease-fire is craving for natural resources in Kachin State by the Burmese military-backed government. That’s why it strive widening its control of the areas with Chinese power projects.

In an interview with The Washington Post, Aung San Suu Kyi said, “Although the president is the head of state, he is not necessarily the highest power in the land. The commander in chief can take over all powers of government at any time he feels it to be necessary. That must be very difficult if you are in the position in which our president is.”

Most analysts support Suu Kyi’s point of view since the Burma Army’s commander-in-chief Gen. Min Aung Hlaing ignores the president’s order to end of hostilities on the Kachin frontline.

On the other hand, although Government holding ceasefire talks with Karen leaders recently, the humanitarian group Free Burma Rangers (FBR) has accused in its report that Burma Army has constantly violated human rights abuses and armed mobilization in Karen State, the Karen News said.

In Karen State no ceasefire agreement has yet been signed, but both the Karen National Union and the Government of Burma have ordered their troops not to shoot at each other. Despite the ‘no-shoot orders’ the FBR report has catalogued current incidents, including homicides and forced labor of villagers.

Despite agreeing to a ceasefire with the Karen National Union earlier this month, Burma Army has been transporting food rations, military supplies and reinforcements in the Myitta sub-township Tanintharyi Division which is now under the control of the KNU’s Brigade 4, the Karen News said.

If government is sincere enough, it should be taken responsibility of pulling out its troops from the frontline zones which are in actual fact under the influence of the ethnic armed groups. To build trust between two parties, the government must show goodwill towards the ethnic minorities.

Fighting between government forces and the Kachin resistance was particularly fierce these days in an area of northern Shan state scheduled to be the route of the Shwe-gas pipeline project into China.

Due to a good number of civilians’ protests last year, President Thein Sein postponed the Myitsone dam project sponsored by a Chinese company sharing with the Burmese military. That annoyed Chinese officials who think Thein Sein of trying to minimize China’s role and to persuade investment from the Western democracies.

Such projects are a source of tension. Also in the Karen State, the same kind of project has been on its way. The Burmese government has given a green light to a huge port and industrial estate development in Dawei. The Italian-Thai Development Public Company Limited (ITD) is a main contractor of the Dawei multi-billion mega project.

The planned area for the Dawei project is in a conflict zone between KNU and Burma Army. Company workers are worried about their security after being caught in the crossfire between the Burma Army and Karen fighters. A KNU source told Karen News that ITD have played down the threat to the Thai media, but privately are worried about increased conflict in the region.

In brief, reforms will not be materialized easily without addressing the armed conflicts in the ethnic areas so as to establish a national reconciliation environment.

Furthermore, the government itself needs to reorganize for one voice. Before peace talks with the ethnic groups, soft-liners or moderate faction and hardliners or conventional faction in the cabinet should pragmatically negotiate first to initiate a genuine reform in the insolvent country.

Photo : lowyinterpreter
News : asiancorrespondent