Risk and Reward
-By John Boley
In Bangkok in neighbouring Thailand, the queue to apply for an entry visa runs twice round the block. Hillary Clinton and Joseph Stiglitz (Nobel Prize for Economics) are among recent celeb visitors. Newspapers the world over run features on democracy and the still-stately face of The Lady, the nickname for Aung San Suu Kyi, is everywhere. No doubt about it, Burma – Myanmar if you favour the official title – is flavour of the month.
It is a hitherto secretive place where transformation appears to be happening at a breathtaking pace not seen since the smashing of the Berlin Wall and subsequent collapse of East Europe’s communist states in 1989-90. Indeed, April sees a historic round of more or less democratic by-elections! So will Burma be the Next Big Thing in the global economy?
Strategically and resource-wise, there is no doubting the country’s value. Resources include tin, antimony, zinc, copper, tungsten and lead. Other resources include petroleum, timber, coal, marble, limestone, gemstones, natural gas and hydro power. Around a year ago, state-run media trumpeted that SIPC Myanmar Petroleum’s exploration project in Magwe had found gas reserves in the Pahtolon oilfield of at least 909 billion cubic feet, and possibly as much as 7.16 million barrels of gas condensate. That is just one example of many.
To oil and gas reserves, add the desperate need for infrastructure. This is one of the world’s poorest countries, with the lowest rate of economic growth in the Greater Mekong Subregion. Britain conquered Burma over a period of 62 years (1824-1886) and incorporated it into its Indian Empire. Burma was administered as a province of India until 1937 when it became a separate, self-governing colony; independence from the Commonwealth was attained in 1948. But since the British upped and left, a series of ever more corrupt military juntas built plush housing for themselves in a new and remote ‘capital city’, Naypyidaw, while ignoring the needs of the population of 55 million.
According to CIA World Fact Book statistics, Burma has just 3,200 km of paved roads for a land area of 677,000 square kilometres. Some 29 per cent of the population has still to receive a clean drinking water supply. There are railways though – 5,000 km of it – but all on a narrow one-metre gauge.
What Burma does have though, in addition to its mineral riches, are a long coastline facing India and the west, and pipelines: gas 3,046 km; oil 551 km. China’s ‘big-buddy’ act is based largely on these: Beijing sees the opportunity for gas and oil to travel across Burma to or from the three ports of Moulmein, Rangoon and Sittwe instead of travelling the much longer distance by sea through the narrow, congested Straits of Malacca, round Singapore and up the long stretch of the South China Sea. China is already a major investor in Burma’s gas and oil sector and is likely to be the end-user of much of its oil and gas production. State-owned CNOOC is building twin pipelines from the Arakan coast to Yunnan province in southwestern China.
The comparison with Mongolia in the title is deliberate. That country, diametrically across China from Burma, has an economy ballooning by 21 per cent per quarter. As The Economist recently put it: “It is not just that Mongolia is a treasure-chest of geological wealth. It is slap-bang next to the world’s biggest and fastest-growing market for most minerals. Put together Mongolian supply and Chinese demand, and Mongolia will be rich beyond the wildest dreams of a population many of whom, a generation ago, saw themselves as nomadic herders.” Brian Fisher, an Australian economist who has conducted a study of the economic impact of OT (Oyu Tolgoi, or Turquoise Hill, a desolate spot in the Gobi desert and the site of a massive copper and gold project), says Mongolia “sounds like Australia in 1930.”
Burma could be the same or bigger (given its population is 20 times bigger), especially on the infrastructure side. Accordingly, everyone and his missus is either there or on the way there. Despite some assertions that the shyly emerging Myanmar has already been carved up between rapacious neighbours China and India, it seems obvious that opportunities abound to provide alternatives – and Australia should be in there pitching with the United States and the EU.
In Indonesia, the government has set up state-owned enterprises to help push the expansion of private-sector companies into Burma. “Indonesia should be able to take up any opportunity in Burma. Their current economy is like Indonesia in the 1970s,” said the Minister responsible, Dahlan Iskan, on the sidelines of a press event in March. Early members of a state-owned network are Bank Negara Indonesia (BNI), construction company PT Wijaya Karya and gas and oil company PT Pertamina; a number of top executives have been in Burma for the last six months.
“[They] are tasked with collecting information on how to do business in Burma so that a strategy can be devised to penetrate the market,” said Dahlan. “We are going to ensure our business in Myanmar will be safe and beneficial for both countries.”
In a telling quote, Deputy Minister for Infrastructure and Logistics Sumaryanto Widayatin said Indonesia would reap benefits from Burma because the country needed infrastructure. Pertamina and others had already proved their ability to contribute to development in Indonesia and could set an example for Burma. BNI would help finance projects initiated by Pertamina and Wijaya Karya. “We have not calculated the planned investment but I can assure you that it will be very big,” he said. “We should have entered the country five years ago. But again, it’s better late than never.”
As part of bilateral cooperation with Burma, the New Zealand Trades Enterprise Limited (NZTE) has been providing technical assistance to Burmese business enterprises since 2010 to help develop some sectors of the country such as milk and dairy production, construction of modernised milch cow breeding farms and car production. NZTE is involved with the building of an artificial beach in the country’s northernmost Kachin state. The project also involves investment from Japan, Australia and China. The project, located near the bank of Ayeyawaddy River, stands a short distance to the Lido highway connecting India, Burma and China.
In Malaysia, International Trade and Industry Minister Mustapha Mohamed said recently that changes in policy by the Burmese government sent a strong signal that the country was serious in attracting foreign investors. He said there were several economic sectors and activities in which local companies and businesspeople could invest including building roads, highway and airports, manufacturing, oil palm, property development projects and oil and gas. “Presently there are 200 Malaysian companies and businessmen there and we want to see more of them in Myanmar,” he told reporters in March.
The travel and tourism opportunities are equally mouth-watering. Steve Macevoy, the (British) boss of a major Thailand-based regional tour operator, Asia World Tour, said his company had just received a licence to operate in Burma and he was “thrilled” to be one of the first allowed in. Reuters reported in March that major hoteliers such as Starwood (Westin and Sheraton) and Marriott both said during the recent World Economic Forum in Davos they planned properties there to compete with the lone big foreign brand, Traders (ShangriLa) in Rangoon. “Marriott would love to be there if the conditions are right,” said Arne Sorenson, president and CEO-elect of Marriott International. “Burma has captured people’s imagination for decades.”
Australia, mindful of course of sanctions that remain in place, appears to be taking a too-cautious approach to this potential gravy-train, even as other countries enter Burma equipped with spoons and large chunks of bread. Certainly much of what is going on will be done confidentially at present – let’s just hope our various industries can make the most of the Next Big Thing in our region.