Business Roundup, July 7, 2012

[News_Editor]

Dawei Project ‘Going Ahead’ Despite Max Myanmar Withdrawal

Bangkok-based construction company, Italian-Thai Development PLC (ITD), said it still plans to build a major oil port and industrial complex at Dawei on Burma’s southeast coast, despite losing a key Burmese partner.

Government-linked Max Myanmar Group has announced it is withdrawing from the project, which has been stalled for months over financing problems.

Max Myanmar, which holds a 25 percent stake in the multi-billion-dollar project, has given no reason for its sudden termination of involvement. It signed an agreement several years ago with ITD and the former military junta to turn Dawei, or Tavoy, in Tenasserim Division, into a special economic development zone.

The viability of the project was not dependent on the local partner because large sums of outside investment will be needed to make it work, said the managing director of Dawei Development Company, Somchet Thinaphong. “The viability of such a capital-intensive development project is largely dependent on fund sourcing,†Somchet told The Bangkok Post. “The local company, or even Italian-Thai, does not have the financial capacity to fund such a massive development project.â€

Italian-Thai, which is the majority shareholder in Dawei Development, is negotiating with a variety of large companies and foreign investment banks to help finance the project. The Thai government has promised funding for infrastructure work on the Thai side of the border to link up with a new road and oil pipelines earmarked to extend to the Burmese coast.

The issue of special economic zones in Burma is to be debated in the new session of the Burmese parliament.

Burma to Host Economic Forum (But Where Will Delegates Stay?)

Burma has been invited to host the next World Economic Forum (WEF). The Naypyidaw government said the forum would most likely be held in Rangoon although the capital is also a possible venue. WEF chairman Klaus Schwab said he was assured that Burma would be ready to handle a large, prestigious gathering, although no date in 2013 has yet been announced.

The 2012 forum in Bangkok had more than 600 delegates from around the world. But Rangoon is suffering from an acute shortage of accommodation for the increasing number of foreign visitors, and Naypyidaw has even fewer rooms to accommodate a large gathering such as the WEF.

$20 Billion: The Cost of Powering Burma

The cost of developing a comprehensive electricity infrastructure network to reach most of Burma’s population would be at least US $20 billion, the government has been advised. A lack of power is one of the biggest hurdles facing Naypyidaw as it seeks to overcome decades of economic slump and isolation. Only 25 percent of the country is linked to a decrepit electricity grid and power blackouts are frequent, even in the capital.

“That kind of money requires aggressive foreign investment. But officials interviewed by Reuters in three ministries, including Industry Minister Soe Thein, said very few multinational companies have committed to large-scale investment despite the deluge of executives visiting the country,†a Reuters survey reported.

The Burmese government is already spending tens of millions of dollars buying in small-scale diesel and gas generators from General Electric of the United States and others sources to try to temporarily plug the energy gap. That action was prompted by candlelit protests by citizens in Rangoon and Mandalay weary of blackouts.

The likelihood is that it would take at least 10 years to redevelop and expand the electricity grid, spending $2 billion per year, Reuters quoted energy ministry officials as saying.

Investment Sought for New Rangoon Airport

Billions of dollars of foreign investment is being sought to finance the construction of a new airport for Burma capable of handling 10 million passengers a year.

The airport has been earmarked to be built at Hanthawaddy about 75 km north of Rangoon, the Civil Aviation Department announced this week. A new airport is needed to cope with an anticipated boom in tourism in the wake of reforms which are opening up the country to outsiders, said department director-general Tin Naing Tun. Hanthawaddy is the site of an airport planned in the 1990s but abandoned after only land clearance works had been done. Rangoon airport can cope with less than 3 million passengers annually and has limited parking facilities for airlines.

In recent months airlines from Thailand, China, India, Malaysia, Singapore and Vietnam have announced plans to resume direct flights to Rangoon. The latest include Japan’s largest airline, All Nippon Airways, Qatar Airways, and Germany’s holiday market specialty line Condor, which plans to start a weekly service from Frankfurt in November.

Tin Naing Tun said it was hoped that construction could begin in 2013 and be completed in 2016. Bangkok’s second airport, Suvarnabhumi, which opened in 2006, took several decades to build at a cost $3.7 billion and can handle over 40 million passengers per year.

Unemployment Could Spark Unrest in Burma: ADB

Unemployment and extreme poverty could lead to civil disorder by some of Burma’s ethnic minority groups the Asian Development Bank (ADB) warned in a report. The problem is heightened by poor agricultural practices and lack of investment in farming, coupled with years of instability, said the ADB. It said 75 percent of Chin are desperately poor, 50 percent in Arakan and 33 percent of Shan.

“You have to address the regional differences in poverty and economic growth,†the ADB’s vice-president of poverty alleviation, Stephen Groff, said in Bangkok. “These disparities within [burma], as in other countries, can lead to ethnic and social unrest that undercuts the country’s potential.â€

Groff said the task facing Burma’s leaders is “daunting†but investment in agricultural production could sow the seeds of revival of the rural poor. But he added: “Even if the economy grows at 5-6 percent a year, it’ll take 30 years to reach Thailand’s current level.â€

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