Monday, February 20, 2012

Analyst warns of potholes in Myanmar

Foreign firms such as the SET-listed Italian-Thai Development Plc (ITD) should exercise caution when investing in Myanmar, as democratic reforms will take time and huge challenges remain, say analysts.

Horst Rudolf, an Asia political and economics analyst, said reforms to modernise Myanmar are real and substantial, and most people there including military officers are happy with the changes.

But despite the huge opportunities, several challenges remain, including upgrading the quality of the banking system, foreign exchange, the tax system, and finding reliable local partners, Mr Rudolf, who was the German ambassador to Myanmar from 1998-2001, told a forum hosted by Ipsos Business Consulting.

Mr Rudolf recommended that ITD, the Thai contractor granted a 75-year concession for the special economic zone in Dawei on eastern coast of Myanmar, be aware of social resistance while implementing its project.

"The Dawei developer must not think it can invest there just to enjoy cheaper labour than Map Ta Phut on Thailand's eastern seaboard, otherwise it will face resistance," he said.

Construction of ITD's 4,000-megawatt coal-fired power plant in Dawei abruptly halted earlier this year due to domestic outcry over the plant's environmental impact.

The decision to put the brakes on the plant follows the suspension last October of the Chinese-led, $3.6-billion Myitsone Dam on the Irrawaddy River, also for environmental reasons.

If completed as planned in 2017, it will be the 15th largest hydroelectric power station in the world. Slated to be 152 metres wide and 152 metres high, it is being built by Burmese government contractors and China Power Investment Corporation.

Estimates are it will provide 3,600 to 6,000 MW of electricity primarily for Yunnan, China.

Analysts said the suspension illustrates the unpredictable business climate in Myanmar as a new government seeks to boost its public image while attracting investors to the economy.

"Investors need to communicate more and take part in social projects for the Dawei project to be successful. It's not that easy," said Mr Rudolf.

"The long-term outlook is still good, but companies cannot just bribe, invest and go."

He said businesses from Thailand, Malaysia, and Singapore could benefit from Myanmar's opening up to the international community.

"Companies unfamiliar with Myanmar may want to combine forces with firms in these countries before they invest there," he noted.

"Investors should go there and look around as reforms are still in the early stages."

Steve Marshall, liaison officer at the International Labour Office in Myanmar, said sanctions on businesses from the US, the European Union, Australia and Canada that work with Myanmar companies still need to be lifted.

"The country is on the right track, but the reform progress is fragile and still has a long way to go," he said.