The Giants Are Coming: Tentative Western Oil Majors Line Up for Myanmar Hydrocarbon Glory

By Tim Daiss
Posted on Sep. 21, 2012

Since President Obama’s easing of sanctions against the Southeast Asian country in July, American as well as foreign companies are flocking to Myanmar for business -- all sectors are on the table including banking, insurance, pharmacy, manufacturing, services and energy.
General Electric was the first American company to set foot in Myanmar after sanctions were lifted and secured a medical equipment deal with two hospitals in just a week after Obama made his announcement. Other American companies seeking investment opportunities in Myanmar include Caterpillar, Citibank, Kraft Foods, Ford, Bell Helicopter, Hewlett-Packard and Arrow Technologies. Last week, MasterCard said it had signed a deal with a Myanmar bank that it hopes will pave the way for electronic payments in a poor country where most transactions are made in cash. The list continues to grow almost daily.
And in a sign of things to come, Singapore Airlines announced on September 4 that it will start a daily service to Yangon (Rangoon) in October to meet growing business and tourist demand for flights to Myanmar's largest city. Also, this month, Japan’s Nippon Airways joined airlines from Thailand, China, India, Malaysia, Singapore and Vietnam, which have already resumed direct flights to Myanmar since economic and political reforms began.
Financing is also coming to Myanmar. The World Bank recently announced that it will resume lending to Myanmar for the first time in nearly 25 years and has opened an office in Yangon. Asian Development Bank (ADB) also recently opened offices in Yangon. Additionally, Japan has extended nearly $900 million in loans to Myanmar.
But the sector that the Myanmar government is banking on to bring much needed revenue to modernize and rejuvenate its anemic and impoverished economy is oil and gas. More poignantly, analysts point to natural gas as the main focus of foreign investment in the coming years.
However much about Myanmar’s oil and gas is a mystery.
Conflicting reserve data
For starters, there is a problem with securing good geological data in Myanmar. A lot of the data already on hand was collected with old and unreliable equipment, a Yangon-based investment manager told Interfax in August.
Also, the country’s reserves vary depending on who you talk to. Myanmar’s proved gas reserves were placed at 11.8 trillion cubic feet (Tcf) at the end of 2010, or 0.2 percent of the world’s total according to the BP Statistical Review. The US Energy Information Administration (EIA) lists Myanmar’s proved natural gas reserves as of 2010 at 10 Tcf, placing their gas reserve ranking at 37th globally. However, Myanmar is more hopeful. Myanmar’s Minister of Energy Than Htay said in January that his country’s natural gas reserves are at 22.5 Tcf.
Myanmar currently produces 19,600 barrels per day of crude oil and 1.475 billion cubic feet (Bcf) a day of natural gas, Myanmar’s Ministry of Energy Planning Department said in March. The ministry also claims that the country’s proved oil reserves total 104 million barrels onshore and 35 million offshore. The EIA ranked Myanmar’s natural gas production at 36th globally in 2010 and crude oil production at 65th.
So, if Myanmar is not hydrocarbon rich, what’s all the fuss about? The fuss is over the lure of the unknown. Lack of exploration work during the years that Myanmar was under Western sanctions means much is unknown about the country’s reserves and new discoveries are still being found. For example, Burma Petroleum Company, a joint venture with Chinese oil major Sinopec and state-owned Myanmar Oil & Gas Enterprise (MOGE), confirmed a major gas discovery in January. Myanmar state media earlier reported that the Chinese-led company has discovered reserves of 909 Bcf of natural gas and 7.16 million barrels of condensate in central Myanmar. The discovery was made at the Pahtolon oil field. Further tests are being conducted.
Myanmar, in an effort to feed the energy feeding frenzy of American, Western and Asian companies, is ready for business and opening up tenders.
“Since the sanctions have been eased by the US, the UK, the Western powers, the giant companies are interested; they come to my ministry daily to discuss how they could participate,” Than Htay told reporters in Yangon on August 26. “Shell is inquiring, BP from the UK is also coming to discuss. There are many giant firms coming.”
“The oil industry is a technology and capital intensive industry, but we are very poor so we need to seek foreign investment and we definitely need to collaborate with the international oil companies and need to see their investment,” he said.
Myanmar already held an energy tender for 18 oil and gas exploration blocks in July 2011 -- before the easing of US sanctions. It was the first formal bid held in five years. Before that tender, companies had to enter into private discussions with the government for direct block awards. Some of the companies that entered into these agreements and have been or are currently operating offshore Myanmar include French oil major Total, Malaysia’s Petronas and Rimbunam, South Korea’s Daewoo, Thailand’s PTT-Exploration & Production (PPT-EP), China’s CNOOC and CNPC, India’s Essar, GAIL and ONGC, Australia’s Danford Equities, Russia’s Sun Itera Oil & Gas, and Silver Wave Energy whose parent company is based in Singapore.
Most Western oil firms were conspicuously absent from the July bidding however. The energy department short-listed bidders and invited selected firms to review geological and geo-physical data of the 18 onshore blocks.
In January Myanmar awarded 10 onshore blocks to eight of these firms from the tender. The Myanmar Times reported that countries in Southeast Asia bagged most of the awards since interest from major state-linked Chinese players was lukewarm, providing the way for lesser know companies to secure blocks. Malaysia’s Petronas secured a block, as did Thailand’s PPT-EP. India’s Jubilant Energy also secured one production sharing block as well as a Switzerland-based company, a Russian company, an Indonesian company, a smaller Chinese firm and a Hong Kong listed firm.
Myanmar failed to strike deals with the remaining eight blocks since they were not seen as lucrative.
MOGE corruption concerns delay upcoming tender
Another oil and gas tender creating considerable media buzz and speculation was set for later this month. The Myanmar Ministry of Energy said 29 offshore blocks would be offered alongside 34 onshore blocks in the next bidding round. It would be the first opportunity in at least 15 years for US oil companies to participate in Myanmar.
However, news broke on September 5 that Myanmar delayed the tender to meet transparency standards of Western oil majors. A Myanmar government official stated that the tender was postponed after several oil companies (ConocoPhillips, Hess, Royal Dutch Shell, BP, BG Group, and Australia’s Woodside Petroleum) approached the government with their concerns.
The fly in the ointment that delayed the tender was MOGE’s lack of transparency. MOGE indeed has a horrible track record, one that makes international human rights groups stay awake at night. In fact, according to Transparency International, Myanmar ranks just behind Somalia and North Korea as the world’s most corrupt country in its 2011 corruption index and the country’s rule of law was given a 3-percentile rank.
All foreign firms investing in the Myanmar oil and gas sector are required to take on a local partner and enter into a production sharing contract and partnership with MOGE, which oversees licensing and holds a majority stake in all onshore and offshore blocks.
Allegations against MOGE abound. Derek Mitchell, then-US special envoy to Myanmar, voiced his concerns to a key US Senate Committee during his ambassadorial confirmation hearing on June 28.
“The issue of MOGE is one that we are looking very carefully at,” he said. “We have concerns about this enterprise and its transparency and the corruption that is associated with it through reports that we have. There are particular concerns here with connections to the military and such.”
Nobel Peace Prize winner Aung San Suu Kyi warned the International Labor Organization that MOGE “lacks both transparency and accountability at the present.”
However, Western oil majors, US diplomats and Nobel Peace Prize winners aren’t the only ones to level accusations against Myanmar’s oil and gas industry. Its citizens also take aim.
In May protests broke out in Yangon over power outages and the exporting of Myanmar gas abroad. Myanmar gas is exported to generate power in other countries despite the fact that roughly 75 percent of its population doesn’t have access to electricity from the national grid. Yet, it appears that the new Myanmar government takes these concerns seriously now.
Last month the government decided to set aside adequate quantities of natural gas for domestic use, though local media reported that it will not be available until 2016-2017. The government also secured agreements to set aside gas from Rakhine state from the controversial Myanmar-China gas pipeline that is set to come online by the second half of next year.
How Myanmar appeases both its citizens who have their first taste of freedom in decades, and willing but anxious oil companies remains to be seen. Hopefully, Myanmar’s government, after decades of isolation and economic hardship, will learn lessons from the past and play ball at home and on the world stage.

Investment and trade in Burma

Wednesday, 02 May 2012 15:32 European Burma Network 

(Commentary) – With many sanctions against the military-backed government in Burma in the process of being suspended or lifted, there is intense interest from European companies in investing and trading with Burma.

Trade and investment in developing countries can help bring benefits to the local population, both through the provision of employment and through revenue for governments to provide services. However Burma does not have a democratic and accountable government to ensure that revenue from trade and investment benefits the people, providing services such as schools and hospitals.

The European Burma Network urges companies not to view Burma simply as a country where they can exploit cheap labour and access natural resources cheaply. Several industries in Burma, particularly natural resource extraction and energy projects, are directly linked to human rights violations and environmental destruction. Despite recent reforms, Burma still has one of the worst human rights records in the world.

In his last report in March 2012, the UN special rapporteur on Burma listed a series of human rights abuses, all committed in Burma in recent months, which could constitute war crimes and crimes against humanity.  They include: “…grave violations of international human rights and humanitarian law, including attacks against the civilian population, extrajudicial killings, internal displacement, the use of human shields and forced labour, confiscation and destruction of property, and conflict-related sexual violence...”

He also raised the possibility of a shift towards different types of abuses in a changing economy. “Given the wave of privatizations last year and the expected increase in foreign investment, along with the new government’s plans to accelerate economic development, I also fear an increase in land confiscations, development-induced displacement and other violations of economic, social and cultural rights.”

There remains a lack of international law to ensure European companies always operate to the highest standards outside the EU. In addition, Burma lacks laws to regulate companies, to protect workers, and protect the environment. It also lacks an independent judiciary and the rule of law that could enforce such regulations, and is one of the most corrupt countries in the world.

Members and observers of the European Burma Network endorse the “Benchmarks for Investment in Energy, Extractive and Land Sectors in Burma” issued by the Burma Environmental Working Group (BEWG) on 22nd March 2012. (The statement is available online at: http://www.bewg.org/). BEWG is an alliance of grassroots environmental and social organizations.

Five key benchmarks have been established by the BEWG:

1) Do no harm – Investment should not exacerbate natural resource and land-based conflict in Burma.
2) Best practices or no practices – Investors should respect the widely accepted global standards for environmental and human rights law while following international best practices in human rights, social and environmental impact assessments.
3) Act transparently and with Principles - Investors should have a zero-tolerance policy on corruption and should uphold full revenue and contract transparency.
4) Support Ccvil society not impunity - Civil society should be free to fulfill its role without threat of repression or abuse.
5) Empower communities - Community grievances must be fully addressed in existing and proposed investments.

The European Burma Network will work with local communities and workers to monitor the activities of European companies operating in Burma. Companies that do not respect the guidelines from the BEWG, or are linked to any human rights abuses, exploitation of workers or suppliers, and environmental destruction, will be targeted for high profile campaigns by members of the European Burma Network. These could include boycotts, protests, shareholder actions and exposure in the media of their links to any abuses. All national and international legal options will also be pursued. The network includes:

Actions Birmanie
Association Suisse-Birmanie
Austrian Burma Center
Burma Action Ireland
Burma Campaign UK
Burmese Rohingya Organisation UK (BROUK)
Christian Solidarity Worldwide
Forum For Democracy In Burma
Info Birmanie
International Federation for Human Rights (FIDH)
NCUB-Europe
People In Need
Polish Burma Solidarity
Society for Threatened Peoples
Swedish Burma Committee

Link : http://www.mizzima.com/edop/commentary/7041-investment-and-trade-in-burma.html

What is really happening in Burma today?

• By Nancy Hudson-Rodd
• Notebook - A selection of Independent views -, Opinion
• Wednesday, 2 May 2012 at 4:00 am

Despite the current euphoria over Burma, the reality is a depressing picture. It is even more important now to study and write on it, and not just about the big picture but the details.

With the help of what I would call “agents of capitalism” (scholars, diplomats, development aid experts, representatives of international agencies, investors, entrepreneurs etc), the land and people of Burma are being robbed and sold off under the lie of development and democratic change.

The state ‘civilian’ government is now being supported by many whose interests lie in having their way with the riches of Burma.  David Cameron, for example, took ten businessmen with him to Rangoon, only as tourists, mind you, because Britain still had some economic sanctions in place.

There are claims that Burma, a very poor country, could benefit from more development aid – as does Cambodia. Since the first Cambodian General Election in 1993, over $6 billion has been provided to official donors and hundreds of civil society organisations. Yet, citizens of Cambodia have not been the major recipients of this aid, but government officials, international experts, and advisers have thrived. There is a nasty ongoing land confiscation by developers. People are displaced from their land – just as in Burma – with no recourse to justice.  Although Cambodia is now a supposed democracy, Hun Sen still rules.

Nor is aid the answer. Real citizen involvement in creating a country is what is needed, not just token involvement by a few. But this is not possible in Burma.

Capitalists, businessmen, and large trading companies of the 17th and 18th centuries opened up the world for the British colonial ruler to step in. The Hudson Bay Company became ruler of large parts of Canada before the Dominion of Canada, Cecil Rhodes was put in power by the British South Africa Company to develop Rhodesia (still grants Rhodes scholarship), and the East India Company opened up India and Burma to the British Government. When the last Burmese king refused the demands of the East India Company, it asked for British Government assistance and Britain declared war.

Now Western governments are prising open new markets for their corporations. They talk only business the market and debt, not health, education, ecology or the common good.

The governments of the EU, Norway, Canada, the USA, and Australia have suspended most sanctions on Burma, rewarding the ‘civilian government’ for its democratic changes. The Australian government has never sanctioned investment in Burma.

Yet Australian, French, American, Thai, Chinese, Indian, Russian, Malaysian oil and gas companies currently operate there. Oil and gas exports are the Burmese leaders’ largest source of income, amounting to nearly US $3 Billion in the 2011-12 fiscal year. Despite this resource wealth, the oil and gas revenues over the last decades have been pocketed by a few corrupt military generals.

Instead of rushing in to Burma we need to study the truth of how Western actions will affect current tensions, relationships and life for the Burmese people.

Myanmar presidential economist ‘frustrated’ with Western sanctions

Author: Lucy McNulty | Published: 5 Apr 2012

Myanmar’s presidential economists have branded the US government’s plans to instigate a targeted easing of sanctions as “frustrating” and called for more international assistance with regulatory reform.

The US today announced it was ready to ease some sanctions in the Southeast Asian country, such as a ban on US companies investing in or offering financial services to the country, in recognition of its burgeoning democratic transition.

But US Secretary of State Hillary Clinton stressed any relaxation of sanctions would begin cautiously, as Myanmar still had a long way to go to shake off years of military rule. Ear

The announcement comes as the EU, Japan and Australia revealed similar plans to ease sanctions and restrictions on doing business in Myanmar following successful by-elections in the country last week. Opposition leader Aung San Suu Kyi’s National League for Democracy party won 40 of the 45 seats at stake.

Myanmar presidential economic adviser Set Aung told IFLR this morning that the sanctions currently in place had created a monopoly environment which succeeded only in benefiting the government cronies they were intended to hinder, and harming the ordinary business man in Myanmar.

“Western governments always talk about the good of the people, but they never do anything beneficial for the people,” he said. “They need to better understand that if this country’s democratic transition is going to work, it has to link to sustainable economic development which directly benefits the people.”

“Simply shifting the goal posts by relaxing periphery sanctions but holding on to those that really matter like trade restrictions will not help achieve that,” he said. “It is really frustrating and not helping the people.”

He added that the country was “desperate” for international assistance with its regulatory reform agenda.

“Most ministers are working in areas which they don’t know much about and are therefore desperate for international consultation,” he said.

“Our focus is on equitable, inclusive and sustainable development across the economic, social and environmental spectrum, but we can’t do everything; we are struggling with the reform process at the moment,” he said.

The Ministry of Finance and Ministry of National Planning and Economic Development were most in need of assistance, he said, given the number of reforms both departments had undertaken.

He added that some Asian consultancies were currently charging $1750 per day to assist with legislative reform but this was expensive and not enough alone.

“The people of Myanmar are complaining reforms are not happening fast enough, while international governments are saying we need to slow down,” he said.

“But if our transition to democracy is going to work we need to work quickly to narrow the gap between urban and rural development,” he said.

Earlier in the week, a Bank of America report warned of over-enthusiasm and great uncertainty in the opening up of Myanmar.

One British diplomat based in Myanmar said today he expected almost all European sanctions, excluding the arms embargo, to be lifted when the EU foreign ministers meet to discuss its policy on the country on April 23.

The British embassy was likely to begin encouraging socially responsible investment into the country around the same time, he said. It was also likely to begin to play a very close role in assisting Myanmar authorities with regulatory reform once sanctions were lifted, he said. The country’s outdated Companies Act was particularly in need of revision, he said.

“The President is keen to encourage British businesses to come in,” he said. “He thinks a lot can be learnt from western companies in terms of setting business standards, such as employee treatment, environmental awareness and so on.”

But he warned the arbitrary rule of law in operation in the country meant business activity in the region was still a risk.

Set Aung said Myanmar wanted sustainable not irresponsible or unethical investment. “Early birds are going to catch more worms,” he said.


LINK : http://www.iflr.com/Article/3007914/Regulatory/Myanmar-presidential-economist-frustrated-with-Western-sanctions.html

The Thieves of Burma

Hello from the third-most corrupt place on Earth.

BY CHRISTIAN CARYL | MARCH 27, 2012

YANGON - This week I'm in Burma, where Nobel Peace Prize laureate Aung San Suu Kyi is running for a seat in parliament. This is the first time she's been allowed to participate in an election in 22 years. The last one, in 1990, brought a landslide victory to her National League for Democracy (NLD). But she wasn't really in a position to enjoy it. As the results came in she was already under house arrest, and many of her colleagues had disappeared into prison.

If she makes it into parliament this time around, she will have little formal power to affect the passage of legislation. Even if the NLD wins all the seats up for grabs, its presence in parliament will still be dwarfed by that of the military, which has controlled the country's political system for the past 50 years and is automatically assured a large bloc of seats in the assembly.

Yet no one should underestimate The Lady, as many refer to her here. As the only politician in the country to enjoy genuine adulation, Aung San Suu Kyi is sure to give her party a disproportionately loud voice, and in politics that can count for quite a lot. As the de facto leader of the opposition, she will be able to turn a spotlight on issues that the country's military rulers have long preferred to leave in the shadows.

She should start with an issue that holds a prominent place in the lives of her compatriots: corruption. Burma is one of the most corrupt countries in the world, which is saying a lot. In the most recent Corruption Perceptions Index published by the watchdog group Transparency International, Burma's rank was 180. The only countries that ranked worse were Somalia and North Korea.

This will not come as news to Aung San Suu Kyi's voters. They encounter petty bribery on an everyday basis, but the culture of sleaze here goes way beyond that. For decades, Burma's military leaders divided up this country's astonishing national wealth among themselves, reducing the rest of their compatriots to poverty. On YouTube you can watch a leaked video of the wedding of the daughter of top general Than Shwe (pictured above, and covered in jewels). If you want to pay your respects to someone powerful in Burma, the best way to do so is by giving him or her a car as a present. Rumor has it that the gifts received by the happy couple in the video included 70 sets of car keys.

This is hardly a trivial problem. Burma desperately needs foreign direct investment to jumpstart economic growth and spur the influx of modern management and technological know-how, but investors are likely to shy away if the country can't clean up its act. Why put money into a factory -- or an English-language newspaper, for that matter -- if some politically well-connected thug can come along at the right moment and scoop up your property? Especially when you know that you'll have little chance of redress, since the legal system is also deeply permeated by sleaze.

So malfeasance is a big problem. But there's another reason why Aung San Suu Kyi should make it a priority. Her real power to change things may be limited, but corruption is one area where a bit of sunlight can have a disproportionate effect. If she succeeds in winning a seat, one of the first things she should do upon entering parliament is to propose a public code of conduct for all government officials. She should push for transparency in the administration of all state-owned assets, including clear rules on procurement and the awarding of government contracts.

She should also declare her interest in setting up an anti-corruption commission modeled on the existing bodies in Hong Kong or Singapore. Both places are famous for giving their corruption-fighting ombudsmen broad powers to investigate and prosecute graft. As a matter of fact, Burma's immediate neighborhood is rife with anti-corruption initiatives these days. Some of the most interesting come from India, where activists are bringing the power of the Internet to bear on petty bribery and official malfeasance. So there can be little talk of corruption-fighting as a quirk of alien Western culture. Nowadays, it would seem, many Asians are becoming obsessed with combating graft. What's more, these efforts demonstrate that combating corruption is not predestined by culture or history. Culturally speaking, Hong Kong and Singapore, both former British colonies, should be just as corrupt as other former British colonies like India and Burma. The difference is that Hong Kong and Singapore found the political will to tackle the problem. Burma's leaders can do the same.

Still, I doubt that the present government is likely to undertake serious measures in this direction any time soon; too many of its members remain compromised by their own dirty dealings. But if the government fails to respond to opposition demands for a true anti-corruption policy, voters will have little reason to reward it for doing so in the next general election three years from now. The powers-that-be reject the principle of clean government at their own risk.

What's more, Aung San Suu Kyi and the NLD should practice what they preach. She should announce a policy of zero tolerance among her own followers, including the full and transparent disclosure of assets. As the recent experience of the African National Congress so vividly illustrates, the popular freedom fighters of yesterday can easily morph into the sleazeballs of today once they achieve real power. Starting with the right policies now can help to stave off temptation in the future.

Myanmar's key pillars of economic change

By Pamela Koh | Posted: 28 March 2012 2109 hrs

SINGAPORE: Telecoms, real estate and energy may be at the forefront of new investments in Myanmar, after the government clears a sweeping economic reform bill.

Ahead of by-elections this weekend, the Myanmar government is already erecting key pillars of its economic transformation.

Currency reform, crucial to Myanmar's internationalisation, is being fast-tracked.

Myanmar will overhaul its complex exchange rate system to allow a managed flotation of its currency from April 1, Myanmar state media announced.

The Myanmar government has also earmarked energy as a target for new foreign investment.

It plans to award nine onshore oil & gas blocks to seven foreign companies and their domestic partners.

In the telecoms sector, four to five new licenses will be issued to foreign network operators in the next six to 12 months.

Among Myanmar's population of 60 million, there are only 2.5 million mobile and 1.5 million fixed-line customers.

This represents one of the last untapped telecoms markets in the world.

While Myanmar's untapped potential is the subject of much optimism right now, the race among foreign firms to turn that potential into profit, will be just as closely watched.

- CNA/wk

Link : http://www.channelnewsasia.com/stories/economicnews/view/1191814/1/.html

Faith placed in Uncle Sam as neighbourhood warily welcomes China

Jessica Brown / March 29, 2012 / (Opinion)

"Even Burma's notoriously authoritarian military regime is warming to the U.S." Photo: AFP

The Defence Minister, Stephen Smith, was quick to play down suggestions yesterday that American military surveillance drones could begin operating from Australia's remote Cocos Islands.

Deep in the Indian Ocean, 3700 kilometres from Darwin, the islands are closer to major south-east Asian capitals including Jakarta, Singapore, Kuala Lumpur and Bangkok: neighbours that Canberra cannot afford to get offside.

But Smith might have to worry more about convincing sceptics at home. South-east Asian countries, worried about the effect a rising China is having on the regional power balance, welcome America's presence in the neighbourhood more than many Australians realise

Even Burma's notoriously authoritarian military regime is warming to the US. Byelections this weekend are a welcome sign that the brutal dictatorship may be inching towards democracy. But, perhaps importantly for Smith, the Burmese generals' newfound taste for reform has a strategic element too.

Burma has long been a Chinese client state. It now hopes that political reforms will lead to closer engagement with the West, particularly the US.

Burma's strategic shift is the most dramatic but not the only such realignment taking place across south-east Asia.

The region's historical relationships with China and America vary wildly. But the uniformity with which they are moving towards the US in response to China's rise is striking.

All south-east Asian countries have close relationships with China, and all want to take advantage of China's economic rise. Yet none wants China to be in a position where it can dominate the region strategically.

The US has long been the preponderant military power in the region, whose nations, by and large, are happy for it to stay that way. They tolerate US primacy, because it has proved to be benign, and welcome its presence because it preserves the balance of power, enabling them to get on with the job of economic development without costly wars.

Like Australia, south-east Asian countries want to maintain the status quo for as long as possible, allowing them to free-ride on the US's implicit security guarantee while being lifted by the rising tide of China's growth.

Yet they know that is far from assured: they worry about a future where their major economic partner may come into conflict with their security guarantor.

South-east Asian strategies for dealing with this dilemma should be instructive for Australia, as we ponder what the ''Asian century'' might look like and our place in it. Although south-east Asian countries have remarkably different strategic outlooks, their strategy for dealing with regional security is essentially the same.

All pursue relationships with China and the US (although for Burma, and its neighbours Laos and Cambodia, these relations are in their infancy). They know that close ties with both is the best insurance against conflict emerging with (or between) either. And while countries such as Thailand and the Philippines have formal links to the US, they certainly don't want to be alienated from China in case it does grow to become the region's leading political power.

Paradoxically, some know they need to shift their own policies to preserve this status quo. Burma is the most striking example; Vietnam is another.

The emerging economic powerhouse of Vietnam shares a border with China, and the two countries are involved in a series of territorial disputes over islands in the resource-rich South China Sea, off Vietnam's coast. China stoked tensions last year when it reportedly cut cables being dragged by a Vietnamese oil exploration ship in the disputed waters.

Anxious about China's increasingly assertive posture in the sea, Hanoi has shifted noticeably closer to the US. The enthusiasm with which Vietnam has welcomed America's attention is an arresting symbol of just how much maritime south-east Asian states, spooked by the spectre of conflict in the South China Sea, hope the US will help keep China's naval ambitions in check.

Burma's case is quite different, but much of the thinking is the same. In October, the Burmese government cancelled a wildly unpopular Chinese-backed dam project, in the first sign that the regime wants to push back against China's dominance of their economy, and increasingly, their security policy.

In Australia, there is debate about whether the US should cede some power to China and accept its strategic rise - a debate fuelled by the musings of the new Foreign Affairs Minister, Bob Carr, about the wisdom of US troop deployments in Darwin. But there are bigger questions about whether the rest of Asia would support such a concession.

South-east Asian governments see overt conflict between China and the US as their worst nightmare, so the Australian government could quickly alienate its neighbours if it supported moves that stoke tension between the two major powers. (Hence the warning in Australia last week from Indonesia's Foreign Minister, Marty Natalegawa, about the danger of resorting to ''traditional alliances and fault lines'' in response to China's rise.)

But, ultimately, south-east Asian governments like Beijing know Australia and the US have a long-standing and close relationship. What's more, they are working carefully to build their relationships with the US too.

South-east Asia - even Burma - welcomes America's substantial presence, not because it changes the status quo but because it helps preserve it.

Jessica Brown is a research fellow at the Centre for Independent Studies. Her report Southeast Asia's American Embrace is released today at cis.org.au.

Link : http://www.watoday.com.au/opinion/politics/faith-placed-in-uncle-sam-as-neighbourhood-warily-welcomes-china-20120328-1vyqo.html#ixzz1qQ7dHLC7

West's energy firms await more reforms in Myanmar

By Randy Fabi

YANGON (Reuters) - Western companies want more concrete political and economic reforms before they invest in Myanmar's oil and gas sector, giving Asian and Pacific rivals an edge in competing to access its untapped resources, company officials said on Wednesday.

Myanmar has opened up to the outside world with astonishing speed since a civilian government took office last year after five decades of military rule.

The prospect of the end of Western sanctions has prompted a surge of interest but actual investment has yet to flood in.

"We are not in any hurry. We are watching closely and making the necessary contacts but we will go in when we are comfortable. There is more than enough gas to be explored," said a senior official with a major Western oil company, who asked not to be named.

Myanmar, one of the world's oldest oil producers which began exporting in 1853, has been moving fast to implement political and economic reforms, promising to float its currency and proposing major revisions to its foreign investment law.

Sunday's parliamentary by-elections, which will be contested by opposition leader Aung San Suu Kyi, are seen as a critical gauge for investors of the government's reform pledges.

If they are free and fair, diplomats say more sanctions are likely to be withdrawn as early as the end of April.

Human rights group, however, have advised oil companies not to rush into Myanmar, considered one of the world's most graft-ridden countries, since reforms can easily be reversed.

U.S. sanctions ban all domestic companies from new investments in Myanmar, while Europe has restrictions on domestic support for the Southeast Asian country's timber and mining industries but not energy.

"The big Western oil companies want more transparency before investing for the long term," said Marc Nickles, Asia-Pacific representative for European oil firm Perenco Holdings, on the sidelines of Myanmar's first major oil industry gathering in years.

"This is a high risk, high reward country and you have to be able to weather the changes," he added.

If reforms continue at the same quick pace, Perenco may participate in the next oil and gas bidding round. This is expected to be launched later this year after the government completes the process, now under way, of awarding nine onshore blocks to seven foreign oil firms.

Unlike their Western counterparts, Asian oil companies from China and Japan to Malaysia and Thailand were eager to expand their operations in Myanmar, after years of investment.

The last oil and gas tender was dominated by Asian oil firms, such as Thailand's PTT Exploration and Production and Malaysia's Petronas.

"I assure you that there has never been a better time for you to come to Myanmar and ... search for opportunities in the oil and gas sectors," said Energy Minister U Than Htay in the conference's opening address.

"At the end of the first international bidding round, we will be launching another international bidding round for onshore blocks in due course. At this moment, we have not decided which onshore blocks to include," he added.

Foreign oil companies awarded an oil and gas block will need to have at least one domestic energy firm as a partner, the minister said.

Myanmar currently produces 19,600 barrels per day of crude oil and 1.475 billion cubic feet a day of natural gas, Htin Aung, director general of the Ministry of Energy's Energy Planning Department, said at the conference.

Other data outlined by Htin Aung put Myanmar's proven oil reserves at 104 million barrels onshore and another 35 million offshore. Proven natural gas reserves were pegged at 410 billion cubic feet onshore and 11 trillion offshore.

(Editing by Anthony Barker)

Copyright © 2012 Reuters

Link : http://thestar.com.my/news/story.asp?file=/2012/3/28/worldupdates/2012-03-28T132558Z_1_BRE82R0PN_RTROPTT_0_UK-MYANMAR-OIL&sec=Worldupdates

Myanmar changes set to benefit neighbours

By Maria Siow | Posted: 28 March 2012 2123 hrs

RUILI, Yunnan province: As Myanmar opens up to the outside world, its neighbours stand to gain from its efforts to seek greater regional and international engagement.

China's Ruili, which borders Myanmar, is one such neighbour that looks forward to the relaxation of the former military dictatorship.

Located in China's southwestern Yunnan province, Ruili is known for its Myanmar influence.

Its location right next to Myanmar means it has quick and easy access to jade and jewellery from the Southeast Asian nation.

With over 5,000 jewellery companies and distributors, Ruili is one of China's four major jewellery distribution centres.

Local authorities hope to transform Ruili into an international jewellery centre within the next few years.

In addition, local traders hope with the opening up of Myanmar, trade and tourism here will take off in an even bigger way.

Jewellery shop manager Yang Cuibo said: "Our customers are mainly from Beijing, Shanghai, Shandong, Northeast China, Hangzhou, Zhejiang and Guangxi.

"We also have foreign customers. We don't just sell. We have our own factory and are involved in the entire process of extracting and processing."

Indeed, some Chinese have already grown rich on Myanmar jade.

Sichuan businessman Gu Yonggui said: "The prices of top quality jade had increased by 300 times over the past 10 years. The most lucrative is raw jade. It's really amazing."

Myanmar traders in China hope more business opportunities will become available after Myanmar opens up.

Shop proprietor Win Naing said: "We sell mainly to wholesalers. We also sell raw jade, pendants and bracelets."

Myanmar jade is globally renowned, and 95 per cent of the world's best and top grade emerald comes from Myanmar.

Like most border towns in China, the city of Ruili has made a name for itself in the development of trade and tourism.

But the growing and closer interactions between China and Myanmar has also brought with it both illegal and illicit activities.

These include the illegal entry of goods and humans, as well as drug trafficking.

Plans are under way to turn Ruili into a centre of border trade between China and Myanmar.

So as more inter-border opportunities become more abundant, greater cooperation will also be needed to ensure illegal activities are kept at bay.

- CNA/wk

Link : http://www.channelnewsasia.com/stories/southeastasia/view/1191817/1/.html

FACTBOX-Myanmar's economy and investment

28 Mar 2012 09:13

Source: reuters // Reuters

March 28 (Reuters) - Isolated for decades and squeezed by Western sanctions, Myanmar is courting investors to try to revive its economy under a new government pursuing big reforms after 49 years of military rule.

The resource-rich but underdeveloped country has struggled to spur growth or attract investment under the sanctions.

The West appears keen to ease the embargoes, which could eventually allow multinational firms access to Myanmar's vast oil and gas reserves, gemstone and mineral resources and its nascent banking and tourist sectors.

Here are details about Myanmar's economy and investment.

ECONOMY

Economic data under Myanmar's secretive former military government was notoriously unreliable. It claimed growth of 10-13 percent annually from 2004-2009, but economists dispute that. The International Monetary Fund has forecast 5.5 percent for this year and gives the same figure for 2011.

The government has forecast 6.7 percent for the 2012/13 fiscal year starting in April.

Few financial institutions provide estimates of the size of Myanmar's economy. The U.S. Department of State reckons the economy was worth $40.28 billion in 2011.

TRADE AND INVESTMENT

Myanmar's biggest trade partners are its immediate neighbours and other Asian countries. It does not publish Foreign Direct Investment (FDI) data on an annual basis.

It gives accumulated data, which shows China is the biggest source of investment, followed by Thailand, Hong Kong and South Korea. Some 47 percent of foreign investment went into power generation and 34 percent into oil and gas.

EXPORTS

Gas is Myanmar's biggest and most lucrative export, most of it going to Thailand. When construction of a huge pipeline from the Bay of Bengal to China's Yunnan province is complete, gas and oil exports are expected to surge.

Myanmar's Energy Ministry in January pegged natural gas reserves at 22.5 trillion cubic feet, almost double the 11.8 trillion estimated by oil major BP in its statistical review last year.

Teak and hardwood are also prominent, with China the main customer, as are garments, although the sector has been hit hard by regional competition. Beans, pulses, fish and seafood are also big exports.

Rice is seen as an area with huge potential if the government pushes ahead with reforms. Under British colonial rule, it was the world's biggest rice exporter, shipping 3.4 million tonnes in 1934. Industry officials say 722,000 tonnes was exported in 2011.

BANKING

A major shake-up of the banking system will inevitably follow the lifting of sanctions and currency reforms, but central bank officials and private bankers say it will take time, with a lack of experienced professionals a major obstacle.

The central bank issued money exchange licences to 17 local private banks in November 2011 and granted licences to 11 banks to carry out foreign banking services. Four banks have opened branches overseas, mainly for remittances by Burmese labourers. Several Chinese banks now facilitate cash transfers in yuan.

The central bank has also allowed 20 banks from 10 countries, mostly from Southeast Asia, to set up representative offices. Several Western banks have expressed interest.

PRIVATISATION BOOM

Private sector reforms accelerated from 2009 with the sell-off of about 300 state assets, from real estate, petrol stations and toll roads to ports, shipping firms and an airline. These highly opaque sales appear to have helped businessmen close to the military elite.

CURRENCY REFORM

Myanmar's kyat currency is pegged at 6.4 to the dollar but the black market rate is closer to 800. It has appreciated sharply against the dollar in recent years because of an influx of money into the energy and gemstones sectors, adding to the problems of local businesses.

INVESTMENT DRIVE

Myanmar is trying to attract investment in its oil and gas sector and in hydropower. In January, it awarded 10 onshore oil and gas blocks to eight mostly Asian firms in its biggest energy tender in years and will soon offer six more onshore blocks.

It is also pushing its tourism sector, where there is a chronic shortage of hotel rooms. Data shows tourist arrivals for fiscal 2010/11 at 424,041, but it only has 570 hotels and 160 guesthouses in the country, with a room capacity of 24,692. It is targeting more than 1 million visitors in the next few years.

Myanmar is setting up Special Economic Zones (SEZs) in Thilawa, south of Yangon, and Kyaukphyu, on the Bay of Bengal.

A Thai contractor plans a $50 billion SEZ at Dawei, strategically located on the Indian Ocean, with access to Thailand and beyond. It could become Southeast Asia's biggest industrial zone although doubts have grown about funding and the authorities have vetoed a big coal-fired power plant.

A new foreign investment law is awaiting parliamentary approval. This offers tax breaks and continues to let foreigners set up business without the need for a local partner. Companies must train local employees to ensure they make up at least 25 percent of the skilled workforce after five years of operation.

RISKY BUSINESS?

Myanmar is seen as one of the riskiest places to invest in. Corruption and cronyism are rife, regulation is a grey area and the workforce, public and private sector, lacks skills.

Some economists have warned any imminent lifting of sanctions could be counter-productive as the country may not be ready to handle a sudden influx of foreign capital. (Compiled by Martin Petty; Editing by Alan Raybould and Ed Lane)

Link : http://www.trust.org/trustlaw/news/detail.dot?id=02118253-d82c-4d9f-bc07-974494ae23d5