Thailand sees big potential for Burma

Business Desk               The Nation                     Publication Date : 13-02-2012

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 240 billion baht, 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 20 billion baht ($648 million), 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. http://www.asianewsnet.net/home/news.php?id=27633&sec=2