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2 European
firms face Myanmar catch-up By
Chris Stewart
The European Union on Monday
suspended most sanctions against Myanmar, paving
the way for a surge of overseas investment in one
of the world's poorest yet most resource-rich
countries. Western businesses are seen as
beneficiaries of the end to sanctions, yet Asian,
notably Chinese, interests may be the biggest
gainers. The United States has yet to ease most of
its sanctions.
The EU decision, which
removes sanctions targeting more than 800
companies and nearly 500 people, is in response to
a rash of reforms by President Thein Sein that
have given the former general credence as a
reformer since he took office in March 2011,
rather than a puppet of generals of the former
military regime.
China is already
Myanmar's biggest investor, having poured nearly
US$14 billion into the country so far, from $1
billion in 2008 and
amounting to 35% of
total investments from more than 30 countries,
according to government statistics. Most of the
investments involve hydropower energy, oil and gas
and mining, with the latest $4 billion being made
in the power energy sector. [1]
That still
leaves plenty of scope for Western companies
willing to risk their money in a country where
investment law has been little changed in 24
years, per capita income at $715 a year is half
that of neighboring Bangladesh and the lowest in
Southeast Asia, and three-quarters of the 48
million mostly rural population lack electricity.
[2] (The government announced nationwide rolling
blackouts on April 2, the day after a landslide
by-election victories for pro-democracy leader
Aung San Suu Kyi and 42 other members of her
National League for Democracy.)
Even so,
Western newcomers will face stiff competition from
Chinese and other Asian interests. While British
Prime Minister David Cameron was obliged to
describe 10 business leaders accompanying him to
Myanmar this month as "tourists", Thein Sein could
openly drum up investment this past weekend when
he attended a summit in Tokyo with leaders of
Japan, Thailand, Cambodia, Vietnam and Laos.
"We hope that Japan's famous and
successful firms ... will support us" to help
shrink the economic gap between the area's rich
and less well-developed nations, he told a
luncheon organized by the Keidanren, Japan's
biggest business lobby.
United States
companies still have to hold back before diving
into the fray, although the dire strait of
Myanmar's infrastructure should mean rich pickings
for the likes of Caterpillar, the world’s largest
construction and mining-equipment maker, when
Washington removes its own restraints. Caterpillar
authorized dealer Myanmar Tractors Ltd, a unit of
its Nepalese dealer, has already grown from a
seven-employee start-up in 1995 to a staff of 350.
Businessmen affiliated with Caterpillar have met
government officials to discuss sales of engines
and other heavy machinery, according to the state
newspaper, New Light of Myanmar. [3]
Still, Caterpillar and European
counterparts will have their work cut out to catch
up with leading Chinese construction equipment
makers such as Sany Heavy Industry, Chansha
Zoomlion and others whose broad range of products
will be in heavy demand when holes have to be dug
and the concrete starts to pour for the airports,
roads, factories and hotels that will sprout up in
a sanctions-free Myanmar. They also have ready
expertise close to hand to train operators and
patch up machinery.
Sany, owned by Liang
Wengen, in 2011 rated China's richest man at an
estimated $11 billion, last year won $20 million
worth of equipment orders in one deal alone from
Myanmar's largest conglomerate, Asia World, and
China Harbor Engineering, for use in building the
international airport at Myanmar's new capital,
Naypyidaw. [4] Asia World's boss, Stephen Law (aka
Tun Myint Naing) is among those who were subject
to EU sanctions.
Zoomlion, which claims to
be China’s biggest cranemaker, stepped up its
presence in Myanmar last November with the launch
of a range of its products in Yangon. The two
companies are well placed to meet any new demand -
between them they accounted for about half of
market value of China's concrete machinery
industry - alone worth $17 billion - trailed by
Xuzhou Construction Machinery Group (XCMG), and
Shantui Construction Machinery, according to
ChinaCrane.net.
Recent purchases by the
Chinese companies will limit competition from
potential European outfits who might have eyed a
stake in Myanmar's revival. XCMG this month agreed
to buy a major stake in Schwing, Germany's
second-largest concrete pump maker. Once XCMG's
acquisition of Schwing is completed, the three
largest concrete pump manufacturers in Europe will
have all been acquired by Chinese companies, China
Daily reported.
In January, Sany paid $475
million for Putzmeister Holding, said in the
industry to be the world-leader in specialist
concrete pumps, in the largest Chinese-German deal
to date. Sany this year has also set up a $143
million venture with Austria's Palfinger AG, the
world’s biggest maker of truck-mounted cranes,
while Zoomlion is already taking advantage of its
2008 purchase of Italy's CIFA, Europe's
second-largest formwork and concrete handling
specialist.
Chinese firms are also ahead
of the game in mining in Myanmar. While the likes
of Canada's Ivanhoe Mines have left the country -
it has said it pulled out of its 50% interest in
the S&K mine at the Monywa Copper project
about 100 kilometers west of Mandalay early in
2007 - China North Industries Corp, or Norinco,
said in 2010 it would spend just short of $1
billion to develop the deposit, The Myanmar Times
reported. Last August, Norinco International Corp
said it had a $700 million contract to supply
purchasing and construction services to the same
project. [5]
North of Mandalay, China
Nonferrous Metal Mining Co and Taiyuan Iron and
Steel (Group), China's largest stainless steel
producer, are developing the Tagaung Taung nickel
mine. The $800 million-plus mine, the biggest
cooperative mining project with China, started
operations last April. Delays to the project since
2004 have seen Myanmar increase its share from 25%
to 50% by 2008, even as costs increased from $600
million. [6]
Plenty more resources are
awaiting exploitation, but Chinese outfits have
gained much experience over the years in what is
required to make a competitive bid with Myanmar
generals and other local interests.
Away
from the heavy lifting, Chinese companies look
strong enough to see off foreign challenges.
Fridges, air-conditioners and microwaves are still
a relative rarity in Myanmar and the country looks
an open market for China-based whites-goods maker
Haier, founded as recently as 1984 and now
claiming to be the world’s No 1 consumer appliance
brand.
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