Industry players are watching with interest an impending tender award by Myanmar’s Ministry of Energy for 30 offshore oil and gas exploration blocks, which has attracted bidding by several major international oil companies (IOC) that were absent in previous tenders. The outcome of the tender will highlight the progress, or lack of one, as the country attempts to improve the climate for energy investments.
Efforts to attract foreign investments into Myanmar have remained a challenge for the government as the state is still reeling from the effects of several decades of economic isolation under military rule. The country, which opened itself to foreign investments after Thein Sein assumed the presidency in March 2011 and introduced political and economic reforms, have still not fully addressed foreign investors’ concerns.
While the pace of reforms in Myanmar was slower than anticipated, there were some attempts to bring the country’s energy sector in line with global practices. Electricity prices were raised in January 2012 as part of power sector reforms, while diesel and gasoline prices were indexed to Singapore spot market prices in 2011, the International Energy Agency (IEA) said in its “Southeast Asia Energy Outlook.”
Under-explored Myanmar “has potential for gas production growth if its energy sector attracts needed investment,” the IEA added. Given Thein Sein government’s commitment to economic growth, Myanmar began to reform its foreign direct investment law in early 2012. This took place around the same time as the United States and the European Union began to ease or suspend economic sanctions imposed against the former military government. Even so, the investment climate in Myanmar is still evolving as the country opens itself to foreign businesses.
“There are uncertainties in regulation, discretion in administration, and implementation may be tough in some cases,” according to Edwin Vanderbruggen and Wai New Tun, Partner and Senior Associate, respectively, at law and tax advisory firm VDB Loi.