Oil and gas and the debate over ‘quality’ investment

Not enough Myanmar companies are benefitting from foreign investment in the oil and gas sector, says Parami Energy group chairman and chief executive officer U Ken Tun.

U Ken Tun says that of the companies operating in or providing services to the sector, fewer than five percent are Myanmar.

Most of the foreign companies in the sector rely on other overseas-based companies to provide services, he told Mizzima Business Weekly.

U Ken Tun also has concerns about the total amount of foreign investment going into oil and gas compared to other sectors.

There should be measures to ensure that a certain amount of foreign investment goes into infrastructure development, he said.

It’s an idea which has the support of Myanmar Pinnacle financial services managing director U Kyaw Myo Htoon.

“There’s a real need to attract foreign investment into the country’s infrastructure development,” said U Kyaw Myo Htoon, who acknowledged that stronger investment institutions would improve the investment climate.

Other members of the business community with concerns about the amount of foreign investment going into oil and gas include Golden Star company chairman, U Thein Tun.

“If foreign investment mainly flows into the oil and gas sector and continues to take advantage of that sector, how will that contribute to economic development,” U Thein Tun said.

U Ken Tun says spending in the oil and gas sector highlights a wider issue about whether enough is being done to attract what he calls “quality” foreign investment.

The Directorate of Investment and Company Administration rejects suggestions that it is not doing enough to attract “quality” investment.

“More than 90 percent of foreign investment is ‘quality’ foreign investment,” said U Aung Naing Oo, the director general of DICA, under the Ministry of National Planning and Economic Development.

U Aung Naing Oo said he defined quality foreign investment as that which created jobs, was responsible, involved technology transfer to help develop domestic industries and strengthened Myanmar’s export performance, such as value-added products.

Apart from oil and gas, manufacturing also attracts a significant share of foreign investment, including in the labour-intensive garments industry.

“About 40 percent of total foreign investment in the past three years has flowed into the manufacturing sector, especially the garment sector,” he said, referring to one of the country’s main employers.

“Foreign investment has also flowed into the telecommunications, hotel and real estate sectors,” said U Aung Naing Oo, who is also secretary of the Myanmar investment commission.

Industry analysts say foreign oil and gas companies clearly meet the criteria for “quality” foreign investment” as defined by U Aung Naing Oo.

They say the sector has directly created hundreds of jobs and that thousands more have been indirectly created to service the industry.

More job opportunities will be provided when exploration and production activities begin in the 20 offshore blocks and 16 onshore blocks for which contracts were awarded earlier this year.

As well as a record of maintaining high workplace safety standards, foreign companies have contributed to the transfer of technology to Myanmar-based firms providing services to the sector as well as knowledge transfer ranging from operating advanced drilling technology to aviation maintenance.

As for export performance, they say that Myanmar earns billions of dollars a year from the sale of gas to Thailand alone.

“Undoubtedly the international oil and gas industry has and will continue to have an enormous economic impact in Myanmar and job creation, technology transfer and the development of domestic industries to support its requirements is a foregone conclusion,” said a well-placed industry source who requested anonymity.

“Most international players have strong socio-economic programs that actively encourage such things and MOGE [Myanmar Oil and Gas Enterprise] additionally tends to build in such requirements into their contract terms,” he said.

Source: Mizzima Myanmar

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