Electricity woes block Burma’s path to developmentBy Casey Hynes Jul 09, 2013 6:13PM UTC
The bidding is finished and initial offers have been made, but the Burma telecom licenses story is far from over. Burma offered licenses to Norway’s Telenor and Qatar’s Ooredoo on June 27, after a bidding and selection process that lasted several months.
It is well known that the companies invited to set up operations in Burma stand to gain massive sums financially, as this is one of the least wired countries in the world and the market is ripe for development.
But Burma is a country in flux, to put it mildly, and those potential rewards will not be gained without facing some very real risks. Many have pointed out that Burma’s government, which has been attempting to prove to the world that it is on the path to democratization and some measure of transparency, continues to be linked to stories of ethnic cleansing and civil unrest.
“Political upheaval always raises the risks” for investors, said Ken Cheung, a partner at Berwin Leighton Paisner’s Singapore office. Whether or not their forays into the Burmese market will pay off for Telenor and Ooredoo remains to be seen.
“Given where Burma is in its general infrastructure, it’s going to be a challenge,” Cheung said. “I think the pressure is on.”
Indeed, it will be interesting to see how these companies fare as it could indicate the future of international investment in a country that is in many ways underdeveloped. Up to this point, there has been a good deal of protest and criticism from locals and rights watchers over resource extraction projects by foreign companies that force farmers off their land, either temporarily or permanently, leading seriously damaging losses. In many cases, the natural resources are used in other countries and profits go to the Burmese government, meaning that most people who live in the affected areas benefit little to almost not at all.
In the case of telecoms and other infrastructure investment, however, even the common man stands to gain. While it seems all too possible that they will be exploited, greater mobile and Internet access in a country that has one of the lowest penetration rates in the world can only be a good thing.
The same might be said for another sector that is absolutely crucial for genuine development in Burma.
“If the country is going to develop, it’s vital for power and electricity to develop,” Cheung said.
In a recent article on General Electric’s interests in Burma, Forbes writer Simon Montlake noted that only 13 percent of the country’s population is on the grid. If the government wants to convince the world that it is truly committed to growth and change, it’s going to have to get power and electricity to much more of the country.
It would seem this is especially vital if major telecom corporations are going to be setting up and attempting to create widespread mobile and Internet networks throughout the country. Here again, international power and electric conglomerates may stand to make great deals of money, but may be hesitant to dive in too quickly. Cheung said potential investors are likely to be watching how other foreign businesses are received, and their opportunities for success before diving in.
“Companies are being very wary at this time,” he said.
The Irrawaddy noted that growing electricity needs due to increased factory production and tourism are straining an already outdated system. In a May piece, writer William Boot cautioned that Burma could follow the dark path of neighboring Bangladesh, which makes promises and proclamations about developing power sources but almost never follows through. This leads to losses of growth and income, which would be a true shame in a country like Burma, where there is so much possibility for not only investors to make money but to improve the quality of life for the people there. According to a 2012 article from The Economist, “three out of four people in [Burma] live in the dark.”
It will be difficult to invite foreign development in other sectors until improvements in electricity generation and distribution are made. Cheung noted that this will likely require heavy government involvement, as well as participation by organizations such as the World Bank, to bring Burma to where it needs to be.
The World Bank issues a press release in February confirming that it supports Burma’s efforts toward greater access to power. That statement quoted World Bank East Asia and the Pacific Vice President Axel van Trotsenburg as saying, “Sufficient, reliable and affordable electricity will help relieve poverty in rural areas and create opportunities for all.”
Cooperation with the World Bank may help Burma’s government work with foreign investors and mitigate risk, further enticing them to do business in the country.
Karin Finkelston, IFC Asia Pacific Vice President, was quoted by the World Bank as saying, “Mobile phone connections, ports, and power lines create jobs and link people to markets, enabling the flow of goods and services. IFC is also working with ACLEDA Bank to bring sustainable microfinance to the people in [Burma].”