Myanmar, formerly one of the poorest nations in Southeast Asia but now
termed the region’s “next economic frontier” by the International
Monetary Fund, is also the newest battleground for Indian companies
seeking to wrest business away from Chinese firms, which remain the
biggest investor in Myanmar, even as western companies rush to the
country.
Export-Import Bank of India (Exim), the state-controlled trade
financing institution, has agreed to invest $800 million in Myanmar,
part of which will be used to upgrade the Yangon-Mandalay railway and a
plant for Tata Motors Limited (NYSE:TTM) to assemble vehicles in the
country, said David Rasquinha, the executive director of the bank,
according to Bloomberg.
Chinese companies have previously invested more than $14.19 billion in its neighboring country.
The competition is somewhat uneven for Exim, as China Development
Bank Corp., which has a loan book more than three times the size of the
World Bank, and the Export-Import Bank of China, offer cheap loans to
snare business. The Indian bank is planning to sign credit agreements of
as much as $500 million by the next month, to participate in an economy
that the IMF predicts will expand 7 percent over the next five years.
“We shouldn’t get pessimistic because competition is there,”
Rasquinha said in an interview in Mumbai. “We should be seeing the size
of the pie and fighting smart.”
Thus far, India has made a single $2.5 billion investment by Oil & Natural Gas Corporation Limited (NSE:ONGC).
China Development Bank signed a $2.4 billion loan agreement with
Myanmar’s Foreign Investment Bank in 2010, according to the Myanmar
Times, to help fund a natural gas pipeline between the two countries. In
May 2011, the bank agreed to provide Myanmar’s Ministry of Taxation and
Finance with a 540 million euro ($718 million) line of credit during a
meeting between Myanmar President Thein Sein and former Chinese
President Hu Jintao.
Exim, which has been active in lending to Africa and helped boost
India’s trade with African countries, is hoping to replicate some of its
success in Myanmar. The bank if trying to “excite” Indian companies to
conduct business in Myanmar, Rasquinha said.
Myanmar needs $650 billion in investment by 2030 to support the 8
percent GDP growth potential forecasted by McKinsey Global Institute,
the research unit of McKinsey & Co. Companies wanting to do business
in Myanmar, which has been ruled by a military regime until 2011, will
have to adjust to the pace of the country’s opening, corruption, and the
lack of infrastructure.
The Southeast Asian country, which borders both India and China, is
ranked No. 172 of 176 in Transparency International’s 2012 corruption
perception index.
Myanmar’s liberalization may reduce its dependence on China,
according to Olivia Boyd, a Beijing-based energy analyst at IHS Global
Insight. China has been a long-time supporter of the country’s junta
government, and was the only major foreign investor, benefitting from
its close ties with Myanmar’s leaders. Now, however, the local
population is protesting against certain Chinese companies for unfair
contracts, environmental damages and their relationship with the junta.
“Myanmar’s dependence on China is lessening,” Boyd said. “Chinese
companies wield less bargaining power, meaning that Chinese companies
may face further contract revision of this sort in the future.”
A contract with Chinese Wanbao Mining Co.’s Latpadaung copper mine
was revised recently, giving Myanmar’s current government a large share
of the mine’s revenue.
Indian companies may be able to tap part of the business if they take a long-term view, said Rasquinha, according to Bloomberg.
“The pie is so big that there’s room for all of us,” he said. “China
has large large amounts of money available and can lend at very low
rates, but they can’t finance every single project.”
source: International Business Times
http://www.ibtimes.com/myanmar-economy-rise-indian-companies-want-wrest-business-away-dominant-chinese-rivals-1360799
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