Monday, January 19, 2015

Day One: Daewoo, Burmese Lunch, and TATA

Day One


After enjoying the wonderful breakfast at the Chatrium Hotel in Yangon, we headed off in our gigantic bus to meet Daewoo International Corporation.  Everyone was very excited to enter into our first meeting and a bit anxious to see how these meetings would proceed. 

Daewoo International Corporation is Korea’s largest trading company and a subsidiary of POSCO (Pohang Iron and Steel Company), a multinational steel making company based in Korea. Mr. Si Bo Joo, the executive vice president and managing director of the Myanmar branch, gave a wonderful presentation of their gas production journey in Myanmar also known as ‘The Shwe Project.”  He went on to talk about some of the technical aspects of drilling, production, and transfer into the main pipelines. 

Interestingly, he also discussed how the contract with the Chinese company, SEA Gas Pipeline Corporation receives 80% of the total sales volume of gas, and only 20% goes into the domestic market. From the first gas produced in 2013 of 200 million standard cubic meters per day to 500 MSm3/d in 2014. The share of gas will not increase over time unless they are able to find more sources and increase their current capacity. The off-shore gas is transferred from the west Myanmar to west China through a 792.5 kilometer pipeline.

Mr. Joo also went into detail of Daewoo’s serious intent in their promotion of CSR. Since starting their project in 2000, they have invested 4.2 million USD on socio-economic programs that have mainly been distributed in health and education. He also mentioned they are environmentally conscious and have participated the Mangrove restoration near the coast that also protect the people from cyclones such as Cyclone Nargis in 2008 that devastated Myanmar with approximately 100,000 deaths.

Although mainly rich in gas, Myanmar will play a pivotal role in the oil industry by transferring Middle Eastern oil to China through a oil pipeline paralleled with the gas one. Currently they are going through the Strait of Malacca and will save companies for transportation costs.

As the meeting was concluding, Mr. Joo gifted all of us a beautiful glass paperweight that had a figure of the gas rig in Swe. This was a very informative meeting and a great start to the week, and we headed back to the bus.

Back on the bus, the gigantic bus and Yangon traffic combined did not help our travels. The local infrastructure changes and increase in tourism has made the traffic in Yangon very congested but after arriving at a local Burmese restaurant, we had our choice of many different dishes including prawns, chicken, mutton, and vegetable dishes.  We had our fill and the food was fantastic and definitely worth the wait. 

~Sharon Yoo

Traditional Burmese Lunch

Tata International

After a hearty Burmese lunch, we spent a couple of hours at the Junction Square Shopping Centre, Myanmar's largest mall. The group split off to explore the shops, sample some desserts at the food court, and play arcade games--Margaux and Matt entertained a few local children with their dance moves on the Dance Dance Revolution mat. We left the mall in the late afternoon to head to our next meeting, which was with Sunil Seth, the Myanmar Country Head for Tata International. Mr. Seth provided us with an informative and detailed brief on the state of business, trade, and infrastructure in Myanmar. Mr. Seth has been with the Tata Group for three decades in Asia and in Europe, and he has witnessed the changes taking place in Myanmar since assuming his current role two years ago.

Tata has identified Myanmar as one of three key target markets for investment, along with Indonesia and Vietnam. Myanmar has traditionally been an exporter of agricultural goods, including pulses and rice. In recent years, exports of pulses--mainly to India--have continued, but both the quantity and quality of rice produced has decreased. Tata is involved in the export of pulses, selling branded Burmese pulses at its retail markets in India. Mr. Seth noted that despite the recent downturn in rice production, the country has the potential to modernize production techniques and once again become a competitive rice exporter.

Tata's most significant investment in Myanmar, however, is a coal power plant currently under development in Pathein. The plant, which is expected to produce 1,320 megawatts of power annually, is expected to cost $3 billion, and it represents the largest single Indian investment in the country. The current power infrastructure is inadequate, however, and severe irregularities in pricing are disrupting the market. Tata, along with other Indian companies and Thai companies, are advising the Myanmar government on developing a uniform power purchase agreement, which would standardize power pricing, and Chinese companies are focusing on upgrading and expanding the power grid. In addition to its agricultural and power investments, Tata operates an automobile assembly plant near Mandalay. Tata struggles to compete on price with used Japanese cars, but Tata is better positioned in the market for commercial vehicles.

Mr. Seth has been impressed with the progress made in Myanmar over the last few years. The country has been cut off from the modern management best practices developed and used abroad for the past fifty years, and, as a result, decision-making is still too concentrated at the top of the government hierarchy. Nonetheless, in Mr. Seth's view, the government has been effective in implementing its reforms over the past two years, and the administration has been receptive to input from the private sector. Mr. Seth is optimistic that the rate of progress will continue, and he expects the (currently small) middle class to expand fairly rapidly, paralleled by increased retail and access to consumer goods.

We thanked Mr. Seth for meeting with us and for answering all of our questions, and we headed back to our hotel to unwind after a productive day.

~Udit Banerjea

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