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Cablegate: A Banner Year for Foreign Investment in Burma?

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 RANGOON 000688

SIPDIS

SENSITIVE

STATE FOR EAP/BCLTV, EB
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: EINV ECON PGOV BM
SUBJECT: A BANNER YEAR FOR FOREIGN INVESTMENT IN BURMA?

REF: A. RANGOON 327
B. RANGOON 43

1. (SBU) Summary: Despite no improvement to Burma's
investment climate, approved FDI last year increased by the
largest amount in five years. The new apparent mini-boom is
largely due to Chinese interest in Burma's questionable
onshore oil and gas reserves, though new Thai and Japanese
investment also flowed in. Unregistered foreign investment
in Burma's rich forests and mines will continue. However, a
new anti-foreigner policy for energy sector investment should
ensure Burma's FDI growth is a one-off occurrence. End
summary.

The Chinese are Coming

2. (SBU) Despite continued economic problems in Burma, and no
improvement in the country's investment climate (ref B),
unpublished GOB figures indicate approved foreign investment
in FY 2004-05 (April-March) was at its highest level in five
years. The GOB data set total new approved investment at
$158.28 mln, raising the total level of approved investment
since 1988 to $7.8 bln. These numbers do not necessarily
reflect actual investment, nor do they change when divestment
occurs.

3. (SBU) The total approved FDI, and the number of new
approved investments, in FY 2004-05 were the highest since FY
2000-01. The main reason for these increases was a
surprising spike in interest in Burma's heretofore
unappetizing onshore oil and gas sector (ref A). This sector
attracted nine new approved investments worth $142.5 mln.
Other winners in FY 2004-05 were the mining (four projects,
$6 mln) and manufacturing (one project, $3.5 mln) sectors.

4. (SBU) The surprising expansion in FDI came primarily from
China. With 11 new projects planned or underway, the PRC's
official approved investment in Burma rose from $67 mln to
$193.5 mln during the last fiscal year. Two of China's major
energy firms (Sinopec and CNOOC) signed agreements to explore
and, perhaps, develop a handful of onshore oil and gas
blocks, and one Chinese mining outfit inked a $6 mln
investment in mineral exploration. Though prominent Chinese
investments are approved by the GOB and recorded, the amount
of Chinese investment in Burma is still vastly underestimated
by official data as much of it is informal investment in
border regions or made by Chinese citizens who have illegally
obtained a Burmese citizen's national identity card.

5. (SBU) The Thais also expanded their approved investment in
Burma with four new projects worth $29 mln (mostly in oil and
gas, with PTTEP exploring new offshore blocks, but also in
hotels and tourism and manufacturing). The Japanese also
made $2.7 mln worth of new investments, but only in
previously approved real estate projects.

The Rankings Now

6. (SBU) At the end of FY 2004-05, the FDI rankings remain
pretty much the same as the prior FY. Based on the value of
approved investments since 1988, Singapore remains number
one, followed by the UK, Thailand, and Malaysia. Hong Kong
has jumped to fifth (replacing the United States whose
numbers come primarily from the pre-1997 investment by
Unocal) due to a transfer of assets held on paper for a
decade by Texaco to the Hong Kong subsidiary of Malaysian
energy giant Petronas (which now operates the offshore
Yetagun gas field). France remains in sixth place, followed
by the United States, Indonesia, the Netherlands and Japan.
Despite the new PRC investment, China is only eleventh in
official total approved investment.

Comment: Biting the Hand

7. (SBU) Though Burma's FDI is still extremely low by any
standard, the significant increase in FY 2004-05 is a boon
both to the GOB's wallets and prestige. Though there are no
figures, we believe that informal foreign investment in the
timber, mining, and fisheries sectors is also bringing cash
into the Burmese economy. That said, the GOB is doing
nothing to improve the climate for legal FDI; quite the
contrary. In a typical move, the GOB recently announced it
would not allow future foreign investment in the onshore oil
and gas sector. This should help ensure that the good
foreign investment times will not roll far. End comment.
Martinez

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