Mon 16 Jul 2012
Filed under: Business / Trade
General Electric is to become the first US company to restart doing business in Burma following the relaxation of Washington-imposed sanctions, it was announced on Saturday.
American firms are wasting no time after President Barack Obama announced the issue of general licenses on Wednesday to allow investment and financial services.
GE was the first to move, agreeing through its local dealer to provide x-ray machines for cardiology and topography to two private hospitals in Burma.
The deal was announced on Saturday during a US business trip to Burma, where investors are hoping to tap into everything from infrastructure and financial services to information technology, oil and gas.
Seventy people from 37 US firms were on hand to examine investment opportunities.
Although the GE deal – done in partnership with Sea Lion Co Ltd – was relatively small at approximately $2m, the company has big plans for Burma, where the government has vowed to boost healthcare spending and tackle chronic power shortages.
“We’re now good to go,” GE’s Stuart Dean on Friday.
“Before it was a grey area, we didn’t know if this was permitted or not. We would prefer it this way, to see the end user. If we gave a hospital 60 days to pay, was that financing and breaking sanctions? We weren’t sure, but now that’s covered by the licenses, so we’re very positive.”
Burma’s 15-month-old quasi-civilian government is navigating an ambitious path to develop a nation that wilted under 49 years of military rule and sanctions, which have largely kept US firms at bay.
Major US companies dealing in Burma under the embargoes were Chevron, which set up there before sanctions were put in place, and Caterpillar, which has sold bulldozers and excavators in Burma through an independent dealer.
The licenses issued to US companies cover provision of financial services and a reporting requirement and detailed disclosures to promote transparency in a notoriously corrupt country, a move Obama said was to provide “immediate incentives to reformers”.
One of the biggest challenges for Burma’s government, and of concern for many investors, is its power outages. Burma has an outdated grid and three-quarters of its 60 million people do not have regular access to electricity. Although it generates hydro-power, most of its output is exported to its neighbours.
Dean said GE was working fast to try to agree a deal to supply Burma with two 25-megawatt gas turbines, which the government promised to the public in response to protests in several cities. It was also seeking to upgrade old GE technology sold to Burma before the imposition of sanctions.
“We continue to negotiate this, discussions are ongoing, but unlike healthcare equipment it’s complicated, you have to connect to the grid and you need gas,” Dean said.
“There’s an urgency, we’re working it hard, Burma’s working it hard, but they’re inundated with other proposals and in terms of people who understand how to negotiate energy deals, they’re limited.”
Now that financing was permitted, the world’s biggest jet engine and electric turbine maker would eventually look to aircraft leasing there as Burma prepares to build a new airport outside the commercial capital Rangoon.
Dean said the country was also interested in upgrading Burma’s decrepit railways and fleet, which was not GE technology, but the company might provide signalling equipment.
With a request to open an office in Rangoon still pending, progress would be slow and the company, he said, would limit its work in the country for now.
“We still have no feet on the ground. We’re looking to hire by the end of the year, it’s one step at a time,” he said. “The real focus is, let’s do healthcare and electricity well.”