Junta to privatize oil industry

Monday, 25 January 2010 20:59 Khaing Suu

New Delhi (Mizzima) – Burma’s military government notified private businessmen on January 19th of their plan to privatize Burma’s oil industry.

Sources in Rangoon’s business circle said several leading private businessmen and companies currently importing petrol and diesel were summoned last Tuesday for a meeting in the administrative capital of Naypyitaw and informed of the government’s plan to privatize the oil business by January 31st.

“We were informed of the plan to privatize the oil business. It is just the beginning and we are to form a fuel businessmen association soon. Naypyitaw instructed us to form an association,” a businessman, who attended the meeting, told Mizzima.

He said the association would be chaired by a close business associate of the junta, Tay Za, and could be vice-chaired by one of the sons of General Thura Shwe Mann, third in-line in the hierarchy of the Burmese junta.

With regards to the privatization of the oil business, the Union of Myanmar Federation of Chambers of Commerce and Industries (UMFCCI) from January 22nd to 23rd held a meeting to brief members on the government’s scheme.

But an officer at the Myanmar Petroleum Products Enterprise (MPPE) office in Naypyitaw, when contacted by Mizzima, denied any knowledge of the plans, saying, “We don’t anything. We can only make things public when the official announcement is made.”

MPPE, the Burmese junta’s business department dealing with the import and domestic sales of petrol and diesel, maintained a monopoly over the fuel business since May 2008, when devastating Cyclone Nargis caused a sharp rise in the demand for fuel by business enterprises.

As MPPE failed to provide the necessary fuel, the government allowed selective businesses with a close connection to the military government, to import fuel. But later, in October 2009, the government allowed all businesses with export earnings to import fuel for their use.

A businessman who deals in importing fuel said during the 2008-2009 fiscal year, Burmese businessmen close to the ruling generals, including Htoo Trading Company owner Tay Za and Thein Win Zaw, owner of Ngwe Biang Phyu, a company dealing in mines, were able to import huge amounts of oil.

Though MPPE is the sole official distributor of oil, with limited quotas, most automobile users, factories and industries using petrol and diesel rely on the black market, even though prices on the black market may be substantially higher.

Before August 2007, the official subsidized price for petrol was about 150 kyats (approximately 15 cents) per gallon (approximately four liters), with the black market rate approaching 10 times the figure.

But, in August 2007, the junta reduced subsidies on oil, petrol and diesel, causing a sharp rise in the official price of oil to over 3,000 kyats (approximately 3 USD), negatively impacting thousands of consumers.

Following the May 2008 decision to allow a few private businesses to play a role in the oil business, the price of oil on the black market has dropped to a level relatively lower than official MPPE’s rates.

Currently, the official rate for a gallon of petrol is about 3,000 kyats, while on the black market it cost about 2,500 kyats.

According to the CIA World Factbook’s January 2008 estimates, Burma consumes 43,140 barrels of oil per day, producing 21,900.

Burma is estimated to have over 50 million barrels of oil in reserve.