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Some 250 petrol stations in Burma earmarked for privatisation in January as part of a grand economic reshuffle by the government are to open in June.
The stations are scattered throughout the country, with around 50 in Rangoon division, 40 in Mandalay division, 37 in Bago division, 27 in Irrawaddy division and 25 in Shan state.
“It is a two-sided story: one side is that the government has monopolised the sector for a long time, since the military coup in 1962, so it is the government losing its monopoly,” said Burmese economic analyst, Aung Thu Nyein. “But at the same time the assets were only transferred to the cronies.”
“I think there are less than ten companies who got licenses to run gas stations; some were transferred to agri-businesses and construction companies,” he added.
The likely owners of the stations are suspected to be the Htoo Group, Asia World and the Eden Group, all of whom have close ties to the ruling junta.
Burma is heavily reliant upon imported fuel as a result of a lack of refining capabilities in the country.
The current privatisation initiative is part of a move towards free trade of petroleum products, which has been overseen by the newly formed Fuel Oil Importers and Distributors Association (FOIDA).
There is hope that private enterprise will be able to run the energy sector more efficiently than the government monopoly. However given Burma’s reliance upon imported refined petroleum products, the private sector may be unable to control retail prices or not have the incentive to do so.
Burma imports around 18,500 barrels of refined petroleum per day, worth some $US586.6 million per year.
The implications are that gas prices could become more volatile in the long term as the government is less able to control supply and demand and distribution of fuel and therefore shield the economy from major fluctuations in international prices. “The economy is reliant upon international prices and could be liable to crises of supply internationally,” said Aung Thu Nyein.
Another potential concern is the relationship that these newly privatised assets, originally nationalised in 1962 and 1963, have with the military government.
Prior to 1962, the assets belonged to individuals who received no compensation upon their nationalisation and were offered no chance to retrieve them on privatisation. To maintain ownership, given a potentially more open legal system of property rights, the new owners will rely on the military for protection from civilian court claims.
As a result or not the military may also demand fuel from the private sector, Aung Thu Nyein suspects, with such impositions threatening a rise in prices.