State energy firms to professionalise

The Ministry of Energy is planning to pursue more joint ventures with foreign companies, as senior government officials have urged state-owned enterprises to professionalise or risk being reformed.

The energy sector includes a prominent set of state-owned firms, but tentative steps to modernise through forming joint ventures with foreign firms have already begun.

The fuel distribution and retail arm of Myanmar Petroleum Products Enterprise plans to partner with a foreign firm to improve its operations, while Myanma Oil and Gas Enterprise (MOGE) and Myanma Petrochemical Enterprise are also planning to work with foreign firms to upgrade certain operations.

Energy minister U Zay Yar Aung said these partnerships are the first step in eventually transitioning the state-owned firms to becoming publically owned firms – though added it will take some time for this to happen.

“It is difficult to change directly from being a state-owned enterprise to being a public company,” he said in an address at a conference on natural resource management in Nay Pyi Taw on October 16. “But we’re implementing reform to move toward [having] public companies in this sector.”

Ministry of Finance and Revenue deputy director general U Zaw Naing said the number of state-owned firms has been dropping, declining to about 40 businesses under 14 ministries after 2012, though had it previously been 47 state-owned firms under 18 ministries.

State-owned enterprises can be slow to develop business and come to depend on the state budget, said U Zay Yar Aung.

“We don’t have enough experience on our own to change businesses – it is a big challenge for us,” he said. U Zay Yar Aung added it may take 10 years to fully change the way the state-owned enterprises do business and see them fully transition from being state-owned.

Senior government officials, including Minister for the President’s Office U Soe Thane and Finance Minister U Win Shein, said earlier this month that there will be some changes coming to state-owned firms, particularly at those that manage to consistently lose money. Some Pyidaungsu Hluttaw members have also openly criticised state enterprises which consistently lose money, noting only a few – mostly in the natural resource sector – are able to show consistent profits.

Several state-owned firms in the energy sector have already taken steps to seek foreign partners. A tender for an international firm to join MPPE in its monopoly of distributing jet fuel attracted about 24 interested bidders, though local media said a shortlist was released last month with four bidders left. Mizzima also reported on October 14 there are nine firms shortlisted in a tender to assist MOGE with professionalising in drilling, pipeline and seismic services.

Nomita Nair, partner at legal firm Berwin Leighton Paisner, which is among the nine shortlisted firms, said government ministries often have limited numbers of people and therefore turn to consulting firms.

For the energy sector as a whole, Ms Nair said she advocates for a comprehensive approach that takes into account the range of energy industries in the country.

“From a legal point of view, a policy point of view, I see a lot of talk about the upstream side, but … a lot of focus really needs to be made on the downstream and power-generation side,” she said.

It is also important to strike a balance between revenue-generating exports and using domestic petroleum on the local market to create jobs and factories, she added.

U Zay Yar Aung also said that while the Ministry of Energy is open to joint ventures with foreign partners in the country to export petroleum abroad, it has prioritised ensuring there is enough oil and gas earmarked for domestic consumption.

“When there is sufficient oil and gas for local use, we will sell it outside Myanmar. But we want to sell high-end products rather than raw materials. This is the president’s latest policy,” he said.

Some of the present contracts require Myanmar to export its oil and gas production, though this may change in the future.


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