Investors, looking for sure bets, can stop reading right now. For those seeking overlooked energy “final frontiers,” well, there’s now – Burma.

According to the secretary of Burma’s largest business federation, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI), Myo Thet, he has been meeting with companies “every day for a year” even though “there is still rather low interest from the West. There have been some bank owners from the west and also Australia but it is still low compared to Asian countries. We wish to see more (investment) not only from the East but also the West… because the West, in terms of technology and finance, is stronger.”

Burmese Industry Minister U Soe Thein, who attended last month’s World Economic Forum in Davos stated that companies are “rushing” to Burma, and claimed his appearance at the Forum, a first for a Burmese government official, was proof of Burma’s growing status as a strategically key market for the west.

Why the turnaround?

The government is opening up the country’s previously tightly state-controlled economy and is accelerating reforms. The biggest external event however is some Western-imposed sanctions are getting lifted, causing Western business executives and government officials to pack flights to the capital Naypyidaw.

The European Union has already dropped a longstanding visa ban on some Burmese ministers and on 6 February the United States relaxed restrictions on the World Bank and International Monetary Fund entering Burma. Washington has also restored full diplomatic relations and lifted some visa bans against some senior Burmese officials. After an early January mission to Burma IMF executive Meral Karasulu told journalists, “Myanmar (Burma) has a high growth potential and could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world into its advantage.”

In December 2011 a group of executives from Germany’s biggest bank and its government investment arm visited Burma. So did Japanese executives from Hitachi, Toshiba, Mitsui, Itochu, JX Nippon Oil and Energy and Marubeni, while Norwegian, Russian and Brazilian investors have expressed an interest in developing Burma ‘s energy sector. Closer to home China, India, Thailand and Vietnam have held trade shows in Rangoon and visited to explore possible infrastructure projects.

Putting the seal on the country’s potential, in January billionaire George Soros visited Burma and said that he intended to establish an office to facilitate philanthropic work and later this month an American delegation is due to visit.

In this context it is worth remembering that in the 1940s and 1950s Burma was Southeast Asia’s wealthiest and well on its way to becoming the second developed nation in Asia after Japan. By 1950 Burma was the first Asian economic “tiger” with an economy on fast-track development, which, by the end of 1960 had built up Southeast Asia largest qualified, educated workforce.

What happened?

A bloody military coup d’etat in 1962, which effectively halted economic development. What Burma’s dolorous history over the past five decades has proved is that junta generals are far more effective in repressing their own people than stimulating economic growth.

Significant change began last year with the election of Thein Sein, previously Prime Minister from 2007, as President in March 2011. In an interview last week with The Straits Times Sein pledged his commitment to the reforms, saying they will go on until Burma achieves a “flourishing democracy.” Western governments and investors are taking him at his word.

Burma has vast, largely untapped natural resources, including large oil and natural gas deposits, teak and timber, tin, antimony, zinc, copper, tungsten, lead, coal, marble, limestone and gems along with huge hydroelectric power and agricultural capacities. Regarding the latter, Burma was once the world’s largest exporter of rice.

Another attraction of undoubted interest to foreign investors is the country’s low wage scale, as the average factory worker currently makes a mere $30-50 per month.

But some nations and investors are already aboard the gravy train, notably China, Burma’s biggest trading partner, followed by Thailand and Singapore. China has already poured billions of dollars of investment into Burma to operate mines, extract timber and build oil and natural gas pipelines.

Last year Britain’s Economist Intelligence Unit estimated Burma’s growth rate was 3.2 per cent, largely driven by its natural gas exports, which account for over half of Burma’s export receipts and foreign direct investment. Burma’s natural gas exports will increase significantly once production begins from its offshore Shwe and Shwephyu fields, estimated to hold 5.7-10 trillion cubic feet of natural gas and scheduled to come online in the next several years.

Sad to say for investors come lately, much of this natural gas is already earmarked for export to China’s Yunnan province via a pipeline currently under construction by a consortium of Burmese and foreign partners, with an estimated completion date of 2014. Beginning next year Burma will earn an estimated $29 billion from the sale of the natural gas to China over the next three decades.

Because of increased natural gas exports, Burma’s Ministry of Commerce is projecting that Burma’s foreign trade will grow more than 30 per cent in the fiscal year 2011-12 to $16.1 billion.

But while China has the lead in developing the country’s energy resources, they are hardly alone, as South Korea’s Daewoo International, along with Indian companies ONGC Videsh Company Ltd and Gas Authority of India Ltd (GAIL), are also developing energy projects.

And Sein’s government is bidding to attract more business interest, having last month announced that it would offer eight-year tax exemptions to companies newly investing there along with revising restrictive investment laws enforced by the former junta.

Lest the above picture seem overly sunny, a cautionary note has been sounded in a report released earlier this month by British risk analysis group Maplecroft, which noted that Burma has the world’s worst legal system for doing business, retaining a position it has held for the last five years despite recent reforms, remaining “the country offering the least legal protection for foreign companies. With recent political reforms and the likelihood of sanctions being lifted, Myanmar offers huge potential for oil and gas firms.” The report added that on-going turmoil in the Middle East and Magreb “has made Myanmar’s hydrocarbon resources even more attractive globally,” but “Tangible improvements in the rule of law, including increased judicial independence and greater transparency in the regulatory system, will be required before the long-term potential of the economy can be realized.”

Still, nothing ventured, nothing gained, right?

Dr. Daly of Oilprice.com wrote in from Washington, D.C., United States.

John Daly