March 30, 2009 | domain-b.com
Tata Motors setting up heavy trucks unit in Myanmar
After launching the world's cheapest car, Nano, Tata Motors is looking east, towards neighbouring Myanmar, to boost its sales by setting up a truck manufacturing plant in the military ruled country.
Tata Motors, the world's fourth largest truck manufacturer and second largest bus manufacturer, will be setting up a heavy turbo truck assembly and component production factory in that country. Production is expected to start by December 2009.
Manas Kumar Mishra of Tata Motors met Myanmar's minister of energy, vice admiral Soe Thein in Naypyitaw on Thursday to finalise the first Indian truck manufacturing unit in Myanmar.
Myanmar's official newspaper, The New Light of Myanmar, said, 'Both sides discussed the speedy implementation of a heavy turbo truck assembly and component parts production factory project and starting manufacturing operations from December 2009.'
This project is part of India's cooperation with ASEAN countries and `Look East Policy' started in 1994, whereby the Indian government wants to engage in bilateral development projects such as construction of roads, power projects, oil refinery units, transmission lines, telecommunications, and Information technology services in East Asian countries like Myanmar.
Tata Motors will get $20 million (Rs100 crore) line of credit that has been sanctioned by the external affairs ministry for setting up the heavy turbo truck assembly and component production factory in Myanmar.
As part of its expansion plans in Southeast Asia, Tata Motors had inked a joint venture with Thailand's Thonburi Auto Assembly's to manufacture up to 35,000 one-tonne pick-up trucks a year over the next 3-5 years. (See: Tata Motors to move fast on small car project, tap Southeast Asian truck market)
Last year the company had raised a further $1 one billion in debt or equity from overseas markets to fund further acquisitions and/or strategic alliances in India and abroad.
India's bilateral trade with Burma for 2007-08 was $901.3 million while Myanmar's export to India was $727.85 million. India's exports to Myanmar totalled $173.46 million.
For a nation of 47.37 million people, there are about 900,000 motor vehicles in Myanmar, more than half of which are in Yangon, and more than half of which are motorcycles.
There are only a handful of truck manufacturers in Myanmar with most of them being located in the Taunggyi industrial zone of southern Shan state manufacturing light trucks and jeeps.
Most of the light trucks are imported, with Japan being the biggest source of light truck imports into Myanmar. Tata Motors, however, therefore not face competition in the heavy truck segment from Japanese imports.
Among the imported trucks, the Mitsubishi Canter and Toyota Dyna of Japan have the highest sales in Myanmar with the Mitsubishi Canter being the most preferred truck because their engines have more power than Dynas.
Japan's Suzuki Motor Co had established a joint venture in 1998 with Myanmar Automobile and Diesel Engine Industries and manufactures Wagon R saloon cars, light trucks and Suzuki motor cycles.
Since 1997, the US and the EU has imposed economic sanctions on Myanmar's military rulers for overthrowing the elected government of Aung San Suu Kyi, and former president George Bush in July 2008, further strengthened the sanctions when the military junta brutally cracked down on the monk-led protests in September 2007.
Since foreign fund flows are scarce, investments in Myanmar have come mainly from its immediate neighbours like China, India as well as from Russia, Singapore and Vietnam.
Foreign investment in Myanmar nearly doubled in the first 11 months of 2008 to $974.9 million, with $855.99 million coming from China. Majority of Chinese investments are in the mining and oil and gas industries.
In 1995, the Essar Group of India, through its subsidiary Essar Oil, signed contracts with the Myanmar government for onshore and offshore explorations for oil and gas and is currently drilling two wells - one onshore and the other offshore.
GAIL and ONGC are part of a consortium in the massive Shwe gas field off the coast of Myanmar with ONGC holding a 20 per cent stake. Recently they discovered new gas reserves, which require an investment of about $2 billion to develop the find.
China, being the largest investor in Myanmar, has invested heavily in the mining and oil and gas sector.
The Chinese government had given a grant of $4.39 million to Myanmar for setting up an industrial training centre in Mandalay, the country's second largest city, to train local technicians for automotive production and maintenance.
A consortium of Chinese companies has built the biggest hydropower project in Myanmar, Shweli 1 Hydropower Station's No. 2 generating turbine on a BOT (Build- Operate-Transfer) basis. This plant supplies power back to China, making it the first power station outside the country that will supply electricity to China.
The BOT contract is for 40 years and the power station is connected to China's power grid, which will supply power to the manufacturing hub of Guangdong.
China is now building a 2,000 km-long gas and oil pipeline from Myanmar's Arakan state to China's Yunnan province before the end of 2011 to import oil and gas from Myanmar.
The total cost of the pipeline will be approximately $1.2 billion and China will bear most of the cost.
In the early half of this month, the $332 billion sovereign wealth fund of Norway, the Pension Fund-Global, divested all its holdings in China's Dongfeng Motor Group for selling 900 trucks to the Myanmar military during the first half of 2008.
The action initiated by the Norwegian wealth fund was in line with its ethical policies of not investing in companies that sell weapons or other military materials to the Myanmar military government.