EXPLORATION ’93 — Southeast Asian projects are ripe for the

At a time when many North American mining companies are working projects in Central and South America, opportunities in Southeast Asia are in danger of being overlooked.

Projects abound at all levels, from grassroots exploration in virgin land to the acquisition of mines with proven reserves. Thailand, Vietnam, Laos, Myanmar (Burma) and Kampuchea (Cambodia) are all seeking foreign investment. When they departed, colonial powers left behind a number of functioning mines in Myanmar and Vietnam, so a considerable amount of mining infrastructure is already in place. Moreover, similarities in the geology of the other three countries point clearly to the presence of gold, base metals, gem stones, coal and industrial minerals.

But while the mineral potential is encouraging, the problem of coping with international investment procedures is daunting, to say the least. Mining-related investments overseas seem to depend less on mineralization than on a jumble of other factors. These include: land tenure, mining legislation, foreign investment regulations, currency controls, incentives, bureaucracy, infrastructure, dependability of local partners, graft at the governmental and individual level and, of course, international politics. What follows are some advantages and disadvantages to investing in mineral projects in Southeast Asian countries:

— Thailand — This country has the greatest potential for return, followed by Laos, Vietnam, Myanmar and Kampuchea. The accompanying Table ranks these nations in terms of potential for investment return.

Reasons for investing in Thailand are: its excellent international reputation and infrastructure; lack of currency controls; little graft; good mining/investment legislation and incentives; the presence of three major mining groups with money, technical expertise and political connections. The chief disadvantage is a complex bureaucracy that requires permission from many independent and competing agencies before projects can commence. — Laos — By comparison, investments in Laos require the involvement of only two government agencies. Also, money invested can be repatriated, there is little graft and no international prohibitions. However, exploration and development may be hindered by scarcity of support groups and lack of local partners.

Both Thailand and Laos seem most likely to prosper in mining. Thailand’s mining houses, such as Padaeng Industry Co., can generate joint ventures with foreigners. Meanwhile, the Laos government grants large mining concessions which can host viable mining projects provided the foreign investor is prepared to pay for roads, waterways, etc.

— Vietnam — Here, advantages include good road/air transport, an entrepreneurial population and availabilty of reliable data. However, legislation has little effect due to rampant graft, and there is no hard currency. Political pressure from the U.S. is preventing investment from North America, though 1993 should see that pressure removed. When this happens, a massive rise in investment and infrastructure will occur, and mines with proven reserves could be placed in production within two years. — Myanmar — Four years ago, Myanmar was thought to have excellent mining potential, thanks to suitable legislation and incentives, technical information and availability of support groups. However, investors are generally discouraged by a record of government repression and lack of progress in negotiating mutually favorable contracts and investment repatriation. There is little hope that this situation will improve in the next few years. Furthermore, poor transportation and lack of government control outside coastal regions persist.

— Kampuchea — Former Cambodia has little to offer. Open war among three major factions means it is dangerous even to visit. Quick return projects are possible only where deals can be made with a military faction. Both Myanmar and Kampuchea seem destined to remain in the backwater until stable, Western-style governments supplant the current regimes. To succeed in these countries, it will be necessary for foreign investors to generate trust. This can only be achieved by demonstrating a clear, long-term commitment as conditions evolve. Local partners are mandatory and choosing the correct group requires intensive research and a continuous presence by the foreign group. Technical data exist but their validity is often questionable and pales in comparison with Western standards. On-site verification is mandatory. One’s entry into a country must be guided by foreigners with excellent local contacts and experience.

In the West, high labour costs demand that companies employ a great deal of automation in exploration and development. All Southeast Asian countries abound in cheap labour which can be readily trained. This resource must be exploited, with automation reserved for special requirements. Southeast Asia will be the site of the next century’s discoveries. Far-seeing, dedicated investors who cleverly position themselves now will be the victors 10 years hence.

— John Steele, who has worked with the Thai government, is with GeoThai Services Co. of Bangkok, Thailand, and Port Credit, Ont.