The future of the much-touted special economic zone remains shaky despite Japan's involvement.
Once in a while, updates on the development of the Dawei Special Economic Zone appear, as if the project would get off the ground soon and be completed in 2016.
The latest good news was Japan’s agreement to take part in the development, bringing the project under the joint supervision of three governments – Myanmar, Thailand and Japan.
During his meeting with Indian Deputy Foreign Secretary Vijay Kumar Singh in October, Thailand’s Prime Minister Gen Prayut Chan-o-cha extended an invitation to India to join in as well.
According to a research note by SCB Securities, the Myanmar-Thailand-Japan coalition recently invited bids for the development of the initial phase, expected to encompass 27sq km, larger than the earlier 20sq km (similar in size to Map Ta Phut in Thailand). It added that only two Thai companies – Italian-Thai Development Plc (ITD) and Rojana Industrial Park Plc – have proposed developing the highway linking Thailand with Dawei plus an industrial estate.
Late October, Myanmar Union Minister for Labour, Employment and Social Security Aye Myint met Japanese delegates from Dawei Institute of Research and Deloitte Tohmatsu Consulting Co Ltd to discuss the progress of research projects to implement the Dawei SEZ. Aye Myint is also chairman of Dawei SEZ Construction Special Working Group. He was informed that Japan would complete its research on the SEZ project at the end of March next year.
There are three research projects for successfully developing the Dawei Special Economic Zone, arranged by the Ministry of Economy, Trade and Industry (METI) of Japan and to be undertaken by Economic Research Institute for Asean and East Asia (ERIA), a Japanese research institute.
There is some progress if compared to the past six years.
The original 75-year concession was awarded to ITD, Thailand’s largest construction company, under a deal struck in the 1990s with Myanmar’s then military government. Since 2008, ITD launched some construction works at the site, mainly involving a road link with Thailand. However, it was struggling to find financing for the gigantic project, which is expected to cost some $8 billion for the construction of seven projects – a road link, a deep-sea port, industrial zone, power plant, housing, town planning, water supply and communication system.
The Thai government stepped in last year to take over the project. Dawei SEZ Development Co was established with both Thailand and Myanmar holding a 50-per-cent stake.
ITD reportedly spent US$189 million on the project’s first phase and remains eligible to bid for future Dawei-related work.
“We’re holding talks with ITD and its partner company to operate some smaller projects such as roads, ports, housing, mini industrial zones, and so on,” Aye Myint said last month.
He added that an evaluation of the project’s importance along the Mekong-India corridor, the size of industrial segment included in the whole project, the participation of the government and the private sector, and the environmental and social impact assessments are being conducted in the first step. Japan would join the project in the second step, he said.
Since taking over the project last year, there have been several meetings between Myanmar and Japanese officials.
On October 14, a delegation led by the chairperson Aye Myint met with Norihiko Ishiguro, Japan’s deputy minister of the Ministry of Economy, Trade and Industry, Japanese industrialists and other relevant officials, seeking their assistance to revive the economic zone.
Japan is not a new friend of Myanmar.
Major Japanese companies are active in the development of Thilawa SEZ, one of three major SEZs being promoted heavily by the Myanmar government in addition to Dawei and Kyaukphyu in Rakhine state.
The government has also been assisting Myanmar in several areas. On December 9, it agreed to provide $400,000 for four hospital and school construction projects in Kachin state and the Magway region. Since 1993, the government has financed several small projects in Myanmar. According to the Japanese embassy in Myanmar, to date, the aid encompasses 321 education programmes, 179 healthcare promotion projects and 136 social welfare and environmental projects as well as 68 basic infrastructure programmes.
The latest agreement is Japan would take part in reviving the Dawei SEZ. Three studies to be carried next year would focus on developing Myanmar’s industrial sector and the economic corridor at the south of the Mekong-India region, enriching the SEZ with required technical know-how, and funding it by collaborating with the government and the private sector.
Dawei is located 330km from Bangkok and some 683km from Yangon. For years, it has been advertised as a new trade route to the Andaman Sea and Indian Ocean, facing India, the Middle East, Africa and Europe. It will allow smooth connection between the west (Andaman Sea) and east (Gulf of Thailand). Beginning with light industry, down the road it can also serve as a site to develop petrochemical and petroleum industries.
In its research, completed in 2013 by ERIA, the institute noted that physical and institutional connectivity enhancement in Asean and East Asia is a key driving force towards deepening economic integration in this region. The institute, in 2009, proposed the Mekong-India Economic Corridor (MIEC) and analysed the possible impact of the corridor development. The Comprehensive Asia Development Plan, proposed by ERIA in 2010, compared the economic impact of the North-South Economic Corridor, the East-West Economic Corridor and the MIEC developments and concluded that the MIEC offers the largest potential contribution to regional economic growth.
“All studies showed that Dawei and Myanmar were the weakest links in the corridors, which present high potentiality. There has, however, been a long delay in the implementation of proposed projects, including the Dawei deep-sea project, the Dawei Special Economic Zone project and road construction connecting to Thailand,” it said in its latest research.
Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai), said in a recent briefing in Bangkok that connectivity would play a key role in drawing foreign direct investment into Thailand and the four CLMV countries – Cambodia, Laos, Myanmar and Vietnam.
“Logistics will be the predominant factor,” she said.
Even as the government seems focused on Dawei, the economic affairs officer at United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has a different opinion.
In his article originally published by Fung Global Institute, he noted that the government should first focus on building deep-sea ports to support the country’s industrialisation. And in this regard, Dawei is not in his plan.
He supported the two potentially significant industrialisation projects – Thilawa SEZ near Yangon and the upgrading of the road connections of the East-West Economic Corridor within the Myanmar territory. However, he said these developments are not adequate to support the needs of all industries in the country, as history shows the manufacturing sector develops best when located adjacent to or near a large deep-sea port.
“One of the bottlenecks of manufacturing development in Myanmar is the lack of a deep-sea port to serve as a key logistical gateway of Yangon, which is the commercial and industrial centre of Myanmar,” Abe said.
In this picture, the Myanmar government should not make Dawei its priority, he said, citing the long distance from Yangon. Although the Dawei port has a geographic advantage with regard to market access to Thailand, Myanmar’s main trade partner, it is far from the traditional industrial clusters of Myanmar, he noted.
Aside from the deep-sea port in Dawei, there are two newly planned projects close to Yangon – in Pathein and on Kalargote Island. Pathein is 200km west of Yangon.
Abe said that the one in Kalargote Island looks the most promising now.
“The Kalargote Island project has clear advantages over the other port development projects, including proximity to Yangon, EWEC, the new industrial zones and Thailand, Myanmar’s major market. This development should take priority to fast track the clear advantages it will bring.
“A comprehensive development strategy for the Thilawa SEZ and EWEC, coupled with the development of industrial zones, other SEZs and deep sea ports, should be at the high priority for the country. A lack of such policy framework, which must include the development of a deep sea port near Yangon, represents a major obstacle in enhancing Myanmar’s growth prospects,” he concluded.