Local firms eye country as manufacturing base

Thai investors are actively working to script success stories in Burma, glossing over their previous failures, but the coming general election in April would be the key to convince more investors.

Producers of agricultural products, seafood, and garments want to invest in Burma in the next few years, foreseeing the opportunity to tap the country as a manufacturing and farming base to serve the more-than 500 million population of Asean countries, and also export to third countries.

However, they do not yet have a clear investment plan as they want to learn more about the foreign direct investment policy and infrastructure development of the neighbouring country.

Thanit Sorat, vice president of the Thai-Myanmar Business Council, said that many Thai firms, from medium to large-scale manufacturers, are interested in expanding their businesses to Burma after the recent change in administration. However, the stringent rules for foreign investment and financial difficulties will allow only large-scale enterprises to successfully invest there.

LABOUR SUPPLY

Thanit pointed out that many firms are concentrating on investing in Tavoy Special Economic Zone, set up for Thai investors in particular. The Tavoy project is expected to be completed in the next 6-10 years, with a deep-sea port to serve as a logistics hub of Burma, connected to Asean countries.

With a 60-million population, Burma also has a huge workforce, mostly middle-aged. In addition, rich natural resources, a good export base to third countries outside Asean as well as export privileges granted to Burma will suit investors.

Since Thailand is facing labour shortage, especially in labour-intensive industries such as food and garment, Thai enterprises are exploring Burma and other countries in Asean as a second manufacturing base. With minimum wage much lower than in Thailand, Burma is an attractive location.

So far, many firms involved in agricultural production such as rubber, rice, sugarcane, and cassava, seafood producers, and garments have sent survey teams to Burma to seek business opportunities and learn about investment rules and regulations, he pointed out.

Other industries that would also set up factories in Tavoy are plastic manufacturers, automobile parts, jewellery, and furniture.

Since the Tavoy project and other logistics developments are not yet completed, some Thai investors, in particular small and medium-sized enterprises, will invest in cross-border provinces as a strategy to penetrate to Burma.

Paiboon Ponsuwanna, chairman of the Thai National Shippers Council, said Thai enterprises are interested in investing in downstream projects as Burma has offered many potential upstream industries such as wood, fishery, precious stones, and energy.

Paiboon, who is also managing director of Transamut Food - one of the country's leading seafood manufacturers - said that his firm is ready to make a second attempt to invest in Burma after pulling out on the previous occasion 20 years ago.

He said his firm is planning to make Burma a second base for seafood production, besides their factory in Samut Sakhon. However, he must learn more about business potential, infrastructure development, and investment rules to ensure the investment is successful.

HIGH POTENTIAL

Sukij Kongpiyacharn, president of the Thai Garment Manufacturers Association, said after many local apparel manufacturers had invested in Asean countries such as Indonesia, Vietnam and Cambodia, Burma is the next destination with high potential for new investment once it opens up its economy.

Burma has great potential as labour there is quite cheap when compared with some other countries in Asean. Sukij said that the association will gradually learn more about investment opportunities in Burma and send a team to explore the country as it will be a new target for future investment.

Gunkul Engineering is one successful Thai company, which has been in the electrical parts trading business there for 15 years. The company is now planning to invest in wind-turbine electricity generation in the near future after it was granted a 30-year concession by the Burmese government. However, the company will take six months to complete a feasibility study on the appropriate location before making the investment.

Gunkul Dhumrongpiyatui, executive chairman of the company, said it hopes to see major changes in Burma within the next three to five years. The change will lead the country forward with a clearer economic policy. Concession for electricity will be a priority followed by the oil and gas sector.

Zeya Thura Mon, managing director of Zaya and Association, Gunkul's trading partner in Burma, said that after the general election the government will inject huge budgets for development, particularly in electricity generation projects as well as oil and gas to ensure Burma's economic grows two to threefold.