A model for regional partnership?-
Myanmar’s transition to democracy and the West’s initiation of the gradual lifting of sanctions imposed on the country offer new investment opportunities for neighbouring countries, Thailand in particular. The upcoming port and industrial complex on the south-eastern coast of Myanmar, being developed by a major Thai infrastructure company, is a prime example that may herald the beginning of many more such investments.
The Dawei port and industrial complex project that will cover an area 16 times the size of Thailand’s largest manufacturing park constitutes the beginning of Myanmar’s economic integration with other countries in the region. Located a mere 370 km from Bangkok, Dawei will provide a much-needed alternative to the overcrowded Strait of Malacca for cargo bound for Bangkok. In fact, the Dawei port and logistics infrastructure promises to reduce the travel time of goods bound for Thailand, China, Cambodia, Vietnam, and Lao PDR by approximately 10 days, while serving as a potential port for exporting goods to emerging markets in Africa and Europe.
Dawei port and industrial complex project
Surrounded by the Tanintharyi hills and monsoon forests, Dawei is located strategically between the rising powers ofIndia, China, and Southeast Asia, thus endowing it with immense economic potential as an industrial zone. It is positioned next to the estuary of a major waterway, the Dawei river, and has a natural deep-sea draught that is ideal for a large commercial port.
Recognising Dawei’s economic potential, the Myanmar government began exploring the possibility of turning the once-small fishing village into an industrial zone. In November 2010, Italian Thai Development Public Company Limited (ITD),Thailand’s largest infrastructure company, signed a 60-year framework agreement withMyanmar’s port authority to build a port and industrial estate on 205 square km of land at Dawei on a build-operate-transfer (BOT) basis. ITD will develop this mega project through its wholly owned subsidiary, the Dawei Development Company (DDC).
The overall project, worth nearly $60 billion, will be the first special economic zone (SEZ) in Myanmar. It will comprise a deep-sea port; an industrial estate comprising an oil refinery, a steel mill, a petrochemical complex, a fertiliser plant, a power plant, and other utility services; cross-border road and rail linkages with connecting transmission lines; and a township for residential and commercial development. The scheduled development will occur in three phases from 2010 to 2019.
The development of the first phase of the project that will cost approximately $8.5 billion comprises roads, utilities, and a port. The next phases include the construction of industrial facilities such as an integrated steel mill and an oil refinery. DDC has appointed reputable consultants to conduct a detailed designed study of the port and road links. Specifically, Halcrow, Aurecon, and Nippon Koei are working on the design of the port, while Epsilon, Tescon, and Mindway have been enlisted to study the road linkages.
One of the key projects in Phase I is the construction of a 132 km long four-lane highway (expandable to eight lanes in the subsequent phases) from Phu Namron in the Kanchanaburi province of Thailand to Dawei. The highway, also known as the Westgate Landbridge project, will be undertaken by a joint venture between ITD and four other companies: Thailand’s PTT Public Company Limited, the Electricity Generating Authority of Thailand, Japan’s Nippon Steel, and Malaysia’s Petroleum National Berhad (Petronas); it is expected to be completed by 2015. The access road from Dawei to Phu Namron has already been built, and eventually, the Landbridge project will be extended through the Greater Mekong subregional southern corridor to Vung Tau and Quy Nhon inVietnamvia Sisophon in Cambodia and Bangkok.
In addition, Phase I involves the construction of a deep-sea port with a capacity to accommodate a total of 25 vessels with capacity ranging from 20,000 to 50,000 tonnes. It will be able to berth 22 wharves simultaneously and handle 100 million tonnes of goods a year. A temporary jetty is now available for use. Plans are also under way to develop a 33 MW power plant and transmission pipelines for the first phase of the Dawei SEZ.
Economic benefits beyond Myanmar and Thailand
Thailand will be the greatest beneficiary of the Dawei project: the project is expected to triple the bilateral trade between the two countries from $4.3 billion in 2010 to $13 billion in 2015. Not only will the project secure a firm source of revenue for ITD that is currently incurring losses, it may also attract a number of Thai and foreign investors. Further, the Dawei project will likely bolster Thailand’s economic influence in Myanmar in the long term.
The export-oriented economies of Southeast and East Asia will also benefit from the existence of this port, as ships will be able to avoid the Strait of Malacca, thus reducing the distance to theBay of Bengalby nearly 3,000 km. Though China has not invested in the first phase of the project, it has recently revealed its plan to build a rail link from Yunnanto Dawei. Further, the Chinese government has proposed the establishment of a $1.5 billion “China City Free Trade Centre” inBangkok: Chinese products traded in Bangkok will likely be exported via Dawei port.
Thus, it is no wonder that Dr S, Thinapong, managing director, DDC, calls the project a “Look West” port project. This port is well positioned to be the gateway for East Asian economies to access markets beyond Asia includingEurope, notwithstanding the global slowdown. As Dr Thinapong pointed out in an interview with Southeast Asia Infrastructure, “The current economic crisis in Europe is short term in nature, and in the long run, the region will prove to be a good prospect for exports.”
Risks and challenges ahead
The financial viability of the project is still uncertain. Thus far, DDC has failed to secure the $8.5 billion needed to finance the project’s first phase. The decision of Max Myanmar, a 25 per cent stakeholder in DDC, to opt out of the project is also another setback for the firm.
Nonetheless, DDC is undaunted by these developments; in fact, it is confident about putting together a consortium of interested firms with the expertise and financing needed to complete the project. Dr Thinapong explained, “We seek to form a consortium of like-minded companies to execute the project; such a practice is standard for large projects. We have received good responses from Japanese, Korean, and other firms.” Citing confidentiality issues, as negotiations are ongoing, he was unable to divulge the names of these firms.
The Thai and Myanmar governments have also decided to push the Dawei project forward and signed a memorandum of understanding (MoU) to that effect in July 2012. Further, in September 2012, the two governments agreed to set up two joint committees and a subcommittee to raise funds for the six industrial sectors that are part of the project.
Apart from financing issues, the project has raised a number of environmental concerns. Construction work on the four-lane road that passes through the Tanintharyi mountain ranges has highlighted the problem of deforestation. The project also poses social and environmental risks for the people near the Thailand–Myanmar border and the ethnic fishing and farming communities in Myanmar. Since Myanmar does not have strong environmental laws to protect its resources and the health of its people, environmental groups fear that most investments will be in heavily polluting industries. However, according to Dr Thinapong, “The company is committed to doing all that is required to ensure that the project is environmentally sound.”
A model project for the region?
There is no doubt that the Dawei port and industrial complex project has immense potential to bring economic prosperity to Thailand and Myanmar, as well as the rest of Southeast Asia. At present, however, the project is clouded by risks. Though the Myanmar and Thailand governments have committed to find the required financial resources for the project, it remains to be seen to what extent the two governments will succeed in their endeavour to raise the $60 billion needed for the overall project; investors have not been convinced by its financial viability.
Also, several experts have questioned the overall justification of the Dawei port and industrial complex as a project for the people. The cynics believe it to be just a tool to empower a select few. Some of the cynicism stems from the lack of confidence in theMyanmargovernment’s willingness or ability to protect the livelihoods and the health of locals who are likely to be affected by the large-scale construction project and its future operational impact.
Any project constructed at the cost of the livelihoods and health of the local population is unlikely to be tenable especially at a time when the Myanmar government is transitioning from half a century of military rule to democracy. It is thus important for the two governments to lay down an unequivocal investment framework that would ensure adequate returns to investors, while minimising the negative social and environmental impact of the project. Thus, the Dawei port project can be a model for other investment opportunities across borders in a region that remains one of the fastest growing, despite the global economic slowdown.
