Myanmar pins growth ambitions on new economic zones!

TORU TAKAHASHI, Nikkei staff writer

YANGON -- The scene today is tranquil. Water buffalo graze in the shadows of a Portuguese church built in 1470. This is Myanmar's Thanlyin district, some 20km southeast of downtown Yangon. The Myanmar government hopes by 2015 the Thilawa special economic zone will be operational in this area -- a symbol of industrial modernity for a growing nation.

As Myanmar emerges from decades of economic and political isolation, the government is pinning the Southeast Asian country's future on foreign capital and technology to finance and develop special economic zones that can drive growth. The country has great potential, but few of its industrial parks have access to a stable power supply, modern ports or good roads. The government has designated three special economic zones it hopes will underpin its drive to liberalize and attract investment -- essential steps if Myanmar is to integrate into the region and catch up with its economically vibrant neighbors.

　

In the zone

This is the government's second attempt to develop Thilawa, which will have an area of 24 sq. km. A consortium of companies from Singapore and Malaysia in the 1990s began work on an industrial park there. That project was shelved in 1997 in the aftermath of the Asian currency crisis and economic sanctions imposed on Myanmar's military junta. The government of President Thein Sein, which assumed power in 2011, revived the project. It decided in July last year to put Japan in charge of developing Thilawa.

Three of Japan's largest trading companies -- Mitsubishi Corp., Sumitomo Corp. and Marubeni -- on Oct. 29 signed a contract with a public-private body in Myanmar and created a joint venture to develop the Thilawa zone. The venture will be 51% owned by a Myanmar's entity, and 49% by the Japanese entities. A 10% portion will be owned by the Japan International Cooperation Agency, known as JICA. The Japanese government will provide yen loans for the construction of a power plant and a port in the zone. Japan's Penta-Ocean Construction won the bid to develop the land and plans to begin building by the end of the year. The joint venture aims to open a 4 sq. km portion of the zone around mid-2015. Suzuki Motor is considering building an auto plant in the zone.

 

 

Other plans are afoot. In the southern city of Dawei, a project for a coastal industrial park that will dwarf Thilawa is on the drawing board. The 200 sq. km Dawei project will be one of the largest zones of its kind in the world if it gets built. Land for the site has been secured in a fishing village facing the Indian Ocean, 300km west of Bangkok. Myanmar intends to bring integrated steel plants and chemical plants, among other operations, to the industrial park. Thailand agreed last August to jointly develop Dawei with Myanmar. Once the zone is linked by road and rail with its neighbor, it could become a base for a cross-border division of labor. Wages are climbing in Thailand, but are much cheaper in Myanmar. The zone could also serve as a distribution hub linking Southeast Asia with India, the Middle East and Africa.

Thein Sein sought Japan's participation in the Dawei project when the East Asian nation's Prime Minister Shinzo Abe visited in May. Japanese officials in late September had their first formal meeting with Thai and Myanmar counterparts in Yangon. With as many as 4,000 Japanese automakers, electronics companies and others operating in Thailand, the Dawei industrial park could be a boon. But with its hands full in Thilawa, Japan Inc. has been cagey about taking part in the Dawei project.

Kyaukpyu, in northwestern Myanmar, is a candidate for the third zone. With oil and natural gas pipelines from the city to China's Yunnan Province operating since September, the zone is expected to attract petrochemical companies, and other corporations. But Kyaukpyu is still in the early planning stages. A lead developer has yet to be selected.

If all goes well, foreign companies should find the three special economic zones in Myanmar attractive. Each has advantages and disadvantages.  Thilawa is close to Yangon, the country's largest city, making it relatively easy to find workers. But the zone is not suited to heavy industry because the port that serves it, on a river, cannot accommodate large ships. Dawei offers convenient access to Thailand, but requires infrastructure building from scratch. Kyaukpyu has a good deep-water port, but is far from Myanmar's industrial centers and those of its neighbors.

Tune in, turn on

Other infrastructure projects are in the works. In June, Myanmar auctioned off operating rights for two mobile communications companies, with Norway's Telenor and Qatar Telecom tendering the winning bids. The two companies plan by 2015 to start offering service, once networks are in place. The local mobile communications market is dominated by Myanmar Posts and Telecommunications and another government-affiliated company. The mobile penetration rate in Myanmar is around 10%. The government hopes introducing competition from overseas telecom companies will boost that figure to 80% by 2016.

Myanmar is also looking to upgrade the country's air links. A consortium comprising Incheon International Airport and other South Korean companies won the right to build and operate Hanthawaddy International Airport in a northern suburb of Yangon. The airport is scheduled to open in 2018 and will be able to handle 12 million passengers a year. The capacity of Yangon's current international airport will also be doubled to 5.5 million passengers by 2015. The government has set a goal of drawing 7.5 million overseas tourists annually, seven times the current level, by 2020. With many underdeveloped assets, such as ancient Buddhist temples, Myanmar's ambition to grow tourism into a $10 billion industry is achievable.

Ref;http://asia.nikkei.com/magazine/20131121-Hang-on,-Yangon/Cover-Story/Myanmar-pins-growth-ambitions-on-new-economic-zones?page=2