Four hundred and eighty houses stand ready for villagers in the Bawah area affected by the construction of the Dawei Special Economic Zone (DSEZ) in eastern Burma. Built three years ago, they remain empty because the local government has yet to approve relocation and compensation plans. Italian-Thai Development Plc (ITD) continues to maintain them.
Nearly 30 kilometres away, construction is 80 percent complete on one of the nine five-storey apartment buildings planned to house workers at Dawei. The township that is taking shape also comprises an eight-storey serviced apartment building and as public facilities including a clinic and temple. It will be home to factory personnel and managers of the project’s initial phase that is now ready for booking.
Meanwhile, port facilities are being expanded with three more small ports planned together with a four-lane road connecting Dawei town with the Thai border in Kanchanaburi province. With estimated cost of around US$400 million, the project is attracting interest from Chinese investors including both state enterprises and private companies.
The interest of the Chinese is a relatively recent development in the tortuous eight-year saga of Dawei. But like so many other aspects of the on-again, off-again mega-project, it is not clear whether the Chinese will be allowed to participate.
Executives of Myandawei Industrial Estate Co (MIE), an ITD subsidiary responsible for developing Dawei, say that much will depend on the policies of the new government under Aung San Suu Kyi and President Htin Kyaw, which will formally take office his week.
ITD president Premchai Karnasuta last month accompanied a Chinese delegation to meet DSEZ management in Naypyidaw, the capital of Burma.
Thailand, Burma and Japan are the three main players in Dawei, one of three special economic zones being developed in Burma. Japan is also backing the Thilawa SEZ in southern Rangoon while Chinese investors are behind the Kyaukpyu SEZ in Arakan State in the country’s northwestern region.
“What was planned earlier has been altered under the new paradigm,” was the terse comment of MIE managing director Somchet Thinaphong to a group of reporters visiting the Dawei site early this month.
A local newspaper recently quoted Htin Kyaw as saying that the new administration would scrutinise the all three SEZs.
Jayant Menon, lead economist for trade and regional cooperation at the Asian Development Bank (ADB), said Dawei was still in the early stages. He described both the initial and main phases as “highly ambitious”, drawing on Dawei’s strategic location to increase Burma’s trade with not only Thailand and other neighbours such as Vietnam and India, but also other parts of the world by positioning itself as a transit point.
“The likelihood of these somewhat grand objectives of even the initial phase being realised remains uncertain, and dependent on both domestic and international factors,” said Jayant Menon.
The key domestic challenge is ensuring a smooth political transition in Burma that produces enduring peace and stability. The new regime, however, will also have to remain receptive and open to foreign investment, he added.
“The global slowdown in trade, and the regional drop in growth led by the China slowdown are negative factors that could limit the pace of development of the project but not derail it, and are much less significant than the domestic factors.”
The former military junta in 2008 awarded ITD a 75-year concession to develop logistics, industrial and energy facilities at Dawei at an estimated cost of US$8.6 billion. However, the Thai company struggled to attract financing given the political uncertainty in Burma, coupled with the fact that the world was in the throes of a financial crisis. In 2013, the Thai and Burmese governments temporarily seized responsibility from ITD before the two governments agreed the following year to revive the project.
Japan agreed in early 2015 to take part in the Dawei SEZ before MIE, a joint venture between ITD and the SET-listed industrial estate operator Rojana Industrial Park Plc, was granted a concession in August to develop the 27-square-kilometre Dawei industrial estate and related infrastructure under the Burma SEZ law.
Located 374 kilometres southeast of Rangoon in Tanintharyi region, DSEZ is designed to be the new gateway connecting the Indian and Pacific oceans and offering shorter shipment times from Thailand to India and Europe. The initial phase is estimated to cost $1.7 billion while the full phase of the SEZ will feature a deep-sea port, upstream and downstream oil and gas industries and power plants.
Dawei is the vital missing link in the economic corridor connecting the Pacific and Indian oceans, says Daiki Kasugahara, former director of the Asia Pacific Division in the Trade Policy Bureau at the Japanese Ministry of Economy, Trade and Industry (METI).
“The Dawei project has huge potential to connect the Mekong sub-region with India, the Middle East and East Africa. Dawei is the last missing link for the Mekong-India Economic Corridor which has great potential for economic development,” he wrote in an email to Asia Focus.
However the actual role Dawei will play remains to be outlined in a detailed master plan, added Daiki Kasugahara, now president-director of the Japan External Trade Organization (Jetro) Indonesia.
The Thilawa SEZ, meanwhile, will meet huge demand for industrial estate space that has been in short supply for the past few years around Rangoon, the country’s commercial hub. It is expected to become a production base mainly targeting the domestic market of Burma. It is also expected to provide quality job opportunities for people in and around Rangoon.
Dawei is seen more as a hub for the international flow of various regional economic activities, with a much longer-term and broader development perspective.
“Thilawa, which will activate Rangoon’s economy and Dawei, which will serve as the crossroads of regional economic activity, can be connected in the future and this will bring benefits to Burma and the region, which will also benefit Japanese business,” Daiki Kasugahara said.
A Japanese regional consultant who studies the Asean economy told Asia Focus that it was essential that the new Burmese government see the importance of DSEZ for the growth of the whole Mekong region and give its full support to the project. That would include taking risk and responsibility for finance for the necessary infrastructure as it is a very basic requirement for any large-scale infrastructure project in any country.
The Japanese government, meanwhile, is fully committed not only to support but to make the project a success as the equal partner with Burma and Thailand, he added.
“Dawei has a great advantage over other industrial estates in the region because it is located on the western edge of the East-West Corridor, which can function as the gateway to and from the west, avoiding the heavily congested Malacca Straits,” he said. “The DSEZ will certainly boost the economic growth of the whole Mekong region, creating synergy with other industrial estates in the region.”
For Somchai Aimimjit, who owns a seafood company in Thailand’s Ranong province bordering Burma, Dawei could offer a new future for his seafood business given the abundant supply of raw materials as well as cheap labour, and tax privileges for exporting to the European market.
A former head of the Ranong Chamber of Commerce, Somchai Aimimjit saw his first business in Burma confiscated by the military government several years ago. He is now confident that his business will be protected under Burma’s new foreign business law.
His family business today employs about 1,000 people in Thailand and operates seafood plants in Ranong and Samut Sakhon. About 90 percent of the workers are from Burma.
A frequent traveler to Burma to source seafood from Myeik and Dawei for the past 15 years, Somchai Aimimjit has become the first customer at Dawei SEZ. He has secured a 10-rai plot of land for 35 million baht to construct an ice plant and processing factory to be run by a new Burmese-registered company called VSI Union.
While he is waiting for his permit to be granted, Somchai Aimimjit has shipped four freezers with a capacity of two tonnes each from Thailand and is ready to transport raw seafood from Dawei to his Ranong and Samut Sakhon plants.
“You can easily find a variety of marine life that have become endangered or extinct in Thailand at the fish market in Dawei. Prices of shrimp and crabs are a lot cheaper here too,” he said while inspecting the land and temporary facilities at the SEZ.
Labour-intensive manufacturing such as seafood and garments are the targets of the initial phase at the Dawei SEZ. The full phase, meanwhile, aims to attract heavy industries such as petrochemicals, oil refining, automobiles, electronics, steel, plastics and fertiliser.
Apart from raw materials and tax incentives for SEZ investments, seafood processors in Burma still enjoy tariff benefits offered to less-developed countries under the European Union’s generalised system of preferences (GSP).
Somchai Aimimjit believes that a number of seafood companies will follow his lead in moving from Thailand to Burma in the near future.
“Most of the workers in the Thai seafood industry are from Burma,” he said, adding that an investment protection agreement that Burma had already signed with Singapore had reinforced his confidence about investing in the country.
For local residents such as 30-year-old Saw Hdaik Oo, who left Dawei when he was 15 to work in Thailand, the brighter prospects of the Dawei SEZ motivated him to reunite with his parents in his hometown a month ago.
Having worked with Somchai Aimimjit’s seafood company in Ranong and Mahachai for many years, Saw Hdaik Oo has been assigned to oversee operations at the new with 10 subordinates. Now, his main task is to source seafood from Burma to supply to Thailand.
Before returning home, he was earning a flat 12,000 baht per month in Thailand, plus an extra 3,000-baht allowance. Thanks to the Thai minimum wage, Saw Hdaik Oo should live a very comfortable life together with his Burmese wife in Dawei.
“Before this project came to life, I have never thought of returning home because job opportunities are limited here,” he said. “Without this project, all I could do here was to be a fisherman like my father or a construction worker.”