Thailand’s dream of acquiring a trade gateway to the Indian Ocean may be scuppered not because of lukewarm interest by Japanese investors but because of Burmese and Chinese business interests.
The Bangkok government has blamed problems in securing Japanese investment for the latest delay in forging ahead with the Dawei industrial port project on Burma’s southeast coast. In fact, the grandiose multi-billion dollar scheme first envisaged by the private Thai developer Italian-Thai Development (ITD) as long ago as 2008 was in limbo long before the Thai government moved in last September to try to help it along.
The Burmese government had clearly gone cold on Dawei—which is closer to Bangkok than Rangoon by 300 km—when it refused to approve a huge 4,000 megawatt coal-fueled electricity generating plant at the site for ITD back in February 2012.
By then, Chinese government money was already building an oil transhipment terminal on the central coast at Kyaukphyu, another sleepy Burmese seaside town where gas from the Shwe field out in the Bay of Bengal will also come ashore.
Kyaukphyu is where oil and natural gas pipelines now being completed through Burma into China’s neighboring Yunnan Province begin. It’s where China plans to take a fast railway line from Yunnan carrying exports, and it’s where the Burmese government on the back of these developments has ambitions to build an economic zone to attract manufacturers and create a major import-export port with thousands of jobs.
Kyaukphyu is not close to Rangoon but it is only 250 km to Naypyidaw and less to the central Irrawaddy belt of towns leading up to Mandalay.
“The fundamental problem with the Dawei project is that its main beneficiary is always going to be Bangkok,” regional energy industries analyst-consultant Collin Reynolds told The Irrawaddy on Feb. 19. “The Thais want it primarily as a crude oil transhipment point much the same as the Chinese are achieving with their Kyaukphyu set up.
“Thailand also sees Dawei as a place where it could expand its petrochemicals industry, which is stymied on the edge of Bangkok because of environmental and health concerns.
“Japanese investment could go into Dawei in support of this because Japanese firms are among those that have been restricted at Bangkok’s Map Ta Phut petrochemicals industrial estate. But I think Japan sees bigger prospects in and around the port in Rangoon where some of its large industrial corporations have committed to a new economic zone.”
Whereas the Naypyidaw government has had no direct input on Dawei—beyond polite meetings with Thai government delegations led by Prime Minister Yingluck Shinawatra—it has already appointed a minister, Myint Thein, to oversee a development agency for Kyaukphyu.
Naypyidaw has signed an agreement with China to permit a combined railway and highway which would link Kyaukphyu with towns in central Burma and especially Yunnan’s provincial capital Kunming.
No timetable for the 1,200-km-long railway’s construction has been announced, but the natural gas pipeline controlled by China National Petroleum Corporation is being tested this month and is scheduled to begin commercial operations in April, while the parallel oil pipeline should be completed by the end of this year.
Kyaukphyu is ideally placed for an expected growth in Burma’s offshore oil and gas exploitation. There are 20 or more untouched blocks dotted along the coast both sides of Kyaukphyu which are likely to go up for auction sometime this year.
“The Kyaukphyu Economic Zone is a specially designated area in which foreign companies will construct and operate petrochemical plants and oversee the export of Chinese-made products,” says Arakan Oil Watch, an NGO concerned about environmental and human rights issues such as land confiscation.
The NGO said a special economic zone law was established by the former military junta in January 2011 and is still in force, regulating investor privileges, land use, finance management and labor.
The Naypyidaw government has said it will consult local people, something that hasn’t happened at other major development sites, before finalizing industrial zoning at Kyaukphyu.
Thailand’s Transport Minister Chadchat Sittipunt, who chairs the Thai-Myanmar Joint Coordination Committee for Dawei, said on Feb. 12 there were serious problems preventing the Dawei project proceeding. It could be another whole year before Japan made a firm commitment, he said.
“Thailand’s Office of Transport and Traffic Policy and Planning has said it will have to conduct a new feasibility study on several aspects of the project as Japan disagrees on [ITD’s] planning of the location of the port and infrastructure details,” said Hong Kong’s Inside Investor, which provides advice to business investors across Asia.
If Dawei does finally return to its sleepy seaside status, the Thais can still secure their gateway to the Indian Ocean and, like the Chinese, avoid using the Malacca Strait for oil shipments. The Thai Ministry of Transport is carrying out yet another feasibility study into a so-called land bridge across Thailand’s narrowest point.
It’s not as handy for Bangkok as Dawei, but Pakbara in southern Thailand near the Malaysian island of Langkawi on the Andaman Sea is only 100 km across to the Gulf of Thailand at Mueang Songkhla, short enough to build oil pipelines for transhipment.