‘Light Industry’ Puts Dawei SEZ in Doubt

By William Boot 31 October 2012

New confusion has surfaced around the much-delayed port and industrial special economic zone (SEZ) project on Burma’s southeast coast at Dawei.

The chief project licensee, construction company Italian-Thai Development (ITD), has announced drastically downsized plans to build a small “light industry” estate instead of a grand heavy industry complex focused round a deep-sea port.

The plans, which would use only a tiny segment of the 24,000 hectares envisaged in the original scheme, come just a few weeks after the Burmese and Thai governments agreed to establish a joint committee charged with reviving the stalled project.

ITD subsidiary Dawei Development Company Managing Director Somchet Thinaphong told Thailand-based The Bangkok Post newspaper that just 100 of the 24,000 hectares would now be used to develop factories for textile, food and furniture production. Somchet said building would start early next year and the estate would be powered by a small 33-megawatt gas-fuelled electricity plant.

The original plans included a large port to handle crude oil from the Middle East for transhipment to Bangkok and heavy industries such as a refinery, petrochemicals and a steel mill. But this ambitious scheme, linked to Thailand by new highways and a railway, has languished due to a lack of ITD finance and investment partners.

ITD has previously said it needs a minimum US $8.5 billion initial capital with the overall development eventually costing up to a whopping $50 billion.

In September, Thai Prime Minister Yingluck Shinawatra met Burmese President Thein Sein on the sidelines of the UN General Assembly in New York and agreed to effectively take over the project including seeking new foreign investors, in particular large Japanese industrial corporations. Representatives of the two governments are scheduled to meet in Bangkok on Nov. 7.

“The latest proposal by Somchet does not seem to make sense. Without a port and proper road infrastructure linking with Thailand and others parts of Myanmar, who is going to set up production of garments and furniture and suchlike in a remote place like Dawei,” Bangkok energy industries consultant Collin Reynolds told The Irrawaddy on Wednesday.

“The whole point of Dawei was to create an import-export port and hinterland communications. Instead, the project has been in limbo for so long it really seems to have missed the boat. The Japanese and Koreans are investing in the new Thilawa economic zone in Rangoon.”

The Thai government has promised $1 billion for infrastructure such as a new highway but only inside Thailand up to the Burmese border crossing by Kanchanaburi.

“If you want investors to go there [Dawei], infrastructure must be ready to support their investments, but so far nothing has been confirmed,” the vice-chairman of the Federation of Thai Industries Thanit Sorat told The Bangkok Post.

Dawei Development Company’s Somchet was unwilling this week to identify the firms that would establish light industry businesses on a green-field site. He also conceded that his company did not yet know where it would obtain the natural gas to fuel the proposed small electricity plant needed to power these factories.

ITD’s woes are compounded by new allegations of land grabbing around Dawei, with local people reportedly paid poor compensation or forced to relocate. These claims are made in a joint report by the Amsterdam-based human rights NGO Transnational Institute and its local partner Paung Ku.

Energy analysts believe the Thai government wants to try to save the project because it sees the advantage of a port to tranship oil from tankers to trains or a pipeline for the 100 kilometres or so into Thailand.

Dawei would short-cut the long sea journey for oil tankers from Africa and the Middle East currently having to journey via Singapore and the narrow Straits of Melaka and up through the Gulf of Thailand to the greater Bangkok region.

However, a port at Dawei will be of little use to Burma’s short-term economic revival and is being seen by some observers as a distraction from more urgent infrastructure and industrial needs.

While Dawei has remained nothing more than an elaborate 3D blueprint, major Japanese and South Korean businesses have signed agreements to invest in the Rangoon port and adjoining SEZ of Thilawa.

Burmese Minister for National Planning and Economic Development Kan Saw last week forecast that parts of the Thilawa zone would be operational during 2013.

Foreign firms lined up for Thilawa include Japan’s Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation, and a consortium from South Korea led by Hyundai. Most of these are engaging in infrastructure contracts, not least a 500-megawatt gas-fired electricity generating plant. Suzuki Motor Corporation also plans a car factory.

The continued lack of a big investor joining the Dawei project, the absence of infrastructure development there and ITD’s latest failure to name firms supposedly joining even a light industry alternative do not bode well for the future of this particular SEZ.