Thailand’s Dawei Port Project in Burma Not Dead Yet

By Marwaan Macan Markar 5 June 2013

BANGKOK — Thailand’s plans to convert a remote coastal strip in southern Burma into a Southeast Asian gateway for international trade appear to have moved little from the drawing board. Or so it seems.

Efforts by the current government to throw a political lifeline to the deep-sea port and special economic zone (SEZ) in Dawei have had limited success financially. After all, its key salesperson, Prime Minister Yingluck Shinawatra, has struggled to secure the injection of funds needed from Japan to breathe life into the troubled multibillion-dollar project.

Nothing conveyed this better than Yingluck’s late May visit to Japan. During a keynote speech at the Nikkei Conference on the Future of Asia, she portrayed Dawei as a bridge to take maritime connectivity to new heights, linking the Pacific Ocean in the east with the Indian Ocean in the west. “Dawei is an investment in the future of Asia,” she said. “We look forward to participation from foreign partners for investment.”

But it appeared—on the surface, at least—that Japanese support for the first phase of the US$50 billion harbor and SEZ was still not forthcoming. The chilly reception to Yingluck’s plea for funds stood in contrast to Tokyo’s clear interest in another industrial zone and port in Burma, at Thilawa.

Japanese Prime Minister Shinzo Abe underscored this when he flew to Burma hours after Yingluck had spoken. Abe promised billions of dollars in debt relief, aid and new investments to the country’s reformist government. The financial support for the Thilawa SEZ, just south of Rangoon, affirmed its relevance as a marquee project for Japan, now in a rush to forge stronger economic ties with Burma.

Yet for those quick to dismiss the Dawei project as a stillborn blueprint, Japan’s Ministry of Economy, Trade and Industry (METI) offers a different picture. It has emerged as a key behind-the-scenes player to confirm that the Japanese government still has an eye on the Dawei SEZ. Lending weight to this effort are leading Japanese companies such as Mitsui and Sumitomo, which are listed as “supporters of the project,” according to an informed source.

Heading the METI’s priorities is a study to review the plan for the harbor and the SEZ that was first conceived by Italian-Thai Development (ITD), Thailand’s largest construction company. That assessment is expected to be completed this year.

ITD won the 60-year concession in 2008 from Burma’s then military regime to develop what it has been promoting as Southeast Asia’s largest industrial zone. Its plans for the 200-square-kilometer industrial complex and port included steel mills, oil refineries and petrochemical plants. An eight-lane highway was to link the Dawei SEZ to major industrial zones and the port southeast of Bangkok.

ITD’s failure to attract $8.5 billion to fund the infrastructure for first phase imperiled the project until the Yingluck administration stepped in to shoulder the burden of raising international finance, with Japanese investment billed as a key draw. Another boost followed: the recent creation of a special company, in which the Thai and Burma governments will each hold 30 percent stakes, to raise finances for the Dawei SEZ.

But the prospect of Japanese funds pouring into this special purpose vehicle (SPV) will have to wait until Tokyo completes a revamped vision for the project. That includes a new Dawei master plan developed by the Japan International Cooperation Agency (JICA) following the METI’s review of ITD’s Dawei master plan, according to a report seen by The Irrawaddy.

In fact, Japan’s interest in this venture was first rooted in another initiative that had drawn Tokyo’s attention—developing logistics as part of its investment portfolio to transform the lower Mekong River region. Under this arrangement, Japan, Thailand and Burma were to “establish a trilateral dialogue for the development of Dawei,” according to the Japanese foreign ministry.

“Japan Inc. is interested in Dawei as a general matter,” said Yuki Akimoto, director of Burma Information Network-Japan, a Tokyo-based watchdog that monitors financial flows to Burma. “But Dawei would be a much bigger undertaking than Thilawa.”

It has also raised questions about who profits more, she told The Irrawaddy, pointing out that Japan may not be in a rush to invest in a project where Thailand stands to reap most of the benefits. “I think it’s partly a matter of sequencing—Japan can’t commit to Thilawa and Dawei at the same level simultaneously—and partly that Japan wants to be helping Burma and not so much Thailand.”

Thailand’s interest in the Dawei project has been further complicated by the overt role played by Thaksin Shinawatra, the fugitive former prime minister, to see the struggling project become a reality. Besides regularly muscling his way into Burma—including a mid-April meeting with the country’s powerful army commander, Sr-Gen Min Aung Hlaing—the eldest brother of Yingluck has also begun lobbying forcefully in Japan.

This has seen the emergence of a hitherto unknown organization last year during Thaksin’s visit to the country. The so-called “Japan-Thailand Economic Partnership Promotion Organization” only seems to feature Thaksin and stresses the importance of the Dawei project as a symbol of Thai-Japanese partnership as its main mission.

“Connectivity is the card Thailand wants to play to increase its regional competitiveness and significance,” said Pavida Pananond, associate professor at Thammasat University’s business school in Bangkok. “There is nothing wrong with that. But this should be done in a transparent and straightforward way.

“If Dawei is so crucial for Thailand, prove why not having it would hurt the country,” she asserted in an interview. “Make it clear what the role and responsibility of the Thai government is, and it should not be an industrial estate operator.”

The rocky journey toward this regional logistics hub has not dampened ITD’s enthusiasm. A workforce of 300 men and women has been assigned to carve out the highway that will link the Dawei SEZ to Thailand’s Laem Chabang port.

“Italian-Thai feels confident that it would be able to attract Japanese investment for the highway,” said Naruemon Thabchumpon, a political scientist at Bangkok’s Chulalongkorn University. “Japan has been interested in supporting regional connectivity, such as the east-west highway links across the Mekong region.”

But that will test the Thai construction giant’s patience. “They may have little choice, given the $2 million already invested and the recent announcement that it may commit a further $300 million for the first phase of the project,” a source familiar with ITD’s investments revealed. “Dawei has exposed the difference between the Thai way of doing business overseas and Japan’s.”