Myanmar regime’s restrictions on export and import licenses, limited availability of supplies and the weak kyat are forcing foreign businesses in the Japanese-backed Thilawa Special Economic Zone (SEZ) in Yangon to halt operations.
Of 113 companies that have invested in Thilawa SEZ, only 45 factories are in full operation while some 27 factories have reduced their production by half and others have suspended work, according to a Thilawa SEZ management committee source.
As foreign companies operating in Thilawa SEZ are 100 percent foreign entities, they are exempt from the junta-controlled Central Bank of Myanmar’s (CBM) currency rules.
In April, the CBM ordered financial institutions to convert foreign currency earned by its customers into kyats within one business day at an official exchange rate of 1,850 kyats to the US dollar.
However, factories in Thilawa that are intended for the domestic market are suffering as demand slumps amid limited availability of supplies, cash flow problems resulting from the banking crisis and inconsistent junta policies.
Some companies that were still building factories in Thilawa SEZ have put off construction. “Some companies have only opened offices and are doing nothing,” said the source.
The CBM’s order to companies and individual borrowers to suspend repayments of foreign loans, both on the interest and principal loan, is also affecting companies in Thilawa SEZ, said the source.
Among the companies that have suspended operations are Japanese automaker Suzuki and Acecook, which produces instant noodles. Companies including Japan’s Ajinomoto and US-owned Ball Metal Container are having supply issues.
Most companies declined to comment to The Irrawaddy.
A manager who suspended operations a few months after last year’s coup said the company has no plans to restart work.
Many factories have no plans to shut down and withdraw because they have made long-term investments in Thilawa.
However, it is unlikely that Thilawa will attract new investment, said the committee source.
“Whether companies will leave depends on [regime] policies. If policies are relaxed, businesses may return but if policies are tightened, they may leave,” said the source.
Thilawa SEZ is the best example of economic reforms initiated under U Thein Sein’s quasi-civilian government and the National League for Democracy administration and showcased bilateral economic cooperation with Japan.
At least three large-scale projects outside Thilawa with an estimated total investment of US$1.3 billion backed by Japanese investors have been put on ice since the coup, according to Nikkei Asia.
