Wednesday, January 18, 2012
Myanmar is developing an $8.6 billion port and industrial complex in
the nation’s south intended to feed Asian demand as the U.S. and Europe
lay out a path to ease sanctions in place for more than 20 years.
Italian-Thai Development Co., the largest
construction company in Thailand, completed an access road last year
from the Thai border to Dawei, about 250 kilometers (155 miles) west of
Bangkok. The company plans to complete financing this year for the
harbor, which with the industrial zone will cover an area 16 times
bigger than Thailand’s largest manufacturing park.
“What makes Dawei interesting is Myanmar itself,”
said Thanet Sorat, who heads a trade facilitation body at the
Federation of Thai Industries, the country’s biggest industry group. “It
was closed for so long and now the government is more open. Thai
companies see many opportunities there due to cheap labor costs and many
natural resources.”
The Dawei initiative highlights Myanmar’s efforts
to connect one of Asia’s poorest nations to a region driving global
growth. Myanmar has freed political prisoners and signed a peace
agreement with rebels, seeking to prompt the U.S. and the European Union
to lift economic sanctions.
Italian-Thai shares, which fell 22 percent last
year, are poised to recover as the Dawei project advances, Athaporn
Arayasantiparb, an analyst with UOB-Kay Hian Securities (Thailand) Pcl,
wrote in a report yesterday. PTT Pcl, PTT Exploration & Production
Pcl, Hemaraj Land & Development Pcl and Ratchaburi Electricity
Generating Holding Pcl are among other listed Thai companies set to
benefit, he said.
‘Opening Up’
Siam Cement Pcl, Thailand’s fifth-biggest company
by market value, also probably will gain assuming the project proceeds
as planned, said Adithep Vanabriksha, who oversees about $4.5 billion of
Thai assets for Aberdeen Asset Management.
“Myanmar’s on the verge of opening up and Thai
companies are likely to benefit given our proximity,” said Bangkok-based
Adithep. “They’re going to need a lot of construction materials, a lot
of cement.”
Myanmar President Thein Sein discussed the Dawei
project at a December meeting with Thai Prime Minister Yingluck
Shinawatra, who sent several cabinet ministers to inspect the site on
Jan. 7. Bangkok-based Italian-Thai signed a 60-year concession to
develop Dawei 14 months ago.
Industrial Hub?
Executives from Bangkok Bank Pcl, Krung Thai Bank
Pcl and Siam Commercial Bank Pcl joined the ministers on the visit to
Dawei this month, according to Somchet Thinaphong, managing director of
the Dawei Development Co., an Italian-Thai unit. Among the potential
investors he listed were Malaysia’s Petroliam Nasional Bhd., known as
Petronas, and Japanese companies Mitsubishi Corp., Mitsui & Co. and
Sumitomo Corp.
“All our experts and all the technical people
from Thailand and Myanmar believe Dawei can be a new industrial hub,”
Foreign Minister Surapong Tovichakchaikul, who was on the trip, told
reporters on Dec. 21.
Japanese manufacturers are interested in using
Dawei to make parts that can supply factories in Thailand, which
automakers Toyota Motor Corp. and Honda Motor Co. use as a production
base, said Somchet, who is overseeing the project.
Japan will try to help finance the Dawei port if
it can reach a deal on the former military dictatorship’s “huge”
outstanding debt, Kimihiro Ishikane, a foreign ministry official, told
reporters in Bali on Nov. 16. Myanmar is a “crucially important” part of
Japan’s plans to try and reduce costs for its companies operating in
the region, he said.
ASEAN Landscape
“This is a project that will help change the
ASEAN landscape,” Somchet said, referring to the 10-member Association
of Southeast Asian Nations, which has a market of almost 600 million
people. “We are establishing an industrial hub where raw materials will
flow” to China, India and Japan.
To be sure, Myanmar has recently put two
electricity projects on hold due to opposition from environmentalists.
One of them is a 4,000-megawatt coal-fired power project in Dawei that
Italian-Thai agreed to build with Ratchaburi. In September, Thein Sein
halted construction of a Chinese-backed $3.6 billion hydropower station.
The moves underscored the investment risks
stemming from Myanmar’s 14-month-old transition toward democracy, a
process on which the lifting of sanctions is conditioned. The country is
viewed as the most corrupt after North Korea and Somalia in
Transparency International’s Corruption Perceptions Index.
The Dawei project is “still far from reality,”
DBS Vickers Securities (Thailand) Co. said in a Jan. 16 report. “Despite
potential to bring economic prosperity to Burma, the project is still
in its infancy and clouded with risks.”
Steel Mill
Italian-Thai is wooing banks to lend $12.5
billion for the development as well as to invest in an integrated steel
mill, an oil, gas and petrochemical complex and fertilizer plants. It
expects to gain income from selling land and acting as the main
contractor on the project’s infrastructure, including a more than
100-kilometer road from Dawei to the Thai border.
Thein Sein took power last year after a general
election in 2010 that ended half of a century of military rule. In
addition to releasing hundreds of political prisoners and signing the
cease-fire with the country’s largest armed rebel group, he has sought
dialogue with democracy advocate Aung San Suu Kyi.
The U.S. and U.K. have pledged to ease sanctions
if he takes additional steps to reduce political repression and
demonstrates the changes will last. Standard Chartered Plc and General
Electric Co. are among those seeking to invest in Myanmar after
Secretary of State Hillary Clinton last month completed the
highest-level U.S. visit to the nation in more than five decades.
‘Strategic Location’
China and India share more than 3,600 kilometers
of border with Myanmar, whose 64 million people earn an average of just
$2.25 per day, according to International Monetary Fund estimates. Both
nations have sought increased access to the resource-rich nation’s
reserves of natural gas.
“Myanmar can become a regional hub for some
sectors,” Nay Zin Latt, an adviser to Thein Sein, said in an e-mail.
“Our strategic location will attract investors. Goods and commodities
will move in and out more conveniently with a lower cost, making us more
competitive.”
Gas sales and better freight links with China,
India and the rest of Southeast Asia may enable Myanmar to boost gross
domestic product growth, which IMF data shows averaged 4.9 percent per
year during 2008 through 2011.
Gas Rich
Natural gas production in Myanmar has almost
quadrupled in the past decade to 12.1 billion cubic meters in 2010. That
is equivalent to about one-eighth the output of China, Asia- Pacific’s
biggest producer, according to the BP Statistical Review. Gas sales to
neighboring Thailand have made it Myanmar’s top trading partner.
“The Dawei port will focus on petrochemicals, not
containers,” said Ruth Banomyong, an assistant professor at Bangkok’s
Thammasat University who has studied logistics in the region for the
Asian Development Bank. “It will be more of an industrial port, with gas
and petroleum products.”
Maersk Line Ltd. will look to do more business in
Myanmar if the nation opens up to the international community, said
Thomas Knudsen, chief executive officer of Asian operations at Maersk
Line, a unit of Copenhagen-based A.P. Moeller-Maersk A/S, the world’s
biggest container shipper.
The deep-sea port will be able to handle more
than 200 million tons of cargo when completed, according to
Italian-Thai. That compares with 47 million tons of cargo that passed
through Laem Chabang, Thailand’s biggest port, in 2009, Port Authority
statistics show.
“Clearly the port could start to grow,” Maersk’s
Knudsen said, referring to Dawei. “We’ve seen that in other parts of the
world when you’ve got the combination of a deepwater port and zones for
manufacturing.”
Source: Bloomberg
