Oct 9, 2012

Suzuki Motor plans return to Myanmar with assembly plant

Japanese automaker Suzuki Motor Corp. plans to build a factory in Myanmar that will produce 20,000 to 30,000 cars a year and push development of one of the world’s largest industrial complexes, sources said.

Suzuki is expected to invest several billion yen in the assembly plant, which is tentatively scheduled for completion by 2015, the sources said on Oct. 8.

Companies around the world are looking to invest in Myanmar to cash in on the country’s expected high economic growth in the coming years. Suzuki’s plant will become one of the largest production centers in Myanmar among foreign manufacturers.
According to the sources, Suzuki plans to build the plant on 40 hectares in the suburban Thilawa district of Yangon, Myanmar’s largest city, and will establish a wholly-owned subsidiary in the country. In the initial years, the plant will manufacture several thousand cars a year.

“From now, we will check the land to see whether the ground conditions have no problems. Then we will make the final decision (on the new plant),” a Suzuki executive said.

Myanmar wants to develop the Thilawa district, located about 25 kilometers from central Yangon, into a huge industrial complex. The government plans to designate the area as a special economic zone that will offer eased regulations and tax breaks for foreign companies.

The Japanese government is supporting the project, and a company jointly set up by Myanmar and Japanese organizations will start developing the special economic zone as early as next spring to improve infrastructure, including facilities for electricity, water and sewerage.

Suzuki executives have already inspected the planned site and are positive about construction of the plant there.

“We have business experience of about 10 years in Myanmar,” a Suzuki executive said.
In 1999, Suzuki started producing and selling passenger cars and motorbikes in the Southeast Asian country through a company jointly set up by the carmaker and Myanmar’s Ministry of Industry.

However, the approval period for the joint company expired in late 2010. The company was liquidated and operations of the plant were halted.

In 2011, however, Myanmar shifted from military junta rule to policies of reform and an open economy.

In response to the move, Suzuki applied to the Myanmar government for a resumption of operations at the joint company’s plant.

However, the Myanmar government rejected the application and instead asked the automaker to establish a large plant in a different location. The government’s request led to Suzuki’s plan to build in the Thilawa district.

About 2.3 million cars are registered in Myanmar, with most of them imported from Japan.

Myanmar has no large domestic automobile manufacturer, and carmakers from India and China are the only ones engaged in small-scale production in the country.

Among Japanese automakers, only Suzuki had a production stronghold in Myanmar.
Foreign companies had refrained from making large-scale investments in Myanmar because infrastructure, such as roads and power stations, were poor under the military junta-controlled government.

But now, foreign companies are flocking to the changing country, which has a population of about 62 million and labor costs that are only a quarter of those in Thailand.

In addition, labor costs are rising sharply in China due to a shortage of workers. Given these risks, foreign companies operating there are considering investing in another country under the “China plus one” policy.

Japanese companies are increasingly moving to set up factories in countries other than China because of the strained relations between the two countries after the Japanese government nationalized the disputed Senkaku Islands in the East China Sea on Sept. 11.

On Oct. 11, Japan will sponsor an international conference in Tokyo to support Myanmar. Lenders, including the Japanese government and the World Bank, are expected to announce additional loans to the debt-ridden Myanmar government.

Japan wants to offer the loans to the Myanmar government as early as possible for the development of the Thilawa district, a key project subject to Japan’s support measures.