An Industrial Project That Could Change Myanmar

An Industrial Project That Could Change Myanmar
Friday, November 26, 2010
By THE INTERNATIONAL HERALD TRIBUNE, The New York Times

DAWEI, MYANMAR -- The vast, pristine stretch of coastline here is almost deserted, save for fishermen hauling their bountiful catches onto white-sand beaches. But a deal signed this month would transform these placid waters into a seaport for massive cargo ships. Cashew nut groves and rice fields would be plowed under and replaced with a warren of factories, refineries and a massive coal-burning power plant.

Myanmar, which is run by a repressive military regime that controls both economic and political life, recently captured the world's attention with its first elections in two decades and the release of Daw Aung San Suu Kyi, the country's leading dissident, from house arrest.

But the Dawei Development Project, as it is known, could have as much of an impact on Myanmar's future as the decades-old political chess games between the military and its opponents -- and perhaps more.

The deal, signed Nov. 2, calls for what would be by far the largest industrial area in Myanmar, which is also known as Burma. In an impoverished, relatively cloistered country where malnourishment is widespread, the factories and refineries could provide jobs on an unprecedented scale, not unlike the special economic zones that China and Vietnam set up in recent decades.

"We need tons of workers," said Premchai Karnasuta, the president of Italian-Thai Development, a conglomerate based in Bangkok that was awarded the contract after years of negotiations and surveys of the area. "We will mobilize millions of Burmese."

A work force on that scale seems years away; engineers at the company speak of hiring tens of thousands of people over the first five years of construction. But analysts see the project as a landmark development for the region in many other ways.

Foreign companies building plants here would be freed from the restraints of increasingly strict antipollution laws elsewhere in the region. For Thailand, the project would be a cheap and convenient way to export its dirty refineries across the border.

"Some industries are not suitable to be located in Thailand," Abhisit Vejjajiva, the Thai prime minister, said in explaining the project to viewers of his weekly television address recently. "This is why they decided to set up there," he said, referring to Dawei.

The project is also crucial for geo-strategic reasons: Construction of a deep-sea port would create a shortcut between Europe and Indochina. Companies in Thailand and the fast-growing economies of Vietnam and Cambodia could save fuel and time by bypassing the long journey through the Strait of Malacca, a detour of several thousand kilometers.

The project has backing at the highest levels of both the Thai and Myanmar governments, including Myanmar's dictator, Senior Gen. Than Shwe, who appears to be treating it as an experiment in opening the largely state-controlled economy.





"Than Shwe said he wanted this project to be like the Shenzhen economic zone," Mr. Premchai said at a news conference this month, referring to the city where southern China's industrial transformation began three decades ago.

Virgin territory

Italian-Thai has been awarded a huge chunk of territory for the project -- 250 square kilometers, or about 97 square miles, more than four times the size of Manhattan. There are also plans to develop hotels and resorts further down Myanmar's wild and sparsely populated southern coast, which extends 500 kilometers, or about 300 miles, south.

The coastline here is a rare blank slate in an otherwise crowded part of the world. In addition to the power plant, the company is planning a steel mill, an oil refinery, a petrochemical complex, a shipbuilding yard, a fertilizer factory and many other facilities.

Workers have already broken ground -- construction on the road to Thailand is under way -- but there remains the possibility that the project will founder. Ethnic rebels inhabit the hills around the site, though they have been relatively quiet in recent years.

Sean Turnell, an expert on the Burmese economy at Macquarie University in Sydney, said he was optimistic about the project's prospects, provided that Italian-Thai can follow through with financing and that the Myanmar government does not interfere.

"Will the government really leave this alone? In the past they haven't been able to resist the temptation," Mr. Turnell said.

Italian-Thai -- which gets its name from a partnership formed five decades ago between an Italian engineer and a Thai medical doctor -- has been given exemptions from import duties and a 75-year concession to build and operate the heavy-industrial part of the project, as well as a 40-year concession for light industry, like garment factories. After that, according to the deal, the concession can be extended, or control can revert to the Myanmar government.

The company estimates that infrastructure for the project will cost $8 billion; it says it has secured the financing, from a private bank that it would not name. Other companies, including the Thai petrochemical giant PTT, have expressed interest but have been ultimately noncommittal.

One of the largest Thai banks, Kasikorn, said it would not offer financing for projects in Myanmar because of "political risk."

Anan Amarapala, vice president of the marine division of Italian-Thai, said Chinese companies had no such fears. "Japanese, Korean and Chinese companies have been flying in nonstop to meet us," he said in an interview.

The Thai government, for its part, is highly supportive of the project. It has been under consideration since the late 1990s, and all Thai governments, before and after the 2006 military coup, have supported it -- a rare example of unanimity across Thailand's fractured political landscape.

In that sense, the Dawei project highlights the ineffectiveness of economic sanctions imposed by the United States and European Union on Myanmar's junta. Myanmar's neighbors, especially Thailand, China and India, have been rushing to do business with the country.

Mr. Premchai, the president of Italian-Thai, said there was so much interest from other nations that when the military government asked him for a decision, he could not hesitate. "They asked me, 'Are you interested in doing this project?' I thought if we didn't take it, the foreigners would definitely get it. So I said, 'I'll take it,"' Mr. Premchai said.

Chinese businesses are already dominant in many parts of Myanmar. A state-owned Chinese firm has begun construction of a pipeline that will carry gas and oil from another port in Myanmar, near the city of Sittwe, to southern China. The purpose of that project is much the same as Dawei's: bypassing the transportation chokehold of the Strait of Malacca and speeding up oil shipments from the Middle East for China's energy-hungry economy.

A free hand

For Thai companies, the business environment in Myanmar could hardly be more different from that at home -- or more convenient for them. In Thailand, new private development requires environmental impact reports and hearings with local residents, obstacles that have snarled a number of high-profile projects.

In Dawei, the government simply told local residents to leave.

A group of farmers interviewed in their fields said they had not been consulted about the project but were told by a local leader that they would have to move. They were offered land elsewhere, they said, but it was not suitable for grazing cattle or cultivating rice. The idea of working on the project itself did not seem to entice them, and no representatives from Italian-Thai had made any offers yet, they said.

"Maybe there will be opportunities," said one farmer. "But right now, we are in trouble."

Local residents said the residents of 19 villages, each home to about 5,000 people, would be forced to leave. That number could not be confirmed. Italian-Thai said it calculated that 3,800 households would have to move.

"We are still in the process of negotiating with the villagers," said Mr. Anan of Italian-Thai. As in most parts of Myanmar, which underwent a massive nationalization of assets in the 1960s, the land belongs to the state.

"It is totally different from Thailand," Mr. Anan said in an interview. "Thais would argue about compensation and go to court. That's not the case with this project."

For foreign companies, the project also means less environmental oversight. In the case of Thailand, new laws that require more environmental safeguards have slowed the expansion of the industrial complex at Map Ta Phut, the country's largest petrochemical facility.

Local residents at Map Ta Phut have pointed to data indicating higher cancer rates and polluted air and groundwater -- and government studies have backed them up. A group of residents filed a lawsuit that last year led to a court injunction on future development; the injunction was later lifted, after protracted negotiations.

By contrast, Italian-Thai officials said that there were no laws in Myanmar covering environmental protection but that they had conducted their own assessment of the likely impact in Dawei.

"You have to think of Myanmar as Thailand 50 years ago," said Surin Vichian, the project manager in charge of engineering. "There's nothing in the country but wilderness and cheap labor."

The Dawei project would help Thailand meet its energy needs while avoiding the brunt of the pollution from the power's generation. A massive 6,000-megawatt, coal-fired power plant planned for Dawei would transmit power to Thailand.

Thailand already relies heavily on Myanmar for energy; the Dawei project is only a few dozen kilometers south of a pipeline to Thailand built more than a decade ago by the U.S. oil company Chevron and the French oil company Total, and which supplies electricity for greater Bangkok. The sale of gas to Thailand, worth $4 billion last year alone, has been crucial in helping buttress the power of the military leadership in Myanmar.

The Dawei project includes a profit-sharing agreement with the Myanmar government, but executives from Italian-Thai said they could not divulge details.

A PowerPoint presentation prepared by Italian-Thai and obtained by the International Herald Tribune described the site, known as northern Maungmagan, as ideal. The water is deep enough to accommodate ships and oil-carrying supertankers with loads of up to 300,000 tons, it said. A number of islands help form a barrier for the port. The adjacent area is largely flat and has plentiful water supplies, making it suitable for factories and refineries that will manufacture plastics and other petrochemical products.

The city of Dawei does not seem entirely prepared for what is coming. It has four traffic lights, dilapidated British colonial villas and horse-drawn carts that clip-clop along potholed streets. The region's poverty and its decrepit infrastructure have left it isolated from central Myanmar, let alone the rest of the world.

The mountainous jungle along the Thai border to the east is so thick that smugglers bring in motorcycles from Thailand on bamboo poles, because there are no paths on which to ride them. But once the planned highway is completed, it is conceivable that Bangkok will be just a few hours' drive away.

The company said the first phase of construction -- the road to Thailand, a water reservoir, and the coal-fired power plant, among other projects -- would be completed within five years, while finishing the whole project would take a decade.

The Thais are drawing on their experience in building Map Ta Phut, the massive petrochemical complex linked to pollution and higher cancer rates. Somchet Thinaphong, who helped devise the master plan for Map Ta Phut, is the managing director of Dawei Development, which is to oversee the project.

"This will be exactly 10 times bigger than Map Ta Phut," Mr. Somchet said.

U.N. official to visit

A senior U.N. official was to visit Myanmar over the weekend to meet the country's military rulers and the recently released democracy activist Daw Aung San Suu Kyi, diplomats said Friday, The Associated Press reported from Yangon.

Vijay Nambiar, chief of staff for the U.N. secretary general, Ban Ki-moon, was probably coming to "feel the temperature" in the country following the first election in 20 years and the democracy leader's release from house arrest, one diplomat said on condition of anonymity, citing protocol.
This article originally appeared in The New York Times.