Thais reduced to ‘matchmaker’ in Dawei as Italian-Thai set to pull out

Myanmar’s stalled Dawei mega-project, which Thailand has striven to get off the ground for years, appears set to pass out of Thai hands, as Japan takes on a bigger role, though the nature of this role is far from clear.

Thailand’s largest contractor, Italian-Thai Development Plc (ITD), which is a contract partner with the Myanmar government for Dawei project development, is now packing its bags and going home, as the framework agreement signed between the two sides has lapsed, according to a source who is close to the project.

“We’re now closing our camp at the Dawei site and have been asked to stop operations and leave there before November 21,” said the source.

The framework agreement ITD signed with the Myanmar Port Authority on November 2, 2010 was for the development of the Dawei deep-sea port, industrial estate and road and rail link to Thailand, on a build-operate-transfer basis. According to the agreement, ITD was awarded a concession period of 60 years and land-lease period up to 75 years.

The project which is located in the Dawei Special Economic Zone in southern Myanmar, 300 kilometres from western Thailand, was estimated to cost around US$8.6 billion (Bt271.8 billion) covering 205sq km of land – 10 times larger than Thailand’s Laem Chabang deep-sea port. Along with the industrial estate zone and infrastructure, there will be development of the township.

Since the government-to-government MoU signed between Myanmar and Thailand in 2008, the Dawei project has not seen much progress, with the construction of the deep-sea port and infrastructure being delayed. Fundraising is the key. There have been expressions of interest from many potential foreign investors such as Japan, China, South Korea and Singapore, but no action. Though the Thai government has strongly pushed the project, with meetings being held between Myanmar President Thein Sein and Thai Prime Minister Yingluck Shinawatra, and later between many bilateral committees, the project has yet to move forward.

Even Japan, one of the most important potential investors, has yet to commit to taking a stake in the project, saying it needs time to make a decision.

So far, ITD has built a small port, cut a road linking Thailand’s Kanchanaburi to the Dawei project site, and flattening the soil in some areas in preparation for industrial estate development. It has also made payments to compensate for the relocation of local people. This reportedly cost ITD several billion baht.

Many academics say the Dawei project is too big to be developed by one player.

The Thai government now seems to be acting primarily as a matchmaker, helping the Myanmar government find a proper investor for the Dawei project. Therefore, participants at the Joint Cooperating Committee (JCC) meeting due to be held in Bangkok on Thursday(21) are no longer expected to discuss ways of moving the project forward, the operations of ITD, or the progress of the establishment of a Special Purpose Vehicle (SPV) and Special Purpose Companies (SPCs) to manage the port, road and rail links, power plants, water facilities, industrial estate, telecommunications network and the township.

In an interview last Wednesday, Energy Minister Pongsak Ruktapongpaisal’s said that at the JCC meeting this week an agreement would be signed to hire a consultant to evaluate the assets and work that ITD has put into the Dawei project.

Pongsak added that, “ITD will also have to stop operation until the appraisal results come out, so that the project-development right can be returned to the Myanmar government. In the meantime, ITD will only do maintenance,” Pongsak added.

Earlier, the Thai government agreed with the Myanmar government to apply a concept of SPVs and SPCs to the Dawei project’s management. But, two pending issues between ITD and the Myanmar government need to be cleared up, according to a source quoted in several newspapers.

First, ITD wants a small port and supporting road in the industrial estate to be part of the SPV or of a joint venture, Dawei SEZ Development Co (DSEZ), to be established in Thailand. But the Myanmar government wants to separate them from the Dawei SEZ. ITD can continue these projects, but the company will have to be granted a license from the Myanmar authorities. Second, ITD wants at least 28,000 rai of land for the industrial estate development, not 6,000 rai as offered initially by the Myanmar government.

Pongsak also told representatives of the Japan External Trade Organisation that Bangkok was only an adviser to the Dawei project, not an operator. In addition, the Myanmar government has referred to Japan as the major investor in the project.

Whether a second tripartite meeting between Myanmar, Japan and Thailand will be held, following the first one in Yangon last October, depends upon the outcome of the JCC meeting on Thursday.

Source: ELEVEN Myanmar

NB: The best way to find information on this website is to key in your search terms into the Search Box in the top right corner of this web page. E.g. of search terms would be “property research report”, ”condominium law”, "Puma Energy", “MOGE”, “yangon new town”,"MECTEL", "hydropower", etc.