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Thailand set to profit from Burma’s new Dawei port project

Burma is opening up. In the past few months foreign leaders paid high-profile visits to the long-isolated country, including US Secretary of State Hillary Clinton and British Foreign Secretary William Hague who both congratulated Burma on its progress toward democratisation.

 

These endorsements signal that Western sanctions against Burma could soon be lifted. Meanwhile, Burma’s neighbours — including other ASEAN states, China and India — now perceive the government in Naypyidaw as ‘lawful’ and feel ever more comfortable engaging with it.

The regime is still focused on consolidating its position in the face of a weakened opposition. But opening up the country economically is an equally important priority and Burma’s active promotion of foreign trade and direct investment has supplemented the ongoing political process. In other words, Burma is transforming itself from an old socialist state into a modern market-oriented nation. Accordingly, the government has approved plans to develop a large port and industrial estate in Dawei with the Italian-Thai Development Public Company Limited (ITD) as a major contractor. The contract for the first phase of this 10-year project is worth an estimated US$8.6 billion, with the entire project estimated to be at least US$58 billion.

In November 2010, ITD signed a 60-year framework agreement with the Myanmar Port Authority to build a port and industrial estate on 250 square kilometres of land in Dawei, in the south of Burma. ITD will develop this mega-project through its wholly owned subsidiary, the Dawei Development Company. The agreement outlines three phases of development after which the port and industrial estate will eventually become Burma’s first special economic zone. The first phase from 2010 to 2015 covers the development of major infrastructure. The second phase will be devoted to the construction of the Dawei port, with a planned capacity that will allow 25 vessels to berth at 22 wharfs in two adjacent ports. Together the two ports will be able to handle upward of 100 million metric tons of goods a year. The third phase will involve setting up an industrial estate, which is likely to become the largest in Southeast Asia. The planned industrial estate will cost up to US$1.3 billion, and will encompass six zones: port and heavy industry, oil and gas, upstream and downstream petrochemical product complexes, medium industry, and light industry.

So far, it seems that Thailand stands to gain the most from the Dawei project. Thai-Burmese border trade has been increasing at an astonishing 55 per cent year-on-year over the past five years, and was worth some US$1.7 billion in 2010. Undoubtedly, the Dawei project will lead to further growth in the total trade volume between the two countries. Moreover, ITD’s investment in Dawei is likely to transform Thailand into a major transit hub within the East-West Economic Corridor.

Thai Prime Minister Yingluck Shinawatra paid a brief visit to Burma in October 2011 and met with President Thein Sein, clearly looking to reinforce this relationship. During this visit she expressed Thailand’s continued support for the Dawei project and increased cooperation with Burma. Earlier, during the Thai-Burmese Joint Trade Commission meeting in April 2010, the two countries set a goal of tripling bilateral trade in five years, from US$4.3 billion to US$13 billion in 2015. The Dawei project would allow Thailand and Burma to meet this target and, further, the deep-sea port could see Thailand realise its aspiration to become the logistics hub of Southeast Asia.

With Dawei set to become a distribution point for Thai agro-industry exports, Thailand will consolidate its position as one of the world’s major food suppliers. Production bases in western Thailand in particular — including Kanchanaburi, Rachaburi, Phetchaburi, Prachuab Kirikhan, Samutsongkhram, Samutsakhon, Suphanburi and even Bangkok — will benefit the most from the Dawei gateway.

The Thai private sector will also profit from Dawei, and this will likely intensify Thai economic influence in Burma over the long term. Potentially lucrative deals have attracted other big conglomerates in Thailand to also pour money into the project. For example, Thailand’s oldest and largest trading business, Loxley Public Company Limited, sent a team to Dawei in April 2011 to assess the project’s feasibility. The company has expressed interest in power transmission lines and oil and gas terminal projects. Other Thai companies are currently negotiating prospective investments in Dawei’s second and third development phases.

In the end, it is possible that the Dawei port project will be used to further legitimise Burma’s new regime and its embrace of capitalismand regional integration. It remains to be seen whether the development will truly benefit local villagers, and whether the revenue gained from the multi-billion dollar project will trickle down into the people’s pockets or end up in the generals’ bank accounts.

Pavin Chachavalpongpun is a fellow at the Institute of Southeast Asian Studies, Singapore.

 

http://www.eastasiaforum.org/2012/02/24/thailand-set-to-profit-from-burma-s-new-dawei-port-project/

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