Myanmar reaches out

Published: 28/05/2012 at 02:47 AM.. 

Industry Minister Soe Thane says new investment rules will be ready soon, and while near-term focus will be on building a base of small-scale industries, stalled Dawei megaproject is still viable.

Soe Thane: Dawei good for all of Asean

Myanmar is preparing for more industrial development and plans to set up a board of investment to promote companies that want to enter Asia's newest frontier market.

"It could take about two to three years before we can set up a body similar to what you see in Thailand," Industry Minister Soe Thane told Asia Focus.

Soe Thane currently heads an unofficial body that grants concessions and tax holidays to investors. He said that setting up a formal investment promotion body would help attract more foreign direct investment into the country.

"We are lagging behind most economies in this region and you can say we're late in this game," he said on the sidelines of the Future of Asia conference, held last week in Tokyo by Nikkei Inc and the Bangkok Post.

The minister's presence at the event was a further sign of the rapid pace of economic and political change in Myanmar. This week, President Thein Sein will be in Bangkok for the World Economic Forum on East Asia, as will opposition leader Aung San Suu Kyi, making her first trip abroad in 24 years.

The government's focus in the near term is to attract investments in small and medium-sized industries, said Soe Thane, as a base is needed before larger-scale industries can develop. In the longer term, as education improves, he hopes to see the country move more toward a knowledge-based economy.

"We have lots of labour, so for the time being we are looking at labour-intensive industry in the textile, garment, toy and footwear industries," he said.

Companies from Thailand, Singapore, Vietnam, South Korea and Japan have already set up businesses in the country and more are expected to follow suit.

Investors in special economic zone (SEZs) are eligible for an eight-year corporate tax holiday. Those outside SEZs qualify for five years.

Parliament will soon vote on new regulations for foreign direct investment (FDI), after having voted recently to allow foreign investors in SEZs to repatriate 100% of profits, "as long as the books are clean", said Soe Thane.

He said the country was looking to build an industrial park in the Bassein region, west of Yangon, but stressed that it would be mainly for domestic industries and would not be an SEZ like Dawei on the coast.

"Dawei is an SEZ and the new area would not in any way be a competitor, although the new zone will also have a deep sea port, but with more than 1,200 kilometres of coastal shoreline, we can have many deep sea ports," he added.

Also under study is an SEZ at Thilawa with Japanese investors, with a decision likely by year-end.

Soe Thane acknowledged that Dawei was making very slow progress. This was something the two governments needed to discuss as it was the job of the Thai government to look for investors, while lead contractor Italian-Thai Development Plc (ITD) seemed to be taking a lot of time, he said.

ITD has also been struggling to raise financing, as some investors believe the new Myanmar government is not as enthusiastic about the megaproject as the former military junta was when it granted the concession.
Soe Thane insisted that the government still believed in Dawei.

"This project is beneficial not only to Thailand and Myanmar but is also a corridor for all of Southeast Asia so it has to go ahead, but how is a different issue," he said. "If Italian-Thai can do it they should. If they cannot, then we will have to review it."

One sticking point has been the government's decision to reject plans for a 4,000-megawatt coal-fired power plant, in which ITD would own 75%, on environmental grounds. Soe Thane indicated that authorities may soften their stand but any new power plant that is approved would probably be smaller.

"We may want to do this in phases," he said, adding that he was impressed by the clean-burning coal-fired plants he'd seen in Japan.

"The people who opposed the initial building plan would need to be shown that there is clean coal-fired power plant technology available," he said.

"Those who opposed the project were people who had seen the old Chinese coal-powered plants in Shan state and thought that the new plant would do similar environmental damage."

In any case, he said, as Myanmar develops it will need even more power plants because brownouts in Yangon and other areas are already a problem.

"There is an urgent need to build at least two plants around Yangon, and maybe one around Mandalay," he said. "All need to be near a river to make it easier to transport the heavy coal.

"These projects need to be undertaken as soon as possible because only about 25% of the country is currently connected to the grid.

"We had not anticipated many things and the speed of change has been so fast," he said. "We plant to look at ways to develop more gas fields although this may take time."

In the worst case, he said, the country could buy back gas from concessionaire PTT Exploration and Production, which exports most of the gas to Thailand. "By 2013-14 we will have more natural gas as new concessions are granted."

Soe Thane conceded that currently there is a mismatch between what is produced and what is consumed and exported but all this should be sorted out in the near future.

"We never expected so many tourists to come to the country to a point that all hotel rooms are booked out, This situation will continue for a few more months or a year before it is resolved."

http://www.bangkokpost.com/business/economics/295359/myanmar-reaches-out