Thailand has moved to dispel doubts over its commitment to the world’s biggest port and industrial zone development project, located on Myanmar’s southern coast.

Bangkok has committed Bt33bn ($1.1bn) to develop infrastructure links to the $50bn-plus scheme, and is forming a team to lobby potential participants.
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The moves follow the sudden withdrawal in July of a key Myanmar partner in the project, and a subsequent bilateral agreement to help build a “strategic corridor” from the Dawei economic zone to industrial areas along Thailand’s east coast.

The hugely ambitious plan – at 204?sq?km, the site is more than twice the size of Manhattan – was conceived when Myanmar still faced international sanctions.

The project has been beset by problems ranging from funding to protests from local and environmental groups. But the lifting of sanctions and the country’s rapid opening to foreign investment has generated fresh optimism.

“The suspension of US sanctions, in particular, has transformed the politics and therefore the viability of this project,” said an analyst with a US investment bank.

Somchet Thinaphong, managing director of Dawei Development, a subsidiary of Italian-Thai Development, Thailand’s biggest construction company and lead developer of the Dawei project, said preliminary work on the $8.6bn first phase would be stepped up once a revised agreement between the company and Myanmar had been finalised.

“Our conditions are straightforward,” said Mr Somchet. “If all the sectoral agreements – meaning concessions – for the deal are signed within [the] next month, we can proceed with [Thai] bridging loans and have the first phase accomplished by the end of 2015. We still feel we can achieve that.

“[Under] this new memorandum between Thailand and Myanmar, it is clear they would help to solicit sources of funds, because it stipulates the Thai government would support the project. So the ball is in their hands.”

The Thai government has established a Dawei “secretariat” to oversee government involvement in the project and is creating a high-level team, led by Kittirat Na-Ranong, finance minister, to help secure funding. It will soon initiate discussions with Japan about Dawei-related infrastructure projects.

Proposals to be put to Japanese bodies – including the Japan International Co-operation Agency, the government’s aid arm, and the Japan Bank for International Co-operation – include construction of a road from the project site to the Thai border, he added.

Several Japanese officials said informal discussions had been taking place “on and off” between Thai officials and counterparts at Japanese bodies including JBIC and JICA about potential involvement in Dawei-related development.

A Japanese government official said Tokyo was “of course interested and is considering this carefully, but contacts up to now have been very informal”.

The Dawei deep-sea port would enable vessels to bypass the congested Strait of Malacca, greatly shortening Asian shipping routes. However, despite investor interest, the huge cost for the main infrastructure development – specifically the port and road link to Thailand – would require a big multilateral or national investor such as Japan, said Mr Somchet.

A recent report from Daiwa Capital spelt out the difficulties for the project which it said had the potential to transform trade in the region. It “faces hurdles in its quest for funding” including a “chicken-and-egg situation”, as financial institutions wait to see which companies will invest as tenants of the Dawei zone, while potential tenants wait for confirmation of port and infrastructure development.

Under a framework agreement signed nearly two years ago, which gives the Italthai group a 75-year lease on the zone, the Dawei project includes a port and an industrial zone featuring petrochemical industries, an oil refinery, a steel plant and power stations, and plans for road, rail and oil pipeline links to Bangkok.

Doubts had grown following Myanmar’s abrupt decision in January to order the suspension of Italthai’s plans to build a 4,000-megawatt coal-fired plant for the Dawei project, amid strong local opposition to the scheme. Funding difficulties for Italthai, which has spent about $100m so far in preliminary clearing of the site, added to doubts.

Italthai will spend more than Bt1.2bn on environmental impact assessments, which should help address local concerns, said Mr Somchet. But opposition remains strong, according to Bo-Bo Aung, a Dawei residents’ group spokesman, who said: “The project’s costs and benefits, and explanations on who will win or lose from the deal, need to be more transparent.”

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