Myanmar mega-project may be on a road to nowhere

Reuters AsiaOne 17 May 12;

DAWEI - A simple, red sign on a white beach marks the start of a billion-dollar highway that will, one day, lead to a vast industrial project to be built close to impoverished Myanmar's border with Thailand.

But with years to go before it is up and running, the US$50 billion (S$63 billion) port and industrial complex in the southern city of Dawei is already struggling to look relevant as Myanmar emerges from untouchable state to Asia's latest Eldorado.

Conceived during the day's of military rule when Myanmar faced crippling sanctions, the project was at the time a very welcome offer of major foreign investment.

Officials insist that nothing has changed despite the rapidly growing list of investors looking hopefully at a rapidly changing Myanmar.

"It will go ahead," said Tin Maung Swe, an official from Myanmar's Home Ministry who works as liaison officer on the project which he says has the backing of reformist President Thein Sein.

"I'm staying here," he told a group of journalists on a rare trip to the site. "I can contact the president directly."

The visit was laid on this month by the project's developer, Italian-Thai Development Pcl, Thailand's biggest construction company, which first made a deal with the Myanmar Port Authority in 2008 when few investors would, or could, go near the country.

The tour coincided with the debt-laden company's struggle to tempt investors to fund the $8.5 billion it needs for the first phase, details of which it hopes to finalise by the end of the year.

Italian-Thai - the "Italian" refers to one of its founders 54 years ago - is pressing ahead and has started to relocate 30,000 people to make way for the 250 sq km (97 sq mile) complex which will allow in pollution-belching heavy industry that Thailand doesn't want.

Even the government has raised questions about Dawei. Energy Minister Than Htay told Reuters in January that the country could develop home-grown special economic zones more quickly, including one south of the commercial capital, Yangon, and another on the Bay of Bengal, where a China-Myanmar pipeline starts.

Slow progress on the project and Italian-Thai's own financial difficulties reinforce the scepticism of some analysts.

It hasn't helped confidence that the construction of a huge 4,000-megawatt coal-fired power plant destined for the zone was vetoed this year after an outcry over the environmental impact.

"It's very challenging for Italian-Thai," said Kasem Prunratanamala, head of research at CIMB Securities in Bangkok, who visited the site in February. "The company's balance sheet is not strong because it has a debt burden, which could raise doubts about the viability of the project."

RELOCATION, COMPENSATION

But around the site, preparatory work is going ahead. In one big area of scrubland outside the zone, workers are clearing the land and knocking in support pillars for two-storey cement houses that villagers will be relocated to.

More than 1,800 families, most of them reliant on farming, will move there from five villages inside a 42 sq km zone set aside for heavy industry.

"We have already paid compensation for about 5 per cent of these areas," said Panno Kraiwanit, the Italian-Thai project manager in charge of relocation.

In total, about 30,000 people from 16 villages will move out by the end of next year, with Italian-Thai footing the bill to compensate them for housing and the loss of livelihoods from rubber, betel and cashew nut and other crops.

The company is also committed to providing infrastructure, power and water, schools and medical services for the new communities.

ROADS AND JOBS

The company says that by the end of 2015 it will open a US$1 billion, four-lane highway to Thailand, a US$1.2 billion deep-sea port plus infrastructure including a 400-MW power plant.

Construction of the asphalt highway is expected to start early next year and could be expanded to eight lanes by 2017.

Italian-Thai has completed a 132 km (80-mile) dirt road linking Dawei with the Thai border in western Kanchanaburi province, said Anusorn Makornpan, project manager for the road.

It has also built a small, temporary port for local use and to bring in construction materials for the project.

"The priority is the road and deep-sea port, which should be opened by the end of 2015. How can you invest in a project without a road? Power and water will be ready the same year,"said Kiwamu Honda, a senior adviser to Italian-Thai.

Once the infrastructure is in place in 2015, the focus will switch to developing heavy industries including steel, oil and petrochemicals, Honda said, adding that the Japan Bank for International Cooperation and the World Bank were keen to provide support.

Asian investors including Japanese and South Korean firms were interested in investing in the steel project, he said.

Outside the project site, surrounded by thick jungle and mountains, Italian-Thai has to contend with the Karen National Union (KNU), an ethnic minority rebel group that dominates areas bordering the road to Kanchanaburi.

Here at least, the political climate in Myanmar is working in Italian-Thai's favour. The KNU has agreed a truce with the government in its fight for greater autonomy and in April became the first rebel group to begin talks on a political settlement.

The company had set up a committee with the KNU to soften the impact of the project on the environment, said Nophadol Briksuvand, an Italian-Thai environmental adviser.

"Everyone says it's risky for the company because they have to pay for everything. But it's a good opportunity for the company to be brave and invest," he said.