Myanmar questions Italian-Thai's resource for giant Dawei project

BLOOMBERG / The Nation 04 May 2012

Myanmar President Thein Sein's top political adviser has questioned Italian-Thai Development's ability to oversee a planned US$8.6-billion (Bt265 billion) industrial zone in the country, raising doubts about the Dawei project's viability.

Executives at Thailand’s biggest construction company “haven’t much experience in developing such a very big special economic zone”, presidential adviser Ko Ko Hlaing said in an interview in Yangon, Myanmar’s biggest city. “We need other big investors.”

Thein Sein pitched both Dawei, 300 kilometres west of Bangkok, and Thilawa, a port 25km south of Yangon, to Japanese investors during meetings in Tokyo last month, he said.

The trip ended with an agreement for Japan to study Thilawa’s potential that made no mention of Dawei.

Italian-Thai has struggled to win financing to build the Indian Ocean industrial hub that it was awarded a concession to develop in November 2010, before Thein Sein took power as Myanmar shifted from five decades of direct military rule.

This year, Myanmar’s government told reporters it had cancelled plans for a 4,000-megawatt coal-fired power plant on the site without informing the company in advance.

Italian-Thai helped build the infrastructure for Map Ta Phut, Thailand’s biggest industrial estate, and can handle the project in Myanmar, according to Somchet Thinaphong, managing director of the Dawei Development Co, a unit of the company.

Every project of this scale needs multiple investors to be successful, he said yesterday.

“This is a global project, it’s an international project,” Somchet said. “One company cannot handle [it].”

Italian-Thai shares fell 1.1 per cent as of 12.26pm in Bangkok, the most in a week.

They have climbed 1.1 per cent this year, compared with a 21-per-cent gain for the Stock Exchange of Thailand’s benchmark index.

The company has reported a loss in three of the past four years, according to data compiled by Bloomberg.

“One of its biggest problems was that it was supported so much by the previous government, and now they need to start again and try to get support from the new government,” said Ruth Banomyong, an assistant professor at Thammasat University who has worked with the Asian Development Bank (ADB).

Italian-Thai likely needs financial guarantees from the Thai government for Dawei to be successful, he said.

Five days before Myanmar held elections in 2010, Italian-Thai signed an $8.6-billion contract with the government to build a deep-sea port and industrial estate, according to company vice president Anan Amarapala. The company expected to secure at least $12.5 billion in loan agreements this year to develop the project, chairman Premchai Karnasuta said late last year.

Last July, Italian-Thai obtained a credit facility valued at Bt2.17 billion, according to an annual financial statement released on February 29. Somchet said |he could not provide details on financing for the project.

The ADB would find it hard to lend money for Dawei given concerns “about how this project should move forward”, Craig Steffensen, the bank’s Thailand country director who also oversees Myanmar, said last month.

“I’m not sure it makes sense for [Italian-Thai] to borrow to build roads and rail connections and transmission lines for something they don’t own, where they will turn it over in 60 years, unless they get an extension,” he said.

“And I’m not sure it makes sense for the government to borrow from the ADB for investments in what is essentially an undertaking by a foreign investor in Myanmar.”

Japan, Myanmar’s biggest creditor, forgave $3.7 billion in debt last month during Thein Sein’s visit. Japan also agreed to complete a feasibility study by year-end to develop a port and industrial estate at Thilawa that promote Japanese investment into Myanmar, according to a statement.

During his trip, Thein Sein visited power plants run by Tokyo Electric Power Co and Electric Power Development Co, also known as J-Power.

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