Will the Dawei Special Economic Zone benefit the people of Myanmar?

Mekong Commons 05 August 2017 | Minari Tsuchikawa

Is the Dawei Special Economic Zone paving the way to environmental disaster?

The governments of Myanmar, Thailand and Japan are together investing to build a special economic zone (SEZ) covering 20,000 hectares (ha) in Dawei, a coastal town in Myanmar. The SEZ plans include an industrial estate and deep sea port to promote export-led industrialization. Project proponents hope to make Dawei the western gateway of the “southern economic corridor” promoted by the Asian Development Bank (ADB). This corridor would link Vietnam, Cambodia and Thailand. Thailand’s Italian-Thai Development (ITD) initiated the project in 2008, but it eventually stalled in 2013, since ITD was unable to raise the necessary funds. The governments of Myanmar and Thailand, however, have continued to promote the project.

In 2015, the Government of Japan formally became involved in the Dawei SEZ. Japan is investing through the Japan Bank for International Cooperation (JBIC) through a Special Purpose Vehicle that provides investment in an equal ratio to that of the Myanmar and Thai governments. In addition, the Japan International Cooperation Agency (JICA) is also conducting a survey for the construction of a road connecting Dawei with the Thai border.

In July 2016, Mekong Watch, a nongovernmental group in Japan working on environmental issues in the Mekong Region, visited the project site and met people who were facing a variety of problems due to the Dawei SEZ project. ITD had already begun the construction of access roads and leveling of land in 2010 as preparation for the construction of the road corridor and the industrial estate. Residents in one village spoke of road construction suddenly taking over their lands with no prior notice. Construction has caused erosion, and sediments have flowed over farmland, making the land unfit for cultivation. Water sources have also been polluted by soil and sediments. Community roads have been divided, and routes and habitats used by elephants and other wild animals have been fragmented. Almost none of the residents affected by these damages have received sufficient compensation.

Similar problems are also arising in the area designated for the SEZ. Farming and fishing communities were told to move out of the SEZ area. A resettlement site was built, but some people were already living there, which created problems for the original residents. People also knew they would not be able to find employment at the resettlement site, so only four households actually moved there. At present, just one household lives there. Now the site contains 480 houses standing empty, side by side. The SEZ project claims it will create employment. But so far, the reverse seems to be the case.

Among residents affected by ITD’s road construction, some have received compensation, some have been partially compensated, and some were not considered eligible for compensation. This is creating new tensions among the communities. Some residents told us that they are hoping Japan would become involved and construct the road. When asked why, they explained that because Japan is an economic superpower, people would be adequately compensated if Japan were responsible for the road. If road construction is financed with Japanese aid, it is possible that livelihood improvement programs might be implemented regardless of damage. However, Japan will not compensate for any damages caused by previous construction work undertaken before the involvement of the Japanese government.

Non-governmental groups from Myanmar and Thailand filed a complaint with the National Human Rights Commission (NHRC) of Thailand. The NHRC conducted a survey and released a report in November 2015 citing violations of the rights of the people in Dawei. The report says there are still unresolved problems, and expects that the negative impacts will continue into the future. The report also says that restoring the environment and the livelihoods of residents is the responsibility of not only the company but of the participating governments as well. ITD, however, claims that it is not responsible because it no longer has any rights in operating the project.

The Dawei SEZ’s area of 20,000 ha is one-thirds the size of Yangon. Phase 1 of the Thilawa SEZ, a project in which global Japanese corporations are investing with the support of Japan’s government is 400 ha, and the entire project is 2,400 ha.

The Japanese government is currently reviewing the Dawei SEZ plans, and we are speculating how Japan will proceed with development in Myanmar. One feasibility study commissioned by the Japanese Ministry of Economy, Trade and Industry (2013), states: “There is a need to rework ITD’s wishful concept into an economically rational plan.”1

In the 2015 report, “Comprehensive Development Plan Study for Assistance to Promote Industrialization in Myanmar,” it is interesting to note that the study anticipates very high port maintenance and management costs due to necessary dredging and erosion measures.2 The private sector was supposed to cover these costs in the initial project plan, but it is still unclear if companies will be interested if port utility fees are high. Public funds are also being considered to cover part of the burden. Another concern is that the currently planned width of the channel is too narrow to enable boats to pass if a large tanker were to enter.

In the feasibility study mentioned above, the chapter on environmental regulations states: “If strict environmental regulations similar to Thailand’s Map Ta Phut project are adopted, Dawei’s capital investment costs will rise, weakening its manufacturing edge.” The study also says, “while keeping the environmental burden that accompanies industrial town development to a minimum, there is a need to design environmental regulations that would make it advantageous for Japanese companies to come aboard.”

In other words, this study is saying that it is economically unfeasible to adopt Japanese environmental standards, and that it is even impossible to adopt standards equivalent to Thailand’s, which the Thai government has begun to revise due to its bitter experience with pollution. Unfortunately, the Japanese government’s involvement is no guarantee that people’s rights and the environment will be protected.

Dawei enables access to the Indian Ocean, and is therefore a very attractive location from a business point of view. The topography may make it impossible, however, to construct an efficient, large-scale port. Without prior construction of the port, there would be little economic benefit to connecting Vietnam to Dawei, and little economic benefit from building the SEZ. Without the SEZ, there is no need to spend exorbitant amounts to cut through beautiful mountainous terrain to construct a huge highway.

Japan achieved its past economic growth by building large-scale industrial estates and developing export industries. But is this a good model for Myanmar as it rebuilds its nation in the 21st century? It may be wise to look at some of the challenges Japan is facing now. In Japan, there is little employment outside of urban centers, and the population has concentrated in large cities, so there are disproportionately high numbers of senior citizens in rural areas. While life in large cities has been made very convenient with infrastructure, human relationships and a sense of community are difficult to develop. The culture of mutual cooperation is weakening and urban life is not easy for children and the elderly. According to a study by the Prime Minister’s Office, there are 236,000 youth who are “hikikomori,” which means they have withdrawn from society, refusing to leave their homes. They stay inside, sometimes for years, refusing, or too afraid, to go outside.

Japan’s financial condition is also unstable. According to documents from the Japanese Ministry of Finance, 24.4% of the annual expenditure for fiscal year 2016 was for servicing the national debt. In addition, 35.6% of the national budget revenue came from public bonds. This means that while one fourth of the budget was used to pay back previous debts, more than one third of the budget was borrowed from future generations. On the other hand, income from corporate income tax is only 12.6%. Due to globalization of the economy, corporate profits do not necessarily lead to national profit. The Japanese government often cites Thailand’s eastern coastal region’s industrial development as an economic success. But that took place in the context of the Plaza Accord, when the yen was very strong, and many Japanese firms were moving overseas. Would the same happen in Myanmar today with the construction of the Dawei SEZ?

In Japan, it has become recently known that the surrounding seas are largely polluted with microplastics. Years after the Fukushima Daiichi Nuclear Power Plant disaster, even today water contamination from radiation is not under control with waste still being disposed in the ocean. In Dawei, on the other hand, the ocean is vibrant with natural resources and stunningly beautiful. There are still many wonderful places along the coast. We have heard of plans to organize eco-tours with the participation of local residents.

Myanmar is in a unique and invaluable position with unlimited opportunities to steer development so that it focuses on the needs of the people in Myanmar and the integrity of the natural environment. Myanmar need not follow old, outdated models where development was implemented primarily for the benefit of corporations and governments with little benefit for the local residents while also causing health and environmental impacts. In principle, Japanese aid is provided upon request. This means that aid is given in response to requests from recipient governments. We ask that the decision-makers in Myanmar consider whether the Dawei SEZ can really benefit the people of Myanmar. Consider it carefully then let the Japanese government know what you think.

1. Prepared for The Ministry of Economy, Trade and Industry, Heisei 24 nendo infura sisutemu yushutsu sokushin chousatou jigyo, Myanma Dawei kaihatsutou ni okeru jigyo kanousei chousa houkokusho, March 2013, p.7-10, in Japanese.
2. Prepared for The Ministry of Economy, Trade and Industry, Myanma sangyo-ka sokushin shien sougou kaihatsu keikaku chousa houkokusho, March 2015, p.4-15, in Japanese.

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