Japan’s Prime Minister Shinzo Abe (front, second left) visits the Myanmar International Terminals Thilawa (MITT) port outside Rangoon on May 25, 2013. (Photo: Reuters)
Japan’s industrial investors stayed with Thailand through the army coups, the Bangkok-paralyzing massed Red-Shirt protests, and the mismanaged floods of 2011 that swamped so many Japanese-owned factories. But a huge labor force in Burma ready to work for one-sixth of a Thai wage could be a turning point.
The visit to Burma earlier this week by Japanese Prime Minister Shinzo Abe’s has certainly got the government of Prime Minister Yingluck Shinawatra in Bangkok worried. It helps explain why last week during a trade promotion visit to Tokyo she apologized to Japanese business leaders for “any inconvenience caused” to them and their businesses in Thailand in recent years and promised to do better.
“Please be patient with Thailand and we will amend and change the regulations for you and other investors,” Yingluck told a Tokyo conference. “Our government will try to make sure that Thailand will be a good place for investments for you all in the future,” she said in response to calls for changes in Thai rules on investment.
“We will try to work out and implement regulations that will suit the investors, as we want to make Thailand the regional hub,” Yingluck said.
Political analysts have been quick to the view that Japan’s intensifying interest in Burma is about seeking to counterbalance the influence of China, but trade and business pundits note that Japanese investment in large-scale manufacturing follows the cheap labor market.
And it’s no coincidence. Japan carefully studies cost issues across the region. A survey by the Japan External Trade Organization, known as Jetro, showed that wages in manufacturing industry in Burma are the lowest among 19 countries.
Jetro is a Tokyo government-financed agency that “promotes mutually beneficial trade and investment”.
The “Survey of Japanese-Affiliated Companies in Asia and Oceania” report covering 2012 showed that the average industry wage in Burma per annum is US$1,100.
In Thailand, the average annual wage is six times higher at $6,704.
Vietnamese wages are twice as high as in Burma. The closest to Burma’s cheap labor is Cambodia, where the average annual wage in manufacturing is $1,424.
Burma also has the lowest wages in the region for engineers, managers and administrative staff.
Among the problems the Jetro survey found was that Japanese companies in Thailand experience are rising wages and end-user complaints about product prices. Key problems faced in Burma are electricity shortages and poor infrastructure.
“I don’t believe that Myanmar [Burma] poses a serious immediate threat to Thailand’s attraction as manufacturing base for Japanese companies. However, some of the important benefits which brought Japan to Thailand are eroding, low costs among them,” an economist with a Western embassy in Bangkok told The Irrawaddy on May 29.
“It will not have escaped Japanese investors’ notice that wages in Myanmar are much, much lower than in Thailand, lower in fact that anywhere else in this region,” said the official, speaking on condition of anonymity because of the sensitive nature of the subject.
It seems to be no coincidence that Japan’s latest offers of financial help to the Naypyidaw government include aiding construction of a large power plant and other infrastructure development.
There have been repeated complaints in recent months by Japanese investors and developers in the big Thilawa Special Economic Zone on the edge of Rangoon about a lack of electricity and other essentials.
“Wherever Japan has plans to invest seriously in manufacturing industry development in emerging countries it more or less sets preconditions for the host government,” Jeff Mead, an independent energy analyst in Hong Kong, told The Irrawaddy.
“We don’t hear much about this but it’s a little like the ‘no money, no honey’ rule. No electricity, no factories,” he said.
“The Thais have been very assiduous in the last 25 years in ensuring that their country has sufficient electricity to support an expansionary industrial base. This is something the Burmese need to do if they want to draw in major Japanese manufacturing industries. The Burmese will be very aware that the fuel to generate much of Thailand’s electricity is actually natural gas imported from Burma.”
It is perhaps that drain into Thailand of much-needed energy resources, albeit paid for handsomely, that makes Naypyidaw lukewarm in its enthusiasm for the Thai-promoted port and economic zone at Dawei on Burma’s southeast coast.
Despite assurances by Bangkok that the Dawei project would benefit Burma, the biggest beneficiary would be Thailand.
It’s Thailand that would benefit from a crude oil transhipment terminal in Dawei, and it’s Thailand that would benefit from developing around Dawei a petrochemicals industry, currently stymied at the Map Ta Phut industrial zone outside Bangkok because of environmental health problems.
Dawei is perhaps another sign of Japan’s future intent. Prime Minister Yingluck has twice this year—first in Bangkok in January and again last week in Tokyo—button-holed Prime Minister Abe to try to pressure him to support the multi-billion dollar Dawei project, which has yet to attract any serious Thai investment.
On both occasions, Abe politely smiled—evidently more interested in a place called Thilawa.
Source: The Irrawaddy