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‘No magic bullet’ behind Thilawa’s success

Success behind the Japan-led Special Economic Zone shows the need for Myanmar to improve access to land and utilities and reform its regulatory framework to capture investor interest, an SEZ investor said.

Yangon’s government showcased 80 project proposals in last month’s Yangon Investment Forum. Apart from housing, industrial zones and highways, the list included ambitious blueprints of Yangon’s “New City”, Dala’s satellite urban centre, another port between Kawhmu and Kungyangon townships. Everyone at the forum praised the Thilawa Special Economic Zones for its success.

The Myanmar Times secured an exclusive interview with panel speaker and investor Tomoaki Yabe.

For the government to replicate this public-private partnership success in other parts of Myanmar, Mr Yabe outlined a few criteria: transparent and investment-friendly regulatory environment, infrastructure and efficient bureaucracy.

The government had laid out transparent regulatory framework with the clear objective of attracting FDI before the scheme began, he said. Good infrastructure developed by Myanmar Japan Thilawa Development Limited (MJTD) within the area makes it attractive for manufacturers, including power supply, access to water, proper waste treatment and internet access.

The list can go on but ultimately it all boils down to “the will and determination of the government to improve the business environment, transforming Thilawa into an ever more attractive choice for investment for the manufacturers.”

Industrial zones across the country and proposed SEZs can benefit a lot by looking at why Thilawa stands out.

“What many of the existing industrial parks in Myanmar faces is bad management and maintenance of infrastructures.

“Even a light industry cannot operate to its full capacity when undermined by poor road conditions, lack of access to clean water, and scarce energy supply,” he emphasised.

What other industrial parks need to do is to focus on fixing ground issues that are being faced by existing manufacturers. The authorities could, for example, prioritise allocation of electricity for industrial areas or even build a small-scale power plant specifically for those zones

Regulatory enforcement is another problem for industrial parks. There are many empty lands in these zones because of land speculation.

To counter this risk, Thilawa developer MJTD put in a time limit for all investors for them to build a factory or warehouse. This ensured that there are no investors speculating the land.

Logistics and trade

Mr Yabe is managing director of Thilawa-based logistics firm Daizen Myanmar, which provides warehousing, freight forwarding and other services. Daizen became the country’s first bonded warehouse operator, having received the first SEZ warehouse licence in 2017.

The other industrial parks would want to bring bonded warehouse function, but the related law is currently being drafted and waiting for approval, he said. The requirements to get a bonded warehouse in the zone include a licencing criteria, application procedures to the authorities, and inspections conducted by Customs to check if the specification of the warehouse itself is in line with the SEZ specification. After acquiring approval, an inventory check will be conducted by Customs to keep track of what types of cargo are being stored.

When bonded warehouse is introduced outside, the other industrial parks in Myanmar can learn about the whole procedure, he continued.

Once the bonded warehouse law is enforced properly, the government will no longer limit bonded warehouse use for non-licence cargo, they will let the operators store both – licenced and unlicenced cargoes.

This is not the only challenge at hand. The liberalisation of regulations and rules on trade has been difficult due to the restrictions the government has imposed and the need for much practical legislation.

While the Ministry of Commerce “is keen to push things forward”, Mr Yabe said there are some policies which need to be amended to align with the SEZ framework. In particular, there remain discrepancies between the national import/ export laws and the SEZ import rules in relation to the use of free zone warehouse (FZW).

“The consequence is that we can operate the FZW where some restrictions still remain depending on the requirement of import license and where the goods are destined to be consumed.

“For instance, for the goods that are destined to be consumed within SEZ or exported out of Myanmar, both licensed and non-licensed goods are permitted to be stored in FZW whereas for the goods that are destined to be consumed outside the SEZ in Myanmar, only non-licenced goods are permitted to be stored in FZW.”

One-stop service centre

The one-stop service centre (OSSC) has made the process of registration and approval simpler for foreigner investors without the need to go through several ministries, Mr Yabe added.

“The OSSC has been very successful in Thilawa SEZ.”

But it would be difficult to scale it up to cover the entire country.

“In Thilawa you have almost 100 companies, 70 of which are operating. This is still a manageable size when compared to the rest of the country. If you were to amplify it you must think of an efficient way to receive the applications by the use of online platforms and come up with a systematic and transparent way of evaluating them.”

For a foreign business to investment in the SEZ, there are many approvals which need to be done, such as business licence and company registration. Thilawa has undergone a process of digitalisation. Digitalisation not only improves efficiency but also minimises interaction with people and hence reduces the corruption risks.

The SEZ Management Committee has undertaken many steps to ensure investment proposals will be implemented with responsibility. Some of the safeguards include signing an Anti-Corruption Declaration, the Environmental Conservation and Prevention Plan, and conducting Environmental Impact Assessment.

Currently, Thilawa Zone A is occupied 100pc in terms of approved investment proposals. Zone B (Phase 1) is occupied 80pc, and Zone B (Phase 2) 50pc, and Zone B (Phase 3) is still in process. A new bridge crossing Bago River, expected to connect the area with downtown Yangon, is under construction. Japan’s Toyota Group plans to start building an assembly plant building at the SEZ this year.

The zone is 51 percent owned by the Myanmar government and companies, and 49pc by the Japan International Cooperation Agency (JICA) and three big trading houses.

Source: Myanmar Times

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