March 21, 2014 6:08 am JST

Myanmar eyes spring 2015 start for Japan-backed industrial zone

MOTOKAZU MATSUI, Nikkei staff writer

The Thilawa industrial zone, slated to open in spring 2015, is expected to become Myanmar's magnet for foreign manufacturers.

YANGON -- Myanmar's first modern industrial zone will open as early as the spring of next year, with subdivisions to be handed out starting this May, according to the project's Japan-backed developer.

     Work on the Thilawa zone began last November, following an intergovernmental agreement the previous year. Initial plans call for developing a roughly 400-hectare area southeast of Yangon, the country's largest city.

     Japanese trading houses Sumitomo, Marubeni and Mitsubishi joined the Myanmar government and major local companies in forming Myanmar Japan Thilawa Development (MJTD), which is managing the project.

     Power and industrial water supplies should become available starting in May of next year. Subdivisions will be held on long-term leases, since Myanmar does not allow private ownership of land. Parcels are expected to rent for a 10-20% discount to nearby industrial parks.

     Seventeen companies have already expressed interest in moving into the zone, said MJTD President Takashi Yanai. Japanese and Hong Kong firms make up 80% of the total so far, but there have been inquiries from as far away as Sweden, as well as from within Myanmar.

     Industrial sites with electrical and water connections are hard to come by in this developing country. To cope with frequent blackouts, companies are forced to maintain costly on-site power generators. Myanmar's shoddy infrastructure poses a major barrier to investment from manufacturers.

     The Japanese government intends to offer around 30 billion yen ($290 million) in financing for infrastructure and other projects in the Thilawa area. Next summer, a power station capable of generating 50,000kW of electricity will come onstream. The zone could become the magnet for big manufacturers that Myanmar has never had.

     A law enacted in January provides for tax breaks and other incentives for companies that build in special economic zones. Thilawa will be the first such zone, said Set Aung, deputy governor of the country's central bank, who is overseeing the project on the Myanmar side.

     President Thein Sein's government has made job creation a top economic priority and is trying to attract investment in labor-intensive industries. Myanmar will soon offer "one-stop" service for construction licenses, corporate registrations and the like, Set Aung said. Cutting red tape would ease one burden on companies venturing into the country.