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Business

IHI to make concrete with Myanmar government

Demand for bridges, overpasses and other infrastructure is surging in Myanmar.

TOKYO -- IHI will partner with the government of Myanmar to build a $15 million concrete factory there, developing the country's materials sector and helping meet surging demand for infrastructure.

     The Japanese heavy equipment manufacturer will contribute 60% of the cost, with Myanmar's construction ministry putting forth the rest. The partners could break ground as soon as January in Yangon, the country's largest city. A start to operations is eyed for September or October, said Kyaw Linn, the ministry's permanent secretary. The midsize plant will be able to produce 77,000 tons of high-strength precast concrete annually.

     The project marks the second factory established jointly by the ministry and a Japanese company since Myanmar returned to civilian rule in 2011. The first, involving JFE Engineering, produces material for steel bridges and other such structures. IHI's venture is expected to meet more diverse demand from the public and private sectors.

     The planned factory is to supply foundation piles for a Japanese-led port development in the Thilawa Special Economic Zone near Yangon. Demand is anticipated in other settings as well, including for large buildings developed by the private sector. The plant also is seen providing materials for public works projects, including concrete bridge beams and drainage ditches. Making such pieces in a factory, rather than on-site from cement, will let builders shorten construction times. Factory-made concrete also is more durable and of higher quality.

Long-awaited reform

By teaming with Japanese companies, the ministry hopes to cut Myanmar's heavy dependence on imported construction materials. State enterprises controlled the cement and other materials industries during the country's military rule, hampering development. U.S. economic sanctions have also inhibited the materials sector.

     Currently, Myanmar imports the majority of its materials from China, Thailand and others in the region. A recent building surge in the country's urban centers sent real estate development spending soaring to around $850 million in fiscal 2014, or 10 times the fiscal 2012 level. But domestic cement production grew only about 40% during those two years while cement imports doubled.

     Transporting construction materials also has become more expensive, making building costs 50-100% higher in Myanmar than in neighboring Thailand. The government in 2013 began realigning state-run cement factories, selling assets to private companies in Myanmar and abroad. The venture with IHI appears to be a continuation of those efforts.

Development demand

The concrete plant -- IHI's first outside of Japan -- is also an important step for the manufacturer as it increases involvement in infrastructure projects in developing nations. Expanding operations abroad will be critical as the company works toward 1.7 trillion yen ($14 billion) in sales for fiscal 2018, particularly as Japan's infrastructure market contracts.

     IHI is in the running to build one of the world's longest suspension bridges across the Dardanelles in Turkey. It will complete a feasibility study on the project this month, presenting the results to Turkish authorities. The company already is building the world's fourth-longest suspension bridge across the country's Izmit Bay. Part of that structure is set to open in April.

     The Japanese company also has won bids for several smaller bridges in Bangladesh, India and elsewhere since April. Such structures are in demand in developing nations. Bridges shorter than 300 meters can be built less expensively from concrete than from steel, IHI says. The Myanmar factory is seen supplying such projects and could export concrete to other nations in the region.

     Other foreign materials makers are increasing involvement in Myanmar as well. Thailand's Siam Cement will begin operations at a new factory in the eastern state of Mon in 2016. The plant "will eventually be able to produce 1.8 million tons of cement a year," fulfilling nearly half of Myanmar's demand, the Myanmar Times reports. China's Anhui Conch Cement, Malaysia's YTL group and others also plan to build facilities in the country.

(Nikkei)

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