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Economy

Myanmar's flagship industrial park ready for takeoff

Number of companies at Thilawa set to double in the next year

Many plants are under construction at the Thilawa special economic zone industrial park outside Yangon.

YANGON -- Myanmar's first industrial park has grown into a thriving hub of foreign investment in its first two years, in a country seeking to catch up quickly with its more industrialized Southeast Asian peers.

During the two years since it opened in September 2015, the Thilawa industrial park in a suburb of Yangon, the country's largest city, has attracted 85 companies, including some that have reserved a lot. Already, 36 of them have started operation, while 34 others are constructing their facilities.

The number of companies operating in the park will double next year to account for over 80% of all the tenants on the list.

Acecook, a Japanese maker of instant noodles and soup, began operating its plant in the industrial park earlier this year.

"It is a state-of-the-art instant noodle factory equipped with technologies we have developed in Japan," Acecook President Hiroshi Muraoka proudly said.

Acecook has spent $20 million to build the plant, which can churn out up to 300 million instant noodle products per year.

The plant is equipped with a full-fledged manufacturing line that makes dough from raw materials, cuts the dough into noodles and then fries and dries them.

It also has such food safety and quality control equipment as air showers to prevent pollution in the production process and X-ray detectors to discover foreign contaminants.

Located within a special economic zone, the Thilawa industrial park is eligible for special tax and regulatory incentives for foreign businesses.

Foreign companies operating in the park, for instance, are allowed to import and sell finished products -- a business category basically reserved for domestic players -- if they provide certain value-added services such as maintenance.

No basic plan

There are two other special economic zones in Myanmar, one in Kyaukpyu, a port town on the Bay of Bengal in the northeastern Indian Ocean, and the other in Dawei, a city in southern Myanmar close to the Thai border. But even a basic plan has not been disclosed for either of them.

The Myanmar government regards Thilawa as a model project for its efforts to attract foreign investment. It has created a "one-stop" administrative service center for foreign companies expanding into the industrial park, allowing them to do all the necessary paperwork for investment permits as well as labor and tax registrations at one location.

The system is aimed at cutting red tape, which has been often criticized as a hotbed of corruption.

The park boasts high-quality infrastructure facilities including reliable water and power supplies. An employee at a Western company operating in the park says it is hard for other industrial parks in Myanmar to attain the Thilawa standards.

The development of the original 400-hectare campus is almost complete. The work to expand the park by roughly 100 hectares began in March, with completion scheduled for next summer. There is talk of further expansion in the future.

As of August, permits had been issued for $1 billion worth of investments in the special economic zone. Japanese companies make up 43 of the 85 tenants of the industrial park, which also include 11 Thai and six South Korean firms.

By market category, 51 companies, or 60% of the tenants, make products for the Myanmar market, while 25 are engaged in export-oriented businesses. The remaining nine are distribution companies.

The figures indicate that the share of domestically made industrial products is on the rise in the country, while export industries are struggling to grow.

Dominant presence

Japanese companies have a dominant presence in the industrial park because Japan's public and private-sector players are deeply involved in the development and operation of the park.

Myanmar's government and businesses have a 51% stake in Myanmar Japan Thilawa Development, the operator of the park, with the remaining 49% stake held by Japanese trading houses Sumitomo Corp., Mitsubishi Corp. and Marubeni along with the government-affiliated Japan International Cooperation Agency. The president is a manager of Sumitomo.

Japan has provided development aid to help build infrastructure in and around the park.

The electric power plant to supply electricity to the park started operation last year. A substation is scheduled to come on stream by the end of this year to ensure stable power supply.

Many of the companies that have started operations in the park are engaged in businesses that do not require massive investment, such as distribution centers.

Some of the companies planning to begin operations in the third year, however, are expected to make large investments for building plants and installing equipment, according to Tomoyasu Shimizu, president of Myanmar Japan Thilawa Development.

Construction work will soon start in earnest again as the rainy season comes to an end.

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