With years of successful operations in Thailand and Vietnam under its belt, the industrial estate developer Amata Corp Plc is preparing to offer a project to attract businesses looking to remain close to Bangkok while tapping into lower costs in Myanmar.
“We initiated the idea of the Mexican model to be implemented in this part of the world,” said Somhatai Panichewa, the chairperson of the investment board at Amata Corp.
“We have talked to Myanmar authorities and they agree that the Mexican model can be used, especially given the rising wages of Thailand. So we selected the area and the initial size would be 10 square kilometers. The eventual aim is to have 40 square kilometres or more but the initial startup is with 10.”
Ms Somhatai, who is in charge of the company’s international operations, said that when companies in the United States wanted to expand and tap into the lower-cost labour, they set up operations just across the border in Mexico, where they could benefit from the infrastructure of the United States while paying Mexican wages. The North American Free Trade Area agreement helped make the arrangement even more successful.
Ms Somhatai told Asia Focus that her company proposed the idea of a border industrial estate to the governments in Myanmar and Thailand and both sides were receptive. Amata is now looking to start the groundwork at a site in Hit Khee, just four kilometers across the border from Phu Nam Rom in Kanchanaburi province. A stone-laying ceremony is expected late this year or by January 2014.
The site is only slightly smaller than the current 14-square-kilometre Amata Nakorn industrial estate in Chon Buri province, but would eventually grow to about 40 square kilometres in about five years, Ms Somhatai said.
The new project will require about a billion baht in initial investment from Amata Corp alone while other partners, both foreign and local, would invest as well. Its location is expected to be a big selling point, given its proximity to key locations in Thailand including Bangkok (170 kilometres), Laem Chabang deep-sea port (300 km), and Kanchanaburi (60 km). Just 160 kilometres to the west will be the huge Dawei special economic zone being developed by Italian-Thai Development Plc and backed by the Thai and Myanmar governments.
Citing the flourishing industrial estates located near the Thai-Laos border such as Savannakhet (686 km from Bangkok) and Poipet on the Thai Cambodian border (254 km from Bangkok), she said Amata believed its project offered even greater advantages given the shorter distances.
The fact that the estate is less than an hour’s drive from Muang Kanchanaburi would mean that executives could return to Thailand after work, while middle managers could stay in the industrial estate along with the workers.
Amata plans to build low-cost housing and other amenities at the site, similar to what it has in other estates.
The proximity to so many key areas including Dawei is expected to be the key driver encouraging Thai companies seeking a lower-cost production base for some of their labour-intensive industries. Amata hopes to see the first factory operational there by mid-2015.
Thailand raised its daily minimum wage to 300 baht nationwide, up 40-90% from previous levels depending on the location, at the start of 2012. Since then, said Ms Somhatai, many industries that require a large number of unskilled workers have faced cost challenges and sought to move to border areas.
But instead of shifting entire production plants to the border area, these companies could use contract production management (CPM), which entails producing semi-finished goods at locations with cheap labour costs and then shipping the products for full assembly at locations in Bangkok or other areas such as the Eastern Seaboard before exporting.
Amata is the first company to propose a border industrial estate in Myanmar and it hopes to attract some government agencies and Japanese partners and clients in launching the project.
There is a small element of political risk involved as the area is under the control of the Karen National Union (KNU), which has been fighting a low-level guerrilla war against Myanmar authorities for six decades. The KNU and the new quasi-civilian government signed a ceasefire agreement last year but negotiations for a more permanent solution could take many years yet.
Ms Somhatai said that Amata had held “good and fruitful” negotiations with KNU representatives and they did not oppose the industrial estate project. “I have met all the [KNU] leaders and we have done very well.”
But as a precautionary measure the area would have its own security, while the site is forecast to generate employment for more than 37,000 people in that part of Myanmar.
The decision by the Myanmar government to give the Amata project the green light was also a breakthrough as Myanmar had declared a no-industry zone within 10 miles of its borders.
The Phu Nam Ron project is still undergoing various studies but the Thailand and Myanmar governments have agreed to many of the requirements.
“What we are asking the governments for is incentives as these are very important to attract investors,” said Ms Somhatai. “What we are asking for is that it must be more than BoI zone 3 in Thailand,” she said, referring to the maximum privileges (such as corporate tax holidays and duty waivers) offered by the Board of Investment for less-developed provinces.
Apart from this, there is a need for one-stop service starting from company registration to licences, taxes, staff visas and work permits, exchange and currency-related issues.
Amata has already negotiated with Thailand’s Provincial Electricity Authority (PEA), which will provide power and erect utility poles that will run four kilometres into Myanmar territory to reach the industrial estate and also be used for internet and telephone connectivity.
Other utilities such as gas will also come from Thailand although water may not be required as the area has enough resources from the rain and rivers.
Most of the area is now forest and Ms Somhatai acknowledged some land clearance would be necessary and some people would have to be relocated, but she said they would see economic benefits in both Thailand and Myanmar.
The two governments in June streamlined immigration procedures at the nearby border crossing, partly to assist in the transport of more goods, equipment and people along the main highway to Dawei.
Until the Dawei project materializes, Ms Somhatai says investors would have the option to tap into the benefits of Myanmar while being close to Thailand.
“Are we a competitor with [Dawei]? I don’t think so as it is for heavy industries that want to use the ports there,” she said. “The people who want to use our facilities are not such big industries; they are light and medium-sized.
“This will be an export promotion zone which is smaller than a special economic zone (SEZ). What we need is customs processing in a zone of the estate and that is by law,” she said, noting that Dawei was an SEZ.
Once the estate is set up, the aim is to attract investments of at least $3.2 billion and for its businesses to generate exports that would be worth close to $8 billion a year.
“We have already done a lot of the work, and so far we are on schedule to launch things,” she said.
The aim is to finish all the regulatory and government-related issues including agreement on one-stop facilities by the end of this year. After that the company will start site preparation.