The ambitious Dawei project will prove difficult to develop if the Myanmar and Thai governments fail to invest in infrastructure and utilities, warns the government's planning agency.
"Normally, investment in megaprojects or large industrial towns worldwide is handled by the government, which invests in utilities and infrastructure while offering privileges to persuade the private sector to set up factories," said Arkhom Termpittayapaisith, secretary-general of the National Economic and Social Development Board.
"But Dawei's development concept differs from normal practice."
The massive project has recently taken a new twist, as no bidders have applied for concessions opened in February for three ventures: a dual-lane highway linking Thailand with the site in eastern Myanmar, a small port and a 30,000-rai industrial estate.
Under the original schedule, Dawei SEZ Development Co (DSEZ), a special-purpose vehicle, had planned to open bidding for the three construction jobs in February and announce the results this month.
Thailand and Myanmar officially agreed to push the ambitious scheme forward last November, with three memoranda of understanding (MoUs) signed by the two countries.
The first MoU covered the framework agreement of the Dawei concession and its transfer to DSEZ from Italian-Thai Development Plc (ITD), which had received the original concession from the Myanmar government in November 2010.
Thailand and Myanmar last June agreed to set up DSEZ with an equal shareholding and initial investment of 12 million baht, far below the 100 million baht proposed earlier. The company is registered in Thailand.
The two countries also agreed to set up special-purpose companies (SPCs) to manage projects such as the port, road and rail links, power plants, waterworks, industrial estates, a telecommunications network and the township. SPCs will be registered in Myanmar.
The second MoU concerns revocation of the existing concession between ITD and Myanmar, while the third involves the warranty that new investors in the port and roads are legally obligated to pay for what ITD has already invested in, worth about 6 billion baht.
Mr Arkhom said the terms of reference for the three projects might not be attractive enough to potential foreign investors.
For instance, they call for investors in industrial estates to build the road linking Dawei and the Thai border town. Developers can collect tolls from commuters.
Japan, which remains reluctant to participate in the Dawei development, recently asked why neither the Thai nor the Myanmar government had started investing in infrastructure if they really wanted to proceed with the plans.
Japan also disagreed with the idea of collecting tolls from commuters.
Two consultancies have been hired to revise the terms of reference.