April 23, 2014
Today, the Japan International Cooperation Agency (JICA) signed a joint venture agreement with the MMS Thilawa Development Company (MMST), the Thilawa SEZ Management Committee (TSEZMC) and Myanmar Thilawa SEZ Holdings Public Limited (MTSH) for the Thilawa Special Economic Zone (Class A Area) Development Project. This is the first project to be conducted in Myanmar since the resumption of JICA private sector investment financing in October 2012.
Under this project, JICA will provide private sector investment financing to provide the funds needed for industrial complex development, sales and operation projects on approximately 400 hectares (a class A area) slated for initial development in the Thilawa special economic zone (SEZ), an area approximately 2,400 hectares in size that is located on the outskirts of Yangon (23 kilometers southeast of the city center), Myanmar.
A special purpose company, Myanmar Japan Thilawa Development, Ltd. was founded in October 2013 by MMST, TSEZMC and MTSH and will undertake the project, funded with JICA equity participation.
After the Thein Sein administration was inaugurated in March 2011, democratization and the transition to a market economy has moved at a rapid pace. The Government of Myanmar is focused on encouraging foreign direct investment while creating employment and improving the income of residents. After inauguration, the new administration revised the Special Economic Zone Law in January 2014 along with taking other measures to revise legislation pertaining to investment and to promote SEZ development. Located in the Yangon metropolitan area, the Thilawa SEZ has such advantages as a plentiful labor force and good market access, and the Government of Myanmar has indicated an intention to prioritize fast-track development there. The Government of Myanmar hopes that Japanese companies, with their advanced technological skill and experience in creating employment in SEZs in other Asian countries, will expand and take part in the Thilawa SEZ development.
Battling stiff competition with companies from other countries around the world, Japanese companies have a strong interest in Myanmar, which is known as the “last frontier in Asia,” and are particularly interested in gaining market share there. Despite interest in investing in Myanmar, many companies are concerned about the lack of power and other such infrastructure, as well as underdeveloped economic legislation. Improving the investment environment is a major challenge that must be faced in order for the Government of Myanmar to encourage the Japanese companies it hopes will come.
As a cooperative project by Japan and Myanmar to respond to such issues for attracting investment in Myanmar, the Thilawa SEZ development will respond to the interest and expectations of both countries. In December 2012, the governments of both countries signed a memorandum of cooperation and have carried out cooperation with involvement by the private and public sectors since the initial stages.
This private sector investment financing by JICA is being provided after a study into the policy for reviewing the use of equity participation in private sector investment finance by collaborative organizations for class A area development at the Economic Cooperation Strategy Conference (a cabinet-level meeting chaired by the Japanese prime minister) in March 2013. As the first large-scale SEZ development in Myanmar, this project will require various forms of cooperation from the Government of Myanmar both in terms physical investment and human development cooperation, including legal system and infrastructure improvements. In addition to cooperating in financing with equity participation through private sector investment finance, JICA will participate in the project as an investor, and is expected to play a role in coordinating with the Government of Myanmar to ensure the class A area development and other aspects of the project proceed smoothly.
For the Thilawa SEZ development, the Government of Japan and JICA are using all types of ODA assistance, including technical cooperation, Japanese ODA loans and grant aid to build power, water, communication, road, port and other infrastructure in the surrounding area, as well as to assist in building a legal framework for the revised SEZ law and formulating detailed regulations. This series of efforts should remove hindrances to private investment in the Thilawa SEZ, which is expected to encourage active investment by companies.
The Government of Japan established a strategic assistance policy with priorities for the Thilawa SEZ in the Infrastructure System Export Strategy released on May 17, 2013, whereby “Japan will promote the creation of Japanese business bases by improving the investment environment, and by strategically supporting organizational infrastructure and private sector investment finance in relation to regional development projects beginning in the initial stages.” This specific strategy is expected to contribute also to foreign development by Japanese companies in public-private partnerships.
An advanced industrial complex with a high-quality power supply and water system is the aim in the Thilawa SEZ, and development is moving forward toward starting the project in 2015. JICA will continue to provide proactive assistance for socioeconomic development in Myanmar, including stimulating the manufacturing industry and creating employment, major challenges for the country.
Myanmar Japan Thilawa Development, Ltd. (MJTD)
A local enterprise founded to build, sell and operate industrial complexes in Thilawa, Myanmar. The shareholder composition is Japan (MMST, JICA): 49%, and Myanmar (TSEZMC, MTSH): 51%.
MMS Thilawa Development Co., Ltd. (MMST)
Founded by Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation, MMST is an investment company for MJTD, a local enterprise that builds, sells and operates industrial complexes in Thilawa, Myanmar.
Thilawa SEZ Management Committee (TSEZMC)
An agency for the Government of Myanmar established under Myanmar’s SEZ Law to handle management and other duties in the Thilawa SEZ. The company also has equity participation in MJTD, a local enterprise that builds, sells and operates industrial complexes in Thilawa, Myanmar.
Myanmar Thilawa SEZ Holdings Public Limited (MTSH)
Founded by nine private Myanmar companies, MTSH is an investment company for local enterprises and other entities that build, sell and operate industrial complexes in Thilawa, Myanmar.