The Burmese government’s decision to take back the Dawei deep-sea port concession from Italian-Thai Development Pcl (ITD) may raise the eyebrows of some investors looking at the country, but negative repercussions on investment are unlikely, say analysts.
Thailand and Burma late last month signed three memoranda of understanding (MoUs) on the Dawei project. One was to transfer the concession to Dawei SEZ Development Co (DSEZ), a new 50-50 special-purpose vehicle set up by the countries to run the project.
In November 2010, Thailand’s third-largest contractor by market value was granted a 75-year, US$8.6-billion concession from Burma’s government to develop a special economic zone (SEZ) and deep-sea port in Dawei.
ITD had hoped to find investors to join the project but did not succeed due to the enormous project size and required investment, prompting the two governments to intervene.
The second MoU signed at the Thailand-Myanmar Joint Coordinating Committee in Bangkok revoked the concession.
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The third one obliges new investors to reimburse ITD for the money it has invested in building roads and other facilities.
ITD can still bid for any of the three main development projects, something it plans to do.
“I believe this is a very positive development. Investors will have more confidence dealing with DSEZ and be more positive about investing in the Dawei SEZ with DSEZ as the regulator,” Albert Chandler of Chandler and Thong-ek Law Offices Ltd in Bangkok told the Bangkok Post.
His affiliate Myanmar Legal Services Ltd has offered legal advice in relation to local and international commercial transactions and aspects of doing business in the neighbouring country.
“I believe there will be more foreign investor interest as a result of the bilateral approach to the Dawei framework between Thailand and Myanmar. The SEZ law and rules will provide many of the positive features of the Foreign Investment Law 1988 and new such law 2012,” said Mr Chandler.
He said ITD is a major construction firm and will likely be engaged as a contractor by several projects in Dawei.
ITD president Premchai Kanasutra said the contractor is committed to bidding for all its projects. About 6 billion baht (US$200 million) has been invested in the project. Thai Government participation makes Dawei viable, he said.
John Fotiadis, senior member of Bangkok legal firm Atherton Co, said it seems ITD is negotiating agreeable terms with both governments.
“Given so, we do not believe this will have negative repercussions for foreign investors considering future investment,” he said. “From what we’ve observed, it seems there are unique circumstances in this case due to the size of the project, changes in government, changes in international sanctions and internal factors, and they are not necessarily due to Myanmar rules and regulations.”
Mr Chandler also said Burma has a good track record in dealing with oil and gas companies, with no reports of dispute settlement proceedings.
“The Myanmar government is on the right track in dealing with the telecom sector. I believe you will find similar positive features in the emerging Dawei SEZ. The project offers good prospects for Myanmar and foreign investors, with upsides for communities in terms of environmental, social, education and health factors,” he said.
But Worasete Phueksakon, executive director at Dharmniti Law Office Co, said some investors may be more cautious about investing in Burma after considering ITD’s experience with this project.
“We understand that part of the reason why the Myanmar government decided to take back the concession from ITD was that ITD failed to attract sufficient investors and there were difficulties relating to finding a suitable power source,” he said.
“We expect a number of bidders will be impacted by a range of factors including the details of the auction, cost of doing business in Myanmar, the stated time frames and specifications of the project.”
If the current regulatory framework in Burma makes the project expensive, difficult or overly complicated to comply with, it will be more difficult for bidders, and some will decide to opt out, he said.
