S pecial Economic Zone (SEZ) is a geographic area that makes laws and practices favourable to the production and export of products, in turn creating new jobs, usually in the thousands, and pushing the economy forward. While other areas are being spoken about around the country, three key SEZs are currently being implemented within Myanmar. In Rakhine State, there is the KyaukPhyu SEZ. In the south of the country, Dawei SEZ in the Thanintharyi Region; and Thilawa SEZ within the Yangon Region.
Kyaukphyu SEZ lies on a little-known island in Rakhine State. Construction is set to begin on a deep-sea port, dozens of factories, roads, reservoirs and a power plant to support large-scale industrial activity. Alongside similar projects in Dawei and Thilawa, the Kyaukphyu special economic zone is one of Myanmar’s most ambitious and expensive development strategies. Kyaukphyu SEZ includes a deep-sea port,industrial and estate area zones. It is strategically located between China and India and gives China direct access to the India Ocean. The project area is around 75 sq.km and project implementation is scheduled in three phases. The vast project is expected to complete in phases by 2016, 2020 and 2025, respectively. This SEZ is expected to rival Singapore as a Petrochemical Hub, consisting of major gas pipelines supplying to china.
Dawei SEZ is in Tanintharyi Division which offers some natural advantages. The sparsely populated region sits in the country’s south-eastern corner, nestled between the Tenarasim Hills, which demarcate the border with Thailand and the picturesque Andaman Sea. Dawei SEZ will be developed by governments of Thailand and Myanmar on a 50-50 basis with support from Japan. The project area had been reduced to 196 square-kilometers (75.6 square-miles) from the original 204.5 square-kilometers (79 square-miles).
Plans for the Dawei SEZ include a deep-sea port, industrial zone, steel plant, fertilizer plant, coal and natural gas-fired power plant and water supply system. The SEZ will have a motorway linked to Thailand’s Kanchaburi province, as well as a railroad hub, links to oil and gas pipelines and electrical cable lines. The project will be implemented in two phases. The initial phase of the project includes a two-lane road, a small wharf which can accommodate 13,000-20,000 deadweight tons of vessels, an industrial zone involving labor intensive industries, a power plant, a residential building, a water supply system and communication lines. The Dawei SEZ Project was suspended in 2013 due to the financial hardles faced by the former developer Itlian-Thai Company. The project is currently seeking additional investors.
The Thilawa Special Economic Zone located on the outskirts of Yangon, is the first Special Economic Zone (SEZ) being built in Myanmar, which will be fully (commercially) operational within 2016. Inside Thilawa SEZ, both the hard and soft infrastructure will be developed to be at par with international standards. It is located at 14 miles (23 km) SouthEast of Yangon. The project will be carried out in 3 phases. It will be the first international standard SEZ of Myanmar and is developed by a Myanmar-Japan joint venture company of Myanmar Japan Thilawa Development Limited, now a listed company in Yangon Stock Exchange (YSE).
Major differences with other industrial projects and SEZ in Myanmar are incentives and prescribed laws. SEZ has its own special law for investors. For corporate income taxes, SEZ law has exemption for first 5 to 7 years depending on type of business, 50% relief on subsquent 5 years and 5 more years on reinvested profit. For custom duties, SEZ law decribed exemptions on raw materials needed during construction period, exemption on raw materials, machinery parts & construction materials for first 5 years of commercial operation. Investors can also lease land for 75 years in SEZ.
Despite the challenges and the weight of history, Thilawa among the three, has many of the essential ingredients to become a successful special economic zone. And as long as government keeps faith in the zone, it will continue to attract foreign capital, nurturing new and far reaching economic opportunities.