Every morning hundreds of cars, trucks and other vehicles carrying factory workers squeeze into a two-lane bridge across Yangon’s Bago river.
The buzz of industrial activity results in often nightmarish traffic jams, a rare phenomenon for Myanmar’s still nascent and in many ways hamstrung manufacturing sector.
Initiated by then-president Thein Sein in 2013, the Japan-backed Thilawa Special Economic Zone (SEZ) is widely viewed by business leaders as Myanmar’s foremost economic success story.
It also has advocates in high political places, with de facto national leader Aung San Suu Kyi repeatedly hailing Thilawa as a “crowning success” that “highlights the type of positive partnership that can be achieved between our respective public and private sectors.”
The 2,500-hectare Thilawa has so far secured over US$1.6 billion in approved investment, including from multinationals such as German retail group Metro AG, US aluminum can manufacturer Ball and Japanese automaker Toyota.
The amount is nearly tantamount to FDI approvals for the entire country (US$1.7 billion) in the interim budget period from April to September 2018, according to official data.
While Thilawa has been plagued by accusations of official land grabbing and related abuses, they so far pale in comparison to the controversies surrounding Myanmar’s other less successful mega-projects.
Takaaki Yabe, the Japanese deputy managing director at Daizen Myanmar, the first company to operate a bonded warehouse in the country, says Thilawa’s liberal trade and administration set the zone apart from the country’s other industrial areas.
“Thilawa is now turning into an industrial powerhouse because of the trade and logistics liberalization, infrastructure and management,” he told Asia Times.
He noted, for example, that three Japanese insurers have been allowed to do business in Thilawa since 2015, four years before the insurance market’s wider opening to foreign players.
Daizen’s warehouse operations in the SEZ allow for cargoes to be stored without immediate payment of duties, improving cash flow and saving time for deliveries, he says.
These liberal policies have attracted local and foreign firms to store their products in Thilawa, making it into a budding logistics hub and contributing to rising international and regional trade for Myanmar, he added.
“From record responsible investment in manufacturing to emerging cross-border trade, we are unlocking Myanmar’s geographical potential,” Yabe said.
Metro’s Myanmar subsidiary has built a similar 5,800 square meter warehouse in Thilawa, from where its online orders are delivered across Yangon.
The company said the plot price, operational capacity and infrastructure advantages were all decisive factors in its investment decision, according to Thiri Kyar Nyo, the company’s communications manager.
As a logistics-driven retailer Metro needs warehouse and import licenses, a fast-tracked import process and government support to bring in products efficiently – all of which, she says, Thilawa provides.
Thilawa has become Myanmar’s premier industrial project because of its liberal policies, proximity to a port and superior power supply, drainage systems and overall infrastructure, said Chris Markey, research manager of Yangon-based business information firm Frontier Myanmar Research.
“These advantages should be reinforced by the SEZ’s continually improving connectivity to Myanmar’s arterial transport corridors and Yangon city itself,” said Markey, who recently authored a report on Myanmar’s industrial zones.
Myanmar’s other SEZs could follow Thilawa’s example by promoting best management practices, curbing land speculation and ensuring infrastructure is ready for investors from the start, he said.
Investors have also praised Thilawa’s one-stop service center, a system that allows for the submission of documents without needing to go through multiple ministries to obtain licenses and permits and is leading the way toward trade digitalization.
“In Myanmar, this means saving a lot of time and trouble,” Daizen’s Yabe said.
The government has pledged to implement the one-stop system countrywide through the new Ministry of Investment and Foreign Economic Relations.
“I am happy to be able to say that a single window system is already in use at the Thilawa SEZ, and that it is providing a strong and positive precedent. Future rollouts of similar systems elsewhere…are planned,” Suu Kyi said in January.
Still, there is skepticism that Suu Kyi’s government has the capacity to replicate Thilawa’s early successes nationwide.
“While replicating a model similar to the Thilawa one-stop service center may sound ideal, the reality is that the model will be challenging to scale,” FMR’s Markey said. “There are currently public sector capacity issues which make it difficult to implement and manage such a system covering all industrial zones.”
Rights groups, meanwhile, are concerned that a nationwide one-stop system will exacerbate the already high risk of big business groups ramming through investment approvals to the detriment of local communities and the environment.
Indeed, behind the corporate and government cheerleading, Thilawa’s picture is less rosy.
Myanmar’s maiden SEZ, while ground-breaking in the country’s laggard economic context, is still small-scale, especially compared to the likes of China’s Shenzhen.
“As SEZs go, Thilawa is nothing to brag about and is certainly not the sexiest thing going for manufacturers in Southeast Asia,” said Robert Walsh, an American investor with interests in northern Kachin state.
“Chinese colleagues think the offering is rather pitiful, like something [China’s] Guangzhou might have tried to pull off in the 1980s.”
It is also arguably premature to judge Thilawa’s production level and potential trickle-down effect for Myanmar’s wider economy.
Only 70 of 106 investors in Thilawa had started to operate their factories or businesses as of June, while part of the SEZ is still being developed. Among those up and running, many have yet to reach full productive capacity.
Still, the Japan-led Thilawa is arguably the only infrastructure initiative that is working in Myanmar, often referred to as Asia’s last frontier market due to its laggard economic development after decades of military rule.
After more than three years in office and a nominal infrastructure push, Suu Kyi’s elected National League for Democracy-led government has little to show for its rhetoric and efforts, critics say.
“The NLD really does not have any Thilawa-caliber economic projects it can point to with any degree of pride,” Walsh claimed. “That, and what little has been achieved, has not been properly spun and publicized as signal undertakings.”
Neither SEZ mega-projects at Dawei in the Tanintharyi Region nor Kyaukphyu in central Rakhine state have started construction, though comparisons to Thilawa are not apt due to differences in location, scale, complexity and risks, says Sang Hyun Park, an economist at the International Growth Center.
The Dawei SEZ, for instance, covers a landmass ten times the size of Thilawa in a state where the Karen National Union – an ethnic armed group – is present and opposed to a planned linking highway, while the proposed China-backed port at Kyaukphyu carries high and rising geopolitical risks.
Moreover, Suu Kyi’s administration is more fiscally conservative than predecessor military-led or backed governments, witnessed in her tendency to avoid grand and expensive foreign-backed schemes.
Many proposals, including the Hanthawaddy airport situated about 50 miles from the commercial capital of Yangon, and the China-backed US$3.6 billion Myitsone dam in Kachin state, are risky legacy projects Suu Kyi inherited from the military era.
That said, the private sector is increasingly exasperated by the government’s inability to more quickly improve the country’s creaky infrastructure. Rather than nixing questionable trophy projects, officials remain fixated on them, critics say.
For instance, the government has yet to abandon the Hanthawaddy airport project, even after two foreign consortia backed away from the mega-project. The military era project was first mooted back in the 1990s.
It is also still committed to building a deep-sea port in Yangon, an idea chastised by investors as being unrealistic in the short-term.
Efforts and resources, they say, should be focused on more pressing practicalities such as improving customs and lifting restrictions on the use of the Yangon-Mandalay highway for freight traffic.
Poor electricity generation and transmission, in particular, remains a massive obstacle to business, trade and commerce, a government shortcoming many investors refer to as the “elephant in the room.”
“If anything, this lackluster performance will be something for which the NLD is remembered,” Walsh observed.