Friday, July 6, 2012

Key Myanmar partner pulling out of Dawei

Ital-Thai faces struggle to locate new funding

The main local partner in the Dawei port and industrial complex in Myanmar said yesterday he was pulling out of the project, adding to doubts about its viability.

Reports have circulated that the Max Myanmar Group, which owns 25% of Dawei Development Co Ltd (DDC), had become lukewarm about the venture.

"We are pulling out from the project gradually," Zaw Zaw, Max Myanmar's owner, told Reuters by telephone when asked about the reports.

He declined to elaborate further.

Italian-Thai Development Plc (ITD) was already thought to be struggling to find financial backing for the US$50-billion, 250-square-kilometre complex that was planned to include a deep-sea port, steel mills, refineries, a petrochemical complex and power plants.

The project was agreed with the military government that ruled Myanmar until March 2011. The energy minister in the quasi-civilian Myanmar government that succeeded the junta told Reuters in February that at least two other special economic zones would be developed more quickly than Dawei.

The government of Thailand has been more enthusiastic.

In May, it approved a budget of 33.1 billion baht for infrastructure in the west of the country that would provide links with the border area by Dawei.

Thailand justified the work _ to include a four-lane road, government offices and homes for Thais who may work in Myanmar _ by saying many Thai firms want to set up in Dawei and the government had to support that investment.

Somchet Thinaphong, DDC's managing director, told the Bangkok Post from a financial perspective, a gradual withdrawal by the local strategic partner is unlikely to affect project viability.

"The viability of such a capital-intensive development project is largely dependent on fund sourcing," he said. "The local company, or even Ital-Thai, does not have the financial capacity to fund such a massive development project. We have to bank on others to provide us financial support."

He did concede the withdrawal of a local partner may raise "questions" about local connections.

Zaw Zaw is one of Myanmar's most influential businessmen whose close ties to the Myanmar government put him on the US government's blacklist of Specially Designated Nationals.

Prasit Rattanakijkamol, an analyst at Asia Plus Securities, said Ital-Thai's share price is unlikely to be affected much by the report, as most analysts have not yet factored in the Dawei development project. "A key point is Ital-Thai's investments in several projects have yet to generate income, so its expenses and administrative costs remain relatively high," said Mr Prasit.

ITD shares closed yesterday on the SET at 3.14 baht, down six satang, in trade worth 25.2 million baht.