Japanese Traders to Start Myanmar Economic Zone Within Two Years

Three of Japan’s biggest trading houses agreed to form a venture with Myanmar that will build an industrial hub in the Southeast nation within two years, aiming to export electronics parts and clothes across Asia.

Mitsubishi Corp. (8058), Sumitomo Corp. (8053) and Marubeni Corp. (8002) will own 49 percent and Myanmar’s government and local enterprises the rest in the venture near the commercial capital of Yangon, the companies said today in a joint statement. The partners may spend about 17 billion yen ($174 million) on power, water and transport infrastructure at the site.

“This project has a very high potential” both to supply domestic demand for auto and construction materials and to set up production for export to Japan, China and other nations in Asia, Toru Kabeya, Marubeni’s deputy chief of the transport infrastructure project department, said in a briefing in Tokyo.

The recent opening up of Myanmar to international trade after five decades of military dictatorship is providing Japan with a chance to establish another low-cost manufacturing base similar to that of Thailand, home to factories of Nissan Motor (7201) Co., Canon Inc. (7751) and Hitachi Ltd. (6501) among others. Myanmar, which has $11 billion in overdue debt from decades of military rule, owes the most to Japan.

Japan has sought closer ties since the 2010 election that brought President Thein Sein to power, hosting him in Tokyo last year and having Prime Minister Shinzo Abe travel to Myanmar in May in the first visit by a Japanese leader for 36 years. During the visit, Abe offered new loans to Myanmar and approved plans made last year to settle the nation’s $6.6 billion debt to Japan.

Thilawa Hub

The Thilawa hub will initially occupy 400 hectares (988 acres). The space may be enough to house 50 firms to 100 firms spanning a wide range of light manufacturing, Kabeya said.

A feasibility study on a further 2,000 hectares of space at the Thilawa site is ongoing, Tomoya Sato, a director at the trade and economic cooperation bureau of Japan’s ministry of industry, said today at the briefing in Tokyo.

Japan will approach the development 23 kilometers (14 miles) south of Yangon as a “national project,” Sato said. The Thilawa site needs roads, power and sewage infrastructure, he said.

Japanese trading houses, whose businesses span commodity procurement, manufacture and retail, began studying Myanmar for the development of industrial parks early last year.

President Sein’s moves to modernize Myanmar’s financial and physical infrastructure after years of neglect have lured private equity funds and companies such as General Electric Co. (GE) and Norway’s Telenor ASA. (TEL)

Myanmar has also inquired about Japanese participation in other industrial projects in the nation, Sato said, without providing details.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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