Industrial inaction

17 August 2015
Industrial inaction
Thai-Myanmar Friedship Bridge in Mae Sot. Photo: Karen News

Tak, a western province bordering Myanmar, has been tipped to host the first special economic zone (SEZ) with a well-managed industrial estate and plenty of investment privileges to attract investors.
But after a year of government efforts, the SEZ remains a far-fetched idea and is unlikely to start up within a few years as planned, according to the business sector.
Several hurdles and risks lie ahead, making investors wary of investing in the zone.
Officials are expected to spend several years settling problems and disruptions before securing appropriate land to be developed into the industrial estate. That means more delays in SEZ investment.
The government has set aside 2,000 rai of denuded forest land near the second Thai-Myanmar Friendship Bridge in Mae Sot district for the estate, invoking Section 44 to allow the use of military force to transfer ownership more quickly and easily.
Things have not gone smoothly, though, as hundreds of families, mostly poor farmers who earn their living from the land, have refused to move out and are asking for fairer compensation before doing so.
"It will not be easy, as the issue has reached the National Human Rights Commission of Thailand (NHRC) and they are sending a senior official to investigate," says Paradorn Kanda, a vice-chairman of the Tak Chamber of Commerce.
The case could take years to resolve, potentially scaring off would-be investors.
Niran Pitakwatchara, who heads the NHRC subcommittee overseeing the case, says the commission has found strong evidence of land-grabbing by the government via Section 44.
"We have sent the complaint to the government and are asking it to reconsider the plan, as there are hundreds of families affected by the policy," Mr Niran says. "However, it depends on the government for how long it will take to settle the case. It will be indefinitely long."
Local authorities have played down the case, saying the 2,000 rai for the industrial zone is a minimal portion of the more than 800,000 rai in Tak set to be developed as part of a bigger scheme of trade and import-export zones in the province.
"The industrial zone is just a small part of the project," says Tak governor Somchai Hatayatanti.
The overall plan is for the government and the Board of Investment (BoI) to grant special privileges to new investors in the 800,000-rai area. Existing investors, however, have voiced their own concerns about the privileges.
"They say it is not fair that the government is giving privileges to new investors and doesn't care about the existing businesses at all," says Somsak Kaveerat, chairman of the Tak Chamber of Commerce.
More than 300 existing businesses and investors, some with decades of involvement in Tak, have lobbied for better privileges after driving the economy on their own for so long.
"They are asking for privileges from the government and the authority is mulling over the privileges to be given to them," Mr Somsak says. "However, the privileges will not be as substantial as what the government plans to give to new investors to promote the SEZ."
Local businesses say privileges for existing investors would calm them down and improve the atmosphere, while some observers worry that the bid could backfire by making privileges for new investors seem less attractive.
"The government will try to compromise with existing businesses, but we don't know for sure that unbalanced privileges won't deter new investors from the SEZ," says Banpot Kokiatcharoen, an adviser to the Tak Chamber of Commerce.
His remarks are in line with those of a senior government official who acknowledges that the SEZ project was not initiated by the government, but rather by the National Council for Peace and Order.
"Once the cabinet was formed, not all members of the economic team agreed with the projects," the official said. "In the case of the SEZ in Tak, those who disagreed felt that there was no real advantage for certain businesses to set up operations there."
Even so, the government should continue to develop infrastructure in Tak to promote border trade, the official added.
At a time of no clear blueprint or schedule for Tak's SEZ, existing businesses want the government to get back to basics in fostering border trade and boosting the fragile economy.
"Border trade is the strongest point of Mae Sot and has supported the economy here for decades, which the government may have missed," says Mr Somsak, the Tak chamber chairman. "We are welcoming the basic plan to support infrastructure that could improve the economy more easily and quickly, without relying too much on the SEZ."
With Myanmar newly opening up to foreign investment and tourism, and demand for Thai goods spiralling, the time is right to tap a golden opportunity, he says.
Mae Sot sits just 45 kilometres from Myanmar's economic district of Myawaddy, with its 60,000-plus population and strong purchasing power. Moreover, Mae Sot is a transit point on the way to Yangon, where demand for Thai goods is surging.
"Goods items, of which about 90% are Thai goods, can be transported to Yangon within five or six hours, compared with more than two days before we had the new road," Mr Somsak says, referring to a 1.14-billion-baht project that enhanced logistics from Mae Sot to Myawaddy.
Infrastructure improvements in Tak, including the expansion of Mae Sot airport and better highways to Bangkok, should help boost border trade value from the current 60 billion baht to more than 100 billion in a few years.
"That would be a realistic plan to help support the economy at this time," says Mr Banpot, the Tak chamber adviser. "But it will take a few years to achieve the goal, since the budgets have just come out and it will take a few years for construction."
Charnvit Amatamatucharti, deputy secretary-general of the National Economic and Social Development Board, says the government has done its best to promote SEZs in response to Prime Minister Prayut Chan-o-cha's policy prescriptions.
"The private sector should thus reflect clearly and directly on what its real problems are," he says, noting that SEZs have been proposed by the private sector itself.
"The Thai Chamber of Commerce and the Federation of Thai Industries have backed them in the SEZ committee. Opponents should use the two private organisations to vent their opinions on the plan."
Mr Charnvit says the government has shown flexibility in assigning state land plots after the private sector complained that the plots designated for SEZs were too expensive.
The government has also offered the highest privileges to 13 industrial categories in five provinces, as well as cutting capital requirements for small and medium-sized enterprises in SEZs from 1 million baht to 500,000 baht, he says.