Regional Integration through Development Project

Presentation by Mr. Arkhom Termpittayapaisith Deputy Minister of Transport and Secretary – General of the National Economic and Social Development Board of

to the Mekong – Five Economic Forum

as part of the 7th Mekong Japan Summit

Tokyo, July 3, 2015 Topics of today's presentation

1 Overview of Dawei Special Economic Zone

2 Dawei SEZ as a Regional Gateway

3 Reinforcement through Thai Special Economic Zone Development

4 Cooperation between Thailand and on Dawei SEZ

5 Current Status of Dawei SEZ

2 1 Overview of Dawei SEZ Dawei SEZ is located in of Myanmar, adjacent to the Andaman Sea and ~130 km from the Thai border

Dawei SEZ - Introduction OVERVIEW

> 196.5 km2 Size > One of the largest SEZs in Asia

Myanmar > Located in Southeastern Myanmar, the Capital of Tanintharyi Region, which has 1.4 m population in 2014 Location > Strategically located adjacent to the Andaman Sea and near the Gulf of Thailand

Thailand Andaman Sea > Distance (km.) from DSEZ to: Dawei 132 km 132 Thai-Myanmar border (Ban ) Kanchanaburi Distance to 300 (TH) Tanintharyi Cambodia key 450 Eastern Seaboard (TH) locations 600 Yangon (MM) Gulf of Thailand 1,050 Vung Tao (VN)

1,200 Chennai (IN)

Source: Dawei SEZ , NESDB, Ministry of Immigration and Population; Roland Berger 3 2 Dawei SEZ as a Regional Gateway Dawei SEZ opens a new gateway to the West, linking India, Europe, Africa and Middle East with ASEAN & East Asia

Dawei SEZ strategic location: new gateway to the West

New gateway to the West Key highlights

> Strategic location: New gateway to the West connecting Indian

Kunming and Pacific Oceans Nanning China – Linking between Southeast Asia and South Asia, the Middle East, Europe and Africa – Providing alternative trade route to the Strait of Malacca – with time and cost savings on logistics Vietnam China, India Dawei Bangkok Japan, – Shortening the distance by approximately 50% or 2,000 km Thailand Taiwan, Korea ESB Cambodia and reducing 3 days of the shipment time from Bangkok to Chennai, India1) > Connecting GMS Southern Economic Corridor markets to

Singapore the West: ~USD 120 bn total trade flow of Thailand, Cambodia, Europe, Africa & Vietnam to the Western markets Middle East > MIEC2) linkage: complete linkage to India via Chennai – Dawei's deep sea port > Dawei SEZ will support Myanmar's regional development throughout the southern area as there are no big cities in the Traditional sea route Potential land-based routes vie Dawei southern area except Dawei and Myeik 1) from 4,500 km via the Malacca Strait vs 2,500 km via Dawei's deep sea port; 2) Mekong-India Economic Corridor Source: Globalasia, NESDB, Roland Berger 4 2 Dawei SEZ as a Regional Gateway Dawei SEZ completes GMS Southern Economic Corridor, connecting regional supply chain linkage through Thailand's Eastern Seaboard

Dawei SEZ completes the GMS Southern Economic Corridor

GMS Southern Economic Corridor Key highlights

> Complete GMS Southern Economic Myanmar Corridor: Dawei SEZ establishes regional connectivity and creates land bridge from DSEZ – Bangkok – ESB – Phnom Penh – Quy Nhon Ho Chi Minh Kanchanaburi Dawei Bangkok Sisophon > Supply chain linkage with Thailand's 132 km Eastern Seaboard (ESB): co-manufacturing Siem Reap Southern 300 km Eastern Economic linkages with the ESB and inducing the Seaboard Corridor 450 km economic activities along the corridor Phnom Penh Ho Chi Minh City > Strong economic and political linkage to ASEAN Vung Tau > Economic and social development: job creation, enhanced livelihood and basic infrastructure improvement

Source: NESDB 5 3 Reinforcement through Development of Thai SEZ Dawei SEZ will be reinforced by the development of Special Economic Zones in Thailand, along the GMS Economic Corridors

Target Areas for Thai SEZ Development Key highlights

Northern North-South st nd corridor corridor > 10 target areas under the 1 and 2 phase SEZ development are located along the GMS Economic Corridors

Central corridor > Factors for determining target areas: Eastern Western corridor corridor – Potential and Competitiveness

East – West – Opportunities corridor – Infrastructure availability – Production factors in areas

Southern corridor – Border trade value

Southern Coastal – Development policies of the neighboring countries corridor – Problems/Constraints

Target SEZ in Thailand Source: NESDB 6 3 Reinforcement through Development of Thai SEZ Thailand's SEZ will be supported by incentives and privileges, one- stop-service centre and infrastructure

Thailand SEZ development framework

Enhance regional economic integration + Lower disparities + Strengthen National Security

Special Economic Zones

The 1st phase SEZs are located in the border areas

Infrastructure & Designated Incentive & Migrant Agricultural OSS Customs Area Privilege Labor produce Center Checkpoint

Source: NESDB 7 3 Reinforcement through Development of Thai SEZ Border SEZ is one of the potential economic areas development in Thailand

2 Inland Area 1 Border SEZs Border SEZs 2.1 Industrial Cluster • Have Potential for trade and investment Important Production Base • Strengthen Connectivity with neighboring countries • Distinguish area / major production base of the country • Utilize AEC e.g. IT Industry • Locate near Port and export channel • Improve livelihood of people • Most of them are industrial estate or service industry. • Focus on potential local economic activities + labor e.g. , ESB intensive industries and logistics e.g. , Sakaeo, Business uses high technology to support national industrial restructuring and has less benefits than border SEZ (but more advantage in Infrastructure)

2.3 Innovation 2.2 Tourism / Free Zone Provincial Cluster Areas/ Tourism Provincial Cluster Areas for Specific Purpose Activities • Unique Areas e.g. island, world heritage sites • Granting benefit for special attractive business investment • Good transport system e.g. airport, train, port • Potential business e.g. Science Park, Research and Development • Service business e.g. hotel, shopping center Center, Duty Free, IHQ (International Headquarter) • Opportunities to develop for convention & exhibition business

Source: NESDB 8 3 Reinforcement through Development of Thai SEZ Thailand's SEZ will be complementary with the development of Dawei SEZ

st nd > Thailand's SEZ are targeted to be Thailand SEZ : 1 and 2 phase development complementary with Dawei SEZ, focusing on industries and services that would be Laos mutually reinforcing with Dawei SEZ, namely : • Agro-industry, fishery industries • Ceramic products manufacturing Tak Mukdahan • Textile and garment industries, and manufacture of leather products Thailand • Manufacture of furniture or parts Kanchanaburi • Manufacture of gems and jewelry or parts Sa Kaeo • Manufacture of medical devices or parts Cambodia • Manufacture of engine and vehicle parts, and manufacture of machinery, equipment, and parts Trat • Electronics and electrical appliances industries • Manufacture of plastic products • Manufacture of Medicine • Logistics • Industrial zones / industrial estates • Tourism promotion service > Boosting value chain integration along the Narathiwat GMS corridors

Source: NESDB 9 4 Cooperation between Thailand and Myanmar on Dawei SEZ The Thai government has been fully supporting the development of Dawei SEZ, in close collaboration with the Myanmar government

Myanmar – Thailand collaboration structure for Dawei SEZ

Policy-level Prime Minister President

Joint High-Level Committee (JHC)

Deputy Prime Minister Vice President

Coordination-level Joint Coordinating Committee (JCC)

Minister Minister

Implementation-level Joint Sub-Committee (JSC)

Myanmar Myanmar Myanmar Myanmar Myanmar Myanmar Thai Thai Thai Thai Thai Thai Deputy Deputy Deputy Deputy Deputy Deputy Minister Minister Minister Minister Minister Minister Minister Minister Minister Minister Minister Minister

1. Infrastructure & 2. Focuses Industry & 3. Power & Energy 4. Community Development 5. Rules & Regulation 6. Finance Construction Business Development & Relocation

Source: NESDB 10 5 Current Status of Dawei SEZ Thai and Myanmar governments have been working together on the Initial Phase development as well as the Full Phase Master Plan

Infrastructure overview – Initial Phase vs. Full-phase Ambition II Full-phase – Illustration

Factories & more Chemical Steel and fertilizer Deep sea port Crude oil refinery industrial estate factories plants

I Initial-phase – illustration Expanded/new Recreation Resort power plant complex Initial industrial Small port 2 lane road LNG terminal estate

Small power Small water Commercial Service industry & More residential Initial township Telecom landline Tourism plant(s) reservoir development Commercial firms housing

Initial projects to materialize launch … ... that will lead to much bigger projects in Time the future

Source: Roland Berger 11 5 Current Status of Dawei SEZ For example, the Thai government has submitted a soft loan proposal for the 2-lane road between Thailand and Dawei SEZ

Dawei SEZ – Current status

Initial Phase Full Phase master plan

Status > Negotiations with selected developer have > Long-term master plan has been been finalized, including initial industrial developed, including: estate of 27 km2, power plant, water supply, telecom landline, LNG terminal, initial – Target industries township, 2-lane road, small port – Required infrastructure > Signature expected by July – August 2015 – Spatial plan

Support > Soft loan for the construction of the 2-lane > Funding of the development of the master from road between Dawei SEZ and Thai border plan Thailand (pending Myanmar government approval) already > Signatory party to the MOI with Myanmar and provided Japan regarding further collaboration in the long-term development

Source: Roland Berger 12 5 Current Status of Dawei SEZ The infrastructure development plans to enhance connectivity between Dawei SEZ and Thailand

DSEZ – MM/TH border – Kanchanaburi – Bangkok – ESB

1 2 3 Infrastructure Development Border Development Domestic Development in Thailand in Myanmar to enhance logistic infrastructure i.e. NSW & Kanchanaburi and Economic areas i.e. Road and Port border SEZ i.e. Motorway & Railway

Thailand DSEZ deep sea port Kanchanaburi and industrial estate construction projects Myanmar Bang Yai

Ban Phu Nam Bangkok Ron border

Andaman Sea

Gulf of Thailand The 2 – Lane Road linking DSEZ Motorway Bang Yai (Bangkok) – Kanchanaburi to MM/TH Border The current existing routes in TH Motorway Kanchanaburi – Ban Pu Nam Ron Eastern deep sea port Seaboard

Source: NESDB 13 Summary In summary, Dawei SEZ is of strategic importance for the region, which is why the Thai government has been supporting its development

Summary > Dawei SEZ opens a new gateway to the West, linking India, Europe, Africa and Middle East with ASEAN & East Asia > Dawei SEZ completes GMS Southern Economic Corridor, connecting regional supply chain linkage through Thailand's Eastern Seaboard and beyond > Dawei SEZ will be reinforced by the development of Special Economic Zones in Thailand, along the GMS Economic Corridors – Thailand's SEZ will be supported by incentives and privileges, one-stop-service centre and infrastructure – Thailand's SEZ will be complementary with the development of Dawei SEZ, for example focusing on higher value added services > As a result, the Thai government has been fully supporting the development of Dawei SEZ, in close collaboration with Myanmar, providing concrete commitment to the project

Source: NESDB, Roland Berger 14 Questions and Answers Back Up

16 3 Reinforcement through Development of Thai SEZ

Incentives & Privileges offered in the SEZs

BOI Offer up to 8 year-tax holiday* with other privileges including permission to employ foreign unskilled workers * 13 target activities will get 8 year tax holiday, others will get +3

Ministry of Reduce taxes from 20% to 10% for 10 accounting periods* Finance * for projects that are not include in BOI’s investment promotion list

Revise condition for establishment of bonded warehouse and duty free zone in the SEZs Customs by Customs Department

SMEs Revise condition for SME’s investment in SEZs by BOI

17 13 Target Activities by each SEZ Target Activities Tak Sa Kaeo Trat Muk Song Nong Chiang Kanchan Nakhon Nara (13) (12) (4) dahan khla Khai Rai aburi Phanom thiwat (5) (6) (5) (10) (13) (13) Agro-industry, fishery industry, and related All 1          activities eligible activities 2 Ceramic products manufacturing    list in the Textile and garment industries, and 3        Announc manufacture of leather products ement 4 Manufacture of furniture or parts       of BOI no. 5 Manufacture of gems and jewelry or parts      2/2557

6 Manufacture of medical devices or parts      Manufacture of engine and vehicle parts, and 7 manufacture of machinery, equipment, and     parts Electronics and electrical appliances 8      industries 9 Manufacture of plastic products     

10 Manufacture of Medicine     

11 Logistics         

12 Industrial zones / industrial estates          Tourism promotion service and activities to 13          support tourism 18