The Company in Dawei

This piece is Part 1 in a three-part series focusing on under-analysed aspects of the Dawei deep-sea port and industrial zone project in southeastern Burma. This piece focuses on Italian-Thai Development, the lead developer of the Dawei project. Part 2 looks at the project from a labour perspective, while Part 3 focuses on women’s and gender issues in Dawei. Both are forthcoming.

From the crest of a hill some two hours’ drive from the town of Dawei, a mocha-brown ribbon of earth can be seen winding its way over the hills to Thailand. This road link connects the Dawei project’s planned beachfront seaport and industrial zone area to a semi-official border crossing at the edge of Thailand’s western Kanchanaburi province. On this hilltop on a morning in May, rumours about the project’s imminent cancellation seem the far-away stuff of idle newsrooms, reaching for a story without the energy to get beneath the surface. Here, by contrast, there is a certain vitality. Bulldozers are eagerly carving road into hillside, while pick-up trucks with a famous logo are busily ferrying workers and goods to and from projects sites and the Thai border. At the dam site up the river valley and in and around the industrial zone area as well, the message is similarly clear: the project, for now at least, is still going forward.

The logo on the trucks, of course, is the logo of Italian-Thai Development (ITD), Thailand’s largest construction company and the lead developer on the Dawei deep-sea port and industrial zone project.[i] Along with labour and gender issues – which, respectively, will be the subject of parts 2 and 3 of this series – the role of ITD in relation to the project has been relatively under-read thus far.[ii] To the extent that it has entered project analyses and reporting, it has been as the outside conglomerate first obtaining the coveted prize (the framework agreement signed with the Myanma Port Authority in November 2010), then struggling to back it up with investment to match. Overwhelmingly, the question has been, ‘What is ITD’s role in the Dawei calculus?’ But answering this important question might actually require turning it around. How, in fact, does the Dawei project fit into the company’s overall profile – its structure and activities, its growth strategy and vulnerabilities?

Beginning with the company on its own ground, rather than relationally through its involvement in Dawei, should bear fruit in terms of gaining an in-depth, situated understanding of the company – not to mention strategic benefits, for campaigners and civil society groups of various kinds. By starting with a holistic analysis of a company, campaigners can then understand where, in a company’s overall structure, its main vulnerabilities lie – at which point building campaigns that target those vulnerabilities becomes possible.[iii] Particularly important in the case of ITD are two elements that have, to date, been little discussed: ITD’s operations model, and its growth strategy. Both emerge fairly clearly in the context of the company’s history.

ITD’s history goes back to its founding in 1958 in Bangkok.[iv] In the company’s early years, the Italian and Thai co-founders – this partnership gave the company its name – oversaw the company’s involvement in highway infrastructure and eventually an emergent tourism industry. Since the death of the company’s Italian co-founder in 1981, the company’s been very much a Karnasuta family affair. Current President Premchai Karnasuta is the son of the company’s other co-founder, Dr. Chaijudh Karnasuta, while Premchai’s younger sister and oldest son are both company directors, with substantial stock holdings to match. President since 1993, Premchai was around for Thailand’s pre-crisis boom years and the depths of the 1997 crisis. By the time of the company’s post-crisis reconsolidation in the early 2000s, heavy infrastructure had moved to the center of their operations and sales structure. Much of the Bangkok Skytrain was the work of ITD, while ITD led the consortium responsible for building Suvarnabhumi Airport – for which the apparently close personal friendship between Premchai and Thaksin Shinawatra surely didn’t hurt, and would help keep the company’s public-sector project backlog pretty well full throughout the early 2000s.

ITD’s operations model dates to the late boom years, when the company shifted towards a more integrated operations model, such that products or services they would formerly get from outside the company – such as prefabricated concrete or the production of beams for railway work – began to be things the company would make or do itself through its own subsidiaries. According to the company, this diversification of operations – also known as ‘backwards integration’ in some trade publications – was due to subcontractors compromising quality and slowing down projects. This was unacceptable during the heady years of the early and mid-1990s. While ITD has pointed to their integration as a key advantage for the company vis-├а-vis its smaller competitors, it does also provide challenges for expansion outside of Thailand, where the company is less able to rely on intra-company procurement and supply networks. In Dawei, however, the company has made intensive use of the overland road link to Thailand, meaning labour and construction materials are relatively easily brought in. The company’s integrated operations approach is thus more intact than one might expect for an ‘overseas’ project.[v]

ITD’s growth strategy is predicated on securing more contracts outside of Thailand. First in the late 1990s, then just after 2006, and again after 2008, the trade and business press in Thailand and the region were all writing the same story about ITD: that it was ‘finally’ looking abroad for more contracts. It’s not difficult to see why the company might want to get creative at any of these times – two financial crises and the fall from grace of a certain powerful ally. Infrastructure trade publications also note that ITD’s domestic contracts have long failed to provide stable footing for the company. But while the company’s overseas project backlog increased only modestly after the 1997 crisis and after 2006, since 2008 – this particular cycle of global crisis having sent ITD balance sheets into the red for years – the company’s expansion abroad has had a look of resolve about it. In addition to the 60-year Dawei concession secured in late 2010, in 2010 ITD also locked in a 25-year concession for an elevated highway in Dhaka, and in 2011 signed a long-term deal on a monorail and mass transit system in Ho Chi Minh City (HCMC).

Viewed together, backwards integration and a thoroughly international growth strategy are not particularly compatible – except in Dawei, in that the road link to Thailand allows the company to continue a fairly in-house operations approach. And here it is important to note that ITD’s post-2008 overseas contracts represent dramatic moves for a company that, until now, has done little of substance outside Thailand – investments here and there, some fairly isolated hydropower projects, reclamation work in the Philippines, relatively small-scale construction work in Burma and Saudi Arabia. Even in India, home to ITD’s largest subsidiary by far (a cement company), the company’s expansion strategy involved few resources besides finance capital, as they basically bought an operating company and kept its management structure intact. In this context the scale of the Dawei project is all the more striking, and yet its physical proximity to Thailand – and Bangkok in particular, which is very much the base of ITD – offers valuable continuity vis-├а-vis the company’s (at this point) long-standing operations approach.

In other words, ITD’s emphasis on integrated operations is a limiting factory for their growth strategy, but one that is less relevant in the case of Dawei than in, say, Dhaka or HCMC. Nonetheless, it points up the company’s substantial dependence on the overland road link – which is something of a weak link in the company’s implementation strategy. According to Dawei-area activists and community leaders, almost all of the construction materials for the project are brought into the Dawei area through this overland crossing, not to mention workers from Thailand and high volumes of consumption goods for Thai worker camps. The road link passes through a semi-official border crossing, which Burmese authorities could close at any time,[vi] and territory held by the Karen National Union (KNU), the non-state armed group that already very publicly halted construction on the road link for months last year. Lately the KNU has scaled back their opposition to the project, possibly in relation to ongoing ceasefire negotiations with the Burmese government. But if the road link were again blocked somehow, or if the border crossing were closed, project implementation would halt almost immediately. The likelihood of this unfolding at this stage is debatable. As a pressure point, however, ITD’s dependence on the overland road link leaves the company somewhat exposed.

ITD faces further vulnerabilities as well. In the context of local implementation, the project’s current phase is relatively labour-intensive, especially compared to later implementation phases and general long-term project plans. Thus ITD is more exposed to labour mobilization now than it will be in the future – though there are significant obstacles to labour-based actions in Dawei in the near term. This labour question will be covered in more detail in the second article in this series. The other two main vulnerabilities have already been much discussed elsewhere, one financial and one political – namely the company’s sustained investment difficulties on the one hand, and on the other hand, question marks over high-level Burmese political patronage, particularly since the cancellation of the coal-fired power plant plan earlier this year. These need little elaboration here, except to note that they are real, and they will likely remain serious concerns for some time still. The recent withdrawal of Max Myanmar, ITD’s main implementing partner in Dawei, will only more deeply underscore these concerns.

Significant question marks notwithstanding, it remains the case, at least currently, that very powerful political and structural factors are still driving the project forward. Peua Thai electoral victories mean ITD suddenly has powerful partners in Thai politics again, as evidenced by Prime Minister Yingluck’s continual foregrounding of Dawei discussions in her visits to Naypyidaw – not to mention Thailand’s recent decision to commit more than USD 1 billion to projects supporting the Dawei initiative on the Thai side of the border (with an emphasis on highway infrastructure). Meanwhile, the Hlutdaws’ new ‘reformists’ have made clear the centrality of industry and infrastructure development to their liberalization agenda, against the broader backdrop of sustained regional economic integration ahead of 2015, when the ASEAN Economic Community is scheduled to come into force.

One thing missing, then, in articles claiming the imminent suspension of the Dawei project, is a deeper sense of the structural forces in place. Were the project actually to be cancelled, it would be against the grain of some of the most important national and regional trends of the neoliberal era in Southeast Asia. And for a company in the midst of a bold bid to rebuild its revenue base and expand overseas, the stakes are high indeed.

Soe Lin Aung is a researcher and consultant based in Rangoon. He can be reached at [email protected].

Works Cited

Bronfenbrenner, K. (Ed.) (2007) Global Unions: Challenging Transnational Capital through Cross-border Campaigns. Ithaca, New York: Cornell University Press.

Chachavalpongpun, P. (2011) ‘Dawei Port: Thailand’s Megaproject in Burma.’ Global Asia. 26 December. Available online at http://www.globalasia.org/V6N4_Winter_2011/Pavin_Chachavalpongpun.html?PHPSESSID=27e2e5f1eea77f9e245c911358886d55 (last accessed 21 July 2012).

Dawei Development Association (DDA) (2012) Local People’s Understandings of the Dawei Special Economic Zone. Rangoon: DDA. March.

Desmond, M. (2011) Crossing the Hills: The Dawei Development Project. Paung Ku Background Paper. Rangoon: Paung Ku. December.

ITD (2011) Italian-Thai Development: Annual Report 2010. Bangkok: ITD. Available online at http://www.itd.co.th/en/index.php (last accessed 21 July 2012).

ITD (2012) Italian Thai Development: Annual Report 2011. Bangkok: ITD. Available online at http://www.itd.co.th/en/index.php (last accessed 21 July 2012).

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