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talian Thai prepare to submit to arbitration in concerning for the potential loss of 8 billion investment.
The Dawei Special Economic Zone Project in Myanmar under the development by Italian-Thai or ITD was stagnant from DSEZ MC terminated the concession agreement, alleged that ITD did not take any action despite the investment of approximately 8 billion baht and the land lease agreement has never been signed yet. “Somjet”, Managing Director of Myanmar Company, urged to find a solution and prepares to submit to arbitration.
On December 30, 2020, the Dawei Special Economic Zone Management Committee (DSEZ MC) terminated the concession agreement of the Initial Phase of the Dawei project, which the ITD Group is granted with seven concessions. As a result, the Dawei Special Economic Zone projects, which Italian-Thai Development Public Company Limited began to develop in 2008, had to suspend immediately. In the meantime, they have to wait for the appointment of a new government. The Thai government is waiting for a signal from the Myanmar government to initiate the discussion on matters, expecting to see some clarity within one or two weeks.
DSEZ MC claimed that the reason for the agreement termination is because ITD did nothing at all. In fact, for the past five years, DSEZ MC has never handed over the land; despite that, the Company has invested around 8 billion baht in public utilities without ever signing a land lease agreement. Besides, since Aung San Suu Kyi’s government came in, it has not taken any action in this regard. Although the agreement states that the parties can submit the issues to arbitration in the event of conflicts, however, as this matter can still be negotiated, it is not currently escalated to an arbitration proceeding.
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Recently on February 5, 2021, Mr. Somjet Tinapong, Managing Director of Dawei Industrial Estate Company Limited, which is a subsidiary company of ITD who develop the Dawei Project, revealed that “The Company had a meeting with DSEZ MC through a video conference for the first time since they received a notice of termination of the concession agreement. In this meeting, they discussed the termination of the Dawei Project’s seven concession and enquired to DSEZ MC on three issues as follows;”
1.The condition was previously specified in the investment agreement that; unless it is the original investor, which is Italian-Thai, who develop the Dawei Project (Initial Phase), which cover 27 square kilometers, the new investor must indemnify for the invested amount according to the assessment by the auditor, company, Ernst & Young (EY). The assessment of the assets and investments (due diligence) in the project was approximately 8,000 million baht. The revision of this condition by DSEZ MC has specified a new condition that a new investor is not required to pay this amount which is unacceptable by ITD as they had previously invested a huge amount in utilities for this project.
2.The delay of the Dawei project. DSEZ MC stated that the part of the project where there is a concession with ITD had been delayed, which the Company clarified that the delay was because ITD, as the concessionaire, did not receive the right to manage the land ownership. As a result, it affected the investment in other matters because it could not proceed further, including the designing of the project or requesting an investment loan from a financial institution. The delay of this project is due to DSEZ MC, who delayed the delivery of the land. Thus, the project’s overall delay cannot allegedly claim that it was because of the Company.
3.The discussion on the terms of fee payment which ITD had to pay to DSEZ MC an approximately 17 million dollars. The Company had previously paid approximately 10 million dollars or about 300 million baht. The Company had stopped paying the amount as a significant delay in the land delivery process occurred. The land deed is vitally important in the development of the Dawei Project because it will be collateral for the investment loan from a financial institution for the amount to be used to develop the project.”
Mr. Somjet continued that “At this meeting, the Company inquired about the status of the Board of Directors in DSEZ MC whether they still have legal authority. Due to the recent political change in Myanmar since February 1, 2021, Myanmar Cabinet and Myanmar’s ministers responsible for the Dawei Project are changing. When asked, DSEZ MCs took a long time to discuss in the Myanmar language before one director replied in English that the directors will still be in a power position, but the response was not quite confidently, and he added that they would have to wait for the policy from the new government as to how it would develop this project further.”
Mr. Somjet provided that “From the recent attitude of DSEZ MC, it is an opportunity for the Thai government to help coordinate with the Myanmar government in this regard because of the importance of the policy level that Thailand wants to push for mutual benefit and help solve the problem due to the investment from the private sector in a strategic project like this which the government must take an action that it will not be damaged. In this regard, the Company will report a discussion with DSEZ MC on this occasion to propose to Gen. Prayut Chan-O-Cha, Prime Minister, including Mr. Supatthanaphong Phanmichaow, Deputy Prime Minister and Minister of Energy, to acknowledge as soon as possible because this concerns the policy of the Thai government and the direction to move forward on the Dawei Project in the future.”
“This matter has three ways out; arbitration, court, or back to the agreement. As this is a civil issue, if we can find any means to negotiate, then we can come back to the existing agreement between both parties. It is obvious that our government has numerous advantages in terms of negotiation but will have to deliver a clear sign to the Myanmar Government to put forward this project.” Mr. Somjet added.
Mr. Supatthanaphong further added that “Whatever the situation in Myanmar will become, the government must find a way to negotiate on cooperation in the Dawei Project. This project is considered a pivotal strategy project for both countries, which will utilize geographic potential to the maximum benefit. ” Follows more news at www.thac.or.th
Source:
- https://www.bangkokbiznews.com/news/detail/921546
- https://www.infoquest.co.th/2021/64831
