TOKYO (THE YOMIURI SHIMBUN/ASIA NEWS NETWORK) - Toyota Motor Corp is planning to build an automobile factory in Myanmar, The Yomiuri Shimbun has learnt.
An official announcement could come before the end of the month, with construction on the plant to start this year.
The plant would be located in the Thilawa Special Economic Zone on the outskirts of Yangon and would assemble pickup trucks through so-called knockdown production, in which parts imported from Japan and other nearby nations are put together at the new plant.
Myanmar has a population of about 50 million people, on a par with South Korea and Spain. It is also a young nation, with an average age of 27.9. While it is one of the poorest countries in Asia, it has seen strong economic growth recently and is expected to grow at annual rates of 6 to 7 per cent.
Though only about 17,500 new automobiles were sold in the country in 2018, the figure more than doubled compared to the previous year. Toyota currently exports about 2,000 passenger and commercial vehicles to Myanmar per year and sees the market as one with strong growth potential.
As of December 2018, Toyota had 50 automobile and parts production sites in 27 nations and regions. The Myanmar factory would be a new strategic base.
The Myanmar government has implemented policies that give preferential tax treatment to companies that produce automobiles locally.
Suzuki Motor Corp was one of the first entrants among Japanese automakers. It has two factories in the country assembling compact cars, for which it now commands more than half of the market.
Nissan Motor Co and Ford Motor Co are among the other automakers that have a presence in Myanmar.
Toyota decided to build a new plant in Myanmar because it expects the country of about 50 million people will have strong economic growth going forward. The decision is also partly the result of the Myanmar government's efforts to lure foreign investment.
Myanmar's per capita gross domestic product is only about US$1,300 (S$1,785). However, the average age of the country is low and the population is expected to continue to grow.
Analysts believe Myanmar has the potential to grow into a market similar in size to neighbouring Thailand (with a population of about 69 million), where about one million automobiles are sold per year.
While Myanmar's automobile market has been characterised by the overwhelming popularity of used Japanese vehicles, sales of new units doubled in 2018 compared to the previous year. This and other signs indicate a growing market for new vehicles.
The government is also providing preferential treatment to companies that manufacture cars locally. Such factors have enticed several automakers to move into the country.
According to the Myanmar Survey Research Co, in addition to Suzuki and Nissan, Kia Motors Corp and Hyundai Motor Co of South Korea, Ford of the US, and others are already operating locally.
As few parts manufacturers operate in Myanmar, automakers assemble cars using imported knockdown parts. The maturation of Myanmar's auto manufacturing industry hinges on whether or not parts makers move into the country.
An investment boom was triggered after Myanmar transitioned to a civilian government in 2011 and US and European sanctions were lifted. However, foreign direct investment logged its third straight year-on-year decline in fiscal 2018.
In response, the administration led by Ms Aung San Suu Kyi passed the first major reform of the nation's corporate law in about a century last year.
Restrictions on foreign currencies were relaxed and a new investment and foreign economic relations ministry was established to solicit investment.
The Thilawa Special Economic Zone, a joint public-private development involving Japan and Myanmar that opened in 2015, has been called "the most successful symbol of Myanmar's economic development" and has attracted investment from around the world.
Toyota's decision to build a new factory in the zone could portend a resurgence of investment into the country.
THILAWA SPECIAL ECONOMIC ZONE
The Thilawa Special Economic Zone is an area 20km south-east of Yangon that opened in 2015, with the Japanese government and major trading companies including Mitsubishi Corp fully supporting the zone's development and management.
Companies that set up operations in the zone receive preferential treatment, such as corporate tax exemptions. As of April 1, more than 100 companies were operating there.
In addition to Japanese firms, Asian companies from nations such as Thailand and South Korea, as well as European and American businesses, have moved in.