Opportunities for British companies in Burma’s Infrastructure sector 2 Opportunities for British companies in Burma’s Infrastructure sector Opportunities for British companies in Burma’s Infrastructure sector 3
Contents
Executive summary p. 4
Company profile p. 5
Macroeconomic and business environment in Burma p. 6
Aviation sector p. 14
Road p. 22
Rail p. 31
Ports p. 39
Industrial p. 46
Energy P. 54 4 Opportunities for British companies in Burma’s Infrastructure sector
Executive Summary
There are few countries in today’s Higher incomes and relaxed rules Industrial production is becoming world that are changing as rapidly have led to a surge in car and an important economic driver, as Burma. Its economy is expanding motorbike ownership, with over five as Burma’s political transition by some of the highest rates in the million vehicles now registered. The inspires renewed confidence in its world, while politically the country road network is being quickly built economic production. Development has undergone a bold transition up to handle the increase in vehicle of industrial zones and special towards democracy in just a few numbers, and neighbouring countries economic zones will continue to be years. New businesses are opening, are keen to extend international important as companies look for and incomes are rising. The highways through Burma to improve locations for their businesses. population is young and dynamic, regional transportation. and Burma is strategically located Powering Burma is a major challenge. between China, India and ASEAN, The domestic railway network is the Officials have stated an aim to move three important centres of growth longest among the ten Southeast from roughly 35% electrification in the 21st century. Yet there is still Asian countries. It currently covers at present, to 100% electrification much to do. most of the major population centres, by 2030, which will require large though the quality of the lines need investment in energy infrastructure. The backbone of continued progress upgrading and there are currently Offshore gas reserves are also will be infrastructure. Burma’s no international rail links. There are drawing significant international transport and energy sectors have significant plans to upgrade both interest. fallen behind, and investment is Rangoon’s commuter lines and the required. There are significant plans longer-haul rail lines in the years Sustaining Burma’s present pace of being developed to help the country ahead. progress will require huge investment catch up, and opportunity abounds in infrastructure. There are significant for UK companies in a wide range The successor to the Irrawaddy plans in a host of industries, with of Burma infrastructure-related Flotilla Company first set up in 1865 major projects under way and in businesses. still travels Burma’s rivers and ports. planning. UK companies are highly The country has three main rivers prized in Burma for their expertise Burma’s aviation market is growing open to cargo and passenger transit, and resources, and will be important rapidly. The number of air passengers and numerous smaller ones, though partners for the country as it has tripled in a decade, to 2.2 million areas such as navigation and river continues with its exciting progress by 2014-15, yet services and facilities ports need improvements. Burma and change. are lagging. Three international also has nine ocean ports, with the airports have now been built, though busiest at Rangoon, though there are they require further upgrades, while plans to add new deep sea ports and there are 66 other airports around upgrade the existing facilities. the country.
Opportunities for British companies in Burma’s Infrastructure sector 5
Company Profile
Frontier Myanmar Research provides and reports focusing on specific transport, telecoms and energy. Its on-the-ground business research and industries. Currently this includes parent company is Frontier MEA Ltd, advisory services for companies and the Myanmar Real Estate and a privately-owned UK firm established organisations operating in Myanmar, Construction Monitor and the in 2009 which specialises in business one of the world’s most exciting Myanmar Energy Monitor, with our and investment research in frontier economies. Myanmar Transport Monitor coming markets. soon. We offer in-depth research into particular sectors or issues, FMR was established in 2014 and helping clients better understand has since worked on a range of their business environment, and projects for local and international also publish subscription services clients, in sectors such as real estate, 6 Opportunities for British companies in Burma’s Infrastructure sector
MACROECONOMIC AND BUSINESS ENVIRONMENT IN BURMA
Introduction and Background begins in the Himalayas to the north, Other fundamentals are strong. flowing south through Mandalay city, Burma has a dynamic, young Burma has become one of Asia’s the former capital, then near to the population of 54 million people, fastest-growing and most promising present capital of Naypyitaw before about the same as South Korea, countries nearly overnight. A emptying into the Indian Ocean at a Spain or South Africa. It enjoys rich transition to civilian rule in 2011 and delta, of which the eastern branch endowments of resources, notably subsequent wide-ranging, market- flows through the commercial capital natural gas and hydropower potential, based reforms have opened up and largest city of Rangoon. but also commodities such as timber, significant opportunities to domestic jade and minerals. Farmland currently and foreign business alike. Burma was seen a country forms the backbone of employment with strong potential upon its in Burma, though this is also shifting A more recent milestone is the independence from the UK in 1948. as the country becomes increasingly November 2015 election, which was A complicated period for the country urbanised. overwhelmingly won by the National followed, however, and the economy League for Democracy party, led by stagnated under the subsequent Export-oriented industry and Daw Aung San Suu Kyi. The party military regime. The 2011 transition domestically-focused production are subsequently took office in April to civilian rule and the market-based both growing rapidly in tandem with 2016, with U Htin Kyaw as President reforms this entailed has led to the rise of the country’s industrial and Daw Aung San Suu Kyi as State significant growth in Burma. The zones and special economic zones. Counsellor. World Bank said economic growth slowed somewhat to 7% in 2015/16 Nonetheless, significant hurdles While many challenges clearly due to floods in July 2015, though remain. The economy is not as remain, the overall portents are this was still one of the highest rates diversified as it could be, and is still positive for Burma’s future. It has in the world. Medium-term growth is reliant on resource exports. An a strategic location, bordering projected to average an even higher underdeveloped financial sector two of the world’s most important rate of 8.2% per year. Its GDP was and limited government and private economies with India to its west pegged at $65bn the same year. sector resources have held back and China to the north-east. It growth. The legal infrastructure also touches Thailand and Laos to Inflation – previously a major concern has been improved but still requires the east, and Bangladesh to the – has also slowed dramatically. Most further work, while human resource southwest. To the south is the Indian outside observers have a figure of skills lag many neighbouring Ocean. around 6% for the most recent year, countries. while the government has pegged It is one of the region’s least-densely it at 5.9% in 2014-15, a far cry from Politically, too, Burma has moved populated countries, with the long rates as high as 32% a decade earlier. into uncertain territory. Daw Aung Ayeyarwady River running north San Suu Kyi’s NLD won a resounding to south through its heartland. It victory in November 2015, and Opportunities for British companies in Burma’s Infrastructure sector 7
1.1 INFLATION CHART in the country, but its economic Avg Change in CPI (%) 35 importance is falling as industry in particular rises. 30
25 Garment and textile production 20 is already taking off in Burma, 15 partly due to price competitiveness 10 but also the lower tariffs given to
5 local producers exporting to more developed economies. Eventually, the 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 economy is ripe for moving up the value chain to more sophisticated despite the predictions of some, Industry, driven by an influx of manufacturing goods, though of course the process will not be easy. the handover to her governmentShare of GDP sofrom sector manufacturing, is also picking far been100 largely smooth. A diverse up, though improvements to the political80 and social landscape will industrial zones and special economic Key infrastructure needs to be put in place to encourage future growth. remain60 a challenge for key players zones is needed to provide business Part of the impetus behind the to navigate,40 and while the signs have a location to work from. The energy Special Economic Zones (SEZs) of been20 promising so far, risks remain. situation is also challenging, though, as in many areas, Burma is well Thilawa, Dawei and Kyaukpyu covered 0 People arriving2000-01 to2005-06 Rangoon2006-11 for the2011-12 endowed2012-13 2013-14 with the2014-15 resources it needs more extensively later in this report is first time will beAgriculture met straightIndustry away Servicesto generateTransportation electricity. to create production nodes that can by the opportunities and challenges. serve as catalysts for future growth. Similarly, transport and energy Central to Burma’s economicTrade ($ story millions) Macroeconomic overview, including in the18000 years ahead will be growth key drivers with relevance to infrastructure must be improved. 16000 of infrastructure. Touching down at transport and infrastructure 14000 the Rangoon’s international airport The World Bank’s 2014 first Burma 12000 likely means walking through a Burma’s growth pattern has already Investment Climate Assessment 10000 surveyed the business climate. The brand-new8000 terminal opened in 2016, begun to follow the path well-trodden top four most-mentioned obstacles located6000 beside another terminal now by the Asian tiger economies. under4000 construction to meet growing Many started as agrarian societies, for firms were access to finance, demand.2000 The drive in to the city before shifting into simple and then access to land, access to electricity, center0 is much slower than it was more complex manufacturing, and and access to skilled workers. Work 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 several years ago, as car numbers finally now developing the service on these and a range of other issues Export Import have increased much faster than the components in their economies. is underway, though access to land and access to electricity is dealt with roads for them to use. Population The trajectory in Burma is similar. 8,000,000 Agriculture is still the main employer directly in this report in the sections 7,000,000
6,000,000 5,000,000
4,000,000 3,000,000 2,000,000 1,000,000 0
Mon Chin Kayin Shan Bago Kachin Kayah Rakhine Magway Sagaing Yangon Mandalay Ayeyarwady Tanintharyi Nay Pyi Taw
States Regions Capital 8 Opportunities for British companies in Burma’s Infrastructure sector
Avg Change in CPI (%) 35
30
25
20
15
10 Avg Change in CPI (%) 5 35
0 30 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 25 on Industrial and Economic Zones, 1.220 GDP BY SECTOR and on Energy. 15 10 Share of GDP from sector Trade has grown significantly, 1005
with the 2014-15 total of $29.2bn 0 802005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 essentially double the value in 2010- 11. However, imports have rapidly 60 outpaced exports in the last two 40
years. Officials have explained this 20 Share of GDP from sector as companies importing means of 100 080 production, such as machines for 2000-01 2005-06 2006-11 2011-12 2012-13 2013-14 2014-15 60 factories and tractors for farming, Agriculture Industry Services Transportation though it is also obvious that there 40 has been a surge in demand of items 20 such as automobiles that previously 0 Trade ($ millions) 18000 2000-01 2005-06 2006-11 2011-12 2012-13 2013-14 2014-15 were difficult to obtain. Agriculture Industry Services Transportation 1.316000 TRADE CHART
14000 Trade is likely to continue to grow, 12000 Trade ($ millions) particularly as the Asean Economic 18000 10000 Community began at the end of 16000 800014000 2015. It allows for significant linkages 600012000 to regional countries, including 10000 4000 important trading partners Thailand 8000 2000 and Singapore. There is also 6000 0 agreement to open up the services 4000 2000 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 sector, which may help this develop in 0 Export Import the future. 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Export Import Population Transport and Infrastructure 8,000,000 Population Issues, including Geography and 7,000,0008,000,000 7,000,000 Demographics 6,000,000 The country6,000,000 itself is divided up into flatter land and larger proportions of 5,000,000 seven5,000,000 regions and seven states, along Burmese people. The states tend to Burma is one of the diverse countries 4,000,000 with the4,000,000 capital area of Naypyitaw. be mountainous and more sparsely in Southeast Asia. While the majority The3,000,000 regions3,000,000 are largely – though not populated areas on the outskirts of of people are ethnic Burmese, there exclusively2,000,0002,000,000 – geographically closer Burma, with more people from the is a large minority of people from a 1,000,000 to the1,000,000 center of the country, with different ethnic groups. range of different ethnic groups. 0 0 Mon Chin Kayin Shan Bago Kachin Kayah Rakhine Magway Sagaing Yangon Mon Mandalay Chin Kayin Shan Bago Kachin Kayah Ayeyarwady Tanintharyi Nay Pyi Taw Rakhine Magway Sagaing Yangon Mandalay Tanintharyi States AyeyarwadyRegions Capital Nay Pyi Taw
States Regions Capital Avg Change in CPI (%) 35
30
25
20
15
10
5
0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Opportunities2011-12 2012-13 for2013-14 British2014-15 companies in Burma’s Infrastructure sector 9
Share of GDP from sector 100
80
60
40
20
0 2000-01 2005-06 2006-11 2011-12 2012-13 2013-14 2014-15
Agriculture Industry Services Transportation
Trade ($ millions) 18000 16000 14000 12000
10000 8000 6000 4000 2000 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Export Import 1.4 POPULATION While nearly all government Population ministries are involved in 8,000,000
7,000,000 infrastructure and transportation to
6,000,000 a degree, a few of the key ministries 5,000,000 are listed below and expanded on 4,000,000 later in the report. 3,000,000 2,000,000 1,000,000 Ministry of Transport and 0 Communications
Mon Chin Kayin Shan Bago Kachin Kayah Rakhine Magway Sagaing Yangon Mandalay Ayeyarwady Tanintharyi Nay Pyi Taw Formed by the new NLD government
States Regions Capital by combining the former Ministry of Transport, Ministry of Railways and Ministry of Communications The regions of Burma tend to have The government is also currently and Information Technology, it more developed infrastructure than conducting wide-ranging planning has numerous responsibilities the states, though this is beginning that will affect transport and in facilitating the country’s to change. A clear goal of previous infrastructure in the years ahead. transportation infrastructure. governments was to improve Notably, a Transport Master Plan is infrastructure links to the more under development, though as of Ministry of Planning and Finance remote areas in an effort to foster July 2016 it was still in draft form. national unity. It remains to be seen the degree to Formed in 2016 from the former which the plan draws on previous Ministry of National Planning Role of government in transport studies conducted by organisations and Economic Development and and Infrastructure such as JICA and KOICA. the former Ministry of Finance, it oversees Burma’s budgeting process Government in Burma is central to JICA announced a Transport Master the development of infrastructure Plan in 2014, while KOICA has Ministry of Electricity and Energy and transport. Its various bodies reportedly entered into agreements control and approve planning and to form master plans for Dala The Ministry of Electricity and implementation of large projects. township and Bago region in 2015, Energy is the lead ministry in Burma The recent election of the National and for the arterial road network and for power and energy. It was only League for Democracy government expressway the same year. recently formed following the April has led to a shift in the structure change in government, and is a of ministries, though the basic merger of the former Ministry of functions undertaken are so far Energy and the Ministry of Electric largely unchanged. Power. 10 Opportunities for British companies in Burma’s Infrastructure sector
Ministry of Mineral Resource and TIBETO-BURMAN Environmental Conservation
Burman Another Ministry formed in 2016 from two predecessors, Chin 1 India specifically the Ministry of Mines and the Ministry of Environmental Kachin Conservation and Forestry. China Rakhine 9 Ministry of Industry
9 Other 1. Naga Has a number of responsibilities with 2. Lahu 8 3. Akhu 8 regards to work such as industrial 8 3 zones and economic zones, as well BURMA and MON-KHMER 3 4 2 2 as operating its own businesses 2 4 Laos 5 Overview on presence and role Karen 5. Pao 6 of foreign companies and foreign 6. Kayan 7. Karenni investment in Burma
KAREN and BURMAN 4 Foreign investment into the country has grown rapidly. Manufacturing
TAI in particular is a popular draw, and 7 has accounted for the majority of Shan 7 the volume of investment approvals Thailand MON-KHMER since the 2011 transition. However, 8. Mon 9. Wa due to the opportunities in Burma 10. Palaung as well as the capital-intensive BURMA and SHAN nature of investment, oil and gas has historically been the largest destination for FDI flows. SHAN and WA
Based on: Martin Smith: Burma - Insurgency and the Politics of Ethnicity Source: The Border Consortium Programme Report, 2013 Opportunities for British companies in Burma’s Infrastructure sector 11
Foreign Investment (by sector, %)Foreign InvestmentSources (by sector, of FDI, %) 1988-present Sources of FDI, 1988-present
1.5 MIC APPROVALS BY SECTOR 1.6 FDI BY COUNTRY
Foreign Investment (by sector,Foreign %) Investment (by sector,Sources %) of FDI, 1988-presentSources of FDI, 1988-present China China Oil and Gas Oil and Gas Singapore Singapore Transport and Communcations Transport and Communcations Hong Kong Hong Kong Hotel and Tourism Hotel and Tourism UK UK Industrial Estate Industrial Estate South Korea South Korea Power Power Thailand Thailand Mining Mining Malaysia Malaysia Agriculture Agriculture The Netherlands The Netherlands Other Services Other Services India India Manufacturing Manufacturing Vietnam Vietnam Real Estate Real Estate France France Livestock and Fisheries Livestock and FisheriesJapan Japan Other Other China China Oil and Gas Oil and Gas Singapore Singapore Transport and CommuncationsTransport and Communcations Hong Kong Hong Kong ForeignHotel investmentand Tourism in non-resourceHotel and Tourism outsized investment from the UK - Standard Chartered, which UK UK basedIndustrial sectors Estate has grown rapidlyIndustrial on Estate is due in part to companies routing operates a representative office South Korea South Korea the Powerback of the Foreign InvestmentPower investment through certain of its Thailand Thailand Law, which was passed in 2012. It jurisdictions, and if this is accounted - Aggreko, which has successfully Mining Mining Malaysia Malaysia outlined much of the regulatory for it is likely that UK investment completed a 95MW fast-track Agriculture Agriculture The Netherlands The Netherlands frameworkOther Services required for a successfulOther Services figures Indiaare closer to the of EuropeanIndia power project investment.Manufacturing Uniquely, it is currentlyManufacturing counterpartsVietnam such as Germany Vietnamor separateReal Estate from the MyanmarReal Citizens Estate France. France France - Prudential, an insurance company InvestmentLivestock Lawand Fisheries which governsLivestock and Fisheries Japan Japan investment by domestic companies. It is also Otherimportant to note the Other - Royal Dutch Shell holds interest in However, a planned combined statistics cover only foreign seven offshore blocks, as well as investment law called the Myanmar investment approvals granted since plans for LNG and existing business Investment Law has been drafted 1988. in downstream products. It with support from the International expanded its local presence with its Finance Corporation (IFC), and at the The opportunities offered in Burma merger with BG time of writing, was expected to be has resonated among businesses passed shortly. in many countries, and the UK is - Unilever, a leading FMCG company no different. Some examples of UK Foreign investment has been businesses with Myanmar presence strongest from regional countries include: such as China and Japan. The 12 Opportunities for British companies in Burma’s Infrastructure sector
Future outlook Urban Planning in Rangoon
Rangoon is Burma’s largest city, and lies at an interesting crossroads. It is Burma is only beginning a bursting at the seams, with commuters keen for more transit and residents remarkable transformation. The hoping for more housing. Yet the city has a unique heritage, with some of government of Daw Aung San Suu the best colonial era architecture in Southeast Asia, as well as fascinating Kyi and the NLD was swept in with religious sites. a wide range of support in the Yangon City Development Committee (YCDC) is ultimately responsible November election, though Burmese for urban planning in Rangoon, although its role overlaps with a range citizens are eager for improvements. of organisations including the Myanma Port Authority, the Ministry of Attitudes and rules are broadly Construction and the Yangon Regional Government. welcoming of foreign investment, particularly when compared with In 2011, YCDC set up the Department of City Planning and Land some regional peers, and further Administration, which works in collaboration with several organisations on a longer-term plan for Rangoon’s development. deregulation is promised. Some analysts have spoken of The Rangoon 2040 report is the first comprehensive study, forecast and a “second wave” of investment urban development plan for Rangoon. It was drafted by a consortium in Burma with the change in including the Yangon Regional Government, YCDC, Japan International government, following the first Cooperation Agency and a team consisting of representatives from Nippon Koei, NJS Consultants, Yachiyo Engineering, International Development wave after the 2011 transition Centre of Japan, Asia Air Survey and ALMEC Corporation. Provisionally to democracy. Interest will only titled ‘Rangoon 2040 - A peaceful and beloved Rangoon, a city of green continue to build, and the Burmese and gold’, the report was submitted in March 2013 and is still pending economy is slated to be one of the full approval. In planning terms, the vision for Rangoon is focused on world’s bright spots for years to decentralising the current city centre. come. The study estimated that by 2040, the population of Greater Rangoon will be 11.7 million, growing at an annual rate of 2.6%. The proposed hubs outside of the heavily congested downtown area have obvious benefits for some developers who are already investing heavily in residential, retail, commercial and hospitality properties there.
Whilst the characteristics of each area are yet to be determined, it is likely that a significant amount of real estate development will be needed to support residents and businesses. Opportunities for British companies in Burma’s Infrastructure sector 13 14 Opportunities for British companies in Burma’s Infrastructure sector
AVIATION SECTOR
Introduction and Naypyitaw have received • Arrivals at Rangoon airport tripled increasing traffic in the past few between 2011 and 2015, reaching Burma’s great distances, years and there are plans to expand 1.2 million in 2015 challenging terrain and limited and upgrade an array of regional • Air freight traffic remains small at ground infrastructure create fertile airports to accommodate growth. just 3,289 freight ton-miles in conditions for a successful aviation The aviation sector’s flagship 2014-15, though is expected to industry, but one which requires infrastructure project, a major new grow significantly as infrastructure significant investment to reach its hub at Hanthawaddy, north-east of develops potential in the coming years. Rangoon, is currently in planning. • Burma currently has 11 domestic airlines, all 100% locally-owned. Aviation has been one of the most While some projects are progressing Several international airlines, visible beneficiaries of the opening- more quickly than others, it is clear including Emirates and KLM, are up of the country in the past five the industry is primed for take-off in launching flights to Rangoon later years, and unprecedented numbers the coming years and can present a in 2016 of passengers are now taking to the range of infrastructure opportunities skies. The influx has been so quick for UK firms. Overview that, in some cases, infrastructure has not kept pace. Expect this to Fast Facts Opportunities for aviation change in future, with rising private infrastructure have been underpinned and public-sector investment likely • There are 69 airports in Burma, by the easing of restrictions brought to transform the industry in the next comprising 42 year-round facilities by political change in the past few decade. and 27 fair-weather strips years. These have vastly improved the Rangoon,Mandalay and Naypyitaw market size for foreign tourists and Although this rapid growth has been are the only international airports. business people, while rising incomes relatively recent, it builds on a strong • Over 2.2 million passengers flew in and a proliferation of airlines have aviation heritage. Although Burma 2014-15, almost triple the 873,000 brought air travel to within reach of had been a stop on the pre-World in 2005-6 more and more people. War II air travel circuit, it was the war itself that brought aviation into its own. The country’s airfields became 2.1 AIR PASSENGERS staging grounds for Allied planes Passengers (thousands) 2500 flying to supply China during the war, after which Rangoon’s international 2000 airport was built. It was completed 1500 in 1947, just months before Burma’s 1000
independence from the UK. 500
0 Rangoon remains the country’s main 1995-1996 2000-2001 2005-2006 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 international hub, but Mandalay Private Airlines Public Airlines Total, private and public
Freight Traffic by Air (Freight ton-miles) 4000
3500
3000
2500
2000
1500
1000
500
0 2000-2001 2005-2006 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Private Airlines Public Airlines Total Opportunities for British companies in Burma’s Infrastructure sector 15
Passengers (thousands) 2500
2000
1500
1000
500
0 1995-1996 2000-2001 2005-2006 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Private Airlines Public Airlines Total, private and public Total passenger numbers have 2.2 AIR FREIGHT virtually doubled in the past five years, and although the pace of Freight Traffic by Air (Freight ton-miles) 4000 growth slowed in 2015 due to 3500 uncertainty around the electoral 3000 process, there is significant potential 2500 for future increases if infrastructure 2000 can keep pace. 1500 1000
500 Burma now has 11 airlines, with a 0 12th approved in June 2016 by the 2000-2001 2005-2006 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 Myanmar Investment Commission Private Airlines Public Airlines Total (MIC). The majority of these companies have only one or two The number of foreign visitors Products Enterprise in 2015 after aircraft, however, and consolidation arriving by air to Burma quadrupled winning a tender to distribute and is expected in the coming years. from just 334,278 in 2010-11 to 1.1 sell aviation fuel. Similarly, dedicated million in 2014-15. Despite the surge, service providers such as Myanmar Some, notably state carrier these numbers remain minimal Aviation Centre have also opened in Myanmar National Airways, by regional standards – Thailand the country to provide more options have put considerable effort into welcomes around double the in areas such as staff training and modernisation. MNA signed an number of visitors per month than catering. aircraft lease agreement with GE Burma does in a year – and further Capital Aviation Services in 2014, and significant growth is expected. GOVERNMENT BODIES, POLICIES is currently the largest carrier in the AND DEVELOPMENT PARTNERS market. Air freight volumes have also grown rapidly in the past five years, albeit Ministry of Transport and International airlines are also from a very low base. As the overall Communications expanding routes. Emirates will economy grows, and development launch a daily Dubai-Rangoon flight and investment spreads further to Formed in April 2016 by the new in August 2016, making it the latest outlying areas, the air cargo sector is government, incorporating what was long-haul carrier to service the stop, expected to present opportunities for previously the Ministry of Transport with other overseas carriers already business. and the Ministry of Communications present in the market including Qatar and Information Technology. Airways, Air China, Bangkok Airways, Changes are also afoot in the Responsible for planning, developing Dragonair, Thai Airways, AirAsia and services business. Puma Energy and regulating all aspects of the ANA. started operating a joint venture with transport sector including air, road, state-owned Myanma Petroleum rail and sea. 16 Opportunities for British companies in Burma’s Infrastructure sector
Department of Civil Aviation (DCA) Asean Open Skies Agreement Key Projects
Falls under the Ministry of Transport The Asean Open Skies Agreement While Burma’s airport infrastructure and Communications, with a specific officially came into effect on 1 varies widely in terms of capacity remit for air traffic services and January 2015. It allows airlines and quality, the next decade is infrastructure. The DCA is currently from any Asean Member State likely to see major improvement drawing up new guidelines for the to operate passenger and cargo programmes across the board. industry, which are expected to services between the home country include new policies on licensing and and a point another member Private-sector involvement in taxation. state, and then carry on to a third operations and upgrades at the member state. Theoretically it three main international airports has Transport Master Plan is part of a larger Asean Single already been cemented in recent Aviation Market, though with a wide years, while plans have also been A new National Transport Master difference between the sophisticated announced to privatise and upgrade Plan, set for release later this year, air operations of some countries the smaller and medium-sized is likely to set out more detailed and nascent stages of others, the regional airports. government plans for the aviation envisaged common aviation market sector. The Japan International may take time to become fully Cooperation Agency (JICA) has effective. previously worked on a transport sector master plan, which estimated aviation investment needs of Ks1.2trn (around $1bn) from 2016 to 2020, and Ks922bn (around $800m) from 2021 to 2030. Opportunities for British companies in Burma’s Infrastructure sector 17
1. Yangon International Rangoon currently has a capacity of In March 2016, two floors of the Airport upgrade 2.3 million passengers per year, but new terminal building were formally with that ceiling fast approaching, opened, with further work ongoing Yangon International Airport is the an expansion is under way to at the site over the summer. main point of entry to Burma. It is raise capacity to six million. Local Improvements and expansions on a single-runway facility located in conglomerate Asia World, through other elements of the airport are Mingaladon township, about 15km its subsidiary Pioneer Aerodrome expected in the future. north of downtown Rangoon. A total Services, won a high-profile tender of 1.2 million visitors arrived by air to in 2013 to expand and run the airport Rangoon in 2015, about ten times the in conjunction with several regional combined total of the country’s other companies. two international airports, Mandalay and Naypyitaw.
Yangon International Airport upgrade
Location Mingaladon Township, Rangoon
Key companies involved Yangon Aerodrome, subsidiary of Asia World
Value $660m
Summary Extension of domestic departure and arrival buildings, $660m new terminal building
Structure Public-Private Partnership (PPP)
Agreement signed in January 2015
Completion date New terminal officially opened in March 2016 18 Opportunities for British companies in Burma’s Infrastructure sector
2. Hanthawaddy International Situated on some 9,000 acres, it will The project has been at least two Airport have an initial capacity of 12 million decades in the making, but was passengers per year, potentially given recent impetus with a January The newly-expanded Yangon rising to 30 million in later stages. 2016 agreement between the International Airport will be able The airport aims to position itself as Burma government and a Japanese- to handle the influx of passengers a regional gateway, connecting local Singapore consortium. Negotiations in the medium-term, but longer- and domestic destinations to improve are continuing in areas such as term demand has prompted the the currently limited air connectivity demand forecasts, financing, government to plan a major new in the country. government guarantees and traffic aviation hub, Hanthawaddy, located allocation, with more progress around 80km north of the city. expected before the end of 2016.
Hanthawaddy International Airport
Location Bago Region, 80km north of Rangoon
Key companies involved Consortium of Yongham Holdings (25%), Changi Airport Planners and Engineers (20%) and JGC Corporation (55%)
Value $1.4bn
Structure Public-Private Partnership (PPP)
Current status 2022+
Estimated completion date Negotiations ongoing, concession agreement expected in Q3 2016
Finances Loans from Japanese Official Development Assistance (ODA) ($706m), Japanese International Cooperation Agency (JICA) ($517m) Opportunities for British companies in Burma’s Infrastructure sector 19
3. Mandalay and Naypyitaw Mitsubishi, JALUX and Burma’s SPA Naypyitaw airport opened in Project Management. Serving the December 2011 with a capacity Rangoon may be the country’s main country’s second largest city, the of five million passengers per international gateway, but other airport has an annual capacity of year. Built by local conglomerate airports, notably Naypyitaw and three million passengers, although Asia World with assistance from Mandalay, are growing in importance has so far handles much lower Singapore’s CPG Consultant, it and likely to see further growth. numbers. However the facility has is generally regarded as being strong potential as a logistics hub underused and traffic remains A contract to renovate, upgrade thanks to its position in the centre limited. However, FMI, one of and operate Mandalay airport for of Burma, and further projects are Burma’s newest airlines, now uses 30 years was awarded in 2013 to likely. the city as its base, and international flights to the airport have also begun.
Mandalay International Airport
Location Tada-U, Mandalay Region
Main companies involved JALUX (45.5%), Mitsubishi (45.5%), SPA (9%)
Value N/A
Structure Concession agreement
Current status Commenced operation and upgrade of the airport in April 2016 20 Opportunities for British companies in Burma’s Infrastructure sector
4. Regional airport plans Seven planned airport improvements for 2016-17
Upgrades and improvements are also Location Project required at the medium and smaller- sized airports in the country, many Naungmoon Airport, Kachin State New runway of which are dilapidated and under- Myitkyina Airport, Kachin State New building and asphalt runway used. Sittwe Airport, Rakhine State Expansion of buildings Burma has 69 airports, of which 42 are year-round and 27 are fair- Man Aung Airport, Rakhine State Runway extension
weather strips. They vary widely in Falam Airport, Chin State Runway extension quality and usage, with some having no regularly scheduled flights. Loikaw Airport, Kayah State Runway extension Myanmar National Airways, which has by far the largest domestic Lashio Airport, Shan State New terminal building network, only flies regularly to 27 destinations in the country. Outlook and Opportunies companies to compete with local players in the market. A tender to upgrade 30 regional The rapid expansion of air travel, airports was announced in 2013, fostered by rising domestic incomes Nonetheless, Key areas of but then postponed in 2015 to and increased international tourist opportunity for UK companies allow international airports to be and business interest in Burma, has include: prioritized. In the meantime, a breathed new life to the industry. series of smaller-scale projects have Significant new aviation infrastructure • Engineering, design and been completed, including a new will be vital in the coming years if consultancy opportunities on passenger terminal at Myitkyina, the Burma is to achieve its ambitious airport infrastructure projects capital of Kachin State, which opened economic and tourism growth plants. • PPP opportunities, particularly in June 2016. on regional airports Among the challenges will include • Financing and investment While the new government’s funding gaps, with the Burma opportunities arising from transport plan and budget is not government unable to finance large- privatization initiatives expected to be finalized until later in scale projects using its own resources. • Ancillary opportunities, 2016, officials have said that seven Other uncertainties surround new e.g. ground services, air regional airports will be prioritised in government policy on the aviation traffic control, supporting the 2016-17 fiscal year: sector, the capacity of state bodies to infrastructure manage multiple large-scale aviation • Supply of aviation equipment projects, and the ability of overseas and components Opportunities for British companies in Burma’s Infrastructure sector 21 22 Opportunities for British companies in Burma’s Infrastructure sector
Road
Introduction more than tripled in a decade, • Over 300 bridges longer than while the internal road network is 180 feet have been built since It would be hard to locate a country up only 50% in the same period. 1988. There are also 14 bridges in a better place than Burma. It is Authorities are keenly aware of the over the Ayeyarwaddy River, sandwiched between two of the challenge, and planning to extend seven over the Thanlwin, two most important global economies, the network to meet the growing over the Chindwin and five China and India, as well as number of vehicles on the road. over the Sittaung bordering Thailand, one of the key Southeast Asian economies, along Plans are afoot to vastly improve Current Trends with growing Bangladesh and Laos. the country’s road network. Burma will one-day be a linchpin on the Once famous for some of the Officials from all sides speak Asian highways, and its internal quietest roads in Southeast Asia, optimistically about the future road network is already taking traffic has rapidly picked up as of Burma as a crossroads of shape. Burma liberalises, driven by newly- commerce. Chinese state press expanded imports of foreign cars have urged the rebuilding of the Fast Facts and motorbikes. There are about Ledo Road, a now-legendary track 40% more passenger cars on that linked northeast India with • There are over five million the road now as compared to five southern China via Burma during vehicles registered in Burma, years ago, while the number of the Second World War. Similarly, of which 4.2 million are motorbikes has more than doubled roads planned to connect India motorbikes in the same timeframe. with Thailand across Burma have • Burma has 151,298km of also begun, potentially opening roads, though only 39,076km important trade corridors. is paved • New types of public transport It is not only the large highway are being trialled, with the projects that are planned for Yangon Bus Rapid Transit Burma. The country’s internal road (BRT) launched in February network is presently insufficient 2016 to service a country of 676,578 sq • There are five main overland km, particularly as demand grows crossings with Thailand, and quickly. Vehicle registration has one each with China and India Opportunities for British companies in Burma’s Infrastructure sector 23
Large vehicles on the road 500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
3.1 HEAVY VEHICLE NUMBERS 3.2 TWO WHEELPassenger VEHICLES Trucks
Two wheelers Large vehicles on the road 500,000 500,000 5 million motorbikes
450,000 450,000 4.5 million motorbikes
400,000 400,000 4 million motorbikes 350,000 350,000 3.5 million motorbikes 300,000 300,000 4 million motorbikes 250,000 250,000 2.5 million motorbikes 200,000
150,000 200,000 2 million motorbikes
100,000 150,000 1.5 million motorbikes
50,000 100,000 1 million motorbikes
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 50,0002014-15 0.5 million motorbikes
Passenger Trucks 0 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Two wheelers Arterial Highways (miles) 500,000 5 million motorbikes 30,000 450,000 While 4.5 million motorbikes motorbikes currently dominate longer lead-times, have not kept up. Burma needs to raise its annual 25,000 400,000 by almost4 million motorbikes a ten-to-margin, passenger The total length of arterial highways investment in the transport sector 20,000 350,000 cars 3.5 millionare motorbikes increasingly popular. A has increased from 22,307 miles from 1% to 3-4% of GDP to meet
300,000 bevy4 million of motorbikeswell-known foreign brands in 2010-11 to 25,21215,000 miles in 2014- investment plans, an “ambitious”
250,000 have2.5 million opened motorbikes showrooms in Burma 15, a slight 13% increase, given level of financing but comparable to 10,000 200,000 in the2 million last motorbikes five years, including the number of vehicles more than what other countries invested during 5,000 150,000 Mercedes-Benz,1.5 million motorbikes BMW, Ford, Chrysler, doubled in the same period from 2.3 periods of high growth.
100,000 Great1 million Wall, motorbikes Mitsubishi, Nissan and million to 5.1 million. Put0 another way, 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 50,000 Toyota.0.5 million motorbikesMotorbikes are banned from there were 64.7 vehicles for every Burma’s road network is not small Rangoon’s urban townships, meaning kilometre of highway in 2010-11, and compared to many of its Asean peers, 0 0 Arterial Road (Miles) 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 cars and buses predominate, while 125.9 vehicles for8,000 every kilometre though much of it requires significant the first international brands are only five years later.7,000 improvement. In 2012, the latest Arterial Highways (miles) 6,000 now30,000 opening their first dealerships year for which Asean has released 5,000
in the smaller cities, such as Ford’s Authorities aim to4,000 catch up. Major full statistics for Burma, the country 25,000 Mandalay showroom. highway and road3,000 expansions and had nearly five times the length of 20,000 improvements are2,000 underway, though unpaved roads as paved roads. 1,000 The15,000 cars are coming, though road experts are pushing0 for greater
Mon infrastructure projects, with their investment. The ADB has estimatedKayin Chin Bago Shan Kachin Kayah Sagaing Magwe Rakhine Yangon 10,000 Mandalay Tanintharyi Ayeyarwady
5,000
Arterial Road by Type (KM) 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 30000
25000
Arterial Road (Miles) 20000 8,000 15000 7,000 10000 6,000 5,000 5000
4,000 0 3,000 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 2,000 Bituminous Metalled Surface Earth 1,000 0
Mon Kayin Chin Bago Shan Kachin Kayah Sagaing Magwe Rakhine Yangon Mandalay Tanintharyi Ayeyarwady
Arterial Road by Type (KM)
30000
25000
20000
15000
10000
5000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Bituminous Metalled Surface Earth Large vehicles on the road 500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000 Large vehicles on the road 500,000 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 450,000
400,000 Passenger Trucks
350,000 Two wheelers 300,000 500,000 5 million motorbikes 250,000
450,000 200,000 4.5 million motorbikes
400,000 150,0004 million motorbikes 24 Opportunities for British companies in Burma’s Infrastructure sector 100,000 350,000 3.5 million motorbikes 50,000 300,000 4 million motorbikes 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 250,000 2.5 million motorbikes
Passenger Trucks 200,000 2 million motorbikes
150,000 1.5 million motorbikes Two wheelers
500,000 5 million motorbikes 100,000 1 million motorbikes
450,000 4.5 million motorbikes 50,000 0.5 million motorbikes 400,000 4 million motorbikes 0 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 350,000 3.5 million motorbikes
300,000 4 million motorbikes Arterial Highways (miles) 250,000 2.5 million motorbikes 30,000 200,000 2 million motorbikes 25,000 150,000 1.5 million motorbikes
100,000 120,000 million motorbikes
50,000 0.5 million motorbikes 15,000 0 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 3.310,000 ROAD LENGTH Artery road network
5,000 Arterial Highways (miles) Topography and demographics have 30,000 been prime determinants when 0 laying out Burma’s road network. 25,000 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 With the largest cities of Mandalay, 20,000 Naypyitaw and Rangoon lying on Arterial Road (Miles) a north-south axis, about 800km 8,00015,000 apart, flanked by the Bago mountain 7,000 range on the west and the Shan 10,000 6,000 highlands to the east, roads have
5,0005,000 traditionally tended to follow a 4,000 similar axis. A case in point is the 0 3,000 Rangoon-Mandalay Expressway, 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 2,000 now Burma’s main highway. The 1,000 north-south emphasis is gradually Arterial Road (Miles) changing, however, and east-west 0 8,000 roads are increasingly being added. Mon 7,000 Kayin Chin Bago Shan Kachin Kayah Sagaing Magwe Rakhine Yangon Mandalay 6,0003.4 ARTERIAL ROAD BYTanintharyi TYPE Ayeyarwady Burma is also a lynchpin on the 5,000 planned Asian and Asean Highways. 4,000 Already it is crossed by these 3,000 Arterial Road by Type (KM) significant links, though in many 300002,000 cases the roads require further 1,000 25000 improvement. 0 20000 Mon Kayin Chin Bago Shan Kachin Kayah Sagaing Magwe Rakhine Yangon 15000 Mandalay Tanintharyi Ayeyarwady 10000
5000 Arterial Road by Type (KM)
30000 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 25000 Bituminous Metalled Surface Earth 20000
15000
10000
5000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Bituminous Metalled Surface Earth Opportunities for British companies in Burma’s Infrastructure sector 25
With the Mandalay-Rangoon Expressway in place, Burma is working to expand its domestic highway network. Part of this is driven by the need to link up with neighbouring countries, which is covered below, but other highways are directed at connecting some of the more remote areas of the country.
Spending on road maintenance is an estimated two to three times below need, with up to 60% of major roads requiring significant maintenance.
Source: ADB July 2016 working paper, “Burma Transport Sector Policy Note: Trunk Roads” Large vehicles on the road 500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Passenger Trucks
Two wheelers
500,000 5 million motorbikes
450,000 4.5 million motorbikes
400,000 4 million motorbikes
350,000 3.5 million motorbikes
300,000 4 million motorbikes
250,000 2.5 million motorbikes
200,000 2 million motorbikes 26 Opportunities for British companies in Burma’s Infrastructure sector 150,000 1.5 million motorbikes
100,000 1 million motorbikes
50,000 0.5 million motorbikes
0 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Arterial Highways (miles) 30,000
25,000
20,000
15,000
10,000
5,000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 3.5 ROAD BY STATE AND REGION Rangoon is one of the few cities where the bus network is almost Arterial Road (Miles) entirely run by private companies. 8,000 The different lines compete against 7,000 each other, and are often accused of 6,000 recklessness in an effort get to the 5,000 stop first and win fares. However, 4,000 Yangon Bus Public Company started 3,000 a bus service called BRT Lite, which 2,000 charges modestly higher ticket fares 1,000 but provides a comfier, safer ride for 0 commuters.
Mon Kayin Chin Bago Shan Kachin Kayah Sagaing Magwe Rakhine Yangon Downtown Rangoon is also off-limits Mandalay Tanintharyi Ayeyarwady to non-official motorbikes. The previous USDP government held 1,283 deaths in 2005. The new NLD The largest change made to Rangoon’s streetscape in recent numerous tenders to improveArterial or Road bygovernment Type (KM) has pledged to cut the years is the introduction of 30000build roads, appearing to gradually number in half by 2020. move away from the government flyovers. Intended to decongest 25000 internally constructing roads. It Local roads key intersections, they have been 20000seems likely that the current NLD controversial, and in some instances may need to be knocked down to 15000government will continue the trend, Many of the country’s roads are though details on their policies are underutilised at present, but this is make way for elevated roads. 10000 only gradually becoming clear. not true of Rangoon. Burma’s largest 5000 city and commercial capital has seen To date, seven flyovers have been built in Rangoon, at Hledan, As0 of 2015, most highways except commuting times shoot up as car for the1995-96 main links2000-01 were2005-06 operating2010-11 2011-12ownership2012-13 takes2013-14 off. 2014-15 Bayintnaung, Shwegonedaing, below capacity,Bituminous meaning BurmaMetalled is Surface Earth Myayingone, Tarmwe, 8 Mile and in position choose selectively which A number of organisations are Kokkine. Others have been planned, roads should be prioritised. Many working on the problem. JICA though have encountered some highways also have build-operate- released a report titled the resistance and budgetary pressure, transfer terms. Comprehensive Urban Transport Plan meaning it is as yet not certain if of Greater Rangoon. Its data shows they will go ahead. Safety is also a concern. The number the majority of people either take the A traffic control system tender of accidents in Burma has risen with bus or walk, though car ridership is was won by China Railway and the growth in the number of vehicles, on the rise. local partner Myanmar Shwe with 4,420 deaths in 2015 from Yin Company, which will help cut Opportunities for British companies in Burma’s Infrastructure sector 27
commuting time once complete. New Road Transport Administration Department of Bridges effort is also being put into improved Department parking capacity, as with a lack of Formerly part of the Department of lots, cars are now frequently parked Responsible for road safety, drivers Public Works, in March 2015 it was on the road. licences, vehicle registration, and reformed into its own entity, along In the medium term, several elevated other associated activities. It is with the Department of Highways highway proposals have been made under the Ministry of Transport and to connect with central Rangoon, Communications. Public Private Partnerships while ring roads around the city are also on the cards. Transport Planning Department About 14% of roads are under BOT schemes with Public Works Government Bodies, Policies, and Responsibly for coordinating plans Department, or 28 companies with Development Partners and budgets for the Ministry of 64 roads totalling 3,408 miles. Transportation and Communication, A number of bodies have authority as well as issuing commercial Common terms for local companies in Burma’s road infrastructure. licences, overseeing passenger and has been 40 years from the start The new government has made freight logistics, and heading up of operations until the end of the the first steps toward rationalising international relations transfer period, while 60 years is the the bureaucracy governing road term for international companies, for transportation in Burma, though Ministry of Construction instance Italian-Thai Development in work still needs to be done. Dawei. International Highways, Union Ministry of Transport and Highways and Arterial highways Tolls must be approved by authorities Communications are under the control of Ministry upon obtaining the Final Completion of Construction, meaning the Certificate. The Ministry of Transport, Ministry ministry arranges for construction of Rail Transport and Ministry of and maintenance, forms joint Yangon City Development Communications and Information ventures, obtains land and imports Committee / Mandalay City Technology have all been merged construction equipment. Development Committee into one body, the Ministry of Transport and Communications, in Department of Highways In charge of local roads as well as April 2016. It is led by U Thant Zin urban planning Maung, a retired railways official and Responsible for planning arterial NLD politician. roads, has also traditionally designed, implemented and maintained the roads. Some of its processes are in need of modernisation. 28 Opportunities for British companies in Burma’s Infrastructure sector
Japan International Cooperation Key Projects from a number of institutions, as well Agency (JICA) as making better use of public-private The World Bank, based on work partnerships. JICA has been active across many by JICA, has identified four road The new government has already areas of transport infrastructure transport corridors as appearing moved to streamline the ministries in Burma, though particularly so critical to Burma’s medium-term overseeing road transport, though in Rangoon. It has formulated a development and to unlock latent there is still more to do in this area. document called the Comprehensive trade: Road transport has become a key Urban Transport Plan of Greater topic particularly in Rangoon, as the Rangoon in 2014, as well as the • Rangoon-Naypyitaw-Mandalay influx of cars is growing congestion, as well as closer to the China, India and National Transport Master Plan. (AH1) / Rangoon-Pyay- Magway- Thai borders, where businesspeople Mandalay; are keen to grow trade. Asian Development Bank (ADB) • Mandalay-Lashio-Muse (AH14); • Mandalay-Kalay-Tamu (AH1) There is still much to do in improving The ADB along with many and Mandalay-Monywa-Kalay- Burma’s roads, and there are a range international partners began Htotla-Tiddim-Rih (two branches of of opportunities for UK companies: dramatic re-engagement with the the same corridor); and country in 2012, working to clear • Rangoon-Bago-Hpa’an- • An expected increase in tenders for off arrears so it could again begin Myawaddy (AH1) both local and national-level lending in Burma. It has extended projects some road loans, such as for an In addition, expect significant work • PPP opportunities in road important 66km stretch of highway to take place aimed at congestion in construction in Kayin State., a missing link on the Rangoon. Mooted plans so far have • Contracts for various aspects of East-West Economic Corridor, which included ring roads, an elevated road construction, including is to link Rangoon with Bangkok and highway, better parking space, added engineering and design then on to Vietnam. bridges across the city’s main rivers, • Financing and even a transport management • Add-on industries, including but Korea International Cooperation system. not limited to parking garages, Agency (KOICA) highway rest stops, traffic Outlook and Opportunities management systems KOICA has provided technical There is a growing realisation that key assistance for a Master Plan for road links must be improved given Arterial Road Network Development the rapid growth in vehicle traffic on Burma’s roads. Experts are urging the country to rapidly increase its budget for transportation, taking advantage of concessionary lending now available Opportunities for British companies in Burma’s Infrastructure sector 29
Rangoon-Naypyitaw-Mandalay (AH1) / Mandalay-Lashio-Muse (AH14) Rangoon-Pyay-Magway-Mandalay
The country’s main highway artery is the Rangoon-Mandalay The Mandalay-Lashio-Muse road connects Upper Burma’s Expressway. Completed in 2010, it is four-lane, separated main city, Mandalay, with the key Muse-Ruili border crossing road. It is credited with cutting the travel time between the to China. country’s two largest cities from 15 hours to 8 hours, as well as passing near other main cities such as Bago, Taungoo, China is by far Burma’s largest overland trading partner, with Naypyitaw and Meiktila, which lay adjacent to the current an estimated 86% of Burma’s border trade taking place with route. The corridor is by far the heaviest in terms of freight the country. The majority of that trade travels on this road. delivery, with a World Bank estimate claiming that of the main transport corridors, this one received over 50% of total While improved on previous conditions, the road favours traffic. twists and turns over bridges and tunnels when travelling through the Shan Mountains. Transport speeds often slow to Further improvement plans were announced in 2015, when 20 to 25 km/h, and repairs are often inadequate. a tender was called to improve it to modern standards, including improving safety features such as rest stops every The exchange of traffic is limited by a municipal agreement 50km and fences on either side of the road to keep out between Muse and Ruili, where trucks may cross only a few motorbikes or the odd cow. kilometres to the trading posts in either country. Gradual liberalisation of these measure will likely also increase traffic flows.
Mandalay-Kalay-Tamu (AH1) and Mandalay- Rangoon-Bago-Hpa’an-Myawaddy Monywa-Kalay-Htotla-Tiddim-Rih
The Mandalay-Tamu road is part of the Tri-lateral Highway, Connecting Rangoon with Myawaddy on the Thai border, the a 3,200km link connecting Moreh in India with Mae Sot road has been much improved since 2015. It has formally in Thailand, by way of Mandalay. Although it runs largely been upgraded from being a one-way road that alternated through Burma, the link has received significant Indian and directions on different days of the week, to a proper two-lane Thai investment, with India upgrading parts of the Tamu- road. Mandalay road to an all-weather route. Tender winners were also announced in July 2016 to upgrade India under Prime Minister Narendra Modi has prioritised a 66km stretch of the road in Kayin State, which represents closer ties with Burma. Overland trade links are small but the missing link on the East-West Economic Corridor. The growing – from $15m in 2006-7 to $60m in 2014-15, according upgrades are funded by a loan from the ADB. to a World Bank report. Tamu is the main gateway, though there is a second crossing at Rih that also serves commerce. 30 Opportunities for British companies in Burma’s Infrastructure sector Opportunities for British companies in Burma’s Infrastructure sector 31
RAIL
Tourist guidebooks covering Burma isolated inside the country, and • Myanma Railways carried 54.8 often include the Circle Train as a there are plans afoot to connect million passengers in 2012 highlight of Rangoon. It winds its way, lines to India, Thailand and China. • 1,000 mm gauge is standard in as the name suggests, in a large circle There are also significant domestic Burma around the city, taking three hours improvements that need to be taken, • Burma is to provide an important to complete. While the guidebooks which is obvious to those following link on the 14,080km TransAsian recommend the train as a way to see the guidebook’s advice and finding Railway network parts of the city that may otherwise themselves chugging along the remain hidden, it also provides a Circle Line at less than 20km/h. The Current Trends glimpse into the opportunities of rail business case facing Burma’s state- transportation in Burma. owned railways is also squeezed, as Burma’s planners previously saw rail road takes a larger share of transport, as more than simply a transportation Burma has the longest network of and Myanma Railway’s revenues method, but as a way of connecting rail line among Southeast Asia’s ten do not current meet expenses. Rail the nation. While endowed with a nations. The first line, the Irrawaddy may be facing increased pressure rail network on independence, it has Valley State Railway, opened in 1877 from road transport, but it can play grown significantly since, adding connecting Rangoon with Pyay, an important part of Burma’s future thousands of bridges, at least a dozen some 262km to the north. The lines transport mix. tunnels and extending the network by gradually extended, until the country’s at least 70%. three railway companies combined Fast Facts into the Burma Railway Co in 1896. The rapid build has made the Burma Railway still exists, though is • 412 locomotives, 960 stations, domestic railways the largest in the now state-owned Myanma Railways. 1375 passenger coaches, 3384 region, an impressive achievement wagons given the relatively underdeveloped The priority has clearly been on • Track length of 5,844km in 2013, state of Burma. expansion of the rail network in the most in Southeast Asia recent years, though this has been expensive. With the low-hanging 4.1 ASEAN RAIL LENGTH fruit already plucked, much of the Rail Length (km) recent network expansion has been 7,000 in mountainous areas such as Shan 6,000 5,000 State. Still, the network now totals 5,844km, longer than Indonesia’s at 4,000 3,000 4,861km or Thailand’s at 4,034km. 2,000 1,000 While there has been significant 0 growth already, there is still much to Lao Brunei Vietnam do. Burma’s rail network is currently Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore
Route mile 800 700
600 500
400 300 200 100 0
Mon Bago Chin Kayin Shan Kachin Kayah Magwe Rakhine Sagaing Yangon mandalay Ayeyarwady Tanintharyi
Freight ton-miles 800,000
700,000
600,000 500,000
400,000 300,000 200,000 100,000 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15
Pasenger - kilometres (million) 18,000
16,000 14,000
12,000 10,000
8,000 6,000 4,000 2,000 0
Lao Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore 32 Opportunities for British companies in Burma’s Infrastructure sector
Rail Length (km) 7,000
6,000 5,000
4,000 3,000 2,000 1,000 0
Lao Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore
Route mile 800 700
Rail Length (km) 600 7,000 500
6,000 400 5,000 300 4,000 200 3,000 100 2,000 0 1,000 Mon Bago Chin Kayin Shan Kachin Kayah 0 Magwe Rakhine Sagaing Yangon mandalay Ayeyarwady Tanintharyi Lao Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore 4.2 RAIL ROUTE MILE INSIDE BURMA 4.3 RAIL ROUTE-TON MILE
Freight ton-miles Route mile 800 800,000 700 700,000
600 600,000 500 500,000
400 400,000 300 300,000 200 200,000 100 100,000 0 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Mon Bago Chin Kayin Shan Kachin Kayah Magwe Rakhine Sagaing Yangon mandalay Ayeyarwady Tanintharyi During the period of expansion, High-volume goods predominate. large quantities of passengers on Pasenger - kilometres (million) some lines were added that have a Timber at 35,634 tonnes,18,000 high- a daily basis. Burma’s equivalent is less than compelling economicFreight case.ton-miles value petroleum products16,000 at the Circle Line in Rangoon, though 800,000There are still important expansion 23,956 tonnes, and stone14,000 at 42,998 it is far from the crowded urban rail 700,000plans, though a more balanced tonnes were among 12,000the main systems of Bangkok or Singapore. 600,000 10,000 500,000approach is now likely, also including products shipped by 8,000rail in 2014-
400,000upgrades and improvements to the 15. Government orders6,000 are also Burma’s rail passenger rates have 300,000existing lines. crucial, providing a guaranteed4,000 level also taken a hit from growing 200,000 of business for Myanma2,000 Railways. competition particularly from road 0 Improved100,000 roads are providing Reform is also needed on the and air for longer trips. However, 0 Lao Brunei Vietnam significant1995-96 competition2000-01 2005-06 to rail.2010-11 Travel2011-12 2012-13process2013-14 of selling2014-15 cargo space. IndonesiaBurma peopleMalaysia areMyanmar still far more Thailand Cambodia Philippines Singapore between Rangoon and Naypyitaw likely to take a train trip on a per takes four to five hours by road, Passenger patterns are also capita basis than people in its closest and eight to nine by rail. Falling busPasenger - differentkilometres (million) from other regional economic peers, Vietnam, Laos 18,000
16,000prices and growing car ownership countries. While countries such as and Cambodia. Indonesia also has 14,000rates also pressure passenger Singapore, Malaysia and Thailand five times the amount of people as 12,000rail, while improved road logistics have smaller networks, they have Burma, but its people take only three 10,000systems and internal railway much greater ridership levels. This is times the amount of trips. 8,000 challenges6,000 have slowed freight because of the urban transit systems delivery.4,000 in the major cities, which funnel 2,000 0
Lao Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore Rail Length (km) 7,000
6,000 5,000
4,000 3,000 2,000 1,000 Opportunities for British companies in Burma’s Infrastructure sector 33 0
Lao Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore
Route mile 800 700
600 500
400 300 200 100 0
Mon Bago Chin Kayin Shan Kachin Kayah Magwe Rakhine Sagaing Yangon mandalay Ayeyarwady Tanintharyi
Freight ton-miles 800,000
700,000
600,000 500,000
400,000 300,000 200,000 100,000 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 4.4 PASSENGER KM (ASEAN) initial procurement package for international bidding on project Pasenger - kilometres (million) 18,000 construction in October 2016, with 16,000 a goal of finishing the upgrades by 14,000 2020. 12,000 10,000
8,000 Myanma Railways has a range of 6,000 other ongoing projects. It is a large- 4,000 scale land owner, and has an ongoing, 2,000 0 high-profile tender underway for
Lao redeveloping Rangoon’s historical Brunei Vietnam Indonesia Malaysia Myanmar Thailand Cambodia Philippines Singapore main station. It also is said to be The number of passengers taking Central to future plans is greater planning to develop new dry ports, Myanma Railways peaked in the 2007 international connectivity. Burma’s in the Ywarthargyi area of Rangoon fiscal year, and has since been in current rail network, while extensive, Region and the Myitnge area of decline. A July 2016 ADB policy note is cut off from its five neighbours. Mandalay Region. said that 35% of all trips are currently There are plans to connect directly on the Rangoon-Mandalay line, while with at least three of these five It has also not been averse to six of the 34 total Myanma Railway neighbours, namely India, Thailand experimenting with new services. routes carry 74% of the passengers. and China, though the three In 2016 the former Ministry of Rail Burma’s train trips are cheap, but they routes are at different stages of Transportation signed a deal with are also often uncomfortable, slow, development. Japan’s West Corporation to build crowded, and frequently delayed. a tram line on Strand Road in the There are an array of plans to improve downtown core. Noting that Rangoon Rail infrastructure also requires various lines as well as the overall has previous had a tram line from significant improvement. Wooden network. Japanese firms Mitsubishi 1906 to 1921, there were plans to sleepers still predominate, despite and Hitachi inked a 2.4bn yen ($20m) gradually expand on the initial 455 other materials being more suited contract with Myanma Railways to million yen ($3.9m) line. However, for the tropical climate. Myanma supply and install signaling systems in it ultimately proved unsuccessful, Railway’s trains are ageing rapidly, May 2015. The contract is covered by stopping in mid-2016. with about half of locomotives over 30 grant aid from JICA, with completion years old. Little of the existing track is schedules for June 2017. Burma’s railways have a promising also twinned. start, but there is still much that JICA has also discussed upgrading needs to be done. The quality of Myanma Railways officials have said Rangoon’s Circle Line. The line is domestic tracks need to be improved, the railway targets an average of managed and operated by Burma urban connections developed, and 48km/h for freight and 68km/h for Railways, with 38 stations on its international lines built, before Burma passenger trips. Achieving a modern 46 kilometer route, with about can take full advantage of rail travel. railway in Burma is possible, though 122 trains per day. It is planning will require extensive upgrades. a tender announcement of an 34 Opportunities for British companies in Burma’s Infrastructure sector
Main government agencies and development partners
Ministry of Transport and Communications
Railways previously had their own Ministry, the Ministry of Rail Transport. However, this was merged into the Ministry of Transport and Communications by the new National League for Democracy government in April 2016, shortly after taking office. The new Ministry covers not only the former Rail Transport ministry, but also the former Ministry of Transportation and Ministry of Communications and Information Technology. Minister U Thant Zin Maung worked at Myanma Railways before starting as a politician.
Myanma Railways
The only rail operator in the country, Myanma Railways traces its history to 1877. It operates the country’s 5,844km, 1,000 mm gauge rail network, including the Rangoon Circle Line. Its revenues are currently not enough to meet operating costs.
On an average day it operates 439 trains, of which 196 are inter-city, 215 are suburban and 28 are freight Source: ADB 2016 report: Burma Transport Sector Policy Note: Railways trains. It has recently been a loss- making institution. It also plans Opportunities for British companies in Burma’s Infrastructure sector 35
and organizes future rail projects. A line from Singapore to Kunming, one of Burma’s three main Special It has two major diesel locomotive in Yunnan, a province in Southern Economic Zones. The line would workshops, Ywataung near Mandalay China, has been discussed for expedite Chinese inland commerce and Insein near Rangoon. The firm’s years, after first being proposed at with different countries, though it record-keeping and ticketing services a 1995 ASEAN Summit as part of has proven controversial. are paper-based and outdated. the 14,080km Trans-Asia Railway Network. The line is intended largely A Memorandum of Understanding Japan International Cooperation for freight. between China and Burma was Agency (JICA) signed in April 2011 in Naypyitaw. The Broadly, there are three main line would run for 4.2km through In September 2014 JICA signed a routes such a line could follow. China, before entering Burma at deal to provide low-interest loans to Each potential path has its own Muse and travelling through Lashio, Burma for four projects with a total advantages and disadvantages. Mandalay, Magwe, Minbu and of up to 63.166 billion yen ($594m)., Ann before reaching Kyaukpyu, a including improving Burma’s most • West – through Burma distance of 809km. important rail lines • Middle – north from Bangkok, through Laos A joint China-Burma team conducted Asian Infrastructure Investment • East – through Cambodia and a survey, geological investigation Bank (AIIB) Vietnam and checked for infringement by buildings along the proposed site, The possibility of the AIIB investing For Burma’s portion, there is a 153 before submitting a feasibility study in large-scale rail projects has been kilometre missing link with Thailand, in 2012. discussed by senior officials on both commonly planned for the Three sides, though so far no deal has gone Pagoda Pass, as well as a shorter In 2014 Burma announced it had ahead missing portion with China. Burma’s annulled the agreement, but there is tracks would also likely need still some interest in pushing forward Key future projects significant upgrade to assist the with previous plans. route with becoming viable. International Kunming (China) to Kyaukpyu Rail Singapore-Kunming Rail Line Line (part of the Trans-Asia Railway Network) The Kunming to Kyaukphyu line would run for 868km largely through Much of the potential future rail Burma. It would connect inland build in Burma fits into the context Kunming with the Indian Ocean at of broader regional connections. Kyaukpyu, which is the future site of 36 Opportunities for British companies in Burma’s Infrastructure sector
Link with India closed shortly after the war in 1947. Myanma Railways previously estimated the cost at $29.6m, One day, there could be a direct Re-connecting Burma with Thailand though other reports have said costs rail link between India and China has been mooted, with the most likely could be higher. The project period passing through Burma. There is route being the Three Pagoda Pass. was anticipated to end by 2020, an estimated missing link of 135km A feasibility study into the route was though its current status in unclear. in Burmese territory for a line from conducted by the Korea International Kalay to Tamu, which is on the Indian Cooperation Agency from 2005 to Rangoon to Mandalay border. There is a further stretch 2007. However, the addition of a dam inside India that would also need to on the Thai side flooded some of the Japan has completed a feasibility be built. potential path, while the route overall study on a proposed $1.7bn is mountainous, steep, expensive modernisation of the crucial A feasibility study had been and likely to receive low freight and Rangoon to Mandalay rail link. conducted for the line in 2004, passenger business, at least at first. though returned with the result Both countries agreed to put it off in In May 2016, plans were revealed to that the line was not economically 2011. call a tender for upgrading the link by viable. A decade later, though, the the end of the year. The goal is to cut plan was picked up again, with the Subsequently, a new line has been travel time on the 622km line from first meeting of the Joint Working proposed that would link Burma’s its current 16 hours to just eight. Group on Railways between India and planned special economic zone, Government officials had previously Burma being held in Naypyitaw on 16 Dawei, with Kanchanaburi and the said this would mean trains travelling and 17 January 2013. rest of Thailand. at up to 100km/h on some stretches.
Both sides have agreed to cooperate Domestic Rangoon Circle Line in preparing a detailed report for the line. Bago to Dawei JICA, Yangon Region and the Yangon City Development Committee have Thailand In conjunction with the proposed looked at improving Rangoon’s Thailand to Dawei line, Burma has commuter rail line to assist with There was once a rail link between discussed upgrading the 507km rail easing congestion in the city. Officials Thailand and Burma, though it was line linking Dawei with Bago, a city have said the aim is to increase the not a happy story. The so-called north of Rangoon. number of people riding rails from Death Railway was built by the 3% of Rangoon’s journeys at present Empire of Japan in 1943 to support to 30% over the next three decades. its war aims in Burma during the Second World War. Although it imposed significant costs, the line Opportunities for British companies in Burma’s Infrastructure sector 37
It is also likely that a spur line will saving time and improving reliability. be developed to connect with the Urban centres, particularly Rangoon, Thilawa Special Economic Zone will also benefit, as urban rail grows located to the Southeast of Rangoon. as an alternative to the increasingly busy streets. Development on railway land There are significant opportunities Two of Rangoon’s most prominent in Burma’s expanding rail network. proposed developments are slated These include, but are not limited to, for Myanma Railways land. The former headquarters of Myanma • Line expansion and improvement Railways on Bogyoke Aung San • Opportunities to supply rolling Street is to be restored as a five- stock star hotel by a group of companies • Service-based upgrades including Peninsula Hotels, local • Consultancy, engineering, project firms Yoma Strategic Holding and management and design work First Myanmar Investment, the ADB, • Opportunities in property IFC and Mitsubishi, while a modern development mixed-use development will be built in the vicinity.
To the north, a tender contest is ongoing to upgrade the historic Yangon Central Railway Station and build a mixed-use project nearby.
Outlook and Opportunities
Burma may have a large rail network already, but there are even bigger plans. International links are likely to be established in the years ahead, particularly affecting freight shipments though also a boon to passengers. Likewise, the domestic network will be upgraded with newer technology and better practices, 38 Opportunities for British companies in Burma’s Infrastructure sector Opportunities for British companies in Burma’s Infrastructure sector 39
Ports
Introduction
Burma’s waters have historically been important conduits for the shipment of goods and travel of passengers. Long before a strong road network was established, its rivers served as highways and its ocean border provided connections with the world.
There are three main rivers running general north-south through Burma. The largest of them all is the Ayeyarwady (Irrawaddy), one of Southeast Asia’s great waterways. Fed by the Himalaya snows in the north, it winds its way 2,170km to the sea. Along the way, it passes many of the country’s largest population centres, including Myitkyina, Bhamo, Mandalay and Pakkoku before emptying into the Andaman Sea. The heartland area it winds its way through has been at the centre of Burma’s history, as it also flows by many of the ancient capitals such as Bagan, Inwa and Amarapura.
In the west is the Chindwin river, which travels from near the border with India before joining the Ayeyarwady between Pakokku and Mandalay. In the east is the Salween (Thanlwin) river, which starts in China, travels through the Shan highlands, and eventually meets the Andaman Sea at Mawlamyine, the country’s fourth-biggest city. 40 Opportunities for British companies in Burma’s Infrastructure sector
A number of smaller rivers such as Overview While there are nine official ocean the Sittang and Myitnge has also ports in Burma, they generally traditionally played a role in the Prospects are strong to increase require significant expansion before country’s river travel. volumes of goods moved by ship, they will attract large volumes. though challenges remain. Rangoon Rangoon has recently been the arrive Burma also has a long coast wedged Port is the main international destination of upwards of 80% of between Thailand and India. It runs gateway to Burma, though volumes Burma’s sea-based trade. for 1,930km, more than Taiwan or are catching up to capacity and Portugal, but less than Germany expansion is on the cards. or Egypt. Rangoon has become a significant port on the Andaman Sea, 5.1 BURMA PORT part of the Indian Ocean, and plans Capacity of vessels arriving at Myanmar Ports call for expansion or creation of a number of other large ocean ports. 25000
20000 FAST FACTS 15000
• Burma has an estimated 1,930km 10000 of ocean coastline • Has three main rivers, the 2,170km 5000 Irrawaddy, the 2,400km Salween 0 (Thanlwin) river, and the 1,200km 2010-11 2011-12 2012-13 2013-14 2014-15 Chindwin • Rangoon port handled 29.2 million Yangon Sittwe Pathein Mawlamyine Other Ports tonnes in 2014-15, with exports The site of Rangoon Port at the The number of international shipping predominating over mports doorstep of the city itself goes a lines with service to Rangoon has • Excluding Rangoon, Burma has Cargo handled by Yangon Port (tons) eight other ocean ports, including long way to explaining its popularity. rapidly increased. In 2014, Shipping 35,000,000 Sittwe, Kyaukypyu, Thandwe, Rangoon is Burma’s commercial Corporation of India announced a Pathein, Mawlamyine, Dawei, Myeik 30,000,000capital and one of the main hubs in fortnightly service connecting the and Kawthaung. Kyaukypu and 25,000,000the country’s road and rail network. city with Colombo and Chennai. In Major businesses in the country January 2015, China Shipping began Dawei, along with Thilawa near 20,000,000 Rangoon, are slated for large-scale generally have a Rangoon presence a direct service connecting the city Special Economic Zones including if15,000,000 they are not based there. As with Shanghai. However, most Burma port facilities 10,000,000Burma’s economy takes off, it has international shipping still comes by
shouldered5,000,000 much of the growing way of Singapore and Port Klang import and export burden. (Malaysia). 0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Opportunities for British companies in Burma’s Infrastructure sector 41
Burma had a fleet of 109 seagoing Capacity of vessels arriving at Myanmar Ports Rangoon Port vessels as of December 2015, defined 25000 as merchant vessels of 100 gross The20000 main port is on the Rangoon River, the eastern-most branch of the tonnes or larger, according to a Ayeyarwady15000 River as divides into a delta and enters Andaman Sea. The port report by Nederland Maritiem Land. itself is about 32km from the ocean. Rangoon River is generally shallow, The fleet was composed of 45 bulk limiting10000 ships to around 10,000 to 12,000 deadweight tonnes. The berths carriers, 12 container ships, 11 ferries, themselves are located along the southern edge of Rangoon at Strand (Kanna) Road,5000 in Bo Aung Gyaw, Myanmar Industrial Port and Asia World Port. five tankers and 36 seagoing tugs, 0 with an average of 27.6 years and In addition,2010-11 a new port 2011-12has been established2012-13 at Thilawa2013-14 SEZ, about2014-15 16km average size of 3176 gross tonnes. downstream from Rangoon. Thilawa is a joint government and private sector Yangon Sittwe Pathein Mawlamyine Other Ports project with Japanese and Burmese owners, while the port itself is developed It is expected to expand further and operated by Hong Kong’s Hutchinson Port Holdings. with the additions to the container Cargo handled by Yangon Port (tons) fleet, though is still small at the 74th 35,000,000 largest in the world. 30,000,000
Rangoon may predominate, but 25,000,000 given its location on a river, it cannot 20,000,000 be developed into a deepwater port. 15,000,000 Nonetheless, plans are in place to 10,000,000 add substantial capacity to other 5,000,000 ports. Dawei and Kyaukpyu are two 0 of the most exciting prospective 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 locations, give the large-scale Special Use of Rangoon Port has increased rapidly on the back of economic growth. Economic Zones they are to connect However, imports have recently outpaced exports, which has resulted in with. Authorities have discussed logistical changes at the ports themselves. expanding other ocean ports as well. River transport is ideal for moving The Ayeyarwady is the main avenue River Transport bulky, non-time sensitive goods for river transport, though is a from Burma’s heartland out to the challenging river to navigate and Away from the ocean, Burma’s sea. A number of private operators in need of engineering support, rivers have historically played an compete with the state-owned specifically to build and maintain a import part in transportation, and services of the Ministry of Transport channel for traffic. Running north- continue to do so. After road, the and Communications on Burma’s south, it is broadly parallel to main rivers carry the highest volumes of inland rivers. road and rail links. The Chindwin is freight among different forms of another often-used river, functioning transportation. as the main mode of transport along 42 Opportunities for British companies in Burma’s Infrastructure sector
some of its stretch. The Salween Department of Marine Inland Water Transport (IWT) on the other hand is not navigable Administration Department for much of its length, only in general use for a stretch north of Responsible for marine safety, A direct successor to the Irrawaddy Mawlamyine, where it meets the internally send externally. Oversees Flotilla Company set up in 1865, ocean. maritime legislation and rules. which was nationalised shortly after independence. The department has Key to improving water transport Myanmar Port Authority gone through several name changes is the improvement of river before adopting its current name in port facilities, such as terminals Responsible for administering nine 1989. for passengers and cargo and of Burma’s publicly-owned coastal warehouses, improvements to the ports, including Rangoon. It also It operates a fleet of 339 vessels, river, and also links to other forms must regularly dredge the Rangoon including passenger vessels, barges of transport such as road and rail. river, and is responsible for issuing and pusher tugs, while transporting Rivers, particularly the Ayeyarwady, permits. about 15 million passengers and 2 must have navigation depths million tonnes of cargo annually. improved and modern aids added. Myanma Shipyards Much of its fleet is in need of upgrading. Government Bodies, Policies, and Myanma Shipyards is a state- Development Partners owned enterprise. It has built a few This fleet operates in competition vessels for export, though most with private operators. Statistics Ministry of Transport and are used domestically. In January show IWT has about 10% of the total Communications 2015 the firm signed a joint venture number of licensed inland ships, and agreement with Dong A Shipbuilding has declined in standing since 2011. Formed in April 2016 by the new Industry Joint Stock Company, It also now largely concentrating on government, incorporating what was claiming $175.4 million will be freight, and carries few long-distance previously the Ministry of Transport, invested. Myanma Shipyards is to river passengers. Ministry of Railways, and the Ministry hold 51%, it was reported. It has of Communications and Information a dockyard in Kamayut township, Technology. Responsible for planning, Rangoon, to the northest of the main developing and regulating all aspects port area. IWT also has dockyards of the transport sector including air, for small vessels. road, rail and sea. Opportunities for British companies in Burma’s Infrastructure sector 43
Myanma Five Star Line KEY PROJECTS 2. Offshore supply base for oil The state flag carrier of Burma, and gas founded as a state-owned enterprise Expanded capacity for water- under the Ministry of Transport transport is urgently required. Burma has an extensive offshore gas in 1972, though has since been There are several plans in place and industry, though the lone domestic privatised. It owns a terminal in underway to improve ocean port facility is inadequate and often the Rangoon’s Thaketa township, and facilities, both in Rangoon and in offshore facilities are supplied from connects different parts of Burma other parts of the country. bases in other countries. as well Singapore, as well as owning several ferries. Thilawa SEZ is expanding, and deep In mid-2015, Myanma Oil and Gas sea projects in Dawei and Kyaukpyu Enterprise held consultations with 52 Directorate of Water Resources are planned. They are covered in the companies to discuss building a base and Improvement of River Systems Special Economic Zone section of in Burma. While it appears a project this report. is still planned, it is unclear when or Responsible for improving navigation where it will go ahead. channels in Burma’s rivers as well Other port projects are also at as stabilising inland river ports and various stages of planning and 3. Development of ocean ports preventing bank erosion. Operates development. under the Ministry of Transport and While there are plans for Dawei and Communications. 1. Kaladan Multi-Modal Transport Kyaukypu, and Rangoon is seeing Project significant improvements, progress World Bank / International Finance has been slower at Burma’s smaller Corporation In 2008, Burma and India signed ports. It remains unclear how they a Memorandum of Understanding will eventually be developed, though In April 2016 the International to develop the Kaladan Multimodal private companies have expressed Finance Corporation, an arm of the Transit Transport Project. It would interest in expanding some of the World Bank, announced a $40m create a new logistics transit way. ports, such as improving Pathein as load to Myanmar Industrial Port. The Beginning in Kolkutta, goods would an agricultural centre or Mawlamyine $40m in mezzanine financing was be shipped by sea to Sittwe port partly due to its connections with the the first phase of a planned $200m in Rakhine State, then either up Salween. Other options are specialist financing packing, which is also to the Kaladan River or by road to terminals, such as for petroleum- include $160m in long-term loans landlocked Northeast India. However, based products. provided by IFC and other foreign work on this project has been slow. lenders 44 Opportunities for British companies in Burma’s Infrastructure sector
Other deep sea ports have been 5. Dredging and improvements Inland waterways are also ripe for mooted including Kalagauk near of the Ayeyarwady and Chindwin expansion. Industry is currently Mawlamyine in Mon State, or rivers clustered mainly around Rangoon, Ngayoke Bay in Ayeyarwady Region. though successive governments However, they are still at the proposal Burma’s rivers may be generally slow would clearly like to see more stage. MoUs for both projects were moving, but navigation is presently business outside of the city. As signed in 2013, though both are at difficult. Rivers need to be dredged commerce expands, particularly the feasibility study stage. and deepened, and navigation aids along the Ayeyarwady river to places improved, which will be particularly such as Mandalay, the need for bulk 4. Development of inland ports helpful during the dry season. transport will also grow.
Improving inland river ports is OUTLOOK AND OPPORTUNITIES Some potential opportunities for feasible, and increasingly likely as Burma ports include: commerce improves. Many are Rangoon Port, including nearby simply now convenient stretches of Thilawa, has shouldered the vast • Terminal building, including river bank, but proper facilities would majority of Burma’s shipping burden. warehousing make river transit more attractive. It will continue to play an essential • Inland transport, improving For instance, a JICA plan from 2014 role in the years to come, though ship building and design proposed 2 x 90 m jetties with a capacity is quickly being squeezed, • Ships for tourism, search and quay depth of 2 m for Mandalay, the given constraints such as small areas rescue, supply, harbour tugs country’s second largest city. for containers and a location along • Port and stevedoring the Rangoon river. capacity Potential improvements are • Other transport extensive. There is a need to develop Development of ports outside of infrastructure links, such as Mandalay’s port facilities, as well Rangoon are a clear opportunity. roads and rail as introduce machine-based cargo Dawei and Kyaukpyu are slated • Improved navigation of handling and improve maintenance to receive large-scale SEZs with waterways, including offerings. The route between attached ports, but there are also nighttime transport Mandalay and Rangoon also requires a number of other current and • Human resources for ocean- improving the navigation channel potential oceans ports that have the going vessels before it can reach its full potential. potential to develop into regionally important trading centres. Opportunities for British companies in Burma’s Infrastructure sector 45 46 Opportunities for British companies in Burma’s Infrastructure sector
INDUSTRIAL
Introduction They also tend to be private-sector Thilawa, Kyaukpyu and Dawei driven, and at least five more are • A total of 20 industrial zones Burma has traditionally relied on planned. operating in the country, with five exports of natural resources, though more planned and numerous the pendulum is beginning to swing An alternative to the industrial others proposed to manufactured products. A rapidly zones are the three large Special growing, large, young population Economic Zones planned for the OVERVIEW provides an ample potential labour country. Thilawa SEZ is about 16 forcev for business to tap in to. kilometres from Rangoon and has Burma has recently stood out Moreover, strong connections with already opened, while two even more among regional countries for its more developed neighbours such ambitious projects are planned, economic reliance on export of as Thailand and Singapore through including Dawei SEZ in the southern natural resources, notably natural the ASEAN Economic Community Tanintharyi Region near Bangkok, gas, jade and timber. This may have helped to ease trade and and the Kyaukpyu SEZ in western be due partly to a large domestic sourcing linkages. Burma also enjoy Rakhine State. Locating business at resource endowment, but decision preferential trade terms with many these SEZs comes with significant leaders would clearly prefer a more of the world’s largest economies, incentives in the form of tax breaks diversified economy. including the European Union. and cut red tape. Development of industry was slowed The World Bank’s 2014 survey on These projects are already underway by the sanctions formerly imposed Burma’s business climate found or operating, but it is likely there will on Burma, but in the five years of that access to land is the second- be many more industrial projects as the country’s democratic transition, largest constraint reported by local Burma continues to grow. nearly all have been removed, setting companies. It is more likely to affect the stage for Burma industry to smaller firms, but has the potential FAST FACTS flourish once again. to disrupt growth. The country’s industrial and economic zones are an • Exports in 2014-15 were more than Burma is increasingly showing up effort to tackle this constraint. three times larger than a decade on the international scene, as world earlier, at $12.5 billion, while imports industry looks beyond China to set There are a range of choices for have also grown to $16.6 billion up export-oriented manufacturing locating businesses to best take • Manufactured goods are industries, while businesses area also advantage of the company’s increasingly large share of Burma’s keen on tapping the large domestic advantages. About 20 industrial export mix, with garments alone market of 54 million people. As shown zones dot the country, with many worth $1.02 billion in 2014-15, from in the chart below, manufacturing clustered around the commercial $379 million a decade earlier approvals skyrocketed as the capital of Rangoon, but others located • Three main Special Economic economy opened following the 2011 in places with specific opportunities. Zones in Burma, including at reforms. Opportunities for British companies in Burma’s Infrastructure sector 47
6.1 MANUFACTURING FDI APPROVALS Many industrial zones, such as Shwe Pyi Thar, Mingalardon Industrial Park Value of Approved Manufacturing FDI (US$m) and Hlaing Thar Yar, have received 2,000 significant investment, while others 1,500 are only getting started.
1,000
500 Existing industrial zones tend to be located near the major cities, 0 notably Rangoon and Mandalay but -500 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 also smaller regional cities like Pyay and Shwebo. Some of the proposed zones are further away from urban The country’s industrial zones are a among different zones. In many, land centres, but located on important diverse bunch. They allow businesses parcels have also been acquired , trade routes and near international to locate in specially-designed though various bodies are attempting crossings. sites with transportation and to put idle land to work. infrastructure links ready-made for There is also opportunity for foreign business, while easing the difficulties Environmental and social concerns companies to take part in setting of setting up shop. around industrial zones have arisen in up industrial zones. Japanese the past, though Burma is improving conglomerate Mitsui & Co partnered The first industrial zones started in these areas. Many of the industrial with a department of the Ministry in Burma in the 1990s, meaning zones around Rangoon are now of Construction when setting up the procedures and methods in many receiving dedicated worker housing, Mingalardon Industrial Park in 1998. are already established. Not all and a central committee under Vice Local companies have also played are created equal however, and President Henry Van Thio is looking crucial rules in setting up most of the important facilities such as transport in to land ownership issues. other industrial parks in the country. links, power and water supply vary 48 Opportunities for British companies in Burma’s Infrastructure sector
Source: Burma Industries Association website Opportunities for British companies in Burma’s Infrastructure sector 49
Special Economic Zones meanwhile take the concept of industrial zones Annex 1: Industrial Zones and Special Economic Zones even further. They became possible
Population with the passage of the 2014 Special Person Per Square Mile 0 2.5 25 130 520 Economic Zone Law, and can Existing Industrial Zones 0 1 10 50 200 provide an opportunity to promote Person Per Square Kilometer manufacturing capacity by lowering
Mandalay Region (3) Planned trade costs. - Mandalay Industrial Zones - Meiktila - Myingyan Locating on an SEZ comes with
Sagaing Region (3) numerous advantages under the - Monywa Nantoon - Shwebo (Shan State) 2014 Law. Commercial holidays - Kalay Yadanapone are granted for five or seven years, (Mandalay Region) Shan State (1) - Taung Gyi with 50% reductions continuing for another five years, and further Magway Region (2) Nay Pyi Taw - Yananchaung (Nay Pyi Taw Region) extensions are possible. - Pakokku Ponnakyun Bago Region (1) (Rhakhine State) - Pyay One Stop Service Centers are also
Phaan Ayeyawady Region (3) to be established at SEZ, with one (Kayin State) - Hinthada - Myaungmya Maywaddy already in place for Thilawa. These (Tanintharyi Region) - Pathein are aimed at reducing the number Yangon Region (4) of bureaucrats with whom investors - Eastern Township Phayar Thone Zu - Western Township (Mon State) must engage. The SEZs have also - Northern Township - Southern Township committed to specific turnaround times such as investment approvals Mon State (1) - Mawlamyaing and company incorporation, and have the ability to grant long-term land Taninthayi Region (1) - Myeik leases of 50 years plus a possible 25- Source: Chapter (3), year extension, as well as guarding Myanmar Investment Guide, Directorate of Investment and against expropriation. Kyaukpyu Thilawa Dawei Company Administration, Special Economic (Rahkine State) (Yangon State) (Tanintharyi State) Ministry of National Planing and Zones in Development Economic Development of Myanmar The SEZs were championed by the previous Union Solidarity and Development Party government. Source: UNESCAP, A policy framework for Burma’s SME, Officials from the new National No.142, February, 2014 League for Democracy government have been quoted in the local press 50 Opportunities for British companies in Burma’s Infrastructure sector
as particularly supporting Thilawa, The law requires the government Directorate of Investment and the most-developed, while wanting set up a central body. The central Company Administration to take a closer look at Dawei and body requires approval from the Kyaukpyu. government to establish an SEZ, The Directorate of Investment and and also must set up management Company Administration (DICA) Thilawa has been open since 2015, committees for SEZs. The handles registrations for local and has attracted a long list of management committees are to and foreign business under the investors already, including at least provide services including investment Companies Act, as well as serving 73 companies. Japanese companies permits, registering companies, tax as the secretary for the Myanmar are the largest source of investment collection and visa and work permits. Investment Commission. It was so far, perhaps no surprise given formed under the Ministry of National 49% of the SEZ is owned by The SEZs themselves are set up by Planning and Economic Development Japanese companies and the Japan private developers, with developers, in October 1993. International Cooperation Agency. whether local or foreign, selected through a tendering process. Burma Investment Commission The other two SEZs, Dawei and Kyaukpyu, are not as advanced, Ministry of Planning and Finance Responsible body for investment though they are likely to play an applications, it is made up primarily important role in future development. Formed in 2016 by merging the of serving and former government While Thilawa is geared toward light previous Ministry of National officials, plus one private sector manufacturing wanting to be located Planning and Economic Development, representative at present near Rangoon, Dawei and Kyaukpyu and the Ministry of Finance. It is led target different sets of industries. by U Kyaw Win. Special Economic Zone Department Government Bodies, Policies and Ministry of Industry Development Partners Located under the Directorate Formed in 2011 by merging together of Investment and Corporate Special Economic Zone Law the Ministry of Industry (1) and Administration, the Special Economic Ministry of Industry (2). It focuses Zone department forms the Central The Special Economic Zone law on industrial production, and owns a Work Group of Burma’s SEZs was enacted in 2014, with the number of its own facilities in goods implementing rules published a year such as vehicles, rubber, ceramics, KEY PROJECTS later in 2015. The law has paved the paper, pharmaceuticals, to name a way for Burma’s SEZs, establishing few. It is led by U Khin Maung Cho. Thilawa the administrative and supervisory oversight necessary for SEZs to The Thilawa project had been move forward. discussed for at least a decade before Opportunities for British companies in Burma’s Infrastructure sector 51
construction began in 2013. It is Thilawa management has focused customs duties and commercial tax currently Burma’s most successful on attracting foreign and local for imports of raw materials as well. Special Economic Zone, becoming investors. A number of well-known operational in September 2015. international companies such as Kyaukhyu It is located about 16 kilometres from Suzuki and Ball Corporation have Rangoon city and about 25km from set up on the zone, along with many Kyaukphyu is a large SEZ planned for the airport. A significant advantage distribution and labour-intensive Rakhine State. A long-running tender derives from its proximity to Burma’s industries. was decided in December 2015 when commercial capital and most the Burmese parliament gave the go- populous city, as a ready market, One strength of Thilawa is the ahead to the first phase of Kyaukpyu transport node and labour force is range of infrastructure available SEZ, awarded to a consortium of nearby. for investors. Electricity, telecoms largely Chinese companies including and water are easily connected, CITIC group. Thilawa has drawn about $760m while waste management services in investment since the spring of is available. The number of local The zone has been estimated at over 2014, equal to about 30% of what businesses on the SEZ also make $10bn in its entirety. It is located manufacturers invested in Burma logistics easier. Moreover, the near the existing oil and gas pipelines during the 2014-15 period, according management committee has that have been completed in the past to press reports. established a One Stop Service few years. The gas pipeline connects Center, the idea being to cut with Shwe Gas, one of Burma’s four The project is a Burma-Japan government red-tape. It also pledges offshore sites, while the oil pipeline is joint venture. Burma owns 51%, specific turnaround times for some intended for tankers to offload crude of which 41% is owned by Burma requests. from the Middle East and Africa to be Thilawa SEZ Holdings, a public pumped to western China, removing company that is traded on the A number of incentives are the necessity to travel by tanker Rangoon Stock Exchange but has also available. Investors receive south around Singapore and the significant investments from some corporate tax exemptions for the Straits of Malacca. large local companies. Japan owns first seven or five years, following 49%, including 10% by JICA and which they get another five years Much of the Kyaukphyu project is 39% by a consortium including at 50%, with one more extension expected to be driven by China. Sumitomo, Marubeni and Mitsubishi possible, under the 2014 Burma Officials from the Kyaukphyu Corporations. Special Economic Zone law. bid evaluation committee have said in the local press that they The site is adjacent to the Myanmar Locating at Thilawa also means an expect Burma will invite the Asian International Terminals Thilawa exemption from customs duties and Infrastructure Investment Bank to (MITT) port, a multi-purpose other taxes for import of capital build 800km of roads connecting the container port on the Rangoon River. goods. Exports are also exempt from SEZ with the Chinese border. 52 Opportunities for British companies in Burma’s Infrastructure sector
It is eventually to sit on 4,289 acres plants, a two-lane road to Thailand, track to grow into significant centres some 12km south of Kyaukphyu town an LNG terminal, an initial township, a of commerce in Southeast Asia. itself. The project is to eventually telecom land and a smaller industrial The benefits of Thilawa are already include a deep water port, residential estate. Work on much of this is being felt as over 70 companies have housing and an industrial zone once already ongoing, or in the case of received permission to set up, while it is built. the small port and some of the other plans for the other two zones are well infrastructure, now complete. underway. It offers significant opportunity in chemical and gas production, export Eventually, backers hope it will be one The country’s smaller regional oriented industries and local logistics, of the world’s major SEZs. Initially industrial zones are also popular among other areas. it will focus on labour-intensive locations for locating business. industries such as garments and While a handful located in Rangoon’s Dawei food processing, its long-term plan periphery are the most popular at includes more higher-value industries present, increasingly businesses Dawei is another large SEZ project such as automotive, steel, electronics, are looking at other areas for the that could have a potentially agricultural processing and other opportunities they provide. transformative impact. Its potential industrial production. has long been eyed, partly due to its Burma’s industrial potential is set proximity to Bangkok. A deep sea The full site is a large 48,432 acres, to grow along with its industrial port and road and rail connections located about 30km north of Dawei potential. Key future opportunities on through the Bangkok could remove town in Tanintharyi Region. Japan has Burma’s industrial zones and SEZs the need for Thai products to ship signalled its intention to participate, include: around Singapore to reach the Indian signing on in December 2015. Ocean. • Location for industry, particularly Outlook and opportunities labour-intensive, as well as In August 2015, the Burma distribution, logistics, service and government’s Dawei Special Burma is fast becoming the next hub transport companies Economic Zone Management for export-oriented manufacturing • Construction and maintenance Committee, and a consortium of industries, while its sizeable and on the zones, including transport, companies including Italian-Thai growing domestic market is drawing energy and water infrastructure Development Public Company, increased interest. The flood of • Design, engineering, architecture Rojana Industrial Park and LNG Plus interest has strained existing capacity, solutions International signed a concession and government and private-sector • Human resources agreement regarding the initial phase. actors are keen to expand offerings.
The initial phase is to include the The three Special Economic Zones of development of a small port, power Thilawa, Kyaukpyu and Dawei are on Opportunities for British companies in Burma’s Infrastructure sector 53
FULL PAGE IMAGE 54 Opportunities for British companies in Burma’s Infrastructure sector
ENERGY
Introduction Changes have also arrived on the Government Agencies, Policies policy front. The government’s and Development Partners Burma is starting from a low base for approach to energy development electricity generation, but it has set has shifted recently, along with The Ministry of Electricity and ambitious targets. It has announced its approach to the sector’s Energy plans to move from roughly 35% administration. electrification at present, to 100% The Ministry of Electricity and in 2030 – less than 15 years away. The new fifteen years will Energy is the lead ministry in The challenge is compounded by undoubtedly be exciting for energy Burma for power and energy. It the rapid growth expected for and electricity, which has the was only recently formed following consumption on a per capita basis, potential to completely change how the April change in government, which means generation capacity people live. The days of generating and is a merger of the former must grow that much more quickly. electricity off biomass such as Ministry of Energy and the Ministry timber or diesel generators are of Electric Power. The Ministry Fortunately, Burma is rich in the nearly over, and a new experience of Electric Power itself was two necessary resources. It has identified will soon begin. separate ministries before a 2012 extensive hydropower potential, rationalisation of government and has had growing success Fast Fact ministries. with its offshore natural gas sites. Burma has three major rivers, the • About 3.7 million households, Ayeyarwady, Chindwin and Thanlwin, or 34% of the country’s total, along with dozens of medium-sized have grid connections rivers suitable for hydropower. • Current installed electricity In all, some estimates say total capacity is 5,235MW, though hydropower capacity potential is to achieve 100% electrification by over 100,000MW. 2030 Burma will need 23,594MW • Some 189,000 households per Proven reserves of natural gas now year are currently being total 11.8 trillion cubic feet, with connected to the grid, but the rate significant potential for further will need to double to 440,000 discovery. Gas exports, to Thailand per year to meet the 2030 goal and China, have been the country’s • Burma has four offshore gas fields most significant export in recent in production – Yadanar, Yetagun, years. Shwe Gas and Zawtika – which produce about 1.8mmcfd of gas along with 5,500 bopd Opportunities for British companies in Burma’s Infrastructure sector 55
7.6 LAYOUT OF ENERGY MINISTERIES Coal production may be the purview of the ministry’s companies, though
Ministry of in practice tends to happen under Electricity licence by private companies. and Energy
Ministry of Education
Energy Electricity While having some input into renewables, it also has a hand in civilian nuclear energy. Burma has Myanma Myanma Myanma Dept of Dept of Electricity Petroleum Oil and Gas Petrochemical Electric Electric Supply no nuclear energy at present, and is Products Enterprise Enterprice Power Power Dept of Enterprice Enterprise (drilling, (refineries, Planning Transmission Hydropower (distribution years from adding any, though has production, LPG) and System outside of formed working groups and signed CNG) Control Yangon, Mandalay initial agreements with countries such as Russia on nuclear power. Electric Yangon Mandalay Power Electricity Electricity Generation Supply Supply Ministry of Agriculture, Livestock Enterprise Corporation Corporation and Irrigation
Responsible for biofuels and small- The Ministry of Electricity and Energy • Myanma Oil and Gas Enterprise scale hydro used for irrigation is specifically responsible for oil and (MOGE), which oversees gas production, as well as electricity. production and transportation of Asian Development Bank oil and natural gas Under the energy side of the Ministry The first loan the ADB gave after of Electricity and Energy, there are Ministry of Mineral Resource and re-engaging in Burma was in 2013 for three important state-owned entities: Environmental Conservation electricity, totalling some $60m to help connect 480,000 people in four • Myanma Petrochemical Enterprise Another ministry formed in 2016 regions. The ADB has also conducted (MPE), which operates refineries, from two predecessors, specifically study into the power sector five fertilizer plans, three liquefied the Ministry of Mines and the Ministry petroleum gas plants and a of Environmental Conservation and methanol plant Forestry. It is currently responsible • Myanma Petroleum Products for coal production as well as having Enterprise (MPPE), which is input into renewable rules, including responsible for the marketing hydropower, solar, wind, biomass and and distribution of petroleum biofuels. products 56 Opportunities for British companies in Burma’s Infrastructure sector
CURRENT TRENDS IN OIL AND GAS as Myanma Oil and Gas Enterprise (MOGE). It had the exclusive rights to The most recent bidding round was Upstream explore, develop and produce until launched in 2013, with 20 blocks 1989, when other related agencies awarded to some of the biggest Burma has a long history in upstream were established and foreign bids for names in energy, including Statoil, production. The British envoys sent offshore rights began. A number of Chevron, Total, Royal Dutch Shell in the 19th century from India to treat well-known foreign companies have and ConocoPhillips in 2014. Further with the last Burma kings in Mandalay entered, including Total, Petronas, bidding rounds are to be launched, were required to traverse the PTTEP and CNOOC. and were previously slated to take Ayeyarwady river, bringing them past place in 2016. the oil production centre at what is Burma’s 2011 opening ushered in now Yenangyaung in Magwe Region. another wave of foreign investment Oil and gas is also by far the largest into the energy sector. Gas is now source of approved foreign investment Though Burma may first have made Burma’s largest source of export in Burma. As of June 2016, 40% of its name in energy production earnings, with four major offshore total approved investment since 1988, with crude oil, it is now natural gas sites, including Yadana, Yetagun, worth a total of $21.5bn, have been in that predominates. Reserves are Shwe and Zawtika. oil and gas. Next is power at 26% or estimated at 11.8 trillion cubic feet, $13.7bn, followed by manufacturing at with more potentially waiting to be • Yadana is Burma’s largest offshore $5.3bn or 10%. discovered. This is enough to put area and is operated by Total. It Burma in 34th position globally, began production in 1998 Offshore success has spawned though is a much more important • Yetagun is operated by Petronas interest in servicing these industries. player regionally, with production and came online in 2000. Yetagun, An improved offshore supply base that World Energy Council puts at Yadana and Zawtika are all in the has been discussed to bring more 10.2 million tonnes of oil equivalent Moattma offshore area south of of the services to Burma, while local per year. Burma’s official data shows Rangoon and Ayeyarwady Region people are increasingly taking part in 12.64 million tonnes of gas exports • Shwe Gas is operated by Daewoo offshore work. worth $5.18bn in 2014-15. and began operations in 2013. It is in the Rakhine offshore area Reflecting declining domestic output, further west from the other three however, Burma is a net importer of oil. • Zawtika is Burma’s newest offshore area and is operated Oil and gas has had a tumultuous by PTTEP history over the past fifty years. The industry was nationalized in the In total there are 51 offshore blocks wake of the 1962 coup, with the state and 53 onshore blocks. Of the latter, energy company undergoing several 28 have been awarded. name changes before emerging Opportunities for British companies in Burma’s Infrastructure sector 57
Downstream
The last two decades have seen major growth in Burma’s downstream industry, though there is still much to do. Thailand is still the main destination for Burma’s natural gas production, with Yadana, Yetagun and Zawtika all oriented east. Production from Shwe Gas, meanwhile, is largely shipped north to China.
The export orientation for Burmese natural gas is beginning to change, however. In June 2010, MOGE completed a new pipeline from the Yadana field to Rangoon, aiming to help ease power shortages to meet government pledges to supply a significant quantity of gas to Burma power plants.
Burma has three refineries at present, all of which require upgrade. The Ministry of Energy announced it would hold a new tender for refurbishing and upgrading the No 1 Refinery at Thanlyin near Rangoon, in September last year. Progress on other refineries has also been mixed.
58 Opportunities for British companies in Burma’s Infrastructure sector
A number of large-scale refineries MPPE has also discussed re-entered Burma currently has 5,239MW have been proposed as well. A the petrol station market with a joint capacity, though by 2030 it will Chinese-led consortium won venture partner. It largely left the need 23,594MW to meet its goal permission for a $2.6bn refinery market in 2010 when 261 of its 273 of 100% electrification. This will project in Dawei in southern China stations were privatised. Shortly require not only a significant in April 2016. Burma also has five later, in 2012, the price of fuel was increase in generation, but also vast fertiliser factories. liberalised. However, MPPE has said improvements to transmission and it would seek a foreign JV partner to distribution. Currently, about 189,000 Progress is also being made in other re-enter the distribution market. households are added to the grid a downstream projects, though the year, but over the next fifteen years specific speed varies significant. Current Trends in The Power more than twice that many will need Sector to be added to meet the goal. The government has also previously supported extensive use of Burma has abundant energy Demand is growing rapidly. World compressed natural gas, which is still resources, though the challenge is Bank statistics show per capita a common sight, with many Rangoon how the potential can be developed consumption is now four times what taxis having a cylinder of the fuel in and then connected to peoples’ it was in 1991. their trunk. Until 2011 an estimated homes. 50 CNG stations were built, with thousands of taxis and buses 7.1 ELECTRICITY CONSUMPTION converted to the fuel. The future of Per Capita Electricity Consumption (KWh) the scheme appears to be in doubt, 180 however. 160 140 More successful is Puma Energy, 120 100 a Singapore-based company which won the rights to form a 80 60 joint venture with MPPE in 2015 to 40 distribute jet fuel. The company, 20 National Energy Puma Aviation 0
Services is 51% MPPE and 49%
2011
1991
2013
2012
1992
1993
1997
1995
1994
1996
2010
2001
1999
1998
2007
2002
2003
2005
2009
2006
2004 2008 Puma. It started with Yangon 2000 International Airport and is slated Power customers are also changing. 60% of the total, by 2030 it is likely to expand to other airports in the While currently residential to be closer to 40% as industrial country. 100 consumption dominates at over power demand surges. 80
60
40
20
0 2012 (consumption) 2030 (projection)
Residential Industrial Transport Comercial Agriculture Other
Electricity Consumption by Location (GWh) 6,000 5,000
4,000 3,000 2,000 1,000 0
Mon Bago Kayin Chin Yangon MagweSagaing Shan S Bago WShan N Shan E Rakhine Mandalay Nay Pyi Taw Ayeyarwady Tanintharyi
Energy Capacity by Source 16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Thermal Diesel Hydro Gas Total Opportunities for British companies in Burma’s Infrastructure sector 59
Per Capita Electricity Consumption (KWh) 180 160
140
120 100
80 60 40 20
0
2011
1991
2013
2012
1992
1993
1997
1995
1994
1996
2010
2001
1999
1998
2007
2002
2003
2005
2009
2006
2004
2008 2000 Per Capita Electricity Consumption (KWh) 180 160 100 140 80 120 100 60
80 40
60 20 40 0 20 2012 (consumption) 2030 (projection)
0 Residential Industrial Transport Comercial Agriculture Other
2011
1991
2013
2012
1992
1993
1997
1995
1994
1996
2010
2001 1999
7.2 ELECTRICITY DEMAND1998 MIX
2007 2002
2003 7.4 ENERGY BY LOCATION
2005
2009
2006
2004
2008 2000
Electricity Consumption by Location (GWh) 100 6,000 80 5,000 4,000 60 3,000 40 2,000 20 1,000 0 0 2012 (consumption) 2030 (projection) Mon Bago Kayin Chin Yangon MagweSagaing Shan S Bago WShan N Shan E Rakhine Residential Industrial Transport Comercial Agriculture Other Mandalay Nay Pyi Taw Ayeyarwady Tanintharyi
Source: http://www.adb.org/sites/default/files/publication/175801/ewp-460.pdf
Electricity Consumption by Location (GWh) 6,000 Power shortages were the third- the latest publicly available figures. The mix ofEnergy energy Capacity byis Source also changing. 5,000 16,000 most cited constraint to doing At the other end is Kayin State, Hydro has recently been the 4,000 14,000 3,000business in the World Bank’s 2014 where the electrification rate is as dominant form of energy, though 12,000 2,000survey. It is a particular problem low as 6%. On an absolute basis, gas is growing quickly. The future 10,000 1,000for larger companies, though every Chin State uses the least amount of role of coal is also a matter of debate 8,000 0business faces power outages, electricity, at about 5 GWh, or 0.1% at present, while renewables such as
Mon 6,000 particularly during theBago hot, dry Kayinof Rangoon’s usage,Chin according to wind, biomass and solar have lots of Yangon MagweSagaing Shan S Bago WShan N Shan E Rakhine Mandalay 4,000 summerNay Pyi Tawmonths.Ayeyarwady To deal with the ADBTanintharyi statistics. potential in Burma.
problem, many companies have 2,000
backup diesel generation, though 0 this is less than an ideal situation. 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Thermal Diesel Hydro Gas Total Present generation mix:
There are also significant localEnergy Capacity by Source 16,000differences on electrification from a Number of Plants (MW) Total (MW) 14,000consumer standpoint. Roughly 50% Hydro 26 3219 12,000of Burma’s power consumption takes
10,000place in Rangoon Region. This is also Gas + Steam 27 1829 where electrification rates are the 8,000 Coal 1 120 highest, nearing 80% according to 6,000
4,000
2,000
0 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Thermal Diesel Hydro Gas Total Per Capita Electricity Consumption (KWh) 180 160
140
120 100
80 60 40 20
0
2011
1991
2013
2012
1992
1993
1997
1995
1994
1996
2010
2001
1999
1998
2007
2002
2003
2005
2009
2006
2004
2008 2000
60 Opportunities for British companies in Burma’s Infrastructure sector 100
80
60
40
20
0 2012 (consumption) 2030 (projection)
Residential Industrial Transport Comercial Agriculture Other
Electricity Consumption by Location (GWh) 6,000 5,000
4,000 3,000 2,000 1,000 0
Mon Bago Kayin Chin Yangon MagweSagaing Shan S Bago WShan N Shan E Rakhine Mandalay Nay Pyi Taw Ayeyarwady Tanintharyi
7.4 ENERGY MIX the work being done is upgrading existing plants and adding new Energy Capacity by Source 16,000 ones, the government has also
14,000 added extensive fast-track power
12,000 from companies such as Aggreko, VPower and APR Energy. Gas is also 10,000 envisioned to play a key role in future 8,000 base load demand, particularly as 6,000 hydro can be a challenge during the 4,000 dry season.
2,000
0 Hydro 1995-96 2000-01 2005-06 2010-11 2011-12 2012-13 2013-14 2014-15 Thermal Diesel Hydro Gas Total The potential is enormous Biomass planners see an extensive role for for Burma’s hydropower. The the fuel, though others point to Ayeyarwady, Chindwin and While hydro is the main source of environmental and social concerns Thanlwin rivers present significant on-grid electricity, most people in and oppose the fuel. Burma opportunities. The government Burma still receive their electricity currently has one coal-fired plant previously identified over 200 the traditional way, through biomass. at Tigyit in Shan State, producing locations suitable for hydropower, An estimated two-thirds of energy in 120MW. Whether further coal with a combined potential capacity the country comes from fuels such capacity will be added remains to be of 40,000MW. Further possible sites as wood, agricultural and animal seen, though a number of MoUs and could be added to bring the total past waste, and charcoal, though wood MoAs have been signed to generate 100,000MW. predominates. using the fuel. Wood may shrink as a fuel source in The country’s first hydro plant was the future. There are other potential Gas Baluchaung 2, which was commission sources for biomass, such as risk in 1960 with a capacity of 84MW. husks and animal waste, which are Gas formerly made up nearly 50% produced every year and simply are of the generation mix two decades Solar discarded. This provides a potential ago. With the growth of hydropower, area of opportunity for the country. gas has played a smaller role, Several MoUs have been signed for though recently the government solar power in Burma. The extensive Coal has again pushed natural gas as a dry zone in the centre of the country fuel, particularly as the two more is ideal, and it is likely projects will The role of coal is currently recent offshore gas areas came move forward in the future. hotly debated in Burma. Some online in since 2013. While much of Opportunities for British companies in Burma’s Infrastructure sector 61
Wind The goalposts are also moving. Some slated at 300MW for the Rangoon estimates say demand will have Region. As of writing this report a Wind energy is in a similar place increased by a factor of five by 2030, winner had not been announced. to solar. Much of the country, largely as industry picks up and particularly the coastal areas in the residential and other consumers can Solar power in central Burma west, have high potential. However, a afford to use more power. lack of data currently limits potential, A number of MoUs have been signed along with other logistical challenges. Current transmission and distribution for large-scale solar projects in meets high loses, though they are Burma, largely located in central Transmission and Distribution declining. Burma’s dry zone. While none have yet come to fruition, Ministry of Generating the necessary power is Further reductions in losses are an Electricity and Energy officials were hard enough, but it is also needs to obvious area of improvement to quoted as saying in July 2016 that an be connected to those who need meet demand, as authorities must 800-MW project was carrying out a it. Burma currently has around 2.3 currently rely on load shedding on feasibility study in the area, one of million residential connections, or occasion. Relic voltages need to be the larger potentially on the cards. about 30% of the population. The phased out and new lines extended. present rate of adding 189,000 Another step that has been Myitsone Dam connections a year is not enough discussed is raising tariffs to meet to meet the government’s target of the cost of production. Currently The Myitsone hydropower dam is a 100% electrification by 2030. electricity starts at 35 kyats for KWh large-scale project at the confluence for general use and 75 kyats per of the Ayeyarwady river in Kachin While there is scope for off-grid KWh otherwise, while generation State. The project, which is majority- solutions, in practical terms, must of costs at gas plants are above 130 owned by China Power Investment the new capacity will be grid based, kyats per KWh. Corporation, along with minority and the rate of new connections stakes owned by the Ministry of must be raised to about 450,000 per Key Projects Electricity and Energy and local year to meet target. conglomerate Asia World, was frozen 300MW fast-track power project following popular opposition early in Adding to the grid will be easiest 2011. It remains to be seen whether in urban areas such as Rangoon Burma has worked to meet an the $8bn project will be allowed to and Mandalay, as well as areas immediate power shortage by go forward. with ample power supply. Other launching several fast-track power corners of the country will be much generation projects. In July 2016, more difficult to reach, requiring a the government announced its most concerted effort. recent tender for a fast-track project, 62 Opportunities for British companies in Burma’s Infrastructure sector
Outlook and Opportunities Transmission and distribution improvements and expansions are Burma has seen significant interest also necessary, which are prime in both energy and electricity. On the projects for international concession energy front, the last two bidding lenders to participate in. rounds for oil and gas blocks have been well-attended by major oil Some specific opportunities for UK companies. Further rounds are companies include: likely in the future, while exploration activities at the latest blocks are now • Technical expertise for capacity well underway. and planning improvements, for both government and The downstream market is also non-government projects growing and changing. Opportunities • Specialist oil and gas services continue to arise, whether to partner for onshore and offshore blocks with government entities or to set • Construction of transmission out independently. and distribution networks • Building, maintaining and On electricity, the goal of 100% supplying power plants electrification is clear. However, • Renewable energy reaching it by 2030 is not set to • Improving refinery capacity and be simple. A range of hydro, gas various downstream industries, and coal projects have progressed, such as fertilizer and in the future while renewables also have strong petrochemicals potential in Burma. New projects • Micro and community-based work emerge constantly. In July 2016, with off-grid solutions in Burma’s a new tender for a 300MW smaller communities power project near Rangoon was announced, for instance. Opportunities for British companies in Burma’s Infrastructure sector 63
Useful websites and further reading
To explore potential trade and investment opportunities in Burma please contact DIT Burma in Rangoon: [email protected]
Doing Business in Burma: Burma trade and export guide www.gov.uk/government/publications/exporting-to-burma/exporting-to-burma
Asian Development Bank: Myanmar Transport Sector Policy Note www.adb.org/publications/myanmar-transport-sector-policy-note-summary-decision-makers
British Chamber of Commerce Myanmar www.britishchambermyanmar.com
Frontier Myanmar www.frontiermyanmar.com/
The Oxford Business Group: The Report: Myanmar 2016 www.oxfordbusinessgroup.com/myanmar-2016
The Myanmar Centre for Responsible Business www.myanmar-responsiblebusiness.org/
The Union of Myanmar Federation of Chambers of Commerce and Industry www.umfcci.com.mm/ gov.uk/dit
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Published September 2016 by the Department for International Trade” URN : DIT/1X/XXXX