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.