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Myanmar: the Key Link Between South Asia and Southeast Asia A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Florento, Hector; Corpuz, Maria Isabela Working Paper Myanmar: The key link between South Asia and Southeast Asia ADBI Working Paper, No. 506 Provided in Cooperation with: Asian Development Bank Institute (ADBI), Tokyo Suggested Citation: Florento, Hector; Corpuz, Maria Isabela (2014) : Myanmar: The key link between South Asia and Southeast Asia, ADBI Working Paper, No. 506, Asian Development Bank Institute (ADBI), Tokyo This Version is available at: http://hdl.handle.net/10419/115323 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu ADBI Working Paper Series Myanmar: The Key Link between South Asia and Southeast Asia Hector Florento and Maria Isabela Corpuz No. 506 December 2014 Asian Development Bank Institute Hector Florento and Maria Isabela Corpuz are consultants at the Office of Regional Economic Integration, Asian Development Bank. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms. Working papers are subject to formal revision and correction before they are finalized and considered published. In this paper, “$” refers to US dollars. The Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI’s working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. Suggested citation: Florento, H., and M. I. Corpuz. 2014. Myanmar: The Key Link between South Asia and Southeast Asia. ADBI Working Paper 506. Tokyo: Asian Development Bank Institute. Available: http://www.adbi.org/working- paper/2014/12/12/6517.myanmar.key.link.south.southeast.asia/ Please contact the authors for information about this paper. Hector Florento: [email protected] Maria Isabela Corpuz: [email protected] Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan Tel: +81-3-3593-5500 Fax: +81-3-3593-5571 URL: www.adbi.org E-mail: [email protected] © 2014 Asian Development Bank Institute ADBI Working Paper 506 Florento and Corpuz Abstract This paper examines the road and railway links in Myanmar connecting northeast India on the one side with the rest of Southeast Asia on the other. It also discusses the importance of new deep-sea ports in creating alternative shipping routes, essential for Myanmar’s international links. It also reviews the country’s external trade patterns, and analyzes issues related to trade facilitation, exchange rate policy, financial sector reform, and private sector development. The extent to which these gaps can be addressed will depend on the costs and benefits. South Asia–Southeast Asia connectivity can only be accomplished if Myanmar improves the hard and soft infrastructure aspects of connectivity. JEL Classification: F15, H5, L9 This paper was prepared by ADBI based on a comprehensive draft study of TA 7557 prepared by Hector Florento and Maria Isabela Corpuz under the guidance of Myo Thant. It is part of the ADB–ADBI flagship project on “Connecting South Asia and Southeast Asia.” ADBI Working Paper 506 Florento and Corpuz Contents 1. Introduction ................................................................................................................ 3 2. Myanmar’s Trade with Its Neighbors in South and Southeast Asia ............................ 3 2.1 Myanmar–India Bilateral Trade ...................................................................... 6 2.2 Myanmar–Thailand Bilateral Trade ................................................................ 8 3. Myanmar as a Transportation Hub in Asia ................................................................. 9 3.1 Road Networks ............................................................................................ 10 3.2 Railway Networks ........................................................................................ 14 3.3 Ports ............................................................................................................ 15 3.4 Inland Waterway Transport Routes .............................................................. 17 4. Costs and Benefits of Regional Integration for Myanmar ......................................... 18 4.1 Trade Liberalization ..................................................................................... 18 4.2 Trade Facilitation and Trade Infrastructure................................................... 18 4.3 Exchange Rate Policy and Financial Sector Reform .................................... 19 4.4 Private Sector .............................................................................................. 20 4.5 Distributional Impact .................................................................................... 20 4.6 Regional Public Goods ................................................................................ 20 4.7 Domestic Transport Integration .................................................................... 20 5. Costs and Benefits in Cross-border Infrastructure Projects ...................................... 21 6. Private Sector Investment in Myanmar’s Infrastructure ............................................ 24 7. Conclusions ............................................................................................................. 26 References ......................................................................................................................... 28 ADBI Working Paper 506 Florento and Corpuz 1. INTRODUCTION Effective physical connectivity between South Asia and Southeast Asia requires a regional perspective in developing transport infrastructure projects. The diverse geography and range of transport modes underscore the need for multimodal planning in implementing roads, railways, seaports, inland waterways, and airports that satisfy the needs of users and transport service providers. An approach to strengthening physical connectivity must address missing links and bottlenecks. These physical barriers are located mainly in Myanmar, the only land bridge between these regions. However, connectivity between Myanmar and northeast India is weak as most of the borders are mountainous. Major pan-Asian infrastructure programs, particularly those of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the Association of Southeast Asian Nations (ASEAN), and the Greater Mekong Subregion (GMS) have assessed the barriers with a view to promoting economic integration by improving the competitiveness of production networks and trade flows, narrowing development gaps, and supporting sustainable and more inclusive economic development across Asia. This study examines road and railway links in Myanmar connecting northeast India on the one side with the rest of Southeast Asia on the other. It also discusses the importance of new deep-sea ports to create alternative shipping routes essential to Myanmar’s international links. The extent to which these gaps can be addressed will depend on the costs and benefits to Myanmar. South Asia–Southeast Asia connectivity can only be accomplished if Myanmar improves the hard and soft infrastructure aspects of connectivity. 2. MYANMAR’S TRADE WITH ITS NEIGHBORS IN SOUTH AND SOUTHEAST ASIA Myanmar is strategically located and rich in natural resources, including arable land, forests, minerals, natural gas, and freshwater and marine resources. The country is the largest in mainland Southeast Asia with a total land area of 676,577 square kilometers. Its total population is estimated at 60.6 million, with more than 70% living in rural areas. Growing internal demand for manufactured consumer goods in Asia has created new opportunities for Myanmar. Although Myanmar was one of Asia’s leading economies in the 1960s, since the late 1980s, growth has been inhibited by low investment, limited integration with global markets, dominance of state-owned
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