STUDY ON ECONOMIC PARTNERSHIP PROJECTS IN DEVELOPING COUNTRIES IN FY2012

STUDY ON THE AYEYARWADY RIVER CROSSING PROJECT IN , THE REPUBLIC OF THE UNION OF

FINAL REPORT

【SUMMARY】

February 2013

Prepared for: The Ministry of Economy, Trade and Industry Ernst & Young SinNihon LLC Japan External Trade Organization (JETRO)

Prepared by: JFE Engineering Corporation JFE Steel Corporation Oriental Consultants Co., Ltd. CHODAI Co., Ltd. Infrastructure Development Institute -Japan (1) Justification, Objectives and Necessity of the Project

The Myanmar Ministry of Construction (MOC) is currently implementing its third five-year plan for road maintenance, which was initiated in 2011. It includes plans to construct a new bridge over the Ayeyarwady River at the city of Hinthada in Ayeyarwady District, and preparations are moving forward on this initiative as it has been deemed a top-priority project.

The Ayeyarwady River runs north-south, dividing the territory of Myanmar into an eastern and western portion. In an effort to eliminate the resulting regional split and create crossings for rail and road traffic, the Myanmar government has completed 12 bridges across the Ayeyarwady since 1934, and is in the process of constructing two more. Still, there are no bridges between the Nawadee Bridge (located in the town of in the ) in the north to the Bridge, located 200 km downstream to the south—creating a missing link in the Myanmar rail and road network linking the left and right banks of the river. Located on the right bank of the Ayeyarwady River is the city of Hinthada, part of the in , while the town of , part of the Thrrawaddy District in the Bago Division, is on the left bank. A ferryboat service has linked these two cities since Burma Railways, the predecessor to Myanmar Railways, set it up in 1903. Through the early 1980s, the service was the main transport line used to ship rice and other agricultural products to . Later, the ferryboat operation was forced to shut down due to competitive pressures from private businesses. A boat still runs between Hinthada and Letpadan, and though it is mainly used by passengers, it does ferry more than 2,000 people on a round trip between the banks each day—indicating the importance of the route. The reason why there has been no bridge constructed here despite the long history of the ferryboat’s operation is that Hinthada is located in a downstream area where the river is wide at about 4 km, and also the depth of water is so deep, making the project a difficult one for Myanmar to tackle alone with its limited funds and technology.

The ongoing democratization of Myanmar makes the country eligible to receive ODA loans once again. Myanmar now aims to complete the Hinthada Bridge through an ODA-funded project by Japan which takes advantage of its technical superiority in bridge engineering—one that the Myanmar government took advantage of with the form of JICA’s Bridge Engineering Training Center Project and other initiatives. In light of the current situation, Japan’s Ministry of Economy, Trade, and Industry has decided to conduct a study on the construction of the Hinthada Bridge, “Ayeyarwady River Crossing Rail and Road project” as part of the Study on Economic Partnership Projects in Developing Countries in FY2012 in July 2012 in Myanmar..

(2) Basic Principle to Formulate the Project

The details of the project were determined in line with the following policies, which are themselves based on standards issued by the Myanmar Government (for railways, the required number of tracks, track width, and horizontal alignment for roads, the required number of lanes, road width and configuration, horizontal alignment, and links to other roads). English version standards were used when available; in other cases proposals by the Study Team have been prepared based on similar bridge projects that had already been completed in Myanmar. The proposal has been confirmed in line with the intentions of the implementing agencies: Public Works (PW), an organization within Myanmar’s Ministry of Construction (MOC), and Myanmar Railways (MR).

1) Required number of tracks To be determined based on the number of tracks used in relevant lines (–Hinthada– and Yangon–Letpadan–) as well as estimated future traffic demand of the bridge.

2) Required road width Road width is to be determined according to standards set by the Myanmar government. As with the required number of tracks for railway, consistency with roads to be connected must be assured.

3) Bridge positioning Since regional map information from the site is scarce, satellite imagery were purchased in order to study river position, river width, relative locations with densely populated urban areas, and other positioning-related information. The location of the bridge was also determined based on water depth measurements, geological survey data, and other information. A comparative analysis was then conducted based on the following evaluation items before settling on a final position. a) Geometric alignment b) River width c) Water depth d) Control points to be avoided (structures, temples, etc.) e) Impact on urban areas

4) Bridge span (length) a) Navigational safety (boats) b) River width c) Type of bridge d) Recorded changes to the river channel due to scouring and sedimentation

5) Type of bridge The following evaluation items were considered and a comparative analysis was done in order to select a bridge type. a) Applicable span (length) b) Construction costs c) Erection methods d) Management and maintenance e) Connections to adjacent railways and roads f) Project implementation capacity of implementing body

6) Connections to adjacent rail links and roads were determined based on the following considerations. a) Maintenance status of adjacent railways and roads (including future plans) b) Results of future traffic demand estimates c) Cost of linkages

(3) Outline of the Project

1) Bridge positioning and route Potential bridge construction sites were considered to be 20 km length along the river in terms of convenience of the people who uses the bridge. The sites were mostly ferryboat pickup/drop-off points along the right bank, and included the downtown area of Hinthada City and Hinthada rail station. Along the river, two potential sites toward upstream side and three potential sites toward downstream side from Hinthada Station were selected by the Public Work (hereinafter referred to PW) as potential bridge construction sites. PW has conducted preliminary cross-sectional river surveys at all five potential locations, measuring river width and conducting ultrasonic bathymetric surveys. Although the river narrows at site 4, it was deemed too close to Hinthada’s urban center and would have required too many relocations to be considered viable. There is a break in the Hinthada-side embankment at site 5, and the area is prone to flooding—eliminating it from the running as well. Sites 1, 2, and 3 were recognized as having the greatest advantages in terms of bridge construction as they are all located in with an appropriate distance from the city center and also are located at a narrower portion of the river.

A more detailed comparative study was done for these three sites, after which site 2 was judged to be the best in terms of water depth (the river is shallowest here) and because it crosses the riverbank at a right angle.

Figure S-1 Five potential bridge sites near Hinthada Station and the Hinthada urban area

Potential site 5

Potential site 4

Potential site 3

Hinthada Station Potential site 1 Potential site 2 (Highly Potential)

Source: PW

Figure S-2 Cross-sectional river measurements at the most prospective site (2) (maximum water depth: 23 m)

Source: Study Team

2) Bridge type selection The Ayeyarwady River is important inland waterway from Yangon to Mandalay and more northern port city, and many vessels navigate up and down the river. It is for this reason that Public Works (PW) wants to build at least two passageways under the bridge with the 80 m of width and 17 m of height clearance needed for ships to pass through. The organization also wants to design the bridge as a single structure that will span the entire length between the Hinthada and Letpadan embankments (a distance of 3,820 m) so that water traffic can continue its nonstop movement along the river.

Another critical requirement is making sure that the bridge design is one that the Myanmar government (PW) can build in the future without foreign assistance. It was determined that a truss type bridge would be the most suitable for the Hinthada Bridge, as the truss bridge not only fulfills the above requirement (the Myanmar government has already constructed several), but also is suitable for use as a joint railway and road ridge.

Most of the truss type bridges constructed by the Myanmar government have been either single-track rail bridges or two-lane road bridges, with a single deck constructed underneath the truss structure. The country has yet to build a double-deck truss bridge like Honshu-Shikoku Bridge and the Kansai Airport Bridge in Japan. A double-deck truss bridge was compared with a single-deck bridge under same design conditions through structural analysis and ultimately recommended for this project in the hopes that PW can acquire the technology and skills needed to design and build new kinds of truss bridges. It was confirmed that a double-deck bridge would require about 19% less steel material than a single-deck bridge, making it the choice in terms of economic efficiency as well. In addition, the span length was set at 120 m in order to ensure the 80-m wide clearance needed for vessel navigation. This is the same length as the longest truss bridge ever built by Myanmar—the 120-m Nyaungdon Bridge completed in 2011.

Figure S-3 and S-4 shows a lateral view of a continuous three-span (120 m) truss bridge and a cross section of both a single-deck and double-deck construction.

Figure S-3 Lateral view of a continuous three-span steel truss bridge supporting a single rail track and two-lane road

Source: Study Team

Figure S-4 Single-deck and double-deck cross section

Note: Designed for a load of a single-track railway and a two-lane road. Source: Study Team

Table S-1 Results of the Schematic Design Span Length Height of Weight of Steel Unit weight of Structural Span/Height Case (m), Bridge Truss Girder Materials per steel materials Type Ratio Length (m) (m) Bridge (ton) (t/m) 1 Double Deck 3@120=360 10 12.0 2,549 7.08 (1.02) 2 Double Deck 3@120=360 12 10.0 2,511 6.97 (1.00) 3 Double Deck 3@120=360 14 8.6 2,554 7.09 (1.02) 4 Double Deck 4@105=320 10 10.5 2,677 6.37 (0.91) 5 Double Deck 4@105=320 12 8.8 2,674 6.37 (0.91) 6 Single Deck 3@120=360 10 12.0 3,126 8.68 (1.25) 7 Single Deck 3@120=360 12 10.0 3,102 8.62 (1.24) 8 Single Deck 3@120=360 14 8.6 3,134 8.70 (1.25) 9 Single Deck 3@120=360 16 7.5 3,208 8.91 (1.28) 10 Double Deck 3@135=405 12 11.3 3,102 7.66 (1.10) Ref. Malun Deck 3@112=336 12.8~18.8 8.8 3,057 9.10 (1.34) Bridge Source: Study Team

3) Bridge length and span length selection The lateral view and enlarged view of the bridge piles below show a continuous three-span truss bridge (total length: 3,872 m) with three 120 m long spans linking the Hinthada and Letpadan embankments.

Figure S-5 Overall view of the bridge

Steel pipe sheet pile foundation Cast-in-place pile foundation for deep water areas (12 piles) for shallow water areas (22 piles)

Source: Study Team

4) Positioning of the main bridge and approach routes (roads) Fig. S-6 shows an overhead view of the main bridge structure as well as these rail and road approach routes. The diagram is overlaid on a satellite image of the Hinthada urban area and Ayeyarwady River purchased in Myanmar (the image covers an area 20 km north-south and 25 km east-west).

Two proposals were considered: linking to the embankment road on the Hinthada side and installing a road bound for Pathein that passes along a road that is currently in the planning phases. However, it was determined that the many houses positioned along the embankment road would make widening the route difficult, making the installation of the Pathein road the best choice.

On the Letpadan side, there is a largely unpaved single-lane road that runs between the city of Letpadan and Thrawaw, and it was decided that the approach would connect there. Because the road has only one lane and because four-wheeled automobiles can only travel along it at a maximum speed of 10 km per hour, plans were made to widen the road to two lanes along with the bridge construction.

Figure S-6 Overhead view of the main bridge, approach railway and road

Source: Study Team

Figure S-7 Standard road cross section

Source: Study Team

5) Overhead view of the main bridge and approach routes (rail) The rail approach on the Hinthada side would link the bridge to a line that runs between Pathein and Hinthada. The basic plan on the Letpadan side was to lay a connector line linking the Letpadan and Thrawaw rail stations. Two possibilities were considered on the Letpadan side, one is linking the bridge to Tharawaw station and the other is linking it to Zeephygone station, located 5 km to the north. Thrawaw was deemed unsuitable in terms of reliable usage, as the station is at risk for flooding once every 10 years, so the decision was made to go with Zeephygone. In addition, almost all of the lines operated by Myanmar Railways use a metric gauge, making them suitable for involvement in the project.

Figure S-8 Route comparison (railway)

Source: Study Team

6) Social and environmental considerations A field survey designed to estimate the impact of the project was used to investigate the social and environmental effects on the target region. The results of the investigation were used to identify the type and degree of project impact according to the JBIC environmental checklist. What follows is a brief summary of this inquiry.  The acquisition of land prior to the project will present no significant impact. This is due to the fact that most of the land is agricultural and can be easily replaced with nearby sites.  The civil engineering work that will take place during the construction phase is expected to have an impact in terms of water pollution, noise, and vibration—though these effects will be temporary.  It is not expected to be a major increase in traffic volume once the project railways and roads are in use, thus posing little threat of atmospheric pollution. An environmental impact is expected once traffic volume rises, bringing with it noise, vibration, and train noise.

1. Number of involuntary relocations The following gives current figures indicating the amount of land that must be acquired for this railway and road project.

The area calculations below are based on the premise that a single-track railway requires land parcels 50 m wide, while a double track requires 100 m of width. The figures on residential areas on the Hinthada and Letpadan sides were calculated by superimposing the track width on satellite images.

Table S-2 Rough estimates on land acquisition area and number of homes to be relocated Rail distance (m) Road distance (m) Width Total area 2 Unit cost Unit Lep. side Hin. side Lep. side Hin. side (m) (m ) Total 1.8 $/m2 13,500 5,500 5,500 9,500 100 2,450,000 Additional 28.9 $/m2 8 10 2 5 200 5,000 residential area Source: Study Team

2. Environmental impact assessment (EIA) Until last year, Myanmar did not have a legal basis for requiring an EIA for this project; however, such laws were put in place this year, and an EIA is now expected.

(4) Planned Project Schedule

Of the six new bridge and/or tunnel construction projects that Myanmar proposed to Japan in November of 2011, this bridge construction project was given the highest priority by the Myanmar government. Table S-3 proposes a project schedule based on a time period that assumes this to be a Japan ODA loan project commissioned as a single construction contract that includes both the bridge itself and the construction of related railways and roads on both banks.

Additionally, the schedule presumes that the Myanmar government will request an ODA loan in August of 2013 and that the L/A will be signed in the spring of 2014. The construction period is expected to be 36 months. As the results, the construction will start in June 2016, and the service will be provided in May 2019.

However, the Myanmar government requested to start the construction in the first half of 2015. To satisfy their request, the Design-Build Method is proposed and shown in Table S-3 together with the Traditional Method. (Upper-side [black-painted]: Traditional Method, Lower-side [slanted line]: Design-Build Method)

Table S-3 Project implementation schedule Number of Major item 2013 2014 2015 2016 2017 2018 2019 Months Request ODA loan

Preparatory survey 6

Pledge

E/N and L/A Selection of consultant in 8 charge of detailed design Detailed design 12 Preparation of tender bid 3 document Pre-Qualification for 3 construction contractors Tender bid/examination of 3 construction contractor Examination approval/ 3 Traditional method Traditional contract negotiations Pre-Qualification for 3 design build contractors Tender bid/examination of 3 design build contractor Examination approval/ 3

Design-Build method Design-Build contract negotiations Approval of contractor 1 Selection of consultant for 9 construction management 20 Land acquisition 12 Construction 36

Defect liability period 24

Law & regulations Schdule on Items of Study of Impact Consideration for Study of mitigation Environment and Society Monitoring Plan Acceptance of EIA Source: Study Team

(5) Feasibility of requesting and issuing an ODA loan

1) Estimated traffic demand

a) Road traffic Using the results of the on-site traffic survey, inflation, economic growth, and other figures were used to estimate future traffic growth. These demand forecasts are listed in the table below. The figures indicate that traffic volume on the Hinthada Bridge will reach 2,302 PCU/d in 2020, 5,915 PCU/d by 2030, and 12,650 PCU/d by 2040.

b) Railway traffic Various types of Myanmar statistical data (including rates of increase in cargo volume, passenger volume, rice production, and the population of Ayeyarwady Province) and documents provided by Myanmar Railways (future rail demand forecasts) were used to create the following demand.

Table S-4 Economic growth and future demand estimates for standard scenario Road traffic demand Train traffic demand

Economic Bridge Growth Growth Cargo Growth Passenger Year growth traffic rate (/y) rate (/y) (t/y) rate (/y) (person/y) rate (/y) (PCU/d) 2020 7.0% 11.0% 2,302 3.9% 965,253 1.4% 1,257 2030 5.0% 9.0% 5,915 3.9% 1,415,131 1.4% 1,445 2040 3.0% 7.0% 12,650 3.9% 2,074,685 1.4% 1,660 Source: Study Team

2) Project costs Table S-5 Cost to be used in economic/financial analysis

(in millions of yen) 2015 2016 2017 Total Total 6,422 8,562 6,422 21,406 (at 2012 prices) Construction costs 7,445 5,584 18,614 18,545 Consultant 745 558 1,861 1,854 Contingency 372 279 931 927 Economic price (at 2012 prices: economic 5,458 7,278 5,458 18,195 analysis) Cost adjusted for inflation 8,085 10,810 8,594 27,488 (financial analysis) Source: Study Team

Table S-6 Scope of target project costs for study Item Economic analysis Financial analysis Comments Bridge Includes road and rail   construction costs approach routes Railway facilities  ‒ costs Road improvement  ‒ project costs Land and   relocation costs : considered, ‒: not considered Source: Study Team

3) Preliminary economic analysis results

a) Premises The following premises were made when performing the economic analysis.

Table S-7 Premises for economic analysis Item Condition Remarks Construction starts in 2015 Analysis period 43 years (40 years of use) Service starts in 2018 Myanmar’s treasury bond (5 year) rate = Social discount rate 12% 11.5%. (capital opportunity costs) To be applied to calculations for B/C and NPV 1USD＝833.602 Kyat Exchange rate Rate as of 2012/10/311 1USD＝79.64 JPY Based on 2012 prices Economic price Not adjusted for inflation Financial cost*0.85 Residual value 0％ Source: Study Team

b) Economic analysis results Results based on the standard scenario

The following EIRR (Economic Internal Rate of Return), NPV (Net Present Value, discount rate: 12%), and B/C (Benefit- Cost ratio, discount rate: 12%) figures were calculated based on the economic costs and benefits estimated above.

EIRR= 12.19% NPV= 511 B/C= 1.02

The EIRR in the standard scenario exceeds 10–12%, which is considered to be a criterion of Opportunity Cost of Capital in developing countries. Therefore, this project can be judged as economically feasible.

1 http://www.oanda.com/

Table S-8 Cash flow of economic analysis Cost Benefit Net Bridge Railway Road OthersBridge Railway Road Cash Flow Invest Rene Invest Opera Invest Rene Total Total Discount O&M O&M O&M Land VOC TTC TC TTC BOC VOC TTC ment wal ment tion ment wal Cost Benefit rate 12% 2012 0.1% 1.0% 0.01% 1.0% 2013 2014 -3 2015 5,458 379 219 6,056 -6,056 -6,056 -2 2016 7,278 379 7,657 -7,657 -6,837 -1 2017 5,458 298 379 6,135 -6,135 -4,891 1 2018 16 2 294 0.1 313 537 120 510 16 67 131 57 1,439 1,126 802 2 2019 16 2 303 0.1 321 596 134 530 16 73 145 64 1,558 1,237 786 3 2020 16 2 312 0.1 330 661 148 551 17 81 161 71 1,690 1,360 772 4 2021 16 2 321 0.1 339 734 165 572 17 89 179 78 1,834 1,495 757 5 2022 16 2 330 0.1 349 815 183 595 17 98 199 87 1,993 1,644 744 6 2023 16 2 340 0.1 358 896 201 618 17 107 219 96 2,154 1,795 725 7 2024 16 2 350 0.1 368 986 221 642 18 116 241 105 2,329 1,961 707 8 2025 16 2 360 0.1 378 1,085 243 667 18 127 265 116 2,520 2,142 690 9 2026 16 2 371 0.1 389 1,193 268 693 18 139 291 128 2,729 2,341 673 10 2027 16 2 381 0.1 11 411 1,312 294 720 18 152 320 140 2,958 2,547 654 11 2028 16 2 393 0.1 411 1,430 321 748 19 165 349 153 3,185 2,774 636 12 2029 16 2 405 0.1 423 1,559 350 777 19 179 381 167 3,431 3,008 615 13 2030 16 2 418 0.1 437 1,699 381 807 19 195 415 182 3,698 3,262 596 14 2031 16 2 432 0.1 450 1,852 415 839 19 211 452 198 3,988 3,538 577 15 2032 16 158 2 446 0.1 622 2,019 453 872 20 230 493 216 4,302 3,679 536 16 2033 16 2 460 0.1 479 2,181 489 906 20 247 532 233 4,608 4,130 537 17 2034 16 2 475 0.1 493 2,355 528 941 20 266 575 252 4,938 4,444 516 18 2035 16 2 491 0.1 509 2,543 570 978 21 287 621 272 5,292 4,783 496 19 2036 16 2 506 0.1 525 2,747 616 1,016 21 309 671 294 5,673 5,148 477 20 2037 16 2 523 0.1 11 552 2,967 665 1,055 21 333 724 317 6,083 5,531 457 21 2038 16 2 540 0.1 558 3,174 712 1,097 21 356 775 339 6,474 5,917 437 22 2039 16 2 553 0.1 571 3,397 762 1,139 22 380 829 363 6,892 6,321 416 23 2040 16 2 566 0.1 585 3,634 815 1,184 22 406 887 388 7,337 6,752 397 24 2041 16 2 580 0.1 598 3,889 872 1,230 22 434 949 416 7,812 7,214 379 25 2042 16 2 594 0.1 613 4,161 933 1,278 23 464 1,016 445 8,319 7,706 361 26 2043 16 2 609 0.1 627 4,411 989 1,328 23 491 1,077 471 8,790 8,163 342 27 2044 16 2 624 0.1 642 4,675 1,049 1,380 23 520 1,141 500 9,287 8,646 323 28 2045 16 2 639 0.1 657 4,956 1,112 1,433 24 551 1,210 530 9,814 9,157 306 29 2046 16 2 655 0.1 673 5,253 1,178 1,489 24 583 1,282 562 10,371 9,698 289 30 2047 16 158 2 671 0.1 11 858 5,568 1,249 1,547 24 617 1,359 595 10,961 10,102 269 31 2048 16 2 687 0.1 705 5,902 1,298 1,569 25 654 1,441 631 11,519 10,814 257 32 2049 16 2 704 0.1 722 6,256 1,376 1,630 25 692 1,527 669 12,176 11,454 243 33 2050 16 2 721 0.1 739 6,632 1,458 1,694 25 733 1,619 709 12,870 12,131 230 34 2051 16 2 738 0.1 757 7,030 1,546 1,760 26 777 1,716 751 13,605 12,848 217 35 2052 16 2 756 0.1 775 7,452 1,638 1,828 26 823 1,819 797 14,382 13,608 205 36 2053 16 2 775 0.1 793 7,899 1,737 1,900 26 872 1,928 844 15,205 14,412 194 37 2054 16 2 794 0.1 812 8,373 1,841 1,974 27 923 2,044 895 16,076 15,264 184 38 2055 16 2 813 0.1 831 8,875 1,951 2,051 27 978 2,166 949 16,997 16,165 174 39 2056 16 2 833 0.1 851 9,407 2,068 2,131 27 1,036 2,296 1,006 17,972 17,120 164 40 2057 16 2 853 0.1 11 883 9,972 2,192 2,214 28 1,097 2,434 1,066 19,003 18,120 155 18,195 633 316 298 92 21,616 1,137 5 45 219 42,556 151,082 33,542 46,890 861 16,861 36,879 16,150 302,264 259,709 511 Source: Study Team

4) Preliminary financial analysis results

a) Purpose and conditions The financial analysis clarifies the following: i) Relationship between project profit and maintenance costs when assuming the PW as an executing agency ii) Project benefits of yen loans financing when comparing other fund resources

Table below shows parameters calculated based on the results of a field survey used as a basis for financial analysis.

Table S-9 Premises for financial analysis Item Conditions Remarks Program schedule Same as Chapter 6 Same as economic analysis Operation term 40 years Same as economic analysis Discount rate 12% Same as economic analysis ODA loan Borrowing rate offered by The poorest country among least 0.01% financial institutions developed countries (JICA regulations) Redemption period: 40 years Repayment -do- Grade period: 10 years Myanmar’s own funds: 20% Borrowing ratio Borrowing : 80% Motorcycle: 100 Kyat/trip Passenger car: 600 Kyat/trip Set in accordance with toll fare standards Standard toll fare (2012) Bus: 3,000 Kyat/trip of neighboring bridges Truck: 4,700 Kyat/trip Same as inflation rate in standard Revision in toll fares +6%/y (standard scenario) scenario. To be raised by every year by 500 Kyat-step Traffic volume See Chapter 3 Same as economic analysis Source: Study Team b) Financial evaluation (results)

1. Relationship between profit size, collected fares, and maintenance costs Table 5-38 shows FIRR calculation results performed based on the conditions.

Table S-10 FIRR calculations (yen loan financing) FIRR Scenario A (conservative) Cannot be calculated Scenario B (standard) 0.05% Scenario C (optimistic) 0.08% Source: Study Team

As shown above, neither scenario above is likely to achieve FIRR (Financial Internal Rate of Return) at an acceptable level, as a profitable project, by covering project cost through profits from toll fares.

However, Myanmar’s other toll road and bridge projects do not aim to cover their initial investments by fares. Therefore, if facility maintenance costs can be covered by project profit, financial efficacy can be secured. A public project agency adopts this policy for this bridge project as well as for other bridge projects, so the relationship between toll fares and maintenance costs is estimated.

Based on the analysis, toll fares obtained from the bridge can exceed operation maintenance costs starting in the first year of the operation. Consequently, profit can be secured for the full project term, even years with renewal costs.

Table S-11 Collected toll fares and maintenance costs (yen loan: standard scenario (B)) (Unit: Millions of yen) Discount Year O&M Toll income Balance Cumulative rate 12% 1 2018 27 100 72 72 72 2 2019 29 111 82 154 138 3 2020 31 131 100 254 202 4 2021 33 162 129 383 273 5 2022 35 190 154 538 342 10 2027 48 412 364 1,859 670 20 2037 89 1,656 1,567 10,821 1,256 30 2047 165 5,569 5,405 44,195 1,652 40 2057 306 16,351 16,045 147,504 1,775 Total 4,669 152,173 147,504 － － Source: Study Team

2. Benefits of yen loan financing Compared to ADB’s project loan interest (1.0 (grace period) - 1.5%) and interest rate (11.5%) for government treasury bonds (5-year), the interest of an yen loan financing (0.01%) for the poorest countries among least developed countries (LDC) is extremely low. This means that yen loans would make a big difference to the execution agency throughout the project term—specifically, more than 100 times the ADB loan and more than 1,000 times treasury bonds.

(6) Technical Advantages of Japanese Companies

Japanese companies have constructed an abundance of steel pipe sheet pile bridges both in and outside of Japan, and are deeply familiar with the basic structure required to construct a deep-water (10 m or greater) bridge across the Ayeyarwady River. Myanmar bridge engineers’ biggest concern is preventing scouring, and a steel pipe sheet pile foundation is incredibly effective in this regard. The bridge engineers at Public Works highly want to learn this type of construction method, which can effectively serve to attract PW towards Japanese civil engineering technologies. Myanmar still does not have the budget to undertake this project, and cannot even afford to repaint its current steel bridges—which are long overdue for recoating and steadily falling victim to rust corrosion. The use of weathering steel in bridge construction is done in just two major developed countries—Japan and the US—, and the use of this material can reduce maintenance and upkeep costs in the future. Japan and the US are thus unrivaled when it comes to this particular strength.

(7) Schedules up to Realization of the project and Risks in Implementation

1) Schedule for realizing the project Detailed program for realizing the project are shown below: i) Preparing environment impact assessment report which reflects the results of this study and obtaining the approval by the government (until 120 days before L/A)

ii) MOC should apply for approval of the Yen Loan Project to the Ministry of National Planning & Economic Development and then Myanmar Government applies for Yen Loan to the Japanese Government after review. iii) ICA will dispatch a fact finding mission to confirm the status of the Myanmar side and then will conduct a study for preparing Yen Loan iv) JICA will dispatch a follow-up mission to discuss policies and conditions of ODA to Myanmar. v) Japanese Government will deicide policies and conditions of ODA, and then Exchange of Notes between two countries will be concluded.. vi) JICA and MOF in Japan will discuss conditions of Yen Loan, and Loan agreement between two countries will be concluded.

The schedule including these procedures above stated is shown in the Table S-3.

2) Risks which hindering the implementation of the project We state risks which hindering the implementation of the project as follows:

a) Priorities with other projects There are many candidates of Yen Loan projects being prepared in Myanmar because of resumption of the Yen Loan after long time disruption of foreign aids such as thermal power plant urgent rehabilitation which will compensate for chronic power shortages and Thilawa Port development project and so forth.

At same time projects for regional development and reduction of poverty are prepared to be candidate Yen Loan projects.

The Hinthada bridge construction which is included in the regional development projects can not avoid competing with other projects. Though it is considered to be the most preferred projects in the MOC, it is a comparatively inconspicuous project in the region which is far from central region of Myanmar, so its needs and importance must be strongly appealed to the Japanese Governmental officials in order to be recognized as an Yen Loan project via consultation with the Ministry of National Planning and Economic Development.

b) Delay of the Relevant Road & Railway Project A connecting laterite road in the Letpadan side has single lane with approximately 30km length and crossing over ten small and middle size bridges on small pond and river. It is planned to be widened to a road with two lanes according to the Hinthada bridge completion. Officials of the PW, MOC clearly stated that when the Hinthada bridge has been adopted as an Yen Loan project, they will implement the widening of the road. However, it is not clear whether the budget is prepared or not.

Existing railway between Zeephygone and Thrawaw must be rehabilitated according to the completion of the Hinthada bridge. Implementation of these relevant railway and road projects is not necessarily guaranteed.

c) Delay of the Study Specific provisions have not been arranged for the implementation of EIA & SIA. Those are stated in the Myanmar’s conservation law (Law No. 9/2012) that the ministry who will implement the project which may affect the environment and society must develop specific provisions for the implementation of EIA & SIA. But they do not have an experience of implementation for EIA & SIA in Myanmar so far, so the delay of EIA and SIA would be anticipated.

Therefore it is necessary to select experienced and competent consultant in order to implement the EIA and SIA quickly.

PW, MOC are unfamiliar with the procedure to select detailed design consultant, so the delay for selection of consultant remains as a risk to implement the project.

d) Other Risks Myanmar’s political situation has been improved by the incidents, democratic political release of political prisoners, taking cease fire measures with militants of minority and commencement of dialogue between President and Suchi since 2011. The US President Obama has visited Myanmar for the first time.

Although Western economic sanctions is being steadily alleviated by these events, it is said that strong powers who wants to be back to militant regime still exist , this fact still remains as a risk to implement the project.

(8) Map of the Project Site

Figure S-9 Map of the Project Site

Source: PW