Myanmar has gnawing gaps in its infrastructure development which will affect its economic development in the years to come. To compound matters, the issue is not a priority for the State Administration Council.
It is a well-worn truism that infrastructure investment is key for sustained, inclusive economic development. Morgan Stanley’s Ruchir Sharma maintains that developing countries which invest 25-35 per cent of GDP in productive investments annually achieve long-term growth and more development.
Sharma’s maxim places Myanmar in the spotlight. Assessments in 2017 by multilateral and bilateral institutions, including the Myanmar Public Expenditure review, highlight that Myanmar’s infrastructure needs are massive due to consistent underinvestment and weak public financial management. According to the Group of 20’s Global Infrastructure Hub, Myanmar’s infrastructure investment gap, at current investment rates, would be US$112 billion out of a total investment need of US$224 billion through 2040. If this gap cannot be filled, Myanmar will not be able to meet its Sustainable Development Goals (SDG) commitments and related development objectives.
Myanmar is already in a precarious position. Its per capita electricity consumption is the lowest in Asia. In 2016, 20 million people lacked basic road access, with road and railway infrastructure in dire need of maintenance. Hence, increased investment in infrastructure is critical to Myanmar’s long-term sustainable development. The historic 1 February coup has only added to this urgency. In the eyes of the State Administration Council, infrastructure governance does not seem to be a priority.
Even before the coup, Myanmar had a very weak regulatory environment for implementing Public-Private Partnership (PPP). Unsolicited proposals were common. In 2016, a PPP framework for infrastructure development jointly developed by the Japan International Cooperation Agency (JICA) and Myanmar’s Department of Investment and Corporate Administration highlighted that Myanmar lacked laws, regulations and policies for systematically implementing PPP and private financing. Lacking too
At bottom, the core of the issue here is a matter of national priorities. At the moment, the military continues to insist on entrenching its position post-coup, and managing escalating conflicts and violence across the country.
In 2018, the National League for Democracy (NLD) government tried to tackle these gaps. Presidential Notification 2/2018 establishing a Project Bank constituted one of the NLD’s more important regulatory and institutional reforms in this area. The Project Bank regulatory framework required ministries and IGAs to undertake pre-feasibility studies before submitting project proposals. These proposals had to be consistent with the Myanmar Sustainable Development Plan (2018-30). Proposals assessed by the Project Bank to be commercially viable and bankable would then be classified in different categories — whether they would be financed from the national budget, with official development assistance (ODA) funds, or via PPP. The Project Bank process also listed procedures for the privatisation or equitisation of inefficient State-owned Economic Enterprises which hold infrastructure assets. Despite some imperfections, the mechanism provided comprehensive regulatory guidelines for PPP implementation (commercially viable and bankable projects will be included in PPP or private financing while others classified as ODA-financed or public investments).
The Project Bank’s priority list had 129 projects as of August 2020, with a combined value of US$20 billion. However, no one knows exactly how these projects were included or whether they were subjected to thorough screening in accordance with prescribed guidelines. The transport, construction, energy and electricity sectors dominate in this list; projects related to these sectors constitute 67 out of the 129 projects.
Though the SAC may not continue the Project Bank mechanism, it is likely to continue implementing existing ODA- and PPP-financed projects, drawing from the existing priority list. This includes projects for major railways, ports, airports, expressways and highways, electricity generation, and some but not all Belt and Road Initiative (BRI) projects. For example, the US$2.7 billion Yangon-Mandalay Railway project funded by a JICA loan, which is in the Project Bank list, is ongoing. However, ongoing ODA projects such as the Yangon-Thanlyin Bridge (with Japan) and the Yangon-Dala Bridge (with South Korea) are not on the list. These two projects are currently suspended, though the SAC’s minister of construction has recently visited the project site of the Yangon-Dala Bridge to discuss ‘timely completion’ of the construction.
Since the coup, many bilateral and multilateral donors have suspended loans and other forms of ODA. These suspensions, combined with the value of Project Bank priorities now in abeyance for at least the next 2-3 years, amount to over US$20 billion. All this does not bode well for Myanmar’s economic future, as investors have hesitated in the past to invest in Myanmar. They have cited poor infrastructure (in particular, unreliable electricity supply) as a key concern. With the coup, and interrupted FDI flows into the manufacturing sector, it now seems nigh impossible for Myanmar to catch up with other industrialising countries in the region. The SAC’s attention to infrastructure development now seems focused on resuming suspended projects and seeking external partners to shore up the infrastructure gaps. The SAC’s engagement with BRI projects —and China as an investor — bears close monitoring, as implementation may prove different from the transparency initiatives and responsible strategies started in the past decade. The role of the private sector also remains unclear on PPP projects, which are currently geared to large-scale, national-level infrastructure. Looking ahead, Myanmar’s immediate recovery may require more smaller-scale, community-based infrastructure development instead.
At bottom, the core of the issue here is a matter of national priorities. At the moment, the military continues to insist on entrenching its position post-coup, and managing escalating conflicts and violence across the country. If this continues, the future of Myanmar’s infrastructure development and governance remains bleak.