Major investment in Myanmar roads, rail and ports

As the largest country in mainland South-east Asia, and sharing borders with around 40% of the world’s population, Myanmar holds enormous potential to become a regional transport and logistics hub.

However, the country suffers from a notable infrastructure deficit. Myanmar lacks a deepsea port and a modernised railway network, as well as a mass transit system in its largest city Yangon. Although several major highway projects have been completed, much of the road network remains in need of upgrades, while the national rail network, the largest in ASEAN by kilometres of track, continues to suffer from poor maintenance and underinvestment.

With a sizeable amount of new investment needed to close its infrastructure gap, officials are now working with international lenders and bilateral partners to finance new transport projects. An increasing emphasis on public-private partnerships (PPPs) is offering additional opportunities to private and foreign investors. The realisation of these projects, could be an important step in the country’s infrastructure development agenda.

Regulation

At the national level, the transport sector is overseen by the Ministry of Transport and Communications (MoTC), which was founded in 1992 and operates various departments, directorates and state-owned enterprises. These include the Road Transportation Administration Department, Inland Water Transport, Myanmar Railways, the Myanmar Port Authority (MPA) and Myanmar National Airlines (MNA). As part of ongoing reforms in Yangon, January 2017 saw the launch of the Yangon Bus Service (YBS). The YBS is managed by the Yangon Region Transport Authority, which assumed responsibility for all the city’s buses (see analysis).

The Department of Civil Aviation (DCA) is the authority responsible for civil aviation administration and air navigation services. Myanmar’s primary international airport, Yangon International Airport (YIA), is owned, operated and managed by the Yangon Aerodrome Company (YAC), whose sister company, Pioneer Aerodrome Services, operates and manages Naypyidaw International Airport (NIA) located in the capital city.

Officials are collaborating closely with a variety of international lenders, aid agencies and bilateral partners to develop transport policy and launch new projects. Chief among these is the Japan International Cooperation Agency (JICA), a state-owned economic and social developmental agency, which has been assisting the government in formulating an urban transport strategy for Yangon and the National Transport Master Plan (NTMP), published in 2014. The Asian Development Bank (ADB), meanwhile, is active in building and implementing a framework for PPPs in the transport, energy and infrastructure sectors, and the Chinese government is investing heavily in port and highway projects as part of its Belt and Road Initiative (BRI), which is focused on reviving land and sea trade routes, connecting China to Africa, the Middle East and Europe. The World Bank has also provided funding for inland river transportation and road projects, although recent civil conflict in Rakhine State has put future lending activities in doubt as Western governments look to impose new sanctions.

National Transport Master Plan

Mid- and long-term transportation policy is outlined in the NTMP, which seeks to develop multiple transport corridors across the country, including 36 north-south and 45 east-west highway projects, spanning seven regions and seven states. As for spending, the government is planning to allocate MMK28trn ($21.4bn) to road, rail, ports and aviation projects through to 2030. Targets aim to develop efficient, modern and environmentally friendly systems, setting aside $11.7bn for road projects, $6.6bn for railway development, and $8.5bn for inland water, sea and airport projects. Rail and highway upgrades are the most critical near-term priority under the plan, which has allocated 87% of planned capital formation to putting in major city-to-city expressway systems between 2014 and 2020.

Necessary Steps

Improving transport is key to encouraging development. In April 2017 the British Chamber of Commerce (BCC) reported that just 25.8% of Myanmar’s 151,298-km road network was paved. The problem is worse outside of major cities. Nearly half of Myanmar’s 33.6m-strong rural population does not have access to all-weather roads, a challenge exacerbated by weak inland waterways and underdeveloped river ports, which in turn drives up transport costs, limits access to markets and services, and contributes to rural poverty. Some 20m people in the country still lack basic road access, 60% of highways are in poor condition and road fatalities are at an all time high on the back of increasing automobile ownership. The number of people killed in automobile accidents in the country doubled between 2009 and 2015 to hit 4375.

Proposals to encourage investment in transport could also help facilitate cross-border trade ties with regional countries. Myanmar ranked 113th out of 160 countries on the World Bank’s 2016 Logistics Performance Index. To compare, the neighbouring countries of China, India, Thailand and Bangladesh ranked 27th, 35th, 45th and 87th, respectively.

“Myanmar’s transport infrastructure deficit is an acute problem,” Mark Livingston, resident partner at Dentons law firm, told OBG. “Generally speaking, moving a product from origin to destination port comprises 70% of the total shipping cost, and the remaining 30% getting it from port to end destination. In Myanmar, however, this figure is reversed.”

Investment Opportunity

This situation presents new opportunities for private sector investment to help fill the gap in public spending. According to the ADB, improved transport networks could boost the country’s GDP by $40bn, or 13% annually. To achieve this, Myanmar would require an additional $60bn of transport infrastructure funding between 2016 and 2030. While road user fees are expected to cover around one-third of total investment requirements, and rail passenger fares cover half the cost of operations, the need for upgrades poses a considerable cost for both manufacturers and the government.

Adding to the problem are public finances, which have come under notable pressure in recent years, limiting the government’s ability to finance all of the necessary transport upgrades and prompting stakeholders to look to PPPs as a viable alternative (see Economy chapter). According to the ADB, transport spending would need to be increased to 3-4% of GDP, up from the current 1-1.5%.

Working Together 

In February 2017 the ADB announced it had partnered with the government to encourage using PPPs in the transport sector by offering strategic and transaction advisory services, and helping the government identify priority projects that could benefit from a PPP financial framework to mobilise private capital. The bank will also provide support in screening, prioritising and structuring projects, as well as performing due diligence activities for potential investors.

The agreement was generally well received by stakeholders, with both the public and private sectors participating in recent discussions regarding best practices for PPP development. At the Myanmar: Moving Ahead Perspectives on Developing Transportation Infrastructure conference in May 2017, speakers discussed PPP policy, frameworks, concessions, financing and applicability of the PPP model to rail, road and port projects.

The government considers PPPs, crucial to the country’s economic development and has been encouraged to begin promoting PPPs even though a dedicated framework has yet to be implemented. This has led to calls for officials to modernise and reform the legislation to enable wider deployment of PPP projects in the transport sector.

The ports segment in particular holds notable potential for future PPP development. Myanmar’s investment regulations do not put limits on foreign stakeholders in port terminal activities, allowing for 100% foreign ownership, as was the case with the deep-river Myanmar International Terminals Thilawa (MITT) and the Myanmar Integrated Port (MIP), two major port facilities located within the Thilawa Special Economic Zone (SEZ). Roughly 75% of the port terminals in Myanmar have been developed by the private sector, according to law firm VDB Loi. PPPs have also been deployed in some highway projects within Yangon to reduce traffic congestion.

While recent bus system reforms have met with limited success, the PPP model is expected to be refined and improved as the government rolls out successive urban and rural transport projects.

Urban Congestion

Growth in the number of drivers has contributed to urban congestion in recent years. This was partly caused by a reduction in vehicle import regulations, which was one of the first economic reforms to be rolled out in 2011, with the resulting price drop leading to a massive uptake in vehicle imports and sales.

Data on the number of vehicles in Myanmar varies between sources, with local media reporting the number of registered vehicles in Yangon rose by 153% between 2011 and 2014. According to the ADB, the number of cars in Yangon more than doubled between 2011 and April 2015 to hit 320,000, while the Financial Times reported that there were roughly 540,000 passenger vehicles registered in Myanmar at the end of the 2015. According to the Ministry of Finance and Planning, the total number of registered vehicles in Myanmar rose from 187,354 in 2005 to 580,703 as of February 2017.

Yangon rivals Jakarta and Manila in terms of rush hour congestion, a problem made worse by the absence of a mass transit system. Public transport systems have failed to adjust to a surge of new private vehicles, and congestion in the city reduces speed at peak hours by more than half, from 30 km per hour (km/h) to between 10 and 15 km/h.

In a bid to reduce the number of cheap imports coming from Japan, a ban on right-hand-drive vehicles, including commercial vehicles, buses and passenger cars, took effect in January 2018. In 2016, 120,000 used vehicles were imported from Japan.

Circular Rail

Besides the YBS, the only other mass public transit option in Yangon is the 29.5-km circular rail line serving 38 urban stations and 17 suburban stations. Yangon rail lines carried an estimated 92,000 passengers per day as of September 2017 – up from 70,000 per day in October 2016. With the number of regular circular rail riders increasing, plans to deliver upgrades to the line, including modern signalling equipment, new rolling stock and track upgrades, are proving popular with locals.

In September 2017 Myanmar Railways began work on the first phase of the $301.29m circular rail upgrade project, which consists of two packages – one for each half of the line. Local contractors A1 Group of Companies and their Chinese partner Sinohydro Corp were awarded the contract for the western part of the line from Danyingone to Yangon station, while local contractors Shwe Taung are in charge of the eastern section from Danyingone to Pazundaung. All line work is set to be completed by mid-2019. Rail car upgrades will follow in 2020, with the line’s existing fleet of 12 carriage cars and 13 big trains expected to be replaced by 66 diesel-electric multiple unit (DEMU) cars between 2020 and 2022.

Some $206.5m of the project’s total budget will be financed using an overseas development assistance loan from the Japanese government, while the remaining $94.76m will be supplied by the Myanmar government. Japanese funding will be used for the purchase and installation of communications and signalling equipment, as well as the new DEMU trains, while the government will pay for rail connections, bridge repairs and fences, according to Myanmar Railways. On completion, the travel time for the entire circle route will be reduced from over three hours to one hour and 50 minutes. Patronage of the line is expected to rise to 260,000 per day after the upgrades are completed.

Water Taxi

A new water taxi service is adding to innovations expected to improve urban transport and inland water ferrying services. In October 2017 the Yangon Water Bus service officially launched from the Botahtaung Jetty on the Yangon River. Although delayed for three months due to administrative difficulties, the inauguration saw 13 ships begin daily service. Three vessels were purchased from Australia, with a capacity of between 180 and 230 people; three from Thailand, with a capacity of up to 60; and seven vessels were locally-manufactured, with a capacity of up to 50 passengers.

Local cruise liners Tint Tint Myanmar Company were awarded the contract to own and operate the service. The first phase of development established a route between Botahtaung Jetty and Insein Township. Tickets are priced at MMK300 ($0.23) per journey, and each leg takes just 30-45 minutes, compared to nearly two hours by land, with boats departing from seven water taxi ports every day between 6.30am and 6.30pm. The company announced plans to expand operations in additional phases in the near future depending on the level of demand. Water taxi services were also planned to improve multi-modal connectivity in Yangon, with Tint Tint reporting that YBS lines will connect water taxi ports to Yangon’s urban core.

Expressways

A number of initiatives aimed at upgrading and improving highway and rail links are under way. These projects should offer a significant boost to cross-border trade, improve and facilitate domestic connectivity and logistics capabilities, and offer new opportunities for private investment.

Myanmar’s main arterial roads form part of the emerging Asian Highway Network, also known as the Great Asian Highway, a 141,000-km network launched by the UN Economic and Social Commission for Asia and the Pacific in 1959, and stretching across 32 countries from Japan to Europe.

Myanmar’s primary road network and its main border crossings include the Asian Highway (AH)- 1, running from the border of India in the northeast to the border of Thailand in the south-east, with crossings at the Myanmar towns of Tamu and Myawaddy. The AH-1 encompasses the 587-km Yangon-Mandalay Expressway (YME) running from Yangon to Mandalay via Naypyidaw and Meikthila. This is the country’s sole modern expressway, with JICA reporting it features a double carriageway and four lanes in good condition. However, heavy trucks are not permitted to use the road.

The AH-2, which includes the Yangon-Pyay highway, links with the AH-1 and runs from the border of Thailand at Chiang Rai to another Thai crossing at Tachileik. The AH-3 connects with the AH-2 and runs to the Chinese border at Muse, while the AH-14 connects to the AH-1 and runs from central Myanmar to the Chinese border, also at Muse.

Upgrades

In Yangon, January 2018 saw the signing of a financial advisory services agreement between the Ministry of Construction and the International Finance Corporation to build the Yangon Elevated Expressway. The 40-km road will connect the downtown area with the Mingaladon Industrial Park on the outskirts of Yangon. Implementation will take the form of a PPP, with a tender process and construction both slated to begin in 2018. The highway’s cost has been estimated at $2m per km.

Meanwhile, ongoing upgrades to the YME will likely see the entire road repaved with asphalt before FY 2020/21. In a bid to increase safety and reduce traffic accidents, a particular 64-km stretch of the road near Yangon will be expanded to four lanes and outfitted with modern safety equipment, such as rumble strips, with assistance from the ADB.

Additional road upgrades include the Yangon-Pathein Highway project, which is being carried out under a build-operate-transfer (BOT) model with the Oriental Highway Company to facilitate the shipment of goods from the burgeoning industrial area.

Country Roads

Road connectivity remains limited in Myanmar. Outside of major arterial highways in the central region, most roads in coastal, western, southern and mountainous areas are in very poor condition, usually offering just one lane to traffic with large stretches of unpaved dirt and gravel that are unusable during monsoon season. In addition, the lack of modern construction equipment in rural areas means tarmac on secondary roads is applied manually, resulting in inconsistent, non-durable and low-quality pavement which reduces traffic speeds to between 30-40 km/h. Coastal roads also have frequent narrow bridges with only one lane.

In February 2016 Myanmar’s published a master plan for industrial policy, which detailed proposals to develop four economic corridors supported by roads, railways, waterways and airports, offering new overland routes into China, India, Thailand and Bangladesh. The plan is not without criticism, with some characterising it as aspirational at best owing to decades of underinvestment and the poor maintenance of existing highways.

Nonetheless, the government has unveiled plans to construct 34,400 km of roads over the next two decades. Work is expected to focus on the country’s economic hubs of Yangon, Mandalay, Bagan and Pyay. Dedicated connections to the Thilawa and Kyaukphyu SEZs, located in the south and west of the country, respectively, will form an important component of new highway plans.

Trilateral Highway

Highway development plans also reflect Myanmar’s existing patterns of cross-border trade, with three proposed links expected to connect China’s Yunnan province to ports in the Bay of Bengal and Andaman Sea, as well as a new border crossing with Thailand. Perhaps the most significant is the proposed India-Myanmar-Thailand (IMT) Trilateral Highway. Originally conceived in 2002, the project will see a 1360-km highway connecting Moreh and Tamu on the Indian border to Mae Sot District on the Thai border.

Although the road has been delayed for years, in September 2017 India and Myanmar issued a joint statement following Indian Prime Minister Narendra Modi’s visit to Myanmar, emphasising their shared commitment to improved connectivity through road construction projects, bridge restorations and port infrastructure. According to the statement, construction work on bridges along the Tamu-Kyigone-Kalewa and Kalewa-Yagyi sections of the IMT Trilateral Highway is set for completion in 2020.

The ADB has also supported the IMT Trilateral Highway with a $100m loan used to build a 66-km stretch of road connecting Karaweik to Kayin State. Both projects are positive signs for enhanced integration with India and Thailand. There has also been talk of expanding the road to Vietnam.

China Connection

Development of the road between Mandalay and the border of China is offering promising prospects. Road connectivity to China has already improved significantly in recent months, following a series of upgrades to the Muse-Mandalay highway between Myanmar’s northern Shan State and China via the border city of Muse.

Highway projects like these offer big economic benefits to the country. The flow of goods and services along the AH-14 highway has already improved after over a decade of roadworks, the most recent of which was announced in February 2016.

The Oriental Highway Company, previously a subsidiary of Asia World Company, announced it had been awarded the contract to widen the highway from two to four lanes. The $300m project will see improvements carried out along 400 km of the 455-km highway, at a cost of $750,000 per km.

Although Asia World Company had previously been awarded contracts to build and upgrade the highway in 1996, 2002 and 2008 under a BOT PPP model, due to its location, the highway remained prone to frequent landslides, chronic congestion and security issues. The most recent round of roadwork is expected to be completed by 2020, which will be a boon for the fast-growing city of Muse. In September 2017 the Ministry of Commerce reported that roughly 1000 trucks use the Muse border crossing daily, with trade volumes estimated at between $9m and $10m per day. The highway is also significant because it forms part of the BRI’s China-Indochina Peninsula corridor, running from Kunming in China, along Myanmar’s northern border, to Kolkata in the east of India. This is one of six economic corridors envisioned in the BRI programme to create new Sino-ASEAN overland links.

Rail Developments

In addition to highways, boosting overland rail integration within Myanmar and to neighbouring countries remains a key goal of the government. According to the BCC, at 3722 km, Myanmar holds the longest network of rail lines among ASEAN member states.

The rail system comprises 412 locomotives, 960 stations, 1375 passenger coaches and 2284 wagons. However, ageing equipment and infrastructure has caused repeated delays and derailment, leading the government to quickly move forward on an ambitious project to revamp its national rail network.

Plans to facilitate connectivity include a new rail project slated to dovetail with existing efforts to upgrade the 622-km rail line linking Yangon to Mandalay. In May 2016 Myanmar Railways announced a $2.2bn upgrade of the Yangon-Mandalay railway, which would reduce travel time from almost 20 hours to eight. Japan is providing a MMK3.33trn ($2.5bn) loan for project. The remaining MMK428bn ($326.9m) will be funded by Myanmar.

Work commenced in early 2018, and upgrades are planned to include railway repairs, station construction, installation of modern signalling and communication equipment, technology upgrades, the introduction of modern locomotives and carriages, and automated ticket machines.

The project will be carried out in two phases with completion set for 2023. The first will upgrade the line from Yangon to Taungoo, and the second phase will be carried out from Taungoo to Mandalay. Authorities announced they had opened bidding for train car suppliers in December 2016, expecting to close in March 2017; however, a contract had not be awarded at the time of publishing.

Regional Links

Rail upgrades are also set to significantly boost Myanmar’s cross-border connectivity with its two largest neighbours. In August 2016 Indian Railways announced it plans to link its section of a planned Trans-Asian Railway Network (TARN) to the border towns of Moreh in India and Tamu in Myanmar. The TARN is a 117,500-km network of railways encompassing 28 countries across Asia and Europe. In February 2016 the ADB also expressed interest in providing $1.5bn of financing for a rail line linking the Bangladeshi beach resort town of Cox’s Bazaar to Myanmar.

Work on a rail line linking Myanmar to China is currently under way. Upon completion in 2021, the route will link Dali in China’s Yunnan province to the Chinese city of Ruili, a major border crossing between China and Myanmar. According to local media, the line will eventually connect to Mandalay and the China-backed Kyaukphyu SEZ in Rakhine State, forming another critical component of the BRI’s trade routes and overland economic corridor.

The BRI has also been slated to play an important role in port development, with the Kyaukphyu SEZ set to welcome the country’s first deepwater port, offering a solution to long-standing maritime shipping challenges. A sizeable increase in trade volumes should facilitate Myanmar’s development into a competitive import-export economy.

Ports

Myanmar’s 2228-km coastline stretches from Bangladesh to Thailand, offering potential to capitalise on rising maritime trade volumes between China, India and ASEAN. The country is home to nine functioning ports, of which the majority are river ports and unsuitable for larger vessels. The largest facilities are located in Yangon and spread across several facilities, including MITT, which handles most of the maritime roll-on/roll-off traffic, and MIP, which handles general cargo, such as steel products, heavy equipment, vehicles and rice.

The Yangon Port spans four terminals and 15 wharfs, including the Bo Aung Kyaw Street Wharf, Myanmar Industrial Port, Asia World Port Terminal and the Sule Pagoda Wharf. Ports in Yangon can serve vessels up to a maximum of 15,000 to 20,000 deadweight tonnes (DWT), although the government plans to increase this capacity to 35,000 DWT.

Maritime Potential

Yangon’s port facilities handle between 85% and 95% of Myanmar’s maritime trade, but capacity remains limited by the city’s location along the Yangon River, which offers a maximum draught of just 9.5 metres and can only be accessed during high tide, preventing large vessels from docking. Issues are exacerbated by a lack of supportive infrastructure and multi-modal connectivity. “There are no bulk handling capabilities, no conveyor belts, limited road links and almost no rail links in Yangon. Contributing to the challenges, the city’s ports lack the capacity to handle Panamax vessels,” Dentons’ Livingston told OBG.

Ocean-going trade holds significant potential for future growth. International maritime cargo traffic grew by more than 10% annually between 2004 and 2014, and by 40% between 2009 and 2014, according to VDB Loi data. In March 2017 the MPA reported that it expects container volumes at Yangon ports to rise from 890,000 twenty-foot equivalent units (TEUs) in 2015 to more than 2m TEUs by 2020, potentially hitting 4m TEUs by 2025.

To help meet anticipated future demand, the MPA has begun testing a new container management system, which would allow cargo shipping from central regions including Mandalay, Sagaing and Magway, to port facilities in Yangon. The trials are being implemented with support from JICA.

The Japanese privates sector is also involved, with the firms Tokyo Construction and JFE Engineering Corporation awarded a $118m contract to build a new container terminal in the Thilawa SEZ in January 2016. The terminal will double existing handling capacity to 187,000 TEUs upon completion in late 2018, according to local media reports.

Deepsea Plans

The ideal long-term solution for maritime shipping constraints is development of a deepsea port. Although the government has unveiled plans for two such facilities at the Dawei and Kyaukphyu SEZs, ongoing delays with both projects are likely to continue to challenge stakeholders.

The Kyaukphyu port project is under development by China’s CITIC Group, which has announced plans to build a new deepsea port offering 7m TEUs of annual capacity on a 1000-ha industrial area within the Kyaukphyu SEZ in Rakhine State.

Adding to its significance, the port would offer a competitive advantage to China and India, as stakeholders have floated plans to connect the project to Myanmar’s national railway network. In addition, the port itself would allow shippers to cut 5000 km of sailing distance for shipments between India and China as vessels would not have to pass through the Strait of Malacca. The $7.2bn project is slated for development under a BOT PPP model, through which CITIC will design, build, finance and operate the facilities under a 50-year concession, with a potential 25-year extension. However, the government has recently moved to renegotiate its agreement and increase its stake in the port from 15% to 30%. In November 2017 the two partners settled on a 70:30 split for the project. Myanmar is expected to pay $2.16bn of total costs under the new agreement, as well as 50% of the SEZ’s $2.7bn industrial park. This will bring its total commitment to the project to $3.51bn, or 5% of the country’s annual GDP, a spending commitment which has been criticised for running the risk of becoming prohibitively high, according to industry media reports. Upon conclusion of financing arrangements, authorities are expected to move forward on environmental impact assessments, which will take between 18 months to two years to complete. This means the deepwater port will not be coming on-line in the near future.

The Dawei deepsea port, meanwhile, would be located along a planned SEZ currently under development by the governments of Myanmar, Japan and Thailand. The SEZ is slated to form an important part of the Southern Economic Corridor, a logistics route connecting to the Andaman Sea and Indian Ocean.

The port would form a major component of a planned SEZ located 680 km south of Yangon, and just 350 km west of Bangkok, offering two basins – one with a 16-metre draught and one with a 12. 5-metre draught. This port would not only be able to handle deepwater vessels, but would also be home to a container terminal with gantry cranes and a bulk cargo terminal. Planned for development over a 10.08-sq-km plot, the port’s surrounding infrastructure would include facilities for the oil and gas industry, a steel mill, heavy industries, and coal- and gas-fired power plants, according to the UN. Like Kyaukphyu, however, Dawei has stalled for several years as authorities work out appropriate financing mechanisms, and it is not expected to come on-line in the near-term (see Trade & Investment chapter).

Logistics

Transportation infrastructure is necessary if Myanmar is to be party to international trade facilitation agreements (TFAs). In late 2013 World Trade Organisation (WTO) members agreed an initial TFA, which was further refined during 2014. The document focuses on actions to ease the movement, release and clearance of goods across borders, including streamlining Customs procedures and the management of goods in transit. WTO research suggests that the TFA could increase global merchandise exports by up to $1trn, with developing countries capturing more than half of the gains. The TFA entered into force in February 2017 after Myanmar ratified the deal in December 2016.

The agreement has already seen initiatives for cross-border transport and logistics gathering steam with Myanmar signing memoranda of understanding on initial implementation of transport facilitation with China and Thailand indicating cooperation between countries. “For the TFA be effective in addressing the problems it was created for, a higher degree of communication and policy integration is required between the ministries and governmental agencies in charge of trade,” U Minn Thu Aung, managing director at logistics firm Helio International Company, told OBG.

Flying High

Questions also linger over the economic feasibility of a proposed new airport in Yangon, even as passenger volumes at YIA record strong growth. Myanmar’s 33 operational airports include three international hubs: YIA, NIA, and the Mandalay International Airport. There are 11 domestic airlines and 28 international airlines operating in the country, with flagship national carrier MNA – rebranded from Myanmar Airways in 2014 – holding the largest domestic fleet of 13 planes, followed by Air Kanbawza, also known as Air KBZ, with eight.

Additional domestic carriers include Air Mandalay, Yangon Airways and Mann Yadanarpon Airlines, with a total of 16 aircraft between them. Major international carriers include Emirates, Thai Lion Air, Qatar Airways, Cathay Dragon, China Airlines and AirAsia all of which launched services in late 2016.

Air passenger traffic has risen steadily at YIA since 2010, with the DCA reporting that international passenger volumes rose from 1m annually in 2010 to 3.4m in 2015, out of a national total of 4.8m. According to YAC, 5.45m travellers transited the airport in 2016, including 3.64m international passengers, a 13.5% increase over the DCA’s figures for 2015 and a 264% increase in international passenger volumes since 2010. YAC reports that traveller numbers at YIA were estimated at 5.9m in 2017, of which 67%, or 3.95m, were international passengers. Both the BCC and the DCA expect the number of people in and out of Yangon to reach 30m by 2030.

Aviation Expansion

YIA’s steady increase in capacity can be attributed to an ambitious expansion plan launched by YAC and the DCA under an Airport Master Plan published in 2013. The project included construction of one domestic and two new international terminals in three phases.

The first phase included plans to construct the new international and domestic terminals, while phase two saw the international terminal further expanded and the construction of a new VIP terminal. Phase three will involve further expansion of the new international terminal, as well as construction of a mixed-used airport city comprising hospitality, commercial and retail facilities.

YAC broke ground on the international terminal in April 2014, and it opened for operation in March 2016, boosting the airport’s annual passenger capacity from 2.7m passengers to 6m. The domestic terminal launched in December 2016. YAC reports that once all phases of the Airport Master Plan are complete, YIA will have an annual capacity of 20m passengers, despite having only one runway.

Excess Capacity

Authorities are also moving to develop Hanthawaddy International Airport (HIA), located 80 km north-east of Yangon in Bago. The airport is expected to become the second-largest in Myanmar upon completion, offering capacity for 12m passengers. In October 2014 a consortium comprised of Singapore’s Yongnam Holdings and Changi Airport Planners and Engineers, as well as Japan’s JGC Corporation was selected as the winning bidder for a construction tender. A concession for the $1.66bn project was expected to be signed in late 2016, although development has since stalled. In February 2018 Yongnam Holdings revealed that a key agreement regarding design, construction and management of the airport has expired.

Some stakeholders claim that YIA’s expansion will enable it to meet mid- and long-term air passenger demands, raising doubts as to the economic feasibility of building another airport more than an hour’s drive outside Yangon. HIA’s 2022 completion date would bring Yangon’s total passenger handling capacity to 32m, making the airports more than capable of handling aforementioned 2030 passenger volume estimates. Authorities remain keen to develop HIA, and in September 2017 U Win Khant, permanent secretary of the MoTC, told local media that HIA is a priority aviation project.

Outlook

Identifying priorities will be critical for the government as it moves to improve cross-border trade, meet rising air passenger demand, capitalise on regional growth trends and reduce transport time and costs. Equally important will be the creation of a codified PPP framework paving the way for future transport project investment. Myanmar’s underdeveloped highway networks, limited maritime shipping infrastructure and rising urban congestion will continue to weigh on economic growth in 2018; however, recent tender awards across key transportation segments highlight the increasingly prominent role the private sector will play in the country’s long-term development, while projected growth and demand across all segments should offer opportunities to foreign and private investors.

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The Report: Myanmar 2018

Transport & Logistics chapter from The Report: Myanmar 2018

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