Once a sleepy capital where cars were rare, Yangon is now a bustling urban centre. The spike in activity has been very positive for economic growth, but has placed pressure on infrastructure. Myanmar’s government has recognised the need to modernise transport capacity and update the legal framework that governs the sector. To that end, international experts, notably from Japan, have gathered in Yangon to plan and guide transport development of Myanmar’s largest city. Their expertise is also being applied to major national logistics challenges, and they are poised to get support from many public-private partnerships (PPPs) that will pay the estimated $433bn bill for transport improvements between 2014 and 2030, assuming the economy grows at the expected annual average of 7% from 2011 to 2035.
Rising To The Task
The country’s rapid pace of modernisation has brought with it several challenges that are common to developing markets, including congestion on the roads and at major gateways. The commercial capital’s international airport is feeling the strain of handling more passengers than it was designed for and it is still subject to occasional blackouts. Trains bump along warped tracks on short journeys that last hours, and while port infrastructure is one of the country’s brighter spots, poor road connections hamper the flow of goods and supplies.
Decades of isolation limited investment in the transport network and left it underdeveloped. Now that the economy is no longer centrally planned, institutions are learning how to adapt to market forces and grapple with new financing mechanisms – like PPPs – which, while common in much of the world, are new to Myanmar.
The government is learning quickly. Work is already under way on key projects, with a bus rapid transit scheme planned for Yangon by 2018 and an overhaul of the city’s 35-km circular railway by 2021. Still, haphazard progress on other major developments, like the new airport at Hanthawaddy, underlines the challenges that lie ahead for modernising outdated transportation.
The Asian Development Bank (ADB) estimates that by simply improving international and national transport, Myanmar could increase its GDP by 21% by 2030. Making rural areas more accessible would also make the country’s agricultural products, like rice, more competitive and boost government efforts to improve the living standards of the more than 70% of the population who live in rural areas, according to the bank. “Investment needs are large mainly because of the low quality and poor condition of existing infrastructure,” the ADB wrote in its report. “Meeting them will take time, and transport institutions need strengthening to delivery better outcomes.”
The National Transport Development Plan, designed in consultation with the Japan International Cooperation Agency (JICA) and approved in December 2014, brings together the three ministries involved in transport issues – the Ministry of Construction, Ministry of Road Transport and Ministry of Transport – to improve coordination among them. The plan proposes the development of transport networks along ten corridors. Five priority corridors have been identified for urgent investment, including the central north-south corridor involving the three major population centres of Yangon, Naypyidaw and Mandalay, the east-west corridor from Myanwaddy to Yangon and the northern corridor between Mandalay and Muse.
The scale of the challenge is enormous. Compared with its neighbours in ASEAN, Myanmar’s transportation network is grossly underdeveloped. Road density is about 2 km per 1000 people in Myanmar, compared with 11 km per 1000 people for the group as a whole. In the World Bank’s 2014 Logistics Performance Index, which is released every two years and considers Customs procedures, infrastructure, international shipments, tracking and other factors, Myanmar ranked at 145th out of 160 countries, just ahead of Gambia and Mozambique.
Myanmar’s 2014 performance was worse than in 2012 when it came in at 129th. In ASEAN, which is in the process of creating a single market and production base, Myanmar was the worst performer, behind Cambodia (83rd) and Laos (131st). By focussing on the country’s strategic routes, JICA estimates the improved transportation network will benefit as much as 61.7% of the population by 2030; that is 65.7m people out of a population that is expected to rise to 73.9m in 2030.
Opportunity For Aviators
Myanmar has enjoyed double-digit growth in air traffic every between 2010 and 2014, according to the Department of Civil Aviation (DCA). The number of international passengers rose to 3.2m in 2014, compared with 2.7m the year before. At the same time, the numbers flying domestically rose to 2.2m in 2014 over 1.9m in 2013. Combined growth in passenger numbers was 18% in 2014, compared with 17% in 2013.
The expansion has put pressure on Myanmar’s airports and the country’s three main gateways at Yangon, Mandalay and Naypyidaw, but especially in Yangon, which is the country’s busiest airport by a considerable margin. Facilities and crucial support services such as navigation, fuel supply and maintenance are feeling the strain.
Myanmar liberalised its airspace in 2011, allowing new companies to start airlines provided they met a set of minimum requirements. It now has nine domestic airlines operating services to 27 domestic destinations and two more were given regulatory approval in 2015. Two airlines, Myanmar Airways International and Golden Myanmar Airlines, operate services to seven regional destinations, according to the DCA. Myanmar National Airlines resumed international services in August 2015, following a 22-year hiatus, flying seven days a week to Singapore, an extremely competitive route, which the Centre for Aviation has warned already suffers from over-capacity. The number of international operators, predominantly from Asia, has increased since 2010 with flights connecting Yangon to major centres such as Singapore, Bangkok and Kuala Lumpur as well as Beijing and Guangzhou. Qatar Airways operates a direct service three times a week with its hub in Doha. According to the Centre for Aviation, at the end of June 2015 there were 39,740 seats a week with Thailand – the top market – and 14,960 with Singapore. Malaysia was third, with 11,054 seats.
Flying In Focus
The government strategy to deal with the rapid rise in demand has four main thrusts, according to U Ne Winn, director of transport at the DCA: the gradual liberalisation of air transportation in line with ASEAN’s Open Skies Agreement, the upgrade of aviation infrastructure, the improvement of airlines’ business capability and the strengthening of connectivity. Legislation is also being updated – some of the laws governing aviation date from the 1930s – for institutional reform the DCA, under the Myanmar Airports’ Authority Law, will be split in two, creating a regulatory agency and an airport and air navigation services provider.
Foreign investment is welcome in 20 segments of the aviation sector, including the airline business, where foreigners can own up to a 49% stake. Needs are broad and include training, particularly for pilots, engineering and maintenance. Investment in navigation is closed to outsiders, but the DCA said it is working with its neighbours in ASEAN to modernise the country’s air traffic operations and bring systems in line with International Civil Aviation Organisation requirements.
The DCA and Yangon Aerodrome Company signed a 30-year concession for the development, management and operation of the Yangon International Airport in January 2015 and construction work is set to be completed by March 2016. The $199.5m project includes expanding the apron and upgrading facilities both airside and land-side. Meanwhile, the modernisation of Mandalay International Airport was awarded in November 2014 to a venture involving two Japanese companies – Jalux and Mitsubishi – and a unit of local firm Yoma Strategic Holdings. Jalux and Mitsubishi together own 90% of the venture which has a 30-year agreement to upgrade and operate the airport, which first opened in 2000. The upgrade in Mandalay is designed to boost both passenger and cargo traffic with the intention of turning the facility into a regional logistics hub.
While some plans have advanced rapidly, progress at the Hanthawaddy airport has been less smooth. Conceived as the country’s new international gateway, given the lack of space for expansion in Yangon, construction is not expected to start until 2016 with completion targeted for 2022, four years later than initially planned. The $1.5bn airport is to be built by a consortium from Singapore and Japan – Yongnam and Changi Airport Planners and Engineering and JGC Corporation – and half the funding will come through official development assistance. Concluding that part of the agreement has taken longer than anticipated. U Ne Winn said that is partly because PPP structures are new to aviation officials. “We did not have such a practice before,” he told OBG. “We are, in the Chinese phrase, ‘crossing the river, feeling the stone.’”
Even as the government seeks to improve aviation infrastructure, the domestic airline market remains challenging. While some operators, such as Myanmar National Airlines, are buying new planes and starting new services, Air Bagan, which was down to only two planes after a series of accidents, suspended services in August 2015 for what it said was a “maintenance check and restructuring plan.” Air Mandalay stopped flights in December 2014, but resumed again in May 2015.
Officials admit they would prefer airlines to consolidate, given the small size of their fleets and their limited investment capacity. However, some say the problems go deeper – pilots are poorly paid, lack training and even have outside jobs, while planes are sometimes overloaded with cargo, increasing the risk of accidents. Aviation fuel is also expensive and of variable quality, and there is a lack of professional expertise in some key airline support functions.
With so many airlines chasing the roughly 2m passengers a year, competition is intense and domestic aviation is currently unprofitable. For those airlines that are trying to improve their services, an anticipated slowdown in demand in 2015 may give operators some breathing space, even as the government pushes forward with reforms. The Centre for Aviation predicts growth in Myanmar’s aviation market will slow to single digits in 2015, after expansion of 20% in the past five years.
Keeping On Track
Myanmar has an extensive rail network, with nearly 6000 km of tracks connecting Yangon to the country’s main cities and smaller communities – much of it built under British colonial rule. Like much else in the country the network fell into decline during the period of military rule. Tracks do not meet modern standards and signals are almost obsolete. Bumping along at about 30-40 km per hour even on an express train from Yangon to Mandalay, it can take some 17 hours to complete the journey.
Updating the rail network is a key element of the National Transport Plan; experts say rail is a more efficient way of moving freight than road, and trains can move more people, more quickly, than cars. JICA analysis of travel and freight patterns show that in 2013 most people, and most goods, travelled by road. Between Yangon and Naypyidaw, for instance, 93% of freight was transported by road even though lorries have to use the old national route because they are banned from the highway. Just 7% of freight was transported by rail and the onward journey from Naypyidaw to Mandalay showed a similar breakdown. For passengers, 83% of those travelling between Yangon and Naypyidaw in 2013, went by bus while 13% went by car. Just 3% took the train. Again, the numbers were similar from Naypyidaw on to Mandalay.
As part of the north-south corridor, the Mandalay Yangon railway will be upgraded under a three-phase programme, according to JICA. The 267-km first phase, with 44 stations from Yangon to Taung Oo, will cost $200m and is being funded by the Japanese. The tracks will be improved, bridges rebuilt and reinforced, and signalling equipment installed. The trains should also get new rolling stock.
Even as the rail service is upgraded, roads will also be improved. Myanmar’s road network extends to some 142,395 km, Daw Tin Aye Han, director of the Directorate of Investment and Company Administration, told the Myanmar Infrastructure Summit in April 2015. The Ministry of Construction is open to build-operate-transfer and joint venture proposals to build and upgrade not only these roads, but airports, ports and cargo depots as well, she said.
The master plan analysis of the key roads between Yangon and Mandalay shows as many as 2000 private vehicles and 370 buses used the expressway every day in 2013. About 1500 large trucks used National Highway 1 and 270 used National Highway 2. The number of trucks using National Highway 1 is expected to exceed capacity during 2016/17, according to growth projections.
Road congestion has also become an increasing issue within Yangon, Myanmar’s commercial hub and largest city, following the decision to relax car import limits in 2011 and the ADB has warned traffic jams – a feature of life in so many Southeast Asian cities – could impede economic growth. Some 430,000 of the 640,000 vehicles registered in Myanmar are on Yangon’s streets,
The Comprehensive Urban Transport Plan of the Greater Yangon (YUTRA) aims to modernise and expand urban transit in a city whose population is expected to increase 1.7 times by 2035, to 9.7m. Household income is also forecast to rise by four times, giving more people the means to own cars.
“Good transport infrastructure can help cut down traffic bottlenecks and is critical in helping cities develop faster,” Gareth Wong, general manager of Surbana International Consultants ( Myanmar), which works in urban planning, told OBG. “It can help facilitate the efficient movement of goods, improve the quality of life and reduce environmental pollutants from traffic jams.”
YUTRA focuses on mass transit systems and envisions a phased development process to move from buses and the existing rail system to the introduction of a mass transit railway and ring roads. The target is to ensure at least 60% of the population is using public transport by 2035.
A tender for local and international companies was called in August 2015 to provide buses for a proposed bus rapid transit network, which will include 11 routes covering 244.9 km. According to Yutaka Araki, a representative at JICA in Yangon who is involved in the implementation of the city’s urban transport development plan, the bus rapid transit system will be the first in a series of measures to address the city’s increasing traffic problems. Built by a joint venture between the government and a number of local companies known together as the Yangon PPP Company, the new bus system is expected to launch in 2018.
Another early measure will involve improvements to the rail line that loops around the city. About 70,000 people use the service each day, according to Myanmar Railways, the state operator. A full circle takes about three hours to complete. Having secured parliamentary approval, Myanmar Railways expects to sign the memorandum of understanding for a $207m loan from JICA in the final quarter of 2015. Under the agreement, the circular railway will utilise Japanese-made trains, an automotive train stop system and improved tracks. U Ba Myint, the general manager of Myanmar Railways, told the Global New Light of Myanmar that the upgrade was likely to cut journey times in half. Ten air-conditioned carriages were delivered from Japan in September 2015.
The government is also considering whether to build the two mass rapid transit lines proposed in YUTRA as longer term solution to Yangon’s transport needs. The projects would be completed by 2035, if they get approval and secure funding.
“Given the projected population increase we believe that a metro rapid transport system is absolutely a necessity for Yangon,” Araki, a representative at JICA, told OBG. The system will be built in two stages, with the first line running north to south to connect the city with the airport. The second line will run south to east. Feasibility studies have yet to be completed on whether the trains would run above or below ground, but the cost of the first line is estimated at about $2.25bn and the second, including an extension to the south, is set at $3.42bn. The high cost means the project would be unlikely to receive grant aid and would probably be constructed under a public-private partnership. Japan would be willing to provide maintenance and service support, Araki indicated. Given the high cost of a mass transit railway, Araki said trams are also under consideration.
Links To Boost Ports
Yangon’s ports lie at the heart of the country’s trade routes, handling approximately 90% of the country’s international trade. There are about eight ports positioned along the Indian Ocean coast towards Sittwe, but the action is centred on Yangon.
The city hosts three major terminal operators – Asia World Port Authority Terminal and Myanmar Industrial Port (both of which are in the city centre) and Myanmar International Terminal Thilawa (25km outside Yangon). Until 1996, there were no privately-owned terminals and those that existed were under state control. The largest terminal is at the Thilawa special economic zone about 25 km south of the city centre. The facility is operated by Hong Kong-based Hutchison International as Myanmar International Terminals Thilawa. One of the biggest issues – both for those moving freight as well as port regulators – is that Yangon’s ports are not positioned on the coast, but on the river.
“Night navigation is not possible due to significant tidal and draft restrictions,” Dawid Sold, the country manager for Maersk in Myanmar, told OBG. “We are using small vessels which are limited to 1100 TEUs (twenty-foot equivalent units) for our three weekly services to Myanmar. Our direct service from Shanghai has proved popular with customers but we are not able to deploy bigger ships due to the limitations.”
“Yangon is still the premier port for Myanmar,” U Kyaw Than Maung, managing director at the Myanma Port Authority (MPA), told OBG. “It is only a river port, but it is safe and we do not need to worry about rough seas and storms. The disadvantage is the depth of the water. We have to rely upon the cycle of the tides.”
Port authorities recognise that the shallow available draft, which is exacerbated by a difference of more than five metres between high and low tides, means that the ports simply cannot cater to larger vessels. There have been discussions with companies from China, Japan and Singapore about deepening the channels, but the work would require the construction of breakwaters and retaining walls and would be costly. For the moment, regular dredging keeps the channels clear.
Yangon’s ports handled between 24m and 25m tonnes of cargo in 2014, about the same amount as in 2013, according to the MPA. The limited growth was in part due to the ban on exports of raw timber, which took effect on April 1, 2014. Yearly growth in container traffic is about 10%, with total market volumes rising to 700,000 TEUs in 2014, compared with 640,000 TEUs in 2013. The country’s main imports are cement, iron bars, steel, construction materials and consumer goods, but close to 80% of containers leave the country empty. Efforts are under way to upgrade the port in Mandalay, and diversify Myanmar’s port network, which is also expected to benefit from the modernisation of road and rail transport infrastructure outlined in the National Transport Development Plan.
Like much else in Myanmar, the transport sector is going through a period of enormous change and officials are learning to understand the machinations of the market economy and the needs of foreign investors. The completion of projects to improve airports, roads, railways and ports will be a big step forward for Myanmar as it seeks to integrate itself into the global economy. New legislation, like the Myanmar Port Act passed in April 2015, gives port authorities increased autonomy, which could improve efficiency. These changes should make it easier to move goods in-country and across borders, relaxing bottlenecks and providing a more conducive climate for investment. The key to success will be locating funding and the government’s ability to negotiate agreements with private companies and donors.
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