Limited Links Sink Myanmar’s Potential

Despite its 2,000 kilometer-long coastline, reaching from Bangladesh to the west and Thailand to the east, Myanmar is home to only nine functioning ports, with the one in the commercial capital of Yangon spread across various sites and run by different owners. The ex-capital currently handles 95% of the country’s maritime trade.

Annual port throughput is currently just over one million twenty foot equivalent units, or TEUs, a standard measure of shipping container transit. Analysts estimate with current port construction underway that figure could rise to three million TEUs by 2021, or triple its current logistical capacity to handle maritime trade.

The bigger potential payoff, Myanmar officials contend, will come with the linkages Myanmar can soon offer as a hub or lane in several of the economic corridors envisaged across upper mainland Southeast Asia and beyond.

Until now Myanmar has been viewed as out-of-bounds territory in various of these multilateral schemes, though many of the areas they would crisscross are still plagued by civil wars.

“We are the western flank of [the] region, especially of the Greater Mekong Subregion (GMS) area,” said Myo Nyein Aye, deputy general manager of the Myanma Port Authority (MPA), at a recent shipping and ports conference held in Yangon.

Beyond GMS linkages are broader opportunities through the Association of Southeast Asian Nations, which recently enacted a regional free trade area that aims to promote more intra-regional trade and investment.

Myanmar is also strategically located near the booming economies of China and India, which its linked to through the so-called BCIM organization, and is viewed as a key link in China’s trade-promoting regional infrastructure schemes, including the US$1 trillion One Belt, One Road initiative.

“There are a lot of large, leading, growing economies that Myanmar is bordering with,” notes Dieter Billen of Roland Berger, a Munich-based global strategy consulting firm.

The trouble is reaching them. Myanmar is plagued by both hardware and software bottlenecks that include “limited port infrastructure but also soft infrastructure such as lack of workforce experienced in modern port handling and outdated processes and tools which need to be made more efficient,” said Billen.

Funds are available for development but “come with conditions which Myanmar will have to trade off.”

One example is China’s development of the Kyaukpyu port in Rakhine State as a potential future hub for transporting fuel to its land-locked western regions. Plans include the development of rails and roads linking to the central city of Mandalay, from where they’ll be redirected north to the Chinese border at Muse-Ruili.

China already built and operates a pipeline that recent came online that traverses nearly the length of the country to ship oil and gas into China. While the Kyaukpyu scheme promises more modern roads, rails and ports, there is still domestic resistance to possible over-reliance on its giant northern neighbor.

“We are afraid of pure Chinese money,” said Aung Khin Myint, chairman of the Myanmar International Freight Forwarders Association, who might be expected to be more enthusiastic.

Infrastructure development in Myanmar is still plagued by a long list of issues, including funding, political risks and policy concerns. Certain government officials profess to be rolling out the welcome mat for new foreign investment in infrastructure.

“Please come and cooperate, coordinate and collaborate,” the MPA’s Myo Nyein Aye told the conference.

The MPA, which serves as both a regulator and facilitator, allows foreign investment of up to 100% to operate ports via leasing, joint ventures and private public partnerships, or PPPs.

“That’s specifically in the law itself,” said Jo Daniels, managing partner at Baker and McKenzie, a law firm, adding the range of options available have created “quite a continuum of how you can pay for port infrastructure” in Myanmar.

Daniel’s noted Myanmar, long closed to the outside world, now offers a wide range of financing options, from equity, debt and financing from trade-facilitating state agencies such as export-import banks.

Still, there are significant political and policy risks. Myanmar still faces a delicate and uncertain transition from decades of military to quasi-democratic rule, led by the former activist protest party, the National League for Democracy. Meanwhile, the military still plays an outsized political role through control of crucial ministries that sometimes results in mixed signals to potential investors.

Mega-project disruption could also arise in the form of community organizations flexing their newfound freedom to organize and stop large-scale infrastructure projects in their home areas, as happened with the China-led Myitsone hydropower dam on the Irrawaddy River and the Letpadaung copper mine.

The former mega-project was suspended due to local protests, while the latter controversial project is ongoing.

“The government is listening to these protests,” said Ed Ratcliffe, Myanmar director of Vriens and Partners, a Singapore-based corporate advisory firm.

Also missing but more difficult to pin down is the lack of coherent and transparent government policy, as former political prisoners and protestors struggle to transform themselves into competent politicians and knowledgeable policy wonks.

According to Billen, the government still needs a clear and open strategy that not only covers national development, including integrated transportation schemes, but also provides a framework to allow new projects to organically arise and compete for resources.

“Port planning at a national as well as specific projects level is required,” he said.

That hasn’t been in evidence with other transport infrastructure. The country’s main highway, linking the commercial hub Yangon to the nation’s second city of Mandalay, has recently been fixed of bumps and instituted speed limits.

Yet the road’s camber runs the wrong way, leading to “massive oversteer,” according to Allan Davidson of truck and car hire company Yoma Fleet.

A bigger problem, he says, is a recent inexplicable policy change which bans trucks from using the highway unless they are ten wheels or less and carrying perishables. That heavier load traffic is now forced to use the old bumpy highway, where the average traveling speed is around 30 kilometers per hour.

Davidson says that to-and-fro cargo runs which could be done in 16 hours now take three days and that heavier use of the older crowded highway by heavy-goods vehicles is leading to more accidents, many of them fatal. “The [new road] asset is just underutilized and it’s unbelievable,” he said.


Source: Asia Times

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