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port infrastructure but also soft infrastructure such as lack of workforce experienced in modern port handling and outdated processes and tools which need to be made more efficient,” said Billen.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.
Published in Daily Times, July 31st 2017.