Developers are rushing to build infrastructure, offices and housing

Evidence of the construction boom in Myanmar is visible throughout the country and especially in Yangon. The old capital has been awakened and is on an express track to becoming a modern city, with the number of public works and concrete buildings rapidly rising in the last four years. This trend is set to continue, as the economy is on track to grow 7.8% in both FY 2014/15 and FY 2015/16, according to the Asian Development Bank (ADB). Growth is supported by the government’s reform programmes.


Despite the rapid growth of the economy, an assessment by Business Monitor International (BMI) in early 2014 showed that the building industry could see a drop in new projects in 2015, as investors adopt a wait-and-see approach pending the general elections in November of that year. However, the ramp up of existing projects will help temper any decline in activity. Investors remain cautious over the long-term viability of the political and economic reforms promised by the present government. BMI forecast that construction sector growth for 2014 would be 9.7%, up from 9.3% in 2013; however, this would drop to 8.5% in 2015 as a result of less investment due to political risks and potential instability. Another factor contributing to the expected drop is the fragile economic recoveries in the EU, China and the US, all major investors in Myanmar.

Infrastructure Upgrades

Construction works on mega-projects that have started in the past four years have been gaining speed. The opening of Myanmar’s economy in 2011 has seen the need to cater for the projected growth and, as a result, the government has embarked on projects to upgrade, expand and build a long list of infrastructure facilities, ranging from roads to bridges, seaports to airports and power plants to affordable housing. Several private projects were announced in 2014, including offices, hotels and malls, but a large portion of Myanmar’s construction activity is taken up by residential projects, valued at $1.5bn. The demand for urban housing, especially in Yangon, is being addressed by a series of major developments.

Residential Developments

In April 2013, Dragages Singapore, a unit of French construction firm Bouygues Construction, announced it would be building the $100m, second phase of the Star City Thanlyin, a large condominium development on the outskirts of Yangon. The project includes 5000 apartments and is set to be completed by 2016.

At the same time, two major domestic construction firms, Shwe Taung Group and IGE Company, are building two large projects in Dagon Seikkan, a township to the east of Yangon. The developments are set to include a combined total of more than 17,000 apartments in 48 towers on 89 ha of land. The units are currently estimated to cost around $20,500 per unit.

Tourism Support

Myanmar’s tourism sector has played a key role in driving the construction industry. Myanmar saw 2.4m tourist arrivals between January and October 2014, and this was set to hit the 3m-mark by year-end, and 5m in 2015. The Myanmar Investment Commission (MIC) said in December 2014 that the tourist sector received the most local investment with 68 projects worth MMK1.3trn ($1.3bn) in 2013, and 22 projects worth MMK587bn ($587m) by the end of September 2014. To cope with this growth, the number of new hotels and guesthouses are on the rise. A Ministry of Hotels and Tourism report in November 2014 stated that Myanmar had 787 hotels with 28,000 rooms in 2004 and by 2014 this has risen to 1076 hotels providing 42,000 rooms.

Most of the new hotels are funded by foreign direct investment in joint ventures with local companies. For 2014, foreign investment in hotel construction has exceeded $2bn, according to the MIC. There are a total of 31 hotels operated by foreign owners throughout Yangon, Mandalay, Bagan, Kawthoung, Techilek and Myeik. In addition to the foreigner-run establishments, which tend to cater to the higher end of the market, in October 2014, the MIC granted permission to two local firms to operate five-star hotels: Know The Truth Group, in Ngwesaung Township, and Imperial Place Hotel in Nyaung-U Township. New facilities such as high-end supermarkets, malls, cafes, restaurants, nightclubs and gyms have also cropped up to cater to the tourists and working expatriates.

Special Zoning

In order to ensure its economic plans continue to grow, Myanmar has also planned three special economic zones connected to major ports: at Yangon’s Thilawa district; at Dawei, in the south of the country; and at Kyaukphyu in the northwest. After delays, the Thilawa project has started to progress with backing from Japanese firms, and Japan’s Suzuki has announced plans to build an automobile factory at the site. About 21 foreign firms have signed to operate out of the Thilawa Special Economic Zone (SEZ). For example, British American Tobacco has announced a planned $50m plant, while Pepsi and Japanese soft-drink maker Pokka were reportedly eyeing investments at the SEZ. More than 200,000 new jobs are expected to be created once the Thilawa SEZ starts functioning.

The country’s other two SEZs, Kyaukphyu and Dawei, have seen more limited progress. While Kyaukphyu will provide a strategic connection for Chinese traders to access the Indian Ocean, much of the basic infrastructure is still missing. Despite this, however, the China National Petroleum Corporation already operates an oil and gas terminal at the site, with pipelines reaching through to Shah State in China.

For its part, development at the Dawei SEZ looks set to restart in 2015, as the Thai government renews its commitment to the project. Originally set to be developed by Italian-Thai Development (ITD), the project has seen limited progress, in part due to concerns about ITD’s ability to fund such a large undertaking. In mid-2014 the project was transferred to Dawei SEZ Development, a special-purpose, 50:50 venture established by the Thai and Myanmar governments.


Backed by the Japanese government and the ADB, major projects are now under way to upgrade Myanmar’s highway network. A number of new roads are also being built to improve connectivity and drive economic growth internally and also to provide easy access to Myanmar’s immediate neighbours.

The Japan External Trade Organisation and Japan International Cooperation Agency (JICA) are presently involved in funding 22 road construction projects throughout Myanmar. Also in the pipeline are three special road projects: the India-Myanmar-Thailand tripartite highway; a main highway to connect Myanmar and neighbouring ASEAN cities; and the Dawei-Sinphyutaung (Thailand) road. Japan is also involved in funding 15 bridge projects throughout the country.

The ADB and the Indian government are involved in building a major highway to connect India’s northeast region to Myanmar, while India is also helping Myanmar to upgrade its 160-km Tamu-Kalewa-Kalemyo road. Local developers are also active. For example, Shwe Taung Development is building several road and bridge projects, including the Yangon-Mandalay Highway project and the Sagaing-Monywa-Shwebo Highway.

“Infrastructure capacity is vital for the development of Myanmar. Key areas include power and water supply,” U Sone Han, chairman of V-Pile Group, told OBG. “Roads are also critical, as these impact operating costs for construction firms because of logistical challenges.”

Airport Expansions

Renovation and expansion projects for the Yangon and Mandalay airports were tendered to international consortia in 2013. The Mandalay tender was won by a consortium of Japan’s Mitsubishi and local construction company Serge Pun & Associates, while the Yangon tender was won by a consortium lead by local firm Pioneer Aerodrome Services and including China Harbour Engineering, among others. In October 2014 the government also awarded a $1.45bn project to build a new Hanthawaddy International Airport near Yangon to Singapore-Japan consortium Yongnam Holdings and JGC. The consortium will receive a Japanese government loan to cover 49% of the cost of building the airport, while also obtaining $517m in private lending and investing $222m. The new airport is set to be operational in December 2019 and will be able to handle 12m passengers a year.


The construction sector will also be driven forward by Myanmar’s huge hydropower potential. More than 80 dams have been proposed, ranging from small local projects to the giant TaSang dam on the Thanlwin river, which would be the tallest in South-east Asia. Most of the dam works are being undertaken by Chinese investors, including Chinese state-owned Sinohydro. Among local firms, Shwe Taung has been active as the builder of the 52-MW Baluchaung 3 dam and as a supplier of concrete to other projects. Another major development completed in 2014 was the $4.3bn of oil and gas pipelines leading from offshore northwest Myanmar to the Chinese border, undertaken by the China National Petroleum Corporation.

Organising Labour

Investors are still daunted by several concerns which can affect the future of the construction industry in Myanmar. A major concern is that the sector is not formally organised, failing to differentiate between contractors and builders, and allowing illegitimate builders to participate. The sector is also lacking proper authorities or legislation to enforce work site safety. Additionally, technical expertise is also limited in government ministries and local governments, which results in delays to processes and the approval of building plans and designs. For example, the Yangon City Development Committee (YCDC) takes about eight to nine months to approve an application.

The government has proposed a comprehensive Myanmar National Building Code; however, implementation has been delayed. In the meantime, many contractors have used the US or UK building codes as a guideline, although others have sought less stringent codes. “From a construction standpoint we still have a lot to learn as a nation,” U Han Thein Lwin, managing director of High Tech Concrete Technology, which is part of Shwe Taung, told OBG. “We have made reasonable progress in architectural and safety fields, but there is still room for improvement,” he added.

The sector is also hampered by the cost of retaining labourers. With so many projects ongoing in Myanmar, labourers are free to switch jobs to projects which offer them higher wages. To overcome this problem, local developer Shwe Taung has raised daily wages and introduced incentives such as bus fares, lunch provisions and higher wages for longer-serving workers. U Aung Zaw Naing, group CEO of Shwe Taung Development, told OBG, “Foreign investors should not be solely motivated by low labour costs. They need to look beyond this characteristic and think about long-term investments.”

In addition to the challenges of retaining basic labourers, the sector also faces a shortage of technical and skilled workers, with many builders hiring foreigners to work on technical matters. Most higher-end projects involve foreign engineering, architecture and design firms from Singapore, Thailand, Malaysia or Japan, with the engineering firm handling complicated work and overseeing one or more domestic construction companies. While international companies are introducing cutting-edge technology, local companies are also slowly adopting new practices. For example, only recently did local contractors start using precast and prefabricated material for their buildings. “Local developers must change their practices to adhere to international quality and safety standards. Otherwise local companies will be left behind,” said U Han Thein Lwin.

Kiwi Aliwarge, CEO of UMG Myanmar, told OBG, “Most small and medium-sized enterprises are not ready to compete with international players. The country should be opened gradually – step by step, sector by sector.”

Professional oversight is also in the process of being implemented, with both the architecture and engineering professions set to be organised, regulated and monitored to ensure good work practices are adhered to, and to cut down the use of unqualified persons in the planning and building processes. “Foreign investors are interested in Myanmar, but the opaqueness of rules and regulations acts as a hindrance to potential construction projects,” Daw Mie Mie Soe Nyunt, director of Kyauk Sein New Construction, told OBG.

Costly Challenges

Developers also complain certain input costs are posing challenges to the sector. Materials are primarily imported and have risen in price due to a weaker kyat. To overcome this, domestic and foreign investors are boosting local production of cement and concrete. Thailand’s Siam Cement is ready with its $420m plant, which has a capacity of some 1.7m tonnes per annum (tpa), while Semen Indonesia will start work in 2016 on a $200m, 1m-tpa plant. Domestic developer-builders Max Myanmar and A1 Group have also signed agreements with engineering firms from Thailand and Singapore to build or upgrade cement plants, while Shwe Taung is building a 400,000-tpa cement plant. Upon completion these projects will double Myanmar’s cement production capacity.

In addition to rising material costs, land prices in Myanmar have risen significantly. Developers must often establish ownership before applying for a building permit, while foreigners are unable to own land, compelling them to partner with local firms to secure land for construction. Domestic builders are often partners in development projects and not merely contractors.

In 2012, the Foreign Investment Law allowed foreign investors in real estate to operate without domestic joint venture partners through build-operate-transfer leases from the government. Another legal reform in the pipeline is the new Condominium Law which will provide foreigners the right to own apartments in condominiums, which will make it easier for developers to finance high-end condominium projects.

Protecting The Past

The sharp increase in development projects in Myanmar is also a concern for those who fear that many of Myanmar’s heritage sites are at risk of being lost. The Yangon Heritage Trust (YHT) has proposed a heritage protection law to the Yangon municipal government to protect the city’s historical elements in the wake of rapid development. Following YHT’s advocacy work, the government, contractors and developers do consult the trust before embarking on projects. However, YHT has no formal power to stop projects from going ahead. The trust is urging the government to zone Yangon so that historical areas are better protected from development. “We are working with architects to ensure they are aware of the importance of protecting heritage sites,” Daw Moe Moe Lwin, director of YHT and general-secretary of the Association of Myanmar Architects, told OBG. These efforts would build upon existing restrictions, which limit development near the city’s iconic Shwedagon Pagoda or around other designated heritage buildings.


Having spent many years in economic isolation, Myanmar is now in a race to catch up to modern norms in terms of infrastructure and development. This has provided abundant opportunities for construction companies, both foreign and domestic, and is expected to continue for years to come. In addition to the backlog, rapid growth from throughout the economy, particularly oil and gas, also promises to boost demand for housing, retail outlets and utilities. Given the major changes in the construction sector, the real challenge will be establishing the necessary institutions and preserving Myanmar’s historic character.

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The Report: Myanmar 2015

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