Spanning a vital geographic area and sharing borders with India, China, Thailand, Bangladesh and Laos, Myanmar is poised to see its transport sector post double-digit growth in the coming years. The transport and logistics sector is bolstered by the country’s 54m-strong population, surging air passenger and trade volumes, and rising urbanisation.
Economic liberalisation in Myanmar has not been without challenges. Ageing road and rail networks, urban and port congestion, and a lack of multi-modal connectivity have made rising transport costs a major impediment to new foreign investment. Dawid Sold, country manager for Myanmar at Maersk Shipping, told OBG, “Myanmar needs investment in hard infrastructure, know-how, processes and legislation.”
The government is moving to address these challenges through delivery of its National Transport Master Plan (NTMP), which should see huge public investment in new transport infrastructure in the coming years. Planned projects include dozens of new north-south and east-west highways, refurbishment of the national railway, new mass transit systems in Yangon and Mandalay, and a port expansion programme that could enable the country to become a major regional trans-shipment hub.
Plans are also currently under way to build a new centre for aviation outside of Yangon, although some stakeholders have expressed concerns about long-term excess capacity. The industry as a whole remains well positioned for substantial future expansion, with further foreign investment, international assistance and new public-private partnerships (PPPs) expected to make a significant impact in addressing the country’s infrastructure gap.
Oversight
The Ministry of Transport and Communications oversees the transport sector through various departments, directorates and state-owned companies tasked with managing their respective sub-segments. These include Myanmar Railways, the Road Transport Administration Department, Inland Water Transport and Myanmar National Airlines (MNA). The Department of Civil Aviation (DCA) is the authority responsible for civil aviation administration and services, as well as air navigation services, while the Myanmar Port Authority is in charge of regulation and administration of the country’s coastal ports.
Long-term transport policy is largely enshrined in the NTMP, which calls for MMK26.7trn ($21.7bn) of new investment in road, rail, ports and aviation infrastructure projects between 2014 and 2030. Published in 2014 in partnership with the Japan International Cooperation Agency (JICA), the plan envisions roads projects comprising the largest portion – MMK11.7trn ($9.5bn) – of spending, followed by MMK6.5trn ($5.3bn) in railway investment, MMK4.7trn ($3.8bn) for seaports, MMK2.4trn ($1.9bn) for aviation and MMK1.4trn ($1.1bn) for inland water projects.
The NTMP is premised on the development of transport corridors, including 36 north-south and 45 east-west highway projects, cutting across seven regions and seven states. Rail and highway upgrades are the most critical near-term priority under the plan, which envisions allocating 87% of planned capital formation to trunk systems between 2014 and 2020. This is a solid strategy: Myanmar’s road network was estimated at 148,000 km in 2013, the majority of which – 79% – is unpaved, according to an April 2015 report on Myanmar’s automotive sector by the consulting firm Solidiance, with Yangon and the country’s capital, Naypyidaw, connected by just one road.
The master plan for Myanmar’s expressways and arterial roads, meanwhile, was created in partnership with the Korean International Cooperation Agency and a consortium of Korean engineering firms between 2013 and 2015. It calls for more than 34,000 km of highway and road development by 2035.
Infrastructure Deficit
There is a substantial need for large-scale investment in transport infrastructure in the country. In July 2016 Asian Development Bank (ADB) officials told regional media that the sector was in need of $45bn-60bn of investment over the next 15 years, with this figure set to rise further if near-term action was not taken.
The bank’s “Transport Sector Policy Notes,” released a week earlier, reported that Myanmar had fallen well behind its ASEAN peers in terms of infrastructure development due to a significant lack of investment, which has kept an estimated 20m citizens from basic road access, while 60% of highways and most rail lines in the country remained in need of urgent maintenance and rehabilitation. According to the ADB, Myanmar’s investment in transport infrastructure averaged 1-1.5% of GDP per year from 2005 to 2015 compared to 3-5% for countries at a similar level of development. The bank noted that sufficient investment could bring logistics costs down by 30%.
Congestion
Myanmar’s infrastructure gap is epitomised in Yangon which, with a population of 7.2m and a GDP contribution of 22%, is the country’s economic centre. JICA reported in August 2015 that the city’s population is projected to hit 10m by 2040, 1.5m more than currently live in Bangkok, and rising vehicle ownership coupled with limited public transport has become a serious concern.
Solidiance found that the number of vehicles registered in Myanmar more than doubled between 2008-09 and 2013-14, rising from 2m to 4.4m. In Yangon alone, the total number of vehicles on the road rose from 214,000 in August 2011 to more than 500,000 by October 2015, while research consultancy Frost & Sullivan has estimated that the country’s auto market will grow by an average of 7.8% per year until 2019.
So far efforts to cut down on congestion in Yangon have had mixed results. In 2015 authorities introduced a policy requiring all individuals applying for a car import permit to first secure a car parking permit from township parking inspection teams.
According to local media reports, the policy only fuelled the rise of a black market trading in permits. “The parking permit is a reasonable idea, but it is not the complete solution to traffic management,” U Chan Mya, managing director of Prestige Automobiles, told OBG. “There are various things that can be copied and pasted from more developed nations to regulate the flow of traffic, such as effective road signage and parking lots.”
Weak public transport systems are driving vehicle sales and have resulted in a disproportionate number of taxis on the roads. In January 2016 the Myanmar Times reported that there were 349 bus lines serving 7m people in the Yangon region, with each bus carrying between 4500 and 4900 passengers daily. Ma Hta Tha, the control committee for private bus lines, estimates that there are 100,000 taxis operating in Yangon. By comparison, New York City, with a population of 8m, has fewer than 14,000 licensed taxis.
Plans to upgrade Yangon’s public transport networks are outlined in the Strategic Urban Development Plan of Greater Yangon (SUDPGY), unveiled in 2013 and published by JICA, in partnership with the Yangon region’s government and Yangon City Development Committee. The plan suggests infrastructure upgrades, including road widening, flyover construction, new railway lines and feeder transport, such as monorails or a light railway transit system, with total investments required for the plan estimated at $25bn. Ayumi Kiko, representative at JICA Myanmar Office, told OBG that while these plans signalled an important step forward for the city, a focus should also be placed on the development of soft infrastructure as well. “Flyovers are not a bad idea; they can accommodate new capacity, which is important for Yangon,” she told OBG. “But hard and soft solutions are needed. Driver training, traffic lights, everything needs to be improved, or ultimately a flyover is just shunting traffic from one road to another.”
Urban Railway
One of the most significant proposals to be published to date involves the construction of an elevated railway, although existing passenger trends indicate that a modern, well-developed network servicing all parts of the city is essential for the project’s success.
In July 2016 U Phyo Min Thein, chief minister of the Yangon region, told local media that the government plans to build a sky train system above Yangon, covering a 48-km radius around the city. Previous efforts to increase urban rail passenger numbers in Yangon have met with only partial success, however, due to the limited reach and slow speeds of existing lines and an insufficient number of passengers.
At present, the Yangon Circular Railway acts as the local commuter network. The 45.9-km line is operated by Myanmar Railways, servicing a total of 39 stations and connecting suburban areas to the city, although local news site Eleven Myanmar reported in July 2016 that just 1% of Yangon residents use it.
Authorities had hoped to boost circular line ridership through the introduction of a new light rail system, which launched in January 2016 on a 4.9-km stretch between Linsadaung and Wardan Jetty, using newly electrified on-street freight cars running along Strand Road. The trains were sourced from Japan’s ageing Hiroshima tram line, and the project was financed by Myanma Railway’s own budget.
Officials had planned to extend the line from Wardan to Kyeemyindaing and from Linsadaung to Pazundaung, bringing its total length to 11.3 km and creating interchanges with the circular rail line at both ends. However, by August 2016 the service had been suspended due to low passenger volumes. Plans are still under way to upgrade the circular railway with modern signalling equipment, new rolling stock and track upgrades, using a $250m soft loan from Japan, although low passenger numbers have proved to be a persistent challenge. Ensuring the new sky train system is able to connect a larger area of Yangon at an affordable price will be an important priority for stakeholders in the project.
Buses
Although plans for a new sky train lend an optimistic long-term outlook to transport development, government authorities have said that road upgrades are the first priority, in addition to the launch of a proposed bus rapid transit (BRT) system, also expected to significantly reduce congestion on successful implementation. “Infrastructure is a priority, especially with regards to roads and rail. There needs to be a systematic BRT system put in place,” U Win Myo Chit, CEO of Greater Man Group of Companies, a local bus and coach distributor, told OBG. “This will assist dramatically in the alleviation of traffic.”
Under the SUDPGY, JICA proposed the launch of a BRT system with dedicated lanes for city buses. The government’s new system, BRT Lite, was later established under a joint PPP with a consortium of five private firms, Yangon PPP Company. Of the company’s MMK25bn ($20.2m) of paid-up capital, MMK10bn ($8.1m) was provided by the government.
In February 2016 the BRT Lite service was officially opened, offering service to 23 stops and connecting Htauk Kyant to 8 Mile Junction along Pyay and Kabar Aye Pagoda roads. Although officials have reported that private buses have been using the BRT’s dedicated lines, resulting in more congestion than would be typical for a BRT system, in May 2016 the government announced that the service had proved so popular that plans were under way to add 20 new buses to the existing fleet of 45. The system is expected to eventually expand to BRT Full, comprising 100 buses covering 150 km of Yangon’s roads.
Highway Improvements
One of the most important highway upgrades under way is the Yangon-Mandalay Expressway project, which will expand and repair the 620-km stretch of road connecting the country’s two largest cities via Naypyidaw.
In January 2016 the Ministry of Construction (MoC) announced that it was launching a 100-day programme to upgrade the highway from two lanes to four. The project is part of a broader MoC initiative to upgrade 64 highways across the country, with the ministry reporting in August 2016 that upgrades to the highway will be finished by March 2017, after seven contractors were awarded construction packages under a build-operate-transfer PPP scheme.
Myanmar’s east-west highway network is also slated for major improvements, following a number of new road projects aimed at improving connectivity with Thailand, one of its largest cross-border trading partners. In July 2016, for example, China Road and Bridge Company announced that it had won a contract from the MoC to build two sections of highway along the Greater Mekong Subregion, under the Eindu-Kawkareik Road Improvement Project. The 65-km project is located in Karen State in southern Myanmar, providing a vital link between Myanmar and Thailand, in addition to opening up eastern swathes of the country to new trade. The project’s budget is estimated at $600m-700m.
Highway projects like these offer big economic benefits to the country. According to a March 2016 report in Nikkei Asian Review, a 50-km stretch of road between Kawkareik and Myawaddy, which borders Thailand, was upgraded between 2012 and 2015, following which vehicles were able to travel at 80 km per hour (km/h), compared to 30 km/h previously. As a result, imports from Thailand to Myanmar jumped by 40% in September 2015, immediately after the road opened, with the transfer of goods via Myawaddy accounting for 30% of Myanmar’s cross-border trade.
Nikkei Asian Review reports that based on this early success, plans are now under way to build new arterial roads as well as a link between the southern city of Dawei and Thailand’s Kanchanaburi, connecting along an international arterial road – the Southern Economic Corridor – which stretches across much of mainland South-east Asia. Construction of the second Thai-Myanmar Friendship Bridge, which provides a link between Myawaddy and Thailand’s Mae Sot over the Moei River, also began in August 2015.
Perhaps most promisingly, there are plans to build a road between Mandalay and the border of China, in addition to a new road linking the southern Sagaing District with India. These new connections would link Myanmar to half the world’s population by road, giving it the potential to become one of the largest economic centres in ASEAN.
National Rail
Another potential game changer for Myanmar’s transport sector will be upgrades to the Yangon-Mandalay rail line. Myanmar Railways announced in May 2016 that the it had planned to launch a tender for private companies to commence work on a $2.2bn upgrade of the 622-km line, which is expected to reduce the journey time from around 16 hours to eight on completion.
The Yangon-Mandalay project, which will be developed using JICA studies, has been under development for a number of years. Mitsubishi Corporation signed a $20m deal to supply and install new a railway signaling system under the Project for Installation of Operation Control Centre System and Safety Equipment (JICA grant aid project) in 2015. A similar project had been proposed by China, which would have linked a planned deep-sea port at Kyaukphyu in Rakhine State with Muse on the Chinese border, although the project was put on hold in 2014.
The latest tender announcement is particularly significant given Indian Railways’ August 2016 announcement that it plans to link its planned Trans-Asian Railway Network with Sagaing in Myanmar, which could create another vital overland connection, further facilitating economic growth. In February 2016 the ADB expressed interest in providing $1.5bn in financing for the project.
Aviation
The DCA reports that there are 11 national airlines offering domestic services, and 28 international airlines operating a total of 341 weekly services between Myanmar and 21 international destinations. MNA is the country’s flagship, state-owned carrier operating scheduled services to major domestic and some international destinations, while Myanmar Airways International (MAI) – which was MNA’s international arm until it was privatised in 2010 – operates a host of international flights to South-east Asia from its base at Yangon International Airport (YIA).
Additional national carriers include Golden Myanmar Airlines, which also operates international scheduled services, Air Bagan, Yangon Airways, Air Mandalay, Asian Wings Airways, Air KBZ, Mann Yadanarpon Airlines, FMI Air and APEX Airlines. Foreign airlines are permitted to fly to Yangon, Mandalay and Naypyidaw, although there are some restrictions on frequency. The country has 69 airports, of which 34 are currently in use, including three international facilities: YIA, Mandalay International Airport and Naypyidaw International Airport.
Growth & Upgrades
The DCA reports that international passenger volumes doubled between 2010 and 2015 to hit 3.4m, recording an average annual growth rate of 17%, although growth moderated to 8% in 2015. The country’s primary international hub is YIA, which handled around 4.8m passengers in 2015, despite having a capacity for just 2.7m.
With facilities becoming increasingly strained, the government moved to expand YIA through a three-phase development plan. A new airport located around 70 km north of Yangon in Bago, Hanthawaddy International Airport, is also planned for construction, offering capacity for up to 12m passengers on completion (see analysis).
New Flights
The new facilities will nonetheless be a welcome development for a rising number of foreign carriers that have entered the market in recent years, including Emirates Airlines, which launched a service between Yangon and Dubai in August 2016, HK Express, which opened a route between Hong Kong and Yangon in September 2016, and Thai Lion Air, which announced plans to offer services between Bangkok and Yangon as part of its international expansion strategy in March 2016. National carriers have also been active in expanding international services. In August 2016 MNA announced that it will launch regular flights from Mandalay, the country’s second-largest city, to Bangkok in August 2016, with MAI announcing that it will launch the same route. MNA also told media in March 2016 that it plans to begin offering services to Shanghai and Chengdu in China, while MAI will start operating a direct flight to Kolkata, India, beginning in December 2016.
Ports Upgrades
Multi-modal connectivity will be further enhanced by a series of planned port upgrades and the construction of new deep-sea ports, which could alleviate congestion at the existing Port of Yangon in addition to substantially expanding the country’s sea shipping capacity.
“The lack of infrastructure at our seaports is a huge constraint,” U Minn Thu Aung, managing director of international freight forwarder and shipping agent Helio International, told OBG. “There is limited handling capabilities, which results in congestion and stock piling of containers. This slows down traffic and increases costs for shippers.”
More than 90% of Myanmar’s trade passes through the Port of Yangon, which is divided into two facilities. The largest of these is Myanmar International Terminal (MIT) in Thilawa, used for roll-on/roll-off cargo. MIT is located 16 km from downtown Yangon and 16 km from Yangon River Bay, next to Thilawa Special Economic Zone (SEZ). Its facilities include two terminals: Myanmar International Terminal Thilawa and Myanmar Integrated Port.
The old Yangon port area, meanwhile, includes four terminals and 15 wharfs. The majority of the country’s general cargo vessels use Myanmar Industrial Port (MIP) and Asia World Port Terminal, because of their close proximity to Yangon’s downtown area.
Container ships calling at Myanmar’s Port of Yangon in May 2016 were forced to wait in port up to three times longer than normal due to critical levels of congestion. In June 2016 the Journal of Commerce reported that congestion at MIP had reached critical levels, with the vast majority of ships required to stay at the port for a minimum of 11 days, compared to an average of three to five days normally. According to the publication, major delays in obtaining berths and cargo loading were the source of the problem, with the country’s trade imbalance (see Trade & Investment chapter) creating a build-up of empty containers waiting to be used for exports.
The government announced that it had established a high-level working committee to examine solutions to the delays, including the possibility of 24-hour container loading and unloading operations, as well as clearing out a backlog of empty and unclaimed containers, following moves to introduce 24-hour Customs clearance for Yangon-bound cargo.
However, economic growth has seen the number of vessels calling at Yangon’s ports double over the past 10 years, according to JOC.com, while the old port’s draft restrictions and disadvantageous location on the river, not the coast, have necessitated the development of a number of new facilities.
Thilawa is set to welcome a new container terminal, a $118m project awarded to Japan’s Toyo Construction and JFE Engineering Corporation in January 2016. Scheduled for completion in late 2018, the terminal will offer annual capacity of 187,000 twenty-foot equivalent units (TEUs), as well as two ships with up to 20,000 deadweight tonnage at the same time, doubling existing handling capacity.
Perhaps more significantly, two new deepwater port projects are planned. The first will be located in Kyaukpyu SEZ in Rakhine State, while the second will be in Dawei, 600 km south of Yangon. The Kyaukpyu port project will see China’s CITIC Group construct a new port with an annual capacity of 7m TEUs on a 1000-ha industrial area, which could eventually be linked to the national railway network.
The Kyaukpyu port has a significant geographic advantage, as it would create new overland links between Myanmar and southern China while also avoiding the Strait of Malacca, which adds an additional 5000 km to the sailing distance for shipments travelling from China to India.
The facilities in Dawei would be located along the Southern Economic Corridor, at the heart of a planned new logistics route connecting Indochina to the Andaman Sea and the Indian Ocean. The government, through a partnership with Thailand’s Italian-Thai Development, is also building an SEZ in the area surrounding the port, which is expected to generate up to 65,000 new jobs on completion (see Industry & Retail chapter).
Outlook
Although Myanmar’s widening infrastructure deficit continues to pose a major challenge across the rail, road and port segments, the sector is poised for significant near-term growth, with private investment set to rise on the back of a bold transport agenda supported by multiple neighbours. New investment in road and rail networks will complement ongoing work at a network of SEZs, bolstering cross-border connectivity and reducing port congestion, and while overcapacity in the aviation sector could pose a long-term challenge, rising passenger and cargo volumes indicate plenty of space for further investment across all segments of the industry.
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