In an effort to alleviate problems associated with rapid urban growth, the Yangon regional government announced the formation of the New Yangon Development Company (NYDC) in March 2018. The NYDC is tasked with overseeing the development of a new city on the western outskirts of the commercial capital.
The development of New Yangon City is planned in two stages. Phase one will be carried out on 80 sq km of land on the western bank of the Hlaing River. Planned infrastructure include an industrial park, water supply and sewage systems, a power plant, residential units and bridges connecting the area with downtown Yangon. The first phase will cost an estimated $1.5bn, and most of the work is expected to be completed by 2020.
A second phase is planned over an additional 600 sq km and could take 20 to 30 years to complete, Alicia Khine, head of the city planning and development department at NYDC, told OBG. The project’s planners envision a development that will rival major new Asian commercial hubs, such as South Korea’s Incheon, China’s Shenzhen and Malaysia’s Iskandar.
Financing Challenges
Questions remain about the current plans, particularly in relation to the feasibility of financing such a vast project, but stakeholders say the project is necessary to take the pressure off highly populated downtown Yangon.
“We need to relieve Yangon’s burden to boost the economy and to improve the living standards of citizens,” Khine told OBG. “It is an industrial-based project that will help create employment and business opportunities for local people,” she said, adding that planners were keen to learn from previous projects.
Though NYDC is wholly owned by the Yangon regional government, the bulk – if not all – of the funding for the new city is expected to come from the private sector under a public-private partnership model, with private firms to make significant equity investments.
While reliance on private sector funding makes sense given the relatively limited spending power of the national and regional governments, it will be a challenge for NYDC to convince private companies to invest large amounts of money into a project of unprecedented scale in Myanmar. Negotiations regarding deals will likely be complicated, and with this in mind, the 2020 deadline for the first phase may be optimistic.
However, NYDC is confident that financing targets will be met and is already working with some private companies. In April 2018 it signed an agreement with state-run China Communications Construction Company (CCCC) to prepare pre-project documents (PPD) for phase one. In November 2018 the NYDC announced that they were amid the final stages of PPD negotiations. Once finalised, the PPDs will be made public and the bidding process for the project will begin.
A relatively unique aspect of the project is what developers are calling the NYDC challenge, which ensures a high degree of competition during the tender process. Under the mechanism, if a second party offers a lower bid, CCCC will be given a change to match it. If it cannot, the other party would win the contract but would have to reimburse CCCC for all costs incurred. These costs will be agreed upon by CCCC and NYDC prior to the start of the bidding process.
As well as raising the necessary funds and adhering to stipulated timeframes, other challenges include overcoming bureaucratic obstacles and logistical challenges that are inevitable with a project of this scale.
Opportunities Abound
A project that could see billions of dollars invested in infrastructure creates huge opportunities for those involved in Myanmar’s construction sector. However, the relatively limited supply of building materials in the country means that most of it will likely be imported from abroad.
Despite the inevitable challenges, if stakeholders can successfully move ahead with the development of the new city, it will create huge economic benefits for many local industries and potentially hundreds of thousands of job opportunities for Yangon residents.
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