BMI View: We believe near-term growth in Myanmar's construction sector will remain at levels that are modest relative to its massive growth potential. The sector remains unable to achieve its full potential due to limited upside to foreign investment - the main driver of construction activity - and the numerous threats to the country's political environment before and during the 2015 general elections. In addition, issues with two of Myanmar's largest infrastructure projects have highlighted the lack of maturity in the country's business environment.
Key Trends And Developments
In February 2014, US-based mobile turbine power firm APR Energy secured a contract to construct a 100MW gas-fired power plant in the central Mandalay region of Myanmar. The project was won through an open tender conducted by Myanmar's Ministry of Electric Power. The plant will have capacity to supply power to more than 6mn people. The power plant will be supplied with natural gas using the country's Shwe gas pipeline. Investment details about the project have not been disclosed.
In February 2014, United Overseas Bank (UOB) and Singapore-based Asiatech Energy signed a financing agreement that would see UOB provide financing for Asiatech to build a 230MW combined-cycle gas-fired power plant in Myanmar. The project will require a total investment of USD170mn, but UOB did not disclose the size of the loan that it will be extending to Asiatech. Asiatech was commissioned to build the power plant in Mawlamyaing township in Mon state by Myanmar Lighting IPP, and the plant is scheduled to start operating by end-2015. MLC will own and run the power plant, while Myanmar Electrical Power Enterprise will distribute the electricity.
In February 2014, the Ministry of Electric Power announced that Myanmar's IGE Company plans to sign a joint venture with China's Hydrochina Corporation to build the 1200MW Naungpha hydropower plant project on the Thanlwin River, reports Eleven Weekly Media. Hydrochina Corporation and IGE will respectively own a 82% and 3% stake in the hydropower project, with the government of Myanmar owning the remaining 15%. Once completed, the Naungpha plant is expected to distribute 90% and 10% of its electricity to China and Myanmar respectively. Hydrochina Corporation and IGE are also planning to implement the 225MW Mantaung hydropower project on Namtma River.
In March 2014, the Myanmar transport ministry called for a new round of bidding for the USD1.1bn Hanthawaddy International Airport project due to changes to the project's financing structure. According to officials from the transport ministry (Reuters), the four consortiums that were previously shortlisted for the Hanthawaddy airport project were invited to submit fresh bids for the project. This is because negotiations between the government and the initial preferred bidder for the airport project, a consortium led by South Korean airport operator Incheon International Airport Corporation (IIAC), had broken down over the scope of the project. In addition, the government had decided to seek overseas development assistance (ODA) for the project, following suggestions from IIAC and from another shortlisted consortium led by Singapore's Yongnam. The deadline to submit the new bids was scheduled on April 22 2014.
In March 2014, the Myanmar Ministry of Rail Transportation revealed it plans to start international tenders soon for the implementation of major railway projects across the country. According to Kyaw Kyaw Myo, assistant general manager at the railway ministry (Eleven Weekly Media), there are plans to upgrade 13 railway lines over the medium term and eight over the long term. Among these projects, five of them are in need of urgent upgrades and will be prioritised. These five lines are the Yangon circular railway system, the Yangon-Mandalay line, the Mandalay-Myitkyina line, the Bago-Mottama-Mawlamyine-Yay line and the Yangon-Pyay line. The Myanmar government has already accepted a JPY20bn ODA loan from the Japan International Cooperation Agency to upgrade the Yangon-Mandalay line. The government plans to obtain a USD100mn loan from the Asian Development Bank for the Bago-Mottama-Mawlamyine-Yay upgrade project and a loan from the Export-Import Bank of Korea for the Yangon-Pyay upgrade project.
"Myanmar's latest political and economic awakening appears to be the 'real deal' and - as with any 'new' investment story - foreign interest is likely to reach fever pitch in the coming years. As seen in other resource-rich frontier markets, we expect a number of key sectors to dominate investor attention in the short to long term."
Business Monitor International (BMI) has just published 'Myanmar Awakens: Unearthing Asia's Hidden Gem', a brand new special report that examines the economic growth prospects for Myanmar as a resource-rich frontier market in the medium to long term.
Use BMI's core views on Myanmar's country and industry development to enhance your investment decision-making and strategic planning activities, assessing key questions such as:
- Will a fair and transparent electoral process in Myanmar pave the way for relaxation of the US and EU economic sanctions?
- With soaring economic prospects forecast for Myanmar as a result of its ongoing reform drive, how will China's interests be affected?
- Will foreign investment prevail in the short or long-term given the history of poor market accessibility?
- Will heavy investment in Myanmar's real estate market offer sufficient liquidity to entice an international audience and what will be the key barriers to overcome?
- Which key sectors will be the main outperformers for Myanmar in the short term?
- Which key sectors will be most promising in the long term?
The special report draws on BMI's 27 years of experience to critically assess the greatest economic and political risks for Myanmar in the years to come, helping you assess the opportunities and challenges for your business in 2012 and beyond.