Myanmar needs more infrastructure

MUSE, Myanmar — Towering apartment blocks are going up on the northern bank of the Shweli River in the border town of Ruili, in China’s Yunnan Province. On the opposite river bank, in Myanmar’s Shan State, the ground is being prepared for something similar in Muse.

In the late 1930s, the ancient trade and migration route through this area was paved; it became a military supply line for embattled Chinese nationalists fighting Japanese troops. Now, this stop on the so-called Burma Road is growing to international importance again, with trade rising year by year as the economy of the country now known as Myanmar plays catch-up with the rest of the region.

State media in Myanmar says official trade through Muse reached $3.8 billion in the 2013-2014 fiscal year — just over half the value of Myanmar’s total with China. Seven years ago, combined imports and exports at the crossing were worth less than $1 billion.

“There’s much more trade now,” said money-changer Aung Khin, one of a line of women who spend each day sitting beside Muse’s main road. “Traders from Mandalay need to change money so they can go into China to buy goods and bring them back,” she said. “There are so many goods coming in from China, but that means I face more competition.”

Despite growing numbers of heavy trucks taking cargo across the border, much of the trade is still done informally. Japanese-made sedans are loaded with boxes of consumer goods and food; motorcycles are carried into Myanmar strapped across the backs of other motorcycles.

Myanmar wants to modernize this border town, and local hopes are focused on a Mandalay-based company called New Star Light Construction. After successfully launching a big housing project in Mandalay, 716km north of Yangon, the company has begun developing a 117-hectare central business district in Muse. Scheduled for completion in 2017, the new district will include an economic zone and residential buildings, stretching along the riverfront for almost the entire length of the town.

The first phase of the project, due for completion this May, includes a variety of retail facilities that will be rented out privately, a two-star hotel and a new jade market. A new border gateway to China is under construction. The developers say it will allow citizens of nations other than Myanmar or China to travel overland between the two countries for the first time.

The development was designed by State and City Planning, a Singapore-based consultancy. By the devlopment’s scheduled completion date of 2017, it is expected to include condominiums, resorts and luxury villas.
The gloss wears off soon after the project’s six-lane highway becomes the road to Mandalay. The central Myanmar town is a 10-hour journey away on a winding mountain road that is crumbling at the edges. Improvements are underway, but Asia World, the Myanmar conglomerate that runs the road — and collects numerous tolls along the way — struggles to maintain its condition.

President Thein Sein’s administration, which took office in 2011, launched numerous ambitious economic reforms. It remains keen to upgrade the country’s infrastructure. A national transport master plan was drawn up last year by the Japan International Cooperation Agency, known as JICA, setting out proposals to develop a series of economic corridors across the country, upgrade seaports and airports, and speed up bureaucratic trade procedures.

The corridors include the connection from Yunnan through Muse to the Bay of Bengal in the Rakhine State city of Kyaukphyu. Tracking the route are parallel oil and gas pipelines, built by Chinese companies, that began pumping gas from fields off Myanmar’s western Rakhine coast and oil from a Chinese-built tanker terminal. Earlier Chinese plans to build a rail link from the west coast to Kunming, the capital of Yunnan, reportedly have been canceled.

Across the continent, work is underway for a continuous Asian Highway that connects India with Thailand and the rest of Southeast Asia. India is funding improvements to bridges between its northeastern region and Mandalay, and in the south, an entirely new stretch of road is set to officially open in July.

The new road between the Kayin State towns of Kawkareik and Myawaddy will cut driving time from more than four hours to less than one. Total two-way trade through that route, which connects Yangon with Thailand, has already more than doubled in just four years, and reached $1.9 billion in 2014 according to Thai statistics. The planned additions of a new bridge and a new economic zone in Mae Sot, on the Thai side of the border, are expected to lead to a surge in cross-border trade.

Adding to the growing list of regional connectivity projects, Myanmar and the other nine member states of the Association of Southeast Asian Nations plan to form an economic community by the end of this year. Delays in implementation, however, mean it will be years before a single ASEAN market emerges.

“[Myanmar’s] potential for increased economic growth through improved land connectivity and the related rise in trade lies first with China, second with Thailand and a distant third with India,” said Romain Caillaud, managing director for the Myanmar office of Vriens & Partners, a regional consultancy.

Caillaud said improved infrastructure — especially the upgrade of Myanmar’s ports — could draw more investors to the country, as long as the government prepares itself to take advantage of the new links.

“The key to success will be for the country to carefully design and implement an economic strategy taking into account where it stands currently in regional supply chains, and where it wants to be years from now,” he said.
JICA’s plan estimates that about $27 billion of investment will be needed for Myanmar’s transport infrastructure by 2030, including about $11.5 billion for road improvements.

The Japanese government is providing funding for infrastructure development, including a new special economic zone and an airport, both near Yangon, the commercial capital. The Asian Development Bank has also pledged some cash for this effort, and has plans to fund more road and rail projects, according to the bank’s principal transport specialist, Jamie Leather.

“Investment requirements are very large, and financing will need to come from many sources; governments, donors and the private sector,” Leather wrote in an email. “It will be necessary to prioritize investment needs to ensure the most deserving are allocated the resources first.”

Nationalist sentiment

Myanmar may also be eyeing China’s new Asian Infrastructure Investment Bank — infused with $50 billion by Beijing. The country will also be interested in a new $40 billion capital fund that the Chinese government has pledged for an initiative to create three “new silk roads,” one of which is the overland trade route to Southeast Asia through Yunnan.

But recent signs are not auspicious for Chinese involvement in Myanmar’s revival. Fighting since last month between the Myanmar army and ethnic Chinese Kokang rebels in Shan State has fanned nationalist sentiment in Myanmar. Many in Myanmar fear the overbearing influence of China, with which they share a 2,200km border.

This tension has in the past been credited with spurring Myanmar’s former military leadership to embark on reforms — using modernization as a means of combating Chinese influence. Many people in Myanmar speak bitterly about the influx of Chinese money into the property market and the flow of cheap Chinese goods, which they say is undercutting local industry.

At the Myanmar customs checkpoint near Muse, known as “105 mile,” the imbalance between the two countries is stark. The majority of the trucks heading into China carry watermelons or sacks of rice.

Unseen are the mining exports, including jade and gemstones, and the illicit flows of timber and heroin. The goods heading the other way include tractors, consumer electronics and apparel.

“Only raw materials go to China,” said an agent who arranges import and export licenses. “Finished goods come back.”
The agent spoke about trade procedures in Muse on condition of anonymity, to protect his business relationship with local officials. He said imported goods often sit at the checkpoint for as long as a week, waiting for government licenses to be obtained.

Speedier service is available, he added, but at a price. “The officials have a fixed rate [for bribes],” he said. “It’s like with all government departments — a bit of money can make it go quicker.”

Myanmar’s reform process has generated rapid economic gains — gross domestic product is expected to grow by 7.8% in 2014-2015, according to the International Monetary Fund. But without better transport infrastructure, the benefits of growth will be limited to major cities.

The rising gap between modernizing Myanmar and the villages is plain to see at the site of the Muse business development. In the center of the planned development is Ho Saung, a village occupied for more than a century by ethnic Shan families, mostly farmers and day laborers involved in river trade.

According to the developers’ plan, Ho Saung will soon be buttressed by a multistory parking lot on one side and a four-star hotel on the other. Those who owned farm land within the project site have been handsomely compensated, and new concrete houses are going up in the village.

One resident — who had no land and so received no compensation — gave a fatalistic laugh when shown the plans. “We will just be in a small village with all these tall buildings surrounding us,” said the resident, who asked not be named. “We will be the water in the cooking pot.”

Source: Nikkei Asian Review

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