For whom the road tolls: Funding highways in Myanmar

Anyone who has spent time in Myanmar – especially outside major cities – does not need to be convinced that the road transport infrastructure requires severe improvement. The evidence is in the bumpy rides.

There is no shortage of academic insight either. Studies have estimated that coffers needed to improve road infrastructure are in the order of US$50-100 billion in the next 15 years. Assuming the exact figure is at the midpoint of $75 billion, this means the government will have to invest $5 billion a year.

This is no small blockade and poses a pressing question: How can the government finance Myanmar’s enormous road infrastructure needs?

Myanmar’s current fiscal situation does not allow for the required road infrastructure spending, as taxes in 2014-15 only netted around $3.8 billion. Besides financing from international organisations, the government may increasingly turn to the private sector, which may have more financial means.

Filling the potholes

Private companies, either domestic or international, will only invest in Myanmar’s road infrastructure if they believe they can make a decent profit, without too much risk. They will typically head along the toll route and ask for guarantees or commitments from the government. They will also only focus on roads where there will be traffic, such as between Myanmar’s major cities and the country’s ports.

Such private involvement in Myanmar’s road infrastructure must strike the right balance between financial attractiveness for the firm and fairness to the Myanmar people.

Should the government allow for private investment, transparent and competitive tenders are required.

This is not unthinkable. A successful tender in the telecom sector in 2013 was lauded as transparent and competitive. It boosted investor confidence and drove mobile uptake in the country. There is much reason to believe that well-run tenders can be the norm rather than the exception in Myanmar, including for toll roads and highways.

Bridging the private sector

A structured framework for public-private partnerships can be set up for Myanmar’s infrastructure needs, including roads, by passing a Public-Private Partnership (PPP) law and setting up a PPP unit.

This could streamline private sector involvement in infrastructure projects, by setting up standardised processes, organisations and contract templates.

It would also allow streamlined monitoring of infrastructure projects for better accountability and ensure visibility on the accumulated liabilities the government takes on.

In the mid-to-long term, the PPP unit can develop a pipeline of bankable infrastructure projects, consolidate progress of each ongoing project and have a roadmap for projects essential to aid economic growth.

This would discourage ministries from launching ad hoc projects and would make national reserves work more effectively. Credible infrastructure projects will result in greater investor interest, paving the way for more sophisticated and varied sources of infrastructure financing.

The road ahead

An extensive road network that integrates with other modes of transport would boost Myanmar’s economic development, reduce inefficiencies and create jobs. Most of all, roads would spur industries such as tourism, agriculture and manufacturing.

With revving economic growth of more than 8 percent expected in 2016, there is no better time than now to plan for better infrastructure that will be beneficial to Myanmar and its people.

 

Source: Myanmar Times

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