ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Myanmar's infrastructure deficit outpaces the world

Naypyitaw needs to get serious on investment or be left behind, report finds

A section of the old, cross-Myanmar road linking Ledo in India to Kunming in China that has been proposed for upgrading. Sometimes called the Stilwell Road after Gen.Joseph Stilwell; it was built by Western troops in World War II, but is now merely a rutted track in many places. (Photo by Tim Johnston)

SYDNEY -- A wide-ranging assessment of Myanmar's infrastructure deficit and its ability to start closing the gap has found that the country is likely to meet only half of those investment needs by 2040, dampening hopes that it can lift the estimated 54 million population out of poverty by then.

Of the 50 nations surveyed for the recently released Global Infrastructure Outlook report, Myanmar fared the worst. The report's authors estimated infrastructure investment needs for all the nations up to 2040, compared them with projected infrastructure investments for the same time frame, and calculated the disparity -- the "gap." Myanmar had the biggest gap, estimated to be worth $112 billion. The finding has implications for millions of people living in Myanmar without power or paved roads, and for the government of de facto leader Aung San Suu Kyi, which has promised rapid reform.

Written by Sydney-based and G-20-backed Global Infrastructure Hub and Oxford Economics, the Outlook report includes in-depth analysis of 50 countries and seven industry sectors.

Some other key countries fared poorly in the report, including India (with a forecast investment gap of $526 billion), Bangladesh ($192 billion) and Pakistan ($124 billion). Many African nations were also expected to face substantial infrastructure gaps in the decades to come, while Argentina, Mexico and Myanmar would need to double investment from current trends in order to meet forecast infrastructure needs.

A Group of 20 initiative set up in 2014 and funded by governments including Britain, Australia, China, South Korea and Singapore, the Global Infrastructure Hub defines its goal as "increasing the flow and quality of private and public infrastructure, by facilitating knowledge sharing, highlighting reforms and connecting public and private sectors globally."

Using World Economic Forum data to assess the 50 nations' current basic quality of infrastructure, the Outlook report analyzed their infrastructure spending over the past 10 years, and estimated such investment between now and 2040. Using this data, the report assessed the likely gap between infrastructure investment and requirements in 2040.

Myanmar under spotlight

The report's bleak assessment of Myanmar's future infrastructure needs underscores a growing chorus of international dismay with the once-shuttered nation that emerged from the shadows in 2010.

Met with global acclaim at the time, Myanmar's giant upheaval saw the nation's first quasi-democratic elections in decades, and the release of Suu Kyi, a Nobel laureate, from house arrest. Her party, the National League for Democracy, is now in power with Suu Kyi at the helm. Yet foreign direct investment has been much slower to arrive than many had hoped, for a raft of reasons including Myanmar's uncertain legal environment, corruption and ongoing conflict.

Chris Heathcote, chief executive officer of the Global Infrastructure Hub, said Myanmar desperately needed foreign private sector investment in infrastructure to tackle endemic poverty. But to attract that investment, it would need take some big steps to clean up corruption, increase transparency and streamline processes. The situation, he said bluntly, was dire.

"To the people of Myanmar, this study says you are getting left behind," he said. "You are going to get left further behind and, if you continue on this present course, you will never, ever catch up."

Despite such warnings, the official response from the seat of government in Naypyitaw has been muted, at best. Myanmar's leaders were sent the report before it was published, and informed when it was launched, according to Heathcote. But, he added, it seemed they had decided not to engage on the matter. "We've had no reaction from Myanmar, but quite a lot from other countries ranging from pleased and congratulatory to less pleased," he told the Nikkei Asian Review. "Myanmar has not engaged with us yet."

Even so, the Asian Development Bank's former Myanmar country director, Winfried Wicklein, who moved to Indonesia earlier this year after five years in Myanmar, said he had found Myanmar's leaders open to suggestions and assistance.

In historic terms, he said, the nation had only recently opened up and re-engaged with the developed world after six decades of neglect and under-investment, and observers should understand that making progress from such a low base takes time.

Approval and procurement processes were certainly bottlenecks in the move toward growth and development, he added, but leaders in Naypyitaw were aware of the problems.

"Obviously Myanmar has a huge infrastructure deficit, and that hinders access to markets for farmers and for businesses and access to services, it increases transport costs, and it compromises the business environment," he said.

ADB analysis had found that only 40% of Myanmar's road network was paved, meaning 20 million people -- half of the rural population -- did not have access to all-weather roads, and only 35% of the population had access to electricity. Many towns only have a few hours of power a day, and these shortages deter investment. If factories have to install generators to guarantee power supply, the fuel and additional generator costs eat into potential profit.

The infrastructure deficit is also limiting the country's ability to capitalize on the potential of its strategic location. The road running through the north of the country connecting China and India is little more than a mud track and impassable for much of the year; and plans to build a port at Dawei on the Andaman Sea that would provide a regional outlet for Southeast Asian goods heading to the markets of India and East Africa remain unfulfilled.

The ADB estimated the infrastructure investment gap between now and 2030 was $120 billion, excluding urban infrastructure.

Improving governance

Wicklein acknowledged that Myanmar had to improve governance and economic policy in order to start closing that huge gap, but he added that critics had to understand that the transition would take time.

He said he had seen nothing to indicate Myanmar's once all-powerful military was deliberately hindering economic progress, and he noted that South Korea and Singapore started with very little several decades ago but were now Asian economic powerhouses.

The ADB had been providing Myanmar with technical assistance to prioritize investment plans, he added. "We are getting a lot of high-level requests, including top-level requests from ministers, for support on public-private partnerships," he said. "They have asked: 'How have other countries done that? How can that be applied in Myanmar? Can we provide training? Can we bring in international best practice?'"

The Global Infrastructure Hub's Heathcote, however, said Myanmar had to deal urgently with a number of fundamental problems in order to make progress. "Myanmar has quite a high level of corruption, and relatively weak levels of governance and poor regulatory frameworks," he said. "Its permitting and approvals and land acquisition processes are reasonably corrupt and quite difficult to fathom; it doesn't have very strong planning capability and it doesn't have the strongest of procurement practices."

According to current estimates, he added, Myanmar was on track to achieve less than half of the infrastructure that the nation's growth will require by 2040. Multilateral development banks like the ADB are trying to improve transparency in nations like Myanmar, he said, but the government had to get serious and take the lead in order to close the gap in investment requirements and start to catch up with the rest of Southeast Asia.

China's regional strategies, such as the Belt and Road Initiative, were unlikely to benefit Myanmar unless it had invested in its own internal infrastructure to support commerce. If Myanmar had nothing to trade, Heathcote said, "One Belt, One Road will roll straight past it and mean almost nothing to it."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media