Myanmar is one of the world's fastest growing economies, with projected annual growth of 7.8% in gross domestic product for the financial year to March 31 2017, according to the World Bank. Only those who have not spent time with its overwhelmingly young and enthusiastic people -- or those unaware of the vast potential of this emerging market of about 54 million consumers -- should find this surprising. But it is nevertheless an achievement for a country that for decades struggled in the wake of the Asian tigers.
Even as the country gains momentum, however, many observers ask whether its success can be sustained. Various elements will combine to answer that question, although there is one crucial aspect that could make or break the country's rise. That is energy -- or rather, Myanmar's lack of electric power generation capacity.
Myanmar's often crippling power shortages is are starkly apparent to anyone living there. Almost 70% of its the population lacks access to grid electricity. Electricity use per capita is less than 10% of the amount consumed in neighboring Thailand. Even major cities that are connected to the grid suffer regular blackouts because supply struggles to meet even the relatively low levels of demand.
Myanmar's energy agencies understand the problem, judging by the previous government's energy masterplan issued in late 2015. From an existing installed capacity of 3,495 megawatts the plan targets 4,531MW by 2020, rising to 14,524MW in 2030. If the plan remains on track, this could require investment of between $30 billion and $40 billion during that period, equivalent to nearly 60% of gross.
Setting a target is one thing, but putting the wheels in motion to achieve it is another. In Myanmar's case, progress on power generation seems to be slowing. For Myanmar to achieve its target, or even get close to it, various energy sources must play their roles, especially hydroelectricity. It offers a ready solution that -- unlike fossil fuels -- is both inexpensive and renewable.
With hydropower potential estimated at 100,000MW, thanks largely to a network of rivers, Myanmar can be self-sufficient in power many times over. Although hydropower currently generates 63% of Myanmar's installed capacity, according to the Ministry of Electric Power, only 3% of the country's hydro potential has thus far been harnessed.
Other sources may be an option. Myanmar's gas-fired power plants can tap ample feedstock in domestic natural gas fields, but are often shut for maintenance and repairs, partly stemming from low pressure in gas pipelines. There is a sense of urgency about addressing this, but the installed capacity for gas generation is only around 32% of Myanmar's electricity supply, and initiatives are slow to be enacted.
Hydropower, however, is both plentifully available and the cheapest renewable energy option. The United Nations Intergovernmental Panel on Climate Change estimates that the average cost of hydropower, after adjusting for all the costs incurred during the lifetimes of projects, is between three cents and five cents per kilowatt-hour. For a cost-conscious economy like Myanmar, hydropower's relatively low cost could be a game-changer.
Not everyone feels positive about hydropower. Progress on two key hydroelectric projects has stalled. The Myitsone hydropower plant at the headwaters of the Irrawaddy River was awarded to China's State Power Investment Corporation in 2006 -- only to be suspended in 2011 in an effort by Thein Sein, Myanmar's then president, to show that he was the marshal of a government that was listening to its people.
Eleven years and $800 million (of an estimated total project cost of $3.6 billion) after it was commissioned, the plant is still largely unbuilt as Thein Sein's successors in the National League for Democracy government, led by State Counselor Aung San Suu Kyi, ponder whether to allow work to recommence. The Mong Ton Dam on the Thanlywin River, where ground was broken in 2007, is facing a similar fate. A decade later, the 7,000MW installed capacity project remains years from completion.
The reasons for the delays include strong domestic opposition, including protests by people in the affected areas. This is a lesson in how local communities must be supported, and where inconvenienced, given appropriate help to reskill or resettle. More should have been done in preparation stages for these big hydropower schemes, and could yet be done, for them. But the concern is that even projects that pass local engagement tests now face an uncertain future because of the pressure on government from campaigners who, for all their well-intentioned passion, are hard-pressed to answer how Myanmar will generate the energy to enable the growth it needs.
In the case of Myitsone, the lead contractor invested in building roads, schools and a hospital for the local community. It also welcomed international assessment of the project's environmental effects -- which showed that the hydroelectric dam would boost seasonal flows on the Irrawaddy, which can fall by nearly 80% during the May dry season, by evening out water flow through the year.
Further, it has been widely claimed that 90% of the energy generated would be reserved for China. But that is merely an estimate of the potential export value of the power supplies. It would be for Myanmar's Ministry of Electric Power to determine the allocations for domestic generation and for export. If popular support is going to be secured then the environmental impact as well as the domestic energy generating benefit, rather than the export potential, must be made much more explicit to the public.
There are many examples across the world of how hydroelectricity has helped countries to meet energy needs and power economic growth. In Japan, a country that has close ties to Myanmar and is one of the biggest investors there, hydroelectricity played a key role in rapid economic expansion in the 1950s and 1960s. The Sakuma Dam, the Makio Dam and five other big dams on the Kitikam River helped revive post-war agricultural communities and powered industrial development.
In the U.S., despite initial opposition, the Tennessee Valley Authority constructed dams that boosted production in the embattled agriculture sector in the southern states after the great depression of the 1930s. Hydropower generated by these dams also attracted industries to the region, and strengthened the rural economy by diversifying it. Eventually the communities that opposed these dams became their biggest beneficiaries and defenders.
Can the people of Myanmar be won over? A government-appointed commission is investigating the viability of hydroelectric projects on the Irrawaddy region. Located at its confluence, Myitsone is the mighty river's only planned dam, although SPIC has proposed five smaller dams upstream on the nonnavigable N'Mai river and one on the Mali river. The commission's delayed report is expected to be on the president's desk by April, after which the government will decide whether to allow these dams to be completed.
Either way, there may be trouble. The anti-dam campaigns may prove too strong for the ruling party to ignore. But the alternative is stark, and international financial institutions which are now focusing on Myanmar may become apprehensive at precedents that could be set by a populist gesture.
A green light for hydropower would indicate the government's commitment to long-term sustainable electricity generation to power its economic growth. It would also reassure foreign investors worried about investment risks and prospects for continuity in economic policy.
A red light might shake that confidence, with all the consequences for growth that could follow. The worst-case outcome is that there might, quite literally, be insufficient electricity to power the country's very bright future. Myanmar's impressive economic growth projections may falter if the lights go out.
Tony Nash is chief economist at Complete Intelligence, a data analytics company based in Singapore.