Myanmar: The New PPP Frontier?

By David Baxter, sr. fellow – Recently I co-presented a PPP workshop in Nay Pyi Taw the capital of Myanmar. The workshop was sponsored by the Dutch Government and was hosted by the Government of Myanmar. Twenty-four senior officials, from different ministries, participated enthusiastically in all activities associated with the workshop.

The source of their enthusiasm was their desire to prepare their ministries and the Government of Myanmar for infrastructure PPPs, especially in water projects in the Irrawaddy River Delta, its upstream navigation channels, and irrigation and dam projects.

The recent political and economic changes in Myanmar are creating a climate conducive to foreign investment. The Government hopes to harness this enthusiasm and attract FDI in large public works and infrastructure through PPP, the most popular forms being BOTs and DBMOTs.

Myanmar has faced difficulties in implementing large infrastructure projects since the changes that were heralded in 2011. Both the Dawei Port Project and the Special Economic Zone (SEZ) project have faced challenges. However, investment continues to flow into Myanmar. Since 2103 FDI investments have exceeded US$2.2 billion according to UNCTAB.

This modest FDI in Myanmar has just begun to address the poor trade and transportation infrastructure needs of Myanmar. PPP investments in transportation infrastructure that increase Myanmar’s ties to its neighbors, support tourism, and help to unlock its mineral wealth are in the strategic national interest of Myanmar and are areas of growth that should be most attractive to foreign investors.

There is a concern that the Government of Myanmar lacks the necessary funds to finance its infrastructure needs and therefore will remain reliant on foreign funding for proposed infrastructure projects. The existing infrastructure funding gap, is creating opportunities for foreign companies to invest in Myanmar. The over reliance on foreign investment and associated risks will have to be mitigated by international companies when raising foreign loans through innovation, expertise and external financing from their national governments and international investment banks. The companies that can achieve this will be the best candidates for PPP projects in Myanmar.

It is of interest to note that the Government of Myanmar has also initiated reforms that are devolving decision making to state and local governments, an about face to its previous highly centralized approach to decision making. The elections next month will hopefully continue the process of decentralization and liberalization of the economy in Myanmar – thereby improving the DFI climate. These positive developments do not come without risk. State and local governments currently have very little capacity to implement PPPs and almost no history of implementing PPPs, a point that was driven home a number of times by the workshop participants. There was also a candid realization among the workshop participants that a PPP Enabling Environment needs to be created in Myanmar.

Currently there is no PPP law (at national or local level), no tangible legislation that would protect private sector partners from political intervention, no coordinated PPP national strategy, and no clear approval process for the approval of PPP projects for inclusion in a PPP prioritized pipeline. In addition, there is almost no institutional capacity in the over 30 ministries that exist in Myanmar.

Because typical large-scale PPP infrastructure projects can last over 30 years, there is an absolute and immediate need for the political leadership to support PPPs in a bipartisan manner. Investors will closely watch the elected government after next month’s elections to determine their commitment to free market reform.   Any positive signal that the future elected government sends out that it is committed to economic and political reforms conducive to creating a PPP enabling climate will bode well. Any misstep will set back PPP initiatives for many years.

By the participants own admission there was a candid acknowledgement that much has to be done before Myanmar is ready to implement PPPs.

The climate for PPPs is unknown territory.

In the workshop the participants acknowledged that PPP initiatives are critical for the creation of a PPP positive milieu. Initiatives could include the:

  • Creation of an enabling environment
  • Drafting of a PPP Law
  • Establishment of PPP units at state and institutional level as well as a PPP unit to be located in either the National Treasury or the Ministry of Finance
  • Promotion of institutional capacity building in all ministries (be they local or national level ministries
  • Education of the political leadership (including opposition parties) about the intricacies of PPPs
  • Creation of regulatory bodies that can be good watchdogs
  • Drafting of a collaborative national PPP strategy
  • Creation of national guidelines and standards (i.e. best practices)
  • Creation of a national infrastructure priorities strategy that aligns with PPP programs
  • Fostering of domestic public sector partners that can serve as equal partners with large international companies to develop consortiums or joint ventures that benefit both national and international players
  • Reaching out to international organizations that have a history of supporting PPP initiatives for support (i.e. UNECE’s PPP Center, the World and Asian Bank’s PPP advisory units, and ESCAP’s PPP initiative in South East Asia).

I am a firm believer that if these sincere intentions are translated into actions, project delays and legal disputes caused by bureaucratic procedures – not friendly to PPPs – will turn things around.

Additional reforms that afford legal protection to foreign companies, define property rights, and environmental protection laws, for example, will allay concerns regarding project start-up delays.

PPP prospects are promising. We can only hope that the national leadership will continue with reforms that will support PPPs. If they persevere, Myanmar will be the next PPP frontier