3. Logistics and industrial infrastructure

This section covers the following topics: ports and waterways, railways, roads, airports, telecommunications and connectivity, industrial and logistics parks.

Summary

• 3.1. Ports and waterways
• 3.2. Railways
• 3.3. Roads
• 3.4. Airports
• 3.5. Telecommunications and connectivity
• 3.6. Industrial and logistics parks

Myanmar's current infrastructure system is still largely underdeveloped, with just over a third of roads paved and limited port capacity. A high concentration of road transport and a lack of multimodal infrastructure contribute to relatively high transport costs. Myanmar's overall logistics performance is considered to be significantly lower than its regional peers, especially when it comes to trade-related infrastructure. Limited transparency and predictability in border procedures further increases the cost of doing business, making it more expensive to move goods across borders.

3.1. Ports and waterways

Myanmar has about 2,200 kilometers of sea coastline along the Andaman Sea and the Bay of Bengal. The country has fertile plateaus and plains divided by mountain ranges and river systems. The longest river is the Irrawaddy which flows into the Gulf of Martaban . Most of the country's major ports and terminals are located on the sea coast or in the delta region.

Yangon is Myanmar's main port, handling about 90% of the country's international maritime trade. Formerly known as Rangoon, the port is located at the confluence of the Yangon River , Pazundaung Creek, and Pegu River . It comprises over 30 berths spread across the port's many terminals. The port handles a variety of cargo, including rice, coal, oil, and metals, as well as general cargo, containers, and RORO. The total volume of cargo handled by the Port of Yangon was nearly 24 million tonnes in 2019 1.

The northern port of Sittwe in Rakhine State bordering India has become the terminal of the “ Kaladan Multi- Modal Transit Transport Project”, a multimodal link project with the port of Kolkata, India, which shortens the distance between the two ports by over 1300 km, allowing goods to avoid overland travel through the “ Siliguri corridor ”, the strip of land that connects India to Myanmar north of Bangladesh. The project was started with a framework agreement 2in 2008 and the new port section was opened in May 2023 3, with the delivery of a cargo of 1000 tons of cement, however, the slow pace with which the Myanmar government is proceeding with the construction of road and rail infrastructure is putting Phase 2 of the project at risk 4.

Also in Rakhine State , 110 kilometers further south as the crow flies, the port of Kyaukphyu is planned for development . In a project that began in 2009 and ended in 2013, the Myanmar Ministry of Energy and the China National Petroleum Corporation (CNPC) built a crude oil terminal at Kyaukphyu , with berths capable of accommodating 23-meter-draft tankers 5. A 771-kilometer pipeline runs from the terminal through Myanmar and into China in Yunnan Province .

In 2013, the development of a much more ambitious project was announced, then approved by law in 2015, which sees Kyaukphyu as a terminal of the China-Myanmar Economic Corridor (CMEC), with the construction of a deep-water port, an industrial area and a tourist area with high-end residences, with the conversion of what was a fishing village into a Special Economic Zone 6.

The project has raised geopolitical concerns about a potential conversion into a military base or “dual-use” for the Chinese navy, given the size of the docks, suitable for the size of Chinese destroyers , and the number of 6,000 beds planned for the resort , which seem excessive considering the lack of a real tourist identity of the place, but analysts agree that the current political condition of Myanmar does not allow the conversion of the port into a Chinese naval base 7, also considering the fact that rebel forces are gaining the upper hand over the military in some key areas of the border between Myanmar and China 8.

According to the initial agreement, China was supposed to own 85% of the Special Economic Zone, against 15% of Myanmar, but with the democratic elections of 2015, the government of the National League for Democracy reduced the Chinese percentage to 70%, for fear of excessive indebtedness. Between August and September 2023, the ruling military junta reaffirmed the national priority of the project, despite serious delays 9.

Data from the Asian Development Bank (ADB) estimates that in 2014, the market share of river transport was only 16% for freight and 1.5% for passenger transport: although road freight transport takes longer, it remains one of the country's cheapest transport options 10.

Myanmar's river system extends over 9,000 kilometres, but navigation is difficult due to shallow waters, limited cargo or the use of small-capacity vessels, resulting in higher costs and inefficiencies as well as longer travel times, particularly during the dry season. The volumes and intensity of flows and sediment transported hinder the use of river transport, as navigation channels continue to shift within the riverbed; furthermore, all river ports, except Yangon , are undeveloped and lack moorings, jetties and important handling equipment.

The government elected in 2015 had announced the construction and redevelopment of river ports 11, and, in general, at the beginning of 2021 the objective of developing a Master Plan for Ports (marine and river) had been announced , which should have been completed in 2023 with a view to 2030 and 2040, but there is still no news of this Master Plan.

3.2. Railways

Rail transport in Myanmar consists of a 6,207,644 km (3,700,000 mi) railway network with 960 stations 12. The network generally runs from north to south with branches to the east and west and includes the Yangon (Myanmar's major commercial city) Circular Railway which serves as a commuter railway. The quality of the railway infrastructure is generally poor. The tracks are in poor condition and are not passable during the monsoon season. The speed of freight trains is severely limited on all existing links due to the poor condition of the tracks and bridges.

The entire network is operated by the state-owned company “ Myanma Railways ”, which, according to estimates by the Asian Development Bank , is undergoing a long-term crisis, despite the growth of the transport market: at the end of the 1990s the company handled 44% of total passenger transport and 14% of freight transport, while in 2015 it handled just 10% of passenger transport and only 1.5% of freight transport. According to ADB, 13Myanmar 's revenues Railways only covers around half of its operating costs, while fuel costs have been a major shock to the company's finances, with many services failing to even cover fuel costs and requiring annual operating subsidies.

According to ADB estimates, without an adequate investment program for rehabilitation, maintenance, modernization and expansion of the network, Myanmar's rail transport is seriously at risk and Myanma Railways could disappear before 2030.

At the 2019 meeting of the Asia PPP Practitioners Network (an Asian regional forum for the promotion of Public Private Partnerships, sponsored by the Asian Development Bank and the World Bank ) in South Korea, Myanmar 's Ministry of Transport and Communications said that the railway sector would be open to private co-investment and put forward a list of rail investment projects 14, but the current ruling military junta has not released a plan in this regard.

In May 2023, the Japanese government halted aid to Myanmar for the Yangon -Mandalay line modernization project 15, which began construction in 2018 with a $1 billion loan from Japan and is estimated to be less than 25% complete.

In February 2023, it was reported that work had resumed on the construction of the line connecting Myanmar to China, which had been suspended due to the Covid epidemic and civil conflicts in Myanmar 16. The line should be built in two sections, one connecting Mandalay to Kunming, the capital of the Chinese province of Yunnan , and the other connecting Mandalay to the port of Kyaukphyu , completing the China-Myanmar Economic Corridor (CMEC). The first section, 431 km long, has an estimated cost of 9 billion dollars 17.

In September 2023, Myanmar's Deputy Prime Minister, Mya Tune Oo , attended a forum in Beijing 18to reiterate the government's support for the project.

3.3. Roads

An 19Asian Development Bank assessment of Myanmar’s transportation situation reveals that the road network is three times less dense than that of neighboring Thailand, and only 20 percent of roads are paved. Due to insufficient maintenance, the condition of the network has fallen well below international standards. A 2014 survey found that 60 percent of the major road network is in poor condition. In particular, highways along the North-South and East-West Economic Corridors, which link to the Mekong Sub-Region and carry 85 percent of Myanmar’s cross-border trade, are below international standards and in poor condition.

An estimated 14 million people – half of the rural population – still lack a basic road system, and transportation costs for people without access to roads are 10 times higher than those with access. Myanmar's village road densities are lowest in ethnic minority areas, particularly in Chin , Kachin, and Kayin states . Despite progress, rural connectivity in Myanmar remains weak, impeding physical and economic access. The country has only a few all-weather roads, making travel difficult and often impossible for much of the year. Myanmar has a rural road network of 95,000 km, of which 6% is paved and another 28% has an improved surface (gravel or macadam), which is generally in poor condition. To meet the national goal of connecting 80% of villages by 2030, the government estimates that Myanmar needs to upgrade about 42,000 km of existing rural roads and build 10,000 km of new roads.

The 1,360 km long India-Myanmar-Thailand Trilateral Highway (IMT Highway ) is the only 4-lane highway under construction, which will connect Moreh , India with Mae Sot in Thailand through Myanmar. The highway was supposed to be fully operational by the end of 2019, however, construction is still ongoing and, as of July 2023, it was estimated to be 70% complete with no estimated completion date 20.

In stark contrast to the rest of the country, the new administrative capital Naypyidaw , built from 2002 to 2012 320 kilometers north of the previous capital Yangon , is organized into 8- or 10-lane avenues over a total area more than six times the width of New York City and with less than a million inhabitants 21.

3.4. Airports

During the previous democratic government, with ongoing economic reforms and the country's expanding middle class, Myanmar's aviation sector was emerging as an attractive area for business opportunities, especially in airport development and upgrading domestic airports. However, the arrival of COVID-19 in mid-2020, followed by the February 2021 coup, crippled the aviation sector's recovery 22.

Myanmar’s aviation sector is managed by the Department of Civil Aviation (DCA), which is part of the Ministry of Transport and Communications (MOTC). MOTC has engaged in 48 agreements to increase international flights, as well as establishing separate framework agreements between Myanmar and Cambodia, Laos, Vietnam, Bhutan, and the Netherlands. DCA is seeking to strengthen the aviation sector through its new strategic plan, which includes improving infrastructure, promoting airline business, and securing air service agreements with international partners. The air cargo subsector remains underdeveloped, although it is a much-needed solution in remote areas of the country.

Myanmar has three operational international airports and 30 domestic airports (in addition to 36 inactive airfields), serving 28 foreign and nine domestic airline operators. Among the nine domestic operators, Myanmar National Airlines (MNA), the national flag carrier of Myanmar, operates both domestic and international routes. Myanmar's only other international airline is Myanmar Airways International (MAI). Myanmar's three international airports are Yangon International Airport (YIA), operated by Yangon Aerodrome Company; Naypyidaw International Airport , operated by Pioneer Aerodrome Services Company; and Mandalay International Airport, operated by Mitsubishi Group and JALUX, an affiliate of Japan Airlines.

Yangon Airport , which was expanded in 2017 with a new international terminal, was the largest and busiest for both passengers and cargo, with visitor traffic growing steadily from 3.12 million in 2015 to 4.47 million in 2019, while domestic passenger traffic grew more slowly from 1.55 million in 2015 to 2.02 million in 2019. According to global economic data, there were 1.51 million domestic and international air passengers in 2020.

The military junta is planning to upgrade Sittwe airport to become an international airport 23, especially with connections to India (also in line with India's investment in upgrading the port in the same city).

Also scheduled for completion is the new Hanthawaddy International Airport , 77 km from Yangon , which, once completed, will become Myanmar's second largest airport, offering an initial capacity of 12 million passengers per year, with a 3,600-metre runway. The project is in its fifth restart cycle, with the Japan International Cooperation Agency (JICA) estimating the project will cost US$2 billion. Under the guidance of the MOTC, a master plan is being drawn up, with Phase 1 scheduled for completion in 2027.

3.5. Telecommunications and connectivity

Until 2013, telecommunications were a monopoly of the government-owned Myanma Post and Telecommunication (MPT). Since 2013, two private mobile phone companies, Ooredoo of Qatar and Telenor of Norway, have entered the market.

The infrastructure, until then among the least developed in the whole of Southeast Asia, has rapidly developed, as demonstrated by data from the World Bank : the number of mobile users has gone from 594,000 in 2010 to 67.9 million in 2021 (126 SIM cards per 100 inhabitants), the percentage of the population that habitually uses the internet has gone from 0.25% in 2010 to 44% in 2021, with traffic developed almost entirely on smartphones , considering that, again in 2021, the number of fixed internet connections was 1.67 per 100 inhabitants 24.

In September 2022, Nikkei Asia reported 25that following the coup, the military junta imposed restrictions on mobile internet usage, blocked access to social networks and blocked access to VPNs. According to the article, Ooredoo was considering a divestment strategy, while Telenor er already left Myanmar, selling the infrastructure to an investor close to the military junta, resulting in a rebranding to ATOM and a $330 million investment plan to introduce 5G nationwide.

Japan's KDDI and Sumitomo Corp., which had an operating agreement with Myanmar Post and Telecommunication, are also considering whether to renew the deal when it expires in 2025.

The main reason for the exit of foreign investors has been the concern about the interference of the Government in access to infrastructure, user data and telephone interceptions, especially mobile ones, since this is also the main means of communication of the rebel groups in conflict with the central government; but while companies from Norway, Qatar and Japan are considering the exit, investors from Singapore and China are offering to take their place.

Meanwhile, the impact of the government restrictions can also be seen in the numbers: between 2021 and 2022, the number of mobile users decreased by 15% (over 10 million fewer SIMs ).

3.6. Industrial parks

Myanmar has three Special Economic Zones (SEZs), Thilawa , Dawei and Kyaukphyu , with preferential policies for companies to set up there. Of the three SEZs, Thilawa is the only one currently operating to international standards 26. Under Myanmar's Special Economic Zones Act, a distinction is made between “Free Zones” and “Promotion Zones” within SEZs, where the former concerns production intended for export, while the latter concerns production intended for the domestic market 27.

Investors located in a SEZ can claim an income tax exemption for the first seven years from the date of commencement of business operations if located in the Free Zone, or five years if located in the Promotion Zone, followed by a reduction in the income tax rate of 50% for a subsequent period of the same number of years. In 2015, the government issued regulations governing SEZs, including the establishment of one-stop service centers on site to facilitate the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue related certificates of origin, collect taxes and duties, and approve work permits and/or approvals for the construction of factories and other investments 28.

In addition to the SEZs, several industrial zones have also been developed, most of which (22) are located around Yangon . Many of these industrial zones are specifically earmarked for private manufacturing enterprises, with each industrial zone being managed by its own Industrial Zone Committee, usually composed of investors, government officials and/or representatives of related public bodies.

Although management practices and service standards differ in each industrial zone, many have taken steps to improve their services. This includes building electrical substations and installing backup generators and wastewater treatment plants.

Road conditions in and around Yangon 's industrial parks vary from place to place. Generally, the main paved roads are in good condition and wide enough to accommodate heavy trucks, including container trucks. However, some sections of road leading to individual factories within industrial parks are in poor condition. Road conditions can be particularly bad during the monsoon season, as drainage is particularly poor. The lack of streetlights, combined with potholes created by heavy trucks, makes it difficult to get around in many places.