Myanmar set to implement its first PPP road project-

In May 2018, the Ministry of Construction (MoC), Myanmar, invited expressions of interest (EoIs) for the construction of the Yangon ring road. It is the first greenfield public-private partnership (PPP) road project in Myanmar. The project is among several other transport infrastructure projects included under the Yangon Urban Transport Development Plan and aims to alleviate traffic congestion in the region.

Need for the project

Yangon city, the largest economic centre of Myanmar, has a population (2011) of about 5.14 million and is experiencing rapid urbanisation and accelerated development. The increasing urbanisation has strained the existing infrastructure in Yangon city, including transport infrastructure,  highlighting the need for an enhanced transportation network in the region.

As per the Japan International Cooperation Agency (JICA), huge traffic demand is expected to emerge not only in the north-south direction but also the east-west direction in the future. The existing road network cannot handle the magnitude of traffic demand likely to be generated by a 10 million-strong population. Therefore, a high capacity road network sufficient to accommodate future traffic demand will be needed, in addition to public transport systems, to support targeted future urban development. As a result, in December 2014, a network of expressways was proposed for the region.

Yangon Urban Expressway Project

The Yangon Urban Expressway Project entails the construction of an inner elevated ring road, outer at-grade ring road and radial spokes. The north radial section of the expressway is proposed to be four-laned and will span 17 km. The project cost has been estimated at $252 million. The east radial section will span 9.5 km and entail an investment of $403 million. Lastly, the west radial section has a proposed length of 9 km and is expected to cost $368 million. All these three radial road projects will be completed within 70 months from the commencement of construction.

The elevated expressway will span a total of 47.5 km. It will commence from Strand Road in Down Town to the Mingalardon Industrial Zone on the outskirts of Yangon, east of Yangon’s inner ring road, and 15 km from Road No. 3 of the Mingalardon Industrial Zone, connecting to the Yangon-Mandalay Highway, and further to the Hantharwady International Airport. It comprises three sections, namely, the east wing, east-west wing and the west wing. The first section will be four-laned, spanning 25 km and will be undertaken under the first phase of the project. The other two sections will span 6 km and 16.5 km respectively.

Recent developments

In January 2018, the International Finance Corporation (IFC), a sister organisation of the World Bank, signed an advisory services agreement with the MoC for the road project. Both parties signed the agreement to design and implement a PPP transaction for the elevated expressway toll project. Under the deal, IFC has been appointed as the exclusive lead adviser for the project. It will also undertake due diligence and structure an internationally competitive tender to choose a private sector developer with established experience.

Recently, in May 2018, the MoC invited EoIs for the construction of the Yangon ring road. There were 53 local and international conglomerates that participated in the initial EoI. Of these, 16 companies are from Myanmar, 13 from China, seven from Japan, three each from India and Korea, and the remaining from other Asian countries. There is only one European company – France’s Vinci Highways, which is well known for its high technology highway construction methods.

Of the 13 Chinese firms, state-owned conglomerate China Communications Construction Company Limited (CCCC), which had signed a framework agreement with the New Yangon Development Company in May 2018 to carry out the necessary surveys and studies for the New Yangon City Project, was also listed as an EoI applicant. Moreover, its subsidiaries, China Harbour Engineering Company Limited (CHEC), the China Railway International Group (CRIG) and the China Road and Bridge Corporation (CRBC), also submitted EoI applications. CRIG, CHEC and CRBC have all developed many infrastructure projects in Africa and Asia under build-operate-transfer (BOT) and PPP schemes for both the government and private sectors.

Meanwhile, Japanese companies such as Kajima Corporation, Sojitz Corporation and IHI Corporation submitted EoIs. All these companies have experience in heavy industry manufacturing, offshore facilities, and participation in the resource and energy sectors in foreign countries. IHI also participates in the government aeronautical engineering, space and defence fields.

Among the 16 local companies, Max Myanmar Construction Company Limited, the Shwe Taung Development Company and the Myanmar Thilawa Special Economic Zone (SEZ) are also exploring participation in the project.

Investment opportunity

The project is sponsored by the MoC and is one of the priority projects of the Myanmar government. The MoC will be the direct counterparty in the concession agreement. The term of the concession agreement is expected to be 30 years.

A traffic demand forecast and willingness to pay study will also be conducted to determine toll revenue projections. IFC has estimated that the expressway project will facilitate $350-$400 million of private investment in Yangon’s road infrastructure.

Role of the private player

The private player will undertake the preparation of the detailed engineering design in accordance with specifications defined in the concession agreement. It will be responsible for the construction of the elevated expressway including all on/off ramps. Further, the provision of toll plazas, safety facilities and other systems will also come under the ambit of the private player’s role. It will also be accountable for the operation and maintenance of the expressway as a toll expressway.

Government support

The MoC is committed to conduct a fully transparent and competitive procurement process in line with best practices. It will provide right of way for the project. In addition, the Myanmar government will provide a sovereign guarantee of the MoC’s obligations under the concession agreement. Various forms of government financial support will also be analysed and considered for the project.

The way forward

The expressway project will offer better connectivity between Yangon port and the Thilawa SEZ in the south, as well as the Yangon International Airport, Yangon Industrial Park and the Yangon-Mandalay Expressway in the north. It is also expected to reduce costs associated with heavy traffic congestion along the city’s north-south routes. The contract for the project is expected to be awarded early next year, while the road will be built over a two- to three-year period. The MoC is expected to call for requests for qualification in August and will issue a request for proposal within the last quarter of the year.

If the Yangon ring road project is successfully tendered and implemented, it could be used as a model for implementing other projects in the country on similar lines.