Session 2.1 Status of the Myanmar Transport Sector (Adrien)

7/26/2019 Session 2.1 Status of the Myanmar Transport Sector (Adrien)

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Transport Sector Diagnosticand Overview


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The Presentation Agenda

The current transport sector overview a diagnostic

The change occurring in the transport sector market andthe need for government to implement policy change

Government institutions need to be restructured to facethe new demands

What are the most urgent investments

What are possible short term actions and how do weimplement them

How is the ADB offering to help


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Myanmar Current Overview Diagnostic

Myanmar between 2005 and 2015 investments grew to

1.5% of GDP; Other similar developing countries have typically

invested 35% of their GDP in transport infrastructure;

Despite a lack of funds, achievements have beensignificant

Between 2004 and 2014, the Department of Highways addedmore than 10,000 km of new trunk roads;

Myanma Railways operated a 3,330 km network in 1990, now6,107 km in 2015.

But...


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Investments Targets Need review

Sixty percent of the rail network serves less than 1,000

ppd less than can justify any rail service. Spending on road and rail maintenance has been two to

three times below needs.

A 2014 survey found that 60% of the trunk road network is in

poor or bad condition, requiring urgent maintenance orrehabilitation.

Because of poor track condition, Myanma Railways is forced tooperate at 50% of its potential speed.

Despite large potential, river transport has not receivedany investment.

The main waterways cannot be operated for 3 months a yearbecause of limited draft.


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Railways need rationalization waterwaysneed basic attention

Myanmars trunk rail lines need modernization, but the

tertiary network should be scaled down. The countrys rail network is by far the longest in Southeast Asia,

but part of it is unproductive.

Neither current design standards nor potential demand on over

half of the network enable commercial operations. The waterways connect Myanmars main cities, which is

unique in Southeast Asia but

As of 2015, they are in natural wild state.

Small investments and increased funds for operations would besufficient to enable modern river operations.


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Markets are changing rapidly


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Markets are changing rapidlythe present

The market reforms of 20112015 have transformed the

transport sector and revealed underlying issues: Car and truck ownership has doubled between 2012 and 2015, a

sign of quick economic growth,

A competitive private transport market has appeared. Better

quality trucks reduce freight costs by 20% since 2012 but . Imported car volume has halved traffic speed in Yangon since

2012. Public transport once carried over 80% of passengers butin 2015 only 50% while shrinking annually by 10%,

Fatalities from road crashes have risen from 2,173 in 2009, to4,314 in 2014.

Myanma Railways lost 1/3 of its customers and IWT lost 65% ofits passenger and 83% of its freight turnover since 2009


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Markets are changing rapidlythe future

Vehicle fleets will double every 5 to 7 years. Motorized

vehicle ownership in Yangon is 5 to 8 times lower than inother similar cities but infrastructure cannot handle thatincrease;

Road fatalities will double by 2020 and reach 15,000

annually by 2025;

To become again effective transport modes and providefor a balanced transport system, rail and waterways

require thoughtful policy changes, adequate resources tocreate efficient infrastructure and stronger managementsystems.


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Institutions need to change to keep pace


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Government has recognized that newinstitutions are needed

The coming two or three years will require significant

reallocation of roles and responsibilities among thegovernance units and the service delivery units.

Tools to manage change are lacking - statisticalinformation, performance and strategic plans, policy

statements and of people with appropriate incentivesand skills.

equipment is old and low salaries make the public sector

uncompetitive in attracting staff


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New institutions are needed corporatizingand commercializing SOEs

Myanma National Airways, Inland Water Transport, RoadTransport and Myanma Port Authority were corporatized

but with mixed results

MNA and MPA are financially viable and have a solidpotential revenue stream that can support commercial

viability IWT and RT do not, and are moreover required to carry

heavy legacy costs debt and pensions from beforecorporatization this virtually ensures that they will not

be commercially viable and are likely to eventually fail.

Myanma Rail requires a concentrated modernizationprogram systems, operations and investment strategy


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Immediate investments provide highreturn


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What are the returns from re-investment and

restructuring?

The diagnostic suggests that a focused and affordable

program of transport infrastructure investments andoperational changes launched in the next five yearscould by 2030:

Reduce transport costs by close to 30%

Increase Myanmars annual gross domestic product by ultimately$40 billion.

Provide basic road access to close to 10 million people.

Save 40,000 lives on the roads that would otherwise be lost.

The incremental improvements are highlighted on thefollowing summary chart,


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What are the returns improved long

distance transport costs


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What investment and development is mosturgent?


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Where should attention focus?

The road sector dominates and should receive a larger

share of investments. However, Myanmar cannot depend in the long run

narrowly on just one mode.

Because they have been operating below potential,railway and river transport reforms and improvementscould have a significant beneficial impact.


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Where are improvements needed?

Highways

These projects involve improving the operations,

maintenance, and rehabilitation of the most highlyutilized road corridors - projects that have the highesteconomic returns.

As of 2015, only few roads require capacity expansion,

so major improvements should be reserved for thecritical links to countries with which Myanmar tradesmost.


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Railways Myanma Railways needs to be reformed and take a

resolutely more commercial focus.

Plans are proceeding to upgrade the YangonMandalayCorridor, where demand is the highest.

There, railways could provide a low-cost alternative of equal orbetter quality than road transport and capture a large market.However, this will take several years, possibly a decade.

Myanma Railway needs flexibility to reallocate assets,staff and resources from unproductive uses to uses with

higher impact and commercial return.


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Waterways

Developing river portsPriority areas are in Mandalay,

Pyay, Magway, Pakokku, and Monywa. The issue here is to find an institutional model: river

ports are a regional government responsibility, but theMinistry of Transport oversees the river and river

frontage. Improving the Ayeyarwaddy waterway up to Mandalayto

a minimum 1.52 meters draft, with more modern

navigation aids would enable 500 ton vessels to operatewith faster turn around, 24 hour daily, year round


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Rural Access

The exceptionally low levels of rural access in Myanmar

and its consequences on poverty ought to make ruralaccessibility a nationwide priority. The government couldlaunch a Nationwide Rural Access ImprovementProgram.

to achieve gradually higher all-season road access in ruralareas, with targets raised periodically.

focus on establishing a core village road network ensuring basicaccess with central management but bottom up planning.

Union government grants, donor funds, and possibly earmarkedtaxes (e.g. India earmarks a tax on diesel) would finance it.


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Yangon

Yangon is a special case and requires consideration as

the major commercial centre as well as its potential to bea major regional city in the future


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Policy changes are essential for leadingreform


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Policy Changes to Guide the Future

A clear transport sector policy statement: the principles that guide both sector wide governance as well as

delivery of transport services to the user public;

Scaled up transport financing is essential: high-priority investment program identified above is in the range

of $68 billion over five years

Users could increasingly finance transport investments

Focus on high return investments EIRR above XX%

Create a new public body with transport planning andpolicymaking functions


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Unlocking private sector growth The government should announce a policy to quickly

shift to 100% outsourcing of public-financed civil works

The gradual transfer of several government functionsand units to the private sector: road vehicle inspection,road construction units, and non-core rail services

Public private partnerships should be pursued, but in amore prudent way than in the past

Restructure many of the Ministry of Constructions build-operatetransfer (BOT) contracts.


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Restructuring Transport SOEs:Rail, Road, Inland Water Transport and PortsBusinesses


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Restructuring transport state-owned

enterprises

Undertake separation of responsibilities policy,

regulation and service delivery; Focus on Service Delivery on a commercial basis

whether offered by the government or by the privatesector must be competitive

people with strong business sense should be put in managingpositions

Governance must have a clear objective and target, andbe based on OECD Standards autonomy, independentboard, financial control and properly capitaized


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Implementing a new ministry structure


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To be completed once we know how many

ministries we have

Just talk about what has been done now. Unitary

Ministry discussion may not be productive


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Short term actions


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The Approach and Some Quick Initiatives Actions will be presented later in this workshop for each

transport sector

Present a revised 2016 budget strategy: budgets toincrease road, rail and waterway maintenance.

To generate leeway for new initiatives, the government

should audit and rationalize long-term commitments. government-financed road or rail infrastructure projects started

or to be started,

ongoing bidding procedures for public-private partnerships, and

long-term concessions.


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Focused Implementation Teams

Form small teams in charge of piloting institutional and

policy reforms and investment plans. This team couldidentify a list of major reforms achievable in the next 24years.

Teams would be composed of civil servant staff and

external people. These teams would directly report to theMinister(s).

Revise State Owned Company management skills:bring in commercial skills quickly


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Show Commitment to reforms

Signal commitment to market reforms, sound planningand efficient management: Issue a National TransportSector Policy Statement leading to a new andconsolidated Transport Law.

After a review, the government could confirm its general

adherence to the National Transport Master Plan and theArterial Roads Master Plan, prepared respectively withJICA and KOICA support. It should then requestagencies to prepare a first medium-term investment

program.


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Show Commitment to reforms

The government should also quickly decide upon thefuture of state-owned enterprises and other transportservice delivery units. It could mandate each transportstate-owned enterprise to identify its financial needs,draw a plan towards restructuring; and prepare corporate

plans. On its basis, the minister(s) could negotiatecommon terms regarding debt, pensions and staff withthe Ministry of Finance.


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What The ADB Can provide

Put in material about a policy loan and investment loans


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Thank you!

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Session 2.1 Status of the Myanmar Transport Sector (Adrien)

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