Transport Sector Diagnostic

and Overview

May 2016

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The Presentation Agenda

The current transport sector overview a diagnostic
The change occurring in the transport sector market and
the need for government to implement policy change
Government institutions need to be restructured to face
the new demands
What are the most urgent investments
What are possible short term actions and how do we
implement 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 been
significant
Between 2004 and 2014, the Department of Highways added
more than 10,000 km of new trunk roads;
Myanma Railways operated a 3,330 km network in 1990, now
6,107 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 or
rehabilitation.
Because of poor track condition, Myanma Railways is forced to
operate at 50% of its potential speed.

Despite large potential, river transport has not received

any investment.
The main waterways cannot be operated for 3 months a year
because of limited draft.
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Railways need rationalization waterways

need 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 be
sufficient to enable modern river operations.

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Markets are changing rapidly

2016-05-20

Markets are changing rapidly

the 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 but
in 2015 only 50% while shrinking annually by 10%,
Fatalities from road crashes have risen from 2,173 in 2009, to
4,314 in 2014.
Myanma Railways lost 1/3 of its customers and IWT lost 65% of
its passenger and 83% of its freight turnover since 2009
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Markets are changing rapidly

the future
Vehicle fleets will double every 5 to 7 years. Motorized
vehicle ownership in Yangon is 5 to 8 times lower than in
other similar cities but infrastructure cannot handle that
increase;
Road fatalities will double by 2020 and reach 15,000
annually by 2025;
To become again effective transport modes and provide
for a balanced transport system, rail and waterways
require thoughtful policy changes, adequate resources to
create efficient infrastructure and stronger management
systems.
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Institutions need to change to keep pace

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Government has recognized that new

institutions are needed
The coming two or three years will require significant
reallocation of roles and responsibilities among the
governance units and the service delivery units.
Tools to manage change are lacking - statistical
information, performance and strategic plans, policy
statements and of people with appropriate incentives
and skills.
equipment is old and low salaries make the public sector
uncompetitive in attracting staff

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New institutions are needed corporatizing

and commercializing SOEs
Myanma National Airways, Inland Water Transport, Road
Transport and Myanma Port Authority were corporatized
but with mixed results
MNA and MPA are financially viable and have a solid
potential 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 before
corporatization this virtually ensures that they will not
be commercially viable and are likely to eventually fail.
Myanma Rail requires a concentrated modernization
program systems, operations and investment strategy
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Immediate investments provide high

return

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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 and
operational changes launched in the next five years
could 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 the

following summary chart,

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What are the returns improved long

distance transport costs

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What investment and development is most

urgent?

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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 improvements
could 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 highly
utilized road corridors - projects that have the highest
economic returns.
As of 2015, only few roads require capacity expansion,
so major improvements should be reserved for the
critical links to countries with which Myanmar trades
most.

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Where are improvements needed?

Railways
Myanma Railways needs to be reformed and take a
resolutely more commercial focus.
Plans are proceeding to upgrade the YangonMandalay
Corridor, where demand is the highest.
There, railways could provide a low-cost alternative of equal or
better 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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Where are improvements needed?

Waterways
Developing river ports Priority 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 the
Ministry of Transport oversees the river and river
frontage.
Improving the Ayeyarwaddy waterway up to Mandalay to
a minimum 1.52 meters draft, with more modern
navigation aids would enable 500 ton vessels to operate
with faster turn around, 24 hour daily, year round

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Where are improvements needed?

Rural Access
The exceptionally low levels of rural access in Myanmar
and its consequences on poverty ought to make rural
accessibility a nationwide priority. The government could
launch a Nationwide Rural Access Improvement
Program.
to achieve gradually higher all-season road access in rural
areas, with targets raised periodically.
focus on establishing a core village road network ensuring basic
access with central management but bottom up planning.
Union government grants, donor funds, and possibly earmarked
taxes (e.g. India earmarks a tax on diesel) would finance it.

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Where are improvements needed?

Yangon
Yangon is a special case and requires consideration as
the major commercial centre as well as its potential to be
a major regional city in the future

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Policy changes are essential for leading

reform

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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 and
policymaking 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 functions
and units to the private sector: road vehicle inspection,
road construction units, and non-core rail services
Public private partnerships should be pursued, but in a
more prudent way than in the past
Restructure many of the Ministry of Constructions build-operate
transfer (BOT) contracts.

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Restructuring Transport SOEs:

Rail, Road, Inland Water Transport and Ports
Businesses

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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 private
sector must be competitive
people with strong business sense should be put in managing
positions

Governance must have a clear objective and target, and

be based on OECD Standards autonomy, independent
board, 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 to
increase 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 could
identify a list of major reforms achievable in the next 24
years.
Teams would be composed of civil servant staff and
external people. These teams would directly report to the
Minister(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 planning
and efficient management: Issue a National Transport
Sector Policy Statement leading to a new and
consolidated Transport Law.
After a review, the government could confirm its general
adherence to the National Transport Master Plan and the
Arterial Roads Master Plan, prepared respectively with
JICA and KOICA support. It should then request
agencies to prepare a first medium-term investment
program.

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Show Commitment to reforms

The government should also quickly decide upon the
future of state-owned enterprises and other transport
service delivery units. It could mandate each transport
state-owned enterprise to identify its financial needs,
draw a plan towards restructuring; and prepare corporate
plans. On its basis, the minister(s) could negotiate
common terms regarding debt, pensions and staff with
the 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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