Energy

With massive infrastructure upgrades in the works and industrial demand rapidly expanding, the energy
market in Myanmar is currently one of the more promising ones in the world. The country is in great need
of electricity generation capacity and must completely overhaul its transmission and distribution systems.
Investment opportunities are available throughout the energy value chain, and will be for decades to
come. Globally, it is an outlier: as other countries slow or cut back on energy investment due to low oil
prices and weak economic growth, Myanmar is ramping up its commitment and inviting the world to
participate.

This chapter contains interviews with Ken Tun, CEO Parami Energy Group; U Kyaw Kyaw Hlaing,
Chairman, SMART Group of Companies; and Billy Harkin, Chairman, Energize Myanmar.

This chapter includes the following articles.

Infrastructure upgrades in Myanmar aim to cover gaps in energy sector

Infrastructure upgrades in Myanmar aim to cover gaps in energy sector

With massive infrastructure upgrades in the works and industrial demand rapidly expanding, the energy
market in Myanmar is currently one of the more promising ones in the world. The country is in great need
of electricity generation capacity and must completely overhaul its transmission and distribution systems.
A raft of investment opportunities are available throughout the energy value chain, and will be for
decades to come. Globally, Myanmar is an outlier: as other countries slow or cut back on energy
investment due to low oil prices and weak economic growth, the nation is ramping up its commitment and
inviting the world to participate.

Powerful Potential

In closing its energy gap, Myanmar has significant domestic resources available. The annual potential of
hydropower is 108,000 MW of capacity and wind is 4032 MW per year, while the potential annual output
of solar is 51,973 TWh (terawatt hours). The country also has an estimated 130m barrels of oil and
10.3trn cu ft of natural gas. In theory, it could power itself using alternative energy alone. Most of the
baseload can be supplied by hydropower, with top-up by solar and wind, said Andre Wheeler, CEO of
Asia Pacific Connex.

The exact path forward is uncertain, however, and is by no means straight and clear. While most
participants agree on the numbers and direction, the country is still debating its desired energy mix. It is a
challenging conversation that brings together experts, donors and now individuals affected by the new
energy capacity being introduced. Yet given the substantial need for power, the governments positive
stance toward liberalisation and the energy assets available, large-scale transactions are being and will
continue to be completed.

On The Rise

Myanmar has a sizeable and growing installed power generation base. Since reforms began in earnest
after 2010, total generation capacity went from 3413 MW in FY 2010/11 to 5235 MW in 2015/16. Key
metrics have ticked up steadily over time. The electrification ratio has increased from 16% in 2006 to
approximately one-third now; per capita consumption soared in the five years to 2015/16, from 108 KWh
to 263. The countrys base of installed, operating capacity, meanwhile, is diverse and robust, with a total
of 26 hydropower plants, 27 gas-fired plants and one large-scale coal plant.

National Plan

Myanmar is actively working to build out the sector. It has introduced an ambitious programme for
expanding its infrastructure, one that promises to make up for existing shortfalls and meet its needs. The
National Electrification Plan (NEP), developed in cooperation with the World Bank and the UN,
establishes benchmarks for progress towards full electrification: 50% access by 2020, 75% by 2025 and
100% by 2030 (with one-fifth of power coming from renewables).

An estimated 20 GW of generation capacity is to be added, which is equivalent to 175,200 TWh per year,
at 100% capability utilisation. To achieve this, an estimated 50-100 power projects will have to be
developed. It promises to be one of the most dramatic energy transformations ever, with the percentages
set to match the exponential capacity expansion in China over the past 15 years.

The extension of the grid is a major priority and will be the focus of early efforts, as the transmission
system is inadequate: under capacity, poorly maintained and limited in terms of coverage. Existing
medium-volt infrastructure will be expanded and 20,000 km of new low-voltage lines will be added. The
scheme will also add local connections and public lights. In the years leading up to 2020, around 1.7m
connections will be introduced at a cost of $700m. That will be followed by the connection of 7.2m
households to the grid and investment of $6bn.

The NEPs total cost is significant. According to the World Bank, to meet the generation goals outlined,
an estimated $20bn will be spent and another $10bn might be needed for expansion.

In terms of the energy mix, the 900-page Myanmar Energy Master Plan, introduced in 2016 by
Myanmars National Energy Management Committee (NEMC), calls for a dramatic adjustment in use of
energy sources. The focus in capacity will gradually shift as the country ramps up generation and
introduces new technologies. One aspect of the plan will involve hydropower dropping from 70% of the
total energy mix to 57% by 2030 and natural gas from 28% to 8%. Coal, meanwhile, will increase its
share from 2% to 30%, with solar rising from 0% to 5%.

The report also calls for the establishment of legal and regulatory frameworks for the administration of
the sector, the active engagement of civil society and environmental groups and the sharing of benefits
from energy development with residents near the infrastructure being constructed.

International Support

Myanmar is receiving significant international support for its energy plans. In September 2015 the World
Bank committed $400m, in the form of a 32-year, interest-free loan, to assist the country in achieving the
goals of the NEP. Of the total, $310m will go towards the expansion of the transmission network and
another $90m will go to the Ministry of Livestock, Fishery and Rural Development. The programme will
invest in both on-grid solutions and developing off-grid capacity.

In addition to the World Bank, other international organisations will be aiding in the expansion, including
the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), the state-
owned German development bank KfW and the German international development company GIZ, which
is also owned by the state.

Yangon Electricity Supply Corporation (YESC), a state-owned entity that distributes power in the city, is
working to transform itself into a stand-alone commercial enterprise. The corporatisation of the Yangon
Electricity Supply Board into the YESC and the Mandalay Electricity Supply Board into the Mandalay
Electricity Supply Corporation was undertaken in July 2015. The idea is that, as independent entities
with their own legal infrastructure, they will be able to raise funds for investment, increase efficiency and
reduce waste. The YESC had been self-funding since 2006, but the structure was ineffective and required
support from the government from 2011, according to the Myanmar Times.

Japan, a major partner in the development of Myanmars energy sector since the 1990s, is upping its
cooperation. It has been supplying JPY4.2bn ($38m) of official development assistance for electricity in a
programme running from 2014 through to 2017. As part of this, in November 2016 it announced a
comprehensive $7.7bn assistance package for Myanmar that includes funds supporting electricity
projects.

Regionally, Myanmar is part of longer-term plans for connectivity, with ASEAN discussing the
development of an association-wide grid. The grouping hopes to balance strengths and weaknesses of the
various markets in member states through the efficient exchange of electricity. Some countries have
power needs while others, such as Laos, have significant surpluses. In late 2016, it was reported that
Myanmar would be the fifth country to join the regional cooperation group, following Laos, Thailand,
Malaysia and Singapore.

Legal Reforms Roll Out

Until recently, the energy sector was underpinned by a series of outdated laws which were crafted for
colonial administration and later for centralised control. They were: the Electricity Act, enacted 1948 and
amended 1967; the Myanmar Electricity Law, enacted in 1984; the Electricity Rules, enacted in 1985; the
Petroleum Act, enacted in 1934; and the Petroleum Rules, enacted in 1937, amended in 1946. The
Myanmar Electricity Law, enacted in late 2014 to replace the 1984 law, changed the framework for
regulating the sector.

Designed with help from international partners, the law encourages investment in electricity and allows
for foreign participation in generation, though projects under 10 MW have technically been restricted
under the Foreign Investment Law of 2012 and are therefore required to be structured as joint ventures.
The Electricity Regulatory Commission, which was created under the law, manages the sector and
monitors anti-competitive behaviour. The commission has the power to set prices if it determines that
competition is being impaired.

Structural Changes

Structural reforms have also been undertaken in order to make the management of the sector more
efficient and effective. The Ministry of Electric Power No. 1 and Ministry of Electric Power No. 2, which
was created from a division of the Ministry of Electric Power in 2006, were themselves merged into the
Ministry of Electric Power (MOEP) in 2012. The NEMC and the Energy Development Committee were
formed in 2013.

In early 2016, the Ministry of Electric Power and the Ministry of Energy were merged into a Ministry of
Electricity and Energy (MoEE) as part of the new governments efforts to consolidate the bureaucracy.
According to local press reports, the combination will mean very little in terms of operations, though a
new division will be created that will run along the lines of the Myanmar Oil and Gas Enterprises former
Energy Planning Department. The significance is more one of focus and commitment. Overall, the new
ministry will be a major force in the country and be responsible for driving the increase in energy output.
It will help make sector-wide policy more effective as the country works to meet its energy needs.

More In The Works

According to the Myanmar Times, the country introduced 10 private gas-fired power plants since 2011 as
investors committed funds to the sector. Almost 1 GW of power has been added to the grid by these
plants.
In the Yangon area, a 50-MW project at Thaketa has been operational since 2013, while the first phase of
the Hlawga power plant, a 2x25-MW project, went operational in July 2013. The Ywarma power plant,
52 MW and gas-fired, has been on-line since 2014. A 121-MW plant at Ahlone, built by Toyo Thai on a
30-year build-operate-transfer basis, became partially operational by 2014.

The Kyaukse power plant, originally rolled out at 82 MW, was commissioned in 2014 within two months.
The following year, an additional 20 MW was added. In 2016 the contract, originally set for 18 months,
was extended for another year. In March 2015, Hong Kongs VP ower Group started delivering 45 MW
to the grid at Kyaukphyu, with the project up and running in just four months.

Another plant, a 230-MW gas and biomass facility at Mawlamyine in Mon State, was connected to the
grid in early 2016. In early 2016 a 50-MW plant was opened at the Thilawa Special Economic Zone
(SEZ), the agreement to build the plant having been signed in early 2015. Concessionary financing came
from JICA while Sumitomo Corp, also a shareholder in Thilawa, was a participant. Gas for the plant will
be supplied from the Zawtika field.

VP ower is working on a 133-MW facility at Myingyan, while construction on another Thaketa plant
started in early 2016. Located 16 km from the Thilawa SEZ, it will be gas-fired and have a capacity of
106 MW. Actual production is scheduled to start in 2018, although this is subject to change. The current
plan is for the Chinese partner to run the project for 30 years, with gas supplied by the Zawtika field.
Slated ultimately for 500 MW, the Thaketa plant, when activated, could be the largest power plant in
Myanmar and the fifth privately-run plant in Yangon.

Another facility, with maximum output of 250 MW, is also on the boards for Thilawa, the tender having
opened in late 2015. To qualify, bidders were required to post a $5m bond and have more than $1bn in
cash flow for the past five years. Unlike the 50-MW project, the new Thilawa project will not come with
a dedicated fuel connection. The winners of the tender are responsible for sourcing their own supply. A
plant at Thaton Township in Mon State is also set to be upgraded, more than doubling capacity from 40
MW to 106 MW. Funding for the project is being provided by the World Bank. Additionally, a 400-MW
gas-fired plant is being built at Thanlyin Township in Yangon. The development is being led by Japans
Marubeni Corp, a trading company.

Stage Of Development

In all, some 81 projects are currently in the works, according to an early 2016 report by the MoEE. They
are at various stages: seven are under joint venture agreements (six hydropower and one gas turbine), 28
are under memoranda of agreement (12 hydropower, one wind, two solar, eight gas turbine and five coal),
and 46 are in the memorandum of understanding (MoU) stage (26 hydro, four wind, three solar, six gas
turbine and seven coal). The MoEE added in late 2016 that it plans to see eight additional combined-cycle
power plants built with a total capacity of 2931 MW. The projects are expected to be undertaken by the
government in partnership with private companies.

Barging In

Due to the urgent need for power, the government has started to accept the necessity of instituting stop-
gap measures that will supply power quickly to where it is most in demand. Blackouts in the countrys
major urban centres and the lack of stable power at the industrial areas threaten to delay economic growth
and have compelled the government to take immediate measures. The situation in Yangon is especially
urgent. Total energy usage in downtown area of the city was estimated in 2016 to be 1250 MW, up almost
20% on 2015.

One solution is to use power barges to supply generation capacity without the need for construction. Two
are already being deployed. One barge is being sent to Yangon and will be operational by 2017. Under
contract with Myanmar Electric Power Generation Enterprise, the vessel, which will be located near the
Thilawa SEZ, will supply 300 MW of power under a five-year contract at $0.11 per kWh.

Another power generation barge contract, for a vessel also rated at 300 MW, was awarded to a
consortium with the following members: National Infrastructure Holdings, MCM Pacific, APR Energy
and the ACE Resources Group. APR Energy was the first company from the US to be involved in power
generation in the country since the lifting of the sanctions, through its involvement in the 102-MW
Kyaukse project. The Ministry of Electricity and Energy (MoEE) published the tender for the project in
July 2016.

The Myingan Factor

The agreement to build the 225-MW Myingyan power project in the Mandalay division was reached in
early 2015, with construction beginning later that year. When completed in 2018, the facility is expected
to be the largest gas-fired power plant in the country. The deal although it took more than two and a half
years to transact is seen as the benchmark for Myanmar, as it was awarded using an open tender process
that could possibly become a template for future tendered transactions. International participation in the
$300m deal was significant, with the IFC advising the government and the IFC, the ADB and Chinas
Asian Infrastructure Development Bank (AIIB) providing the funding. Singapore-based Sembcorp will
own 80% of the project, with the rest of the equity held locally.

The Myingan power purchase agreement (PPA), which will run for 22 years, was signed in March 2016.
The agreement is significant, in that it was the first PPA resulting from a competitively-awarded
independent power project (IPP) and was developed according to international best practices. The ADB
reviewed the PPA with the assistance of international advisers, such as Allen & Overy.
Properly structured IPPs and PPAs are vital if the country is to meet its anticipated energy needs, as
private sector participation is absolutely necessary. While international financial institutions and the
government will play major roles in financing, a commercial element is required if sufficient funds are to
be raised. The country will need $2.5bn a year to build out generation capacity and transmission assets. It
is also important to have the private sector lead, and in the cases involving joint-venture models and
where the significantly longer transaction time allows a transparent and competitive bidding process may
result in lower costs for the country.

A Long Way To Go

Despite the progress that has been made thus far, the country has a long way to go. Because only one-
third of the country is electrified, the vast majority of people in Myanmar have no access to the grid,
while in some places the rate of access is exceedingly low. For example, in 2013 the last year for which
national data is available in Yangon, the rate of access to some level of electricity was 78%, while in
Kayah it was 46%, Mandalay 40%, Naypyidaw 39%, Kachin 28%, Ayeyarwady 11%, Tanintharyi 9%
and Kayin 6%. The overall rural electrification rate is 16%. The nations electricity use has been among
the lowest in the world. At 160 KWh per year in 2014, annual per capita consumption was 5% of the
world average, though by 2015/16 it had risen to 263 KWh about one tenth of the consumption in the
UK.

Where there is power, the set-up is far from ideal. The distribution grid is weak, the network outdated and
in need of upgrading and repair. Transmission loss, and theft, while down from rates hit in the mid1990s,
is still three times that in Thailand and almost three times that in Vietnam. Electricity, especially in rural
areas, is often supplied by diesel power generators, which produce energy at three to 10 times the cost of
other, larger-scale solutions.

In Myanmar it is the poorest people that pay the highest price for electricity. The country overall is highly
dependent on basic sources, the vast majority of cooking and lighting energy being provided by
traditional charcoal, animal dung, other biomass and candles. Even in areas with high rates of
electrification, significant problems still remain. For a number of years, the countrys primary commercial
centre Yangon has faced repeated blackouts resulting from the limitations of infrastructure within the
energy distribution network.

Top Priority

The government has been quick to take action. Because of the threat of blackouts, restoring stability to the
system was a part of the administrations first 100-day plan. Top priority was placed on taking the steps
necessary to improve supply in the short term. This includes: fixing damaged transmission infrastructure,
building new transformers and adding generation capacity.
The energy gap is not just a temporary problem, but a long-term issue the country must deal with for
decades to come. With the opening of Myanmar to outside investment and the wide-ranging reforms
being undertaken, economic activity has been increasing at a rapid pace and is expected to continue to do
so for the foreseeable future. Myanmar is the fastest-growing economy in ASEAN and one of the fastest-
growing in the world. According to the ADB, electricity demand is increasing by 15% annually and is set
to double by 2020.

Overcoming Challenges

The price of electricity is seen as problematic. In Myanmar, households are charged MMK35 ($0.028) to
MMK50 ($0.04) per KWh and businesses MMK75 ($0.06) to MMK250 ($0.20) per KWh. In both
absolute and comparative terms, the household pricing representing 48% of the total revenue is
extremely low. At the retail level, Myanmar consumers pay at the lower level of pricing for that sector,
about half that of their counterparts in Thailand, while businesses pay about one-third. Myanmar rates are
less than a third of those in ASEAN overall. Still, the lowest rates are far below the cost of producing and
distributing electricity, and this has significant implications for the future of power development. The
government loses money on each unit of electricity sold, with the annual shortfall estimated at $300m. In
FY 2015/16 the MoEE said it spent MMK22.67 ($0.018) per unit in subsidies. Efforts to increase
household rates have been met with resistance and are unpopular. The last major adjustment, in 2014, was
delayed due to concerns about how it would affect the poor and small commercial or industrial users.
The people need to be educated about the actual costs for things, particularly electricity, U Zeya Thura
Mon, CEO of holding company Zeya & Associates, told OBG. If the government continues to subsidise
electricity tariffs, then it will be difficult for the sector to grow.

Change Of Plans

Myanmars ambitious energy targets have raised some concerns as well. Some industry observers say that
the lack of a robust regulatory framework, complex politics and the need for the right technology are
going to make some of the targets difficult to meet. The 20% renewable ratio is a particularly high bar,
and questions have even been raised about the 100% electrification goal (though the even critics agree
that a rapid increase in this ratio is nevertheless doable).

Myanmar has been flooded with advice from a wide range of institutions, but no consensus has
developed. It has received assistance from the World Bank, the UN, JICA and the ADB, and is working
with a National Energy Policy, an Electricity Sector Policy, an Energy Master Plan, a revised Energy
Master Plan, an Electricity Master Plan and the NEP. The assessments are, in and of themselves, helpful
enough. However, the abundance of input has left the country without a single, coherent vision, just many
choices.
The varied options can be as much a hindrance as a reason for optimism. Critics add that while the NLD
has committed to developing the sector, its goals are rather broad and do not provide much direction. The
government is also lacking in the necessary resources. They are active but they lack the budget; the plan
is only a plan on paper, said U Kyaw Kyaw Oo, director at Barons & Fujikura. He added, There are a
large number of reports, but which is the best and which will the government try to adopt? To meet the
2030 plan is quite complicated.

A number of observers remark that while the focus is on generation, transmission will be the real
challenge. As it stands, Myanmar has more 66-KV lines than 132-KV or 230-KV ones. Without the
capacity to move the electricity, the newly installed generation units will not be very useful. A major
bottleneck could result if the right investments are not made. Whatever we develop on the generation
side, the transmission is not ready, said U Kyaw Kyaw Oo.

The energy mix has become a major sticking point in the development of the sector. The original concept
was to increase the use of coal and de-emphasise hydro, taking coal from almost nothing to a third and
significantly cutting water power. Because of resistance to coal, the government acknowledges it might
not be possible to meet their goals. As a result, the country may have to adjust its development to be more
in line with the political reality. It is likely that hydropower will remain a majority portion of the mix,
while liquefied natural gas (LNG) can also play a role.

Coal Power

Coal was seen early on as a solution for energy development in Myanmar. The fuel is cheap and the
plants easy to build, allowing the country to boost its capacity quickly and at a low cost. It was to be a
substantial component of the planned energy mix: a target had been set for around 7940 MW of coal
power to be added, a full third of future capacity. However, despite advancements in clean coal
technology, this energy source is still seen as highly polluting and is being resisted at home and abroad,
slowing development and fundraising efforts.

Due to environmental concerns, major sources of international financing for coal are drying up. In
February 2016, the World Bank said it would not be funding any coal-fired plants. While the group
recognises Myanmars urgent need for power, it feels that coal is not appropriate, especially since other
resources, such as hydropower and natural gas, are cleaner and more readily available. Across the board,
multilateral development banks are becoming increasingly hesitant to get involved in coal-related
projects. In addition to the World Bank, the ADB and the European Investment Bank will only provide
funding for coal projects under very special circumstances.

Others are on the fence. JICA has funded some coal plants in recent years and is pushing supercritical
technology in general, while the AIIB is also backing such projects. Yet it is not clear how successful the
new institution will be in supporting coal ventures in Myanmar. The AIIB wants to be known as green
and responsible and has been vague on its coal policy. On the other hand, private sector participants from
some countries are enthusiastic about investment, especially Indonesian and Thai interests.

Limited Supply

Myanmar is not an ideal place for the development of coal. It has very little of the fuel, and what it does
have is of low quality. If it is to use coal for power generation in any significant quantity, it will have to
import it, probably from Australia or Indonesia. Myanmar also has almost no history of coal generation.
Its installed base of coal plants is quite low. As of the end of 2016, it only had two coal-fired plants up
and running: one in Shan State, the 120-MW Tigyit plant, and one in the Tanintharyi Region with a
capacity of 8 MW.

Even the government is undecided about what to do and has been sending mixed signals. While it said
that it supports coal, 11 coal plants that were agreed to in 2010 have been placed on hold, and some have
been cancelled outright. The situation is dynamic. The government is facing serious resistance to the use
of coal, but industry observers note that the public is not very well informed about coal or indeed other
generation technologies, which have helped to make the plants cleaner than previously.

Coal Challenges

In July 2015 a 279-MW coal-fired plant in Htantabin Township, Yangon was cancelled by the MOEP.
The project was to be developed by Chinas Huaneng Lancang and Myanmars Htoo Group of
Companies, under a 2010 MoU. A 1280-MW supercritical coal-fired plant in Ye Township, Mon State
has also been delayed, though the government has said the project has not been cancelled, only
suspended. Backed by Toyo-Thai Corporation, the facility was to adhere to global pollution criteria.

Other projects seem to be going forward but face uncertainty. In 2016 Chinese interests started
refurbishing the 2x60-MW Tigyit coal-fired plant. The facility the countrys first coal-fired station, built
in 2001 and operational in 2005 has been the subject of concern regarding the both environment and
efficiency. In 2015 it was shut down for what was to be two years due to mechanical problems, but
reopened in late 2015 after the previous government granted Wuxi Huaguang Electric Power Engineering
a lease to run it for 22 years.

At the end of 2016 local groups were continuing to call for its complete shutdown. They said that health
concerns were still an issue and argued that the tests being conducted were not being carried out in a
transparent manner. Particularly worryingly, the Tigyit plant is supplied by the Tigyit coal mine a
deposit discovered in 1989 composed of lignite, which is highly polluting and has poor thermal qualities.
However, officials insist that the recent operation of the plant is for testing purposes only and that no final
decision has yet been made on whether it will return to public-use operations.

Development Of Oil & Gas

Myanmar has been producing oil since the middle of the 19th century, but because of Western sanctions
and the complex bureaucracy before the recent reforms, the country has, until now, been a relatively
modest producer. Since 2010 much has changed. On one hand, domestic demand for hydrocarbons has
increased significantly with economic growth and liberalisation, which has resulted in an increase in
investment and production. On the other hand, the reduction in the global price of oil has served to
prevent the sector from developing as quickly as it might have otherwise done. The removal of sanctions
has seen the entrance of many reputable energy companies, U Than Htunt, general manager of Path-
Finder Technical Services, an oil field service company, told OBG. But the global oil price has reduced
the amount of investment trickling down, resulting in fewer opportunities for local service companies.

As a result of the reforms, the process for gaining access to resources has been made more
straightforward, while a number of bidding rounds have been held for blocks onshore and off. As of early
2016 the country had 17 onshore oil and gas fields and four offshore. It exports about 1.1bn cu ft of
natural gas to Thailand and 300-400m cu ft to China. About 300-350m cu ft is used domestically.

Natural gas production has been particularly strong. According to the US Energy Information
Administration, it went from 450bn cu ft in 2012 to 692bn cu ft in 2015, due in part to the Zawtika gas
project coming on-line in 2014. This trend is seen continuing on new exploration and as new production
comes on-stream. As demand rises within the country, Myanmar is seeking to use more of its natural gas
production domestically.

Oil has not kept up with gas. Because of the reduction in the price of crude, there has been little incentive
to explore; overall production levels have declined since the 1980s, and new discoveries are needed in
order to get the output near previous levels. The downturn of the oil and gas sector has limited the
expansion options for the industry and has resulted in a reduction of revenue for local service companies,
U Aung Kyaw Kyaw, managing director of Alliance Logistics, told OBG. In order for activity to
increase, price per barrel needs to reach approximately $60 for production to be sustainable.

Currently, Myanmar uses production-sharing contracts (PSCs) to guide investment in the oil and gas
sector. Attorneys familiar with these contracts assert that they are fairly straightforward and follow the
Indonesian model. They include all the standard features: relinquishment, cost recovery, work
commitments, royalties, profit oil and equity stakes for the government. The contracts also deal with
domestic supply commitments; those offered recently reflect the countrys shift in emphasis, from one
focused on the generation of hard currency as was the case before the reforms began to one that is in
need of natural gas to fuel its own economic growth. PSCs today require a substantial share of oil output
be diverted to domestic use. A number of major international firms received licences during the third
round, in 2013. These included: BG Group, Woodside Energy, Oil India, Shell, Statoil, ConocoPhillips
and Eni. The Woodside Petroleum blocks have been particularly productive. In 2016 the company
increased its reserve estimates for the areas it is exploring. Despite the success, no new bidding rounds are
expected until 2017. The government has said it wants to focus on the blocks awarded in the 2013 round.

Chevron did put all of its Myanmar assets up for sale in early 2016. However, this move was viewed as
being driven by the companys desire to unload non-core assets and was not interpreted as a statement
about the countrys potential. Given the decline in hydrocarbons prices, Chevron is currently
consolidating and building up its cash reserves. Indeed, the potential sale was viewed as a positive, as it
indicates that the company is confident that other investors are willing to buy into the country.

Myanmar and China share an oil and gas pipeline that runs from Kyaukphyu to Kunming. The pipeline
has been operational since early 2015, allowing China to move resources from the Middle East without
passing through the Straits of Malacca. The natural gas pipeline can carry 424bn cu ft of gas per year,
while the crude oil pipeline has the capacity for 440,000 barrels per day. The pipelines, however, have
been the target of demonstrations, with local residents saying that their property was damaged during the
construction phase.

The Lng Solution

LNG has become one of the best possible sources of additional energy for the country, and is seen by
some as the key to closing the energy gap, especially if coal remains problematic. It is cleaner and less
disruptive than other options. It is also readily available on the international market, given the extensive
development of relevant assets in the past. According to Billy Harkin, chairman, Energise Myanmar,
LNG is reliable as a supply. As a result, the government is seeking partners to develop its LNG
infrastructure. In September 2016 it issued an invitation for expressions of interest seeking firms for
investment in LNG import, regasification, storage and distribution. Interest in developing Myanmar LNG
assets has been expressed by parties from several countries, including China, Korea, Japan, Norway,
Singapore, Thailand and the Netherlands.

The China National Petroleum Corporation has proposed an LNG terminal at Kyaukphyu. Japanese
companies have studied the possibility of developing an offshore floating storage and regasification unit
(FSRU). Thai firms are already involved in the development of LNG facilities in Myanmar. The Thai
stateowned oil and gas company, PTT, and Ratchaburi Electricity Generating reported in 2015 that they
had signed deals in Myanmar with respect to floating LNG storage and FSRU facilities.
The proposed FSRU would have the capacity of 3m tonnes per annum and require a $400m investment.
Meanwhile, Royal Dutch Shell has signed an agreement with Thai partners to develop an LNG terminal
and regasification facility at Dawei. Italian-Thai Development will build the facility, which will cost an
estimated $500m and have an annual capacity of around 6m tonnes. The World Bank is slated to supply
the funding for the terminal.

The Nuclear Option

In 2015 Russia and Myanmar signed an agreement on the development of nuclear power and the training
of relevant staff. A working group was formed in 2016. Discussions on the building of a reactor in
Myanmar are not new, with cooperation going as far back as 2007, when the countries agreed to build a
10-MW nuclear plant.

The Rosatom Corporation, the state-owned Russian company behind the project, has been working on the
development of nuclear power generation in the ASEAN region. It has already reached project
agreements with Vietnam and Indonesia and is looking for a third country with which to develop a plant.
It has cooperation agreements with Thailand, Myanmar, Laos and Cambodia. In the region outside of
ASEAN, the company is working with Bangladesh, where it is building a power plant.

Outlook

Significant generation and transmission capacity will be built in Myanmar in the coming years. The exact
nature of the generation will not be certain for some time. The new government needs to arrive at a
solution that is cheap, bankable and acceptable to the population. As of the end of 2016 LNG seemed to
be the favoured fuel going forward, in part because it is clean and available, and in part because it is
receiving substantial support, especially from Japan. However, the ultimate solution will likely be a
pragmatic one, and coal and hydropower could also play a role, if the funding is available and if domestic
concerns from the countrys citizens can be addressed.

Ken Tun, CEO, Parami Energy Group: Interview

Ken Tun, CEO, Parami Energy Group, on the future of energy security: Viewpoint

Deep in the heart of Myanmar is the town of Yenangyaung, which is famous for two things: it produces
the best onions in the country, and it is the site of one of the world's oldest producing oil fields. With this
historical backdrop, Myanma Oil and Gas Enterprise (MOGE), the national oil company, has signed more
than 100 production contracts so far.
While Myanmar has good fundamentals in place for its oil and gas sector to flourish, the country was
isolated from the global community for over 20 years. That said, it did manage to attract a few
international players, such as PTT Exploration and Production, Total, Daewoo, PETRONAS and some
Chinese firms. However, access to new technology and capital for development projects and field
operations remains limited. As such, the technologies and practices of national and private firms are
outdated by international standards.

With three open bidding rounds, the new government has sent out the message that Myanmar is now open
for business. Thus far, the country has attracted several oil majors, national oil companies and
independent players more than any other country in the region could hope to achieve in two years. The
decision to join the Extractive Industries Transparency Initiative is also promising, with Myanmar
accepted as a candidate country in July 2014. It is now on its way to becoming a South-east Asian centre
for high-intensity exploration activities in 2015 and beyond.

However, Myanmars aging infrastructure is becoming increasingly costly to operate and maintain, such
as its 2000 km of aging domestic pipelines, ranging from 6 to 24 inches, and three outdated and
inefficient refineries, with total refining capacity of just 54,000 barrels per day. Indeed, the cost of
producing oil from the onshore fields operated by MOGE stands at $60-70 per barrel, whereas
international crude prices had fallen to around $50 as of January 2014.

While 100,000 MW of hydropower could be generated from four large rivers in the country, 70% of the
population still lacks basic access to electricity, and Myanmar continues to depend on petrol imports
this despite its role as a large gas exporter, supplying around 30% of Thailands energy needs and 1% of
Chinas.

The trick is finding the right recipe for reform to help Myanmar achieve success and support capacity
development for sustainable growth in local economies. Most importantly, the country must strike while
the iron is hot. Unlocking its potential as a strategic centre for regional cooperation is key, as is its role in
the regional energy supply chain, with Myanmar acting as the connector between markets totalling over
3bn people.

Internally, all the enabling factors are in place. Billions are to be spent on petroleum exploration from
2015 onwards, buoyed by unprecedented domestic demand for electricity and petroleum products, a
sounder political system with diversity in political leadership, and a young and active population.

However, persistent inefficiencies and infrastructure gaps could threaten economic growth, which is key
to attracting foreign direct investment. Myanmar can modernise existing infrastructure and undertake new
projects with funding from international financial institutions, such as the International Finance
Corporation and the newly created Asian Infrastructure Investment Bank. These new projects should
focus on deep-sea ports, offshore marine bases, refineries, and production, transport and processing
infrastructure.

Indeed, energy security has never been more important. Under the current plan, over 7m households will
be electrified by 2030 or 500,000 per year. The best way to achieve this goal is by expanding the
national grids while simultaneously deploying grid-ready minigrids. The Electrification Law offers hope
for greener, more efficient and less costly options, as regional governments have greater involvement in
power projects.

In the short run, gas will be the most viable option. However, effective use of this resource will require a
great deal of inter-ministerial coordination, big-picture thinking, long-term vision, the development of
sound institutions and cooperation with the private sector.

U Kyaw Kyaw Hlaing, Chairman, SMART Group of Companies: Interview

U Kyaw Kyaw Hlaing, Chairman, SMART Group of Companies: Interview

Interview: U Kyaw Kyaw Hlaing

To what extent have service companies been affected by the decline in oil prices?

U KYAW KYAW HLAING: Service companies have had to make significant cutbacks in different
ways, including staffing. While the oil and gas sector is well versed in dealing with cyclical swings in oil
prices, individual companies even those with international portfolios are struggling. In Myanmar, for
example, there are many blocks due for seismic tests or drilling that have not yet commenced due to the
downturn. If we begin to see a trend of a lack of movement from the study period to the exploration
phase, it will eventually trickle down into the service industry.

What are the prospects for developing new discoveries, and how can they best be monetised?

KYAW KYAW HLAING: Our country is a gas producer. Oil and gas prices are related but not directly
priced one-to-one. We are also selling our gas through long-term agreements with neighbouring countries.
These are important factors to consider. For example, Woodside has discovered two gas fields offshore,
AD-7 and A-6. The first is a huge discovery at a depth of 800 metres, and the second is a smaller reserve.

First, the operators have to drill the wells and then appraise them. Then, based on the appraisal, they have
to make a decision. They are not able to sell gas at the spot price unless they convert it to liquefied natural
gas (LNG). If this decision is taken, the bankers want to know how much gas is there, so third-party
certification is required.

However, gas fields take around eight to 10 years to develop, starting from the day of discovery to the
selling of the first batch of gas, and take even longer for deepwater deposits. It is difficult to predict what
is going to happen by 2024. Woodside still has aggressive plans to drill follow-up wells, and once there is
a clearer picture of the size of the deposits, then a decision can be made regarding better utilising the gas.
During the administration of President U Thein Sein, 20 blocks were awarded to local and foreign players
10 deepwater and 10 shallow water. Of this, some are already due for drilling. The good thing is that in
shallow water they have one year after the study period before starting exploration, and two years in the
case of deepwater. In the exploration phase a commitment of three years is required. The government
allows firms free rein during the study period, so some drill the well during the this time. If they make a
discovery, they go into the exploration period, and if they do not, they cease operations. Some big firms
will want to take advantage of this now, because they can benefit from the low cost of services for drilling
due to the current market conditions. So, despite the low oil price, there will still be exploration activity in
2017. How this is best monetised will depend on market conditions at the time of production.

Which infrastructure projects should the government incentivise to help the oil and gas industry?

KYAW KYAW HLAING: Thats a difficult question. One area that needs to be addressed is an offshore
supply base. According to Myanmar Oil and Gas Enterprise, if you want to invest in this area you must do
so in partnership with them. At the same time, however, the country is open, and the government wants to
corporatise bodies to improve efficiency, which should help to encourage participation.

Another area of concern is the limited availability of gas. Woodside has made discoveries, but they will
not be available until 2024. By 2018 Total will have been producing from their field for 20 years, so we
may see production coming down. As such, the availability of gas for local power production between
2017 and 2024 is a concern. The government has some difficult decisions to make about how to manage
this shortage. There are plans for LNG projects, but there is nothing concrete in place yet to close the gap.

Renewables alone could power Myanmar

Renewables alone could power Myanmar

Installed hydroelectric capacity in Myanmar is significant, with the country operating 26 plants, with the
capacity to generate 3214 MW of power. Still, hydro-power is not considered a sole solution and
questions are being raised about the use of water resources compared with other options. While the whole
country could be powered by water alone, it is probable that hydropower will play a reduced, albeit still
majority, role in the countrys future energy mix.

No Norway

Hydropower assets do not perform consistently in Myanmar. In the dry season, they only operate at 30-
35% capacity, hence the uneven output needs to be balanced with other sources. Hydropower is also less
favoured by some because, among all the alternative energy sources, it can take the longest to develop,
with the process taking years rather than months depending on the size of the power station. A base load
of 98% being hydro only really works in Norway at the moment, Billy Harkin, chairman of Energize
Myanmar, told OBG.

Most significantly, while hydropower has a reputation for being clean, its impact on the environment and
society, if poorly developed, is highly controversial. It often requires relocation of inhabitants, flooding of
agricultural lands and changes to transport routes, not to mention that it can scar the landscape and alter
entire ecosystems. However, if done well, as per the approaches undertaken by say Norway and Canada,
the benefits can outweigh the impacts.

The largest source of potential water power in the country, the Ayeyarwady River, is vitally important for
agriculture and navigation, and is also a major source of fish. As a result of real or perceived disruptive
impact associated with hydropower, numerous projects have been halted. The Tamanthi and Shwezaye
dams on the Chindwin River were cancelled in 2013, while the 7000-MW Mong Ton dam project on the
Thanlwin river remains controversial. Residents and civil society groups are now calling for its
suspension until the people affected can be properly engaged. Some 49 hydropower plants were approved
by the previous government. Each of these is now being scrutinised by the new leadership.

Nevertheless, Myanmar has had considerable success with hydropower in recent years. Project
completions include the Lower Paunglaung dam, in 2005, and the Lower Paunglaung dam, in 2014. Both
are near Naypyidaw. The Shweli I Dam, in Shan State, was competed in 2008, while the Yeywa Dam was
operational from 2011 the largest hydropower station in the country, rated at 4x197.5 MW. Meanwhile,
the Dapein-I hydropower station was up and running in 2011, and Chibwenge in 2013. Both are at
Kachin. Thaukyegat-II, at Bago, has been in operation since 2013 and Shwegyin, also at Bago, since
2011. Kunchaung, at Bago as well and rated at 2x22 MW, has been connected to the grid since 2012.
Pyuchaung, located at Magway and with a 2x20-MW configuration, opened in 2015. At Magway, Nancho
commenced operations in 2013, Kyeeon Kyeewa in 2012 and Kabaung in 2008, and Baluchaung-3 at
Kayah came on-line in 2014.
Myitsone The Keystone

The key hydropower project currently under consideration in Myanmar is the Myitsone dam. In
development for more than a decade, it was brought to a halt after the recent round of reforms began.
Myitsones fate has cast a pall over the subsector, and the risks for bringing it to completion are
discouraging financiers from committing to other projects, while tying up resources Myanmar could use
for its other fully funded programmes.

China has pushed hard to get the dam completed and operational, arguing that the project will not only
help the country meet its power needs, but also secure water resources in Myanmar. China has changed its
approach over time, in a way that could help. It has started to recognise its social and environmental
responsibility and has acknowledged that it cannot simply show up and spend money without considering
the impact of its investments.

The increasing sophistication of Chinese investors has not gone unnoticed. Efforts made the State Power
Investment Corporation, the Chinese partner in Myitsone, has been recognised by the Myanmar Centre
for Responsible Business. According to the centre, the company has effectively identified and engaged
interested parties, even those opposing the dam. The centre has also recognised Myanmar Yangtse Copper
(which published a sustainability report on the S&K Mine, part of the Monywa mining complex) and
Myanmar Wanbao Company (which published an Environmental and Social Impact Assessment on the
controversial Letpadaung copper mine).

Not So Charmed

The charm offensive has not been entirely effective. Chinas campaigns are often criticised for inspiring
more ire than acceptance. In some cases the research being published to push the Myitsone project has
been rejected by local interest groups as unpolished and condescending. Residents question whether the
dam would be beneficial to the country and point out that 90% of the electricity will be diverted to China.
At the end of 2016, Myitsone remained a subject of resistance, with civil society groups insisting that the
project be stopped and local residents sending a petition opposing it.

In August 2016 it was announced that a committee formed by President Htin Kyaw would determine the
future of the Myitsone project. It is charged with evaluating the impact of the dam on the environment
and the people living in the vicinity. At the end of 2016 the Myanmar Times reported that a committee
member indicated the conclusion would be to cancel the Myitsone project altogether. The source told the
newspaper that, because the public had resisted the construction of the dam and the agreement was signed
under a dictatorship, a consensus had been reached that it would not be right to let it proceed.
It was not clear, however, whether the report on the dam will be made public and who ultimately will
make the final decision on the project. The committee has said that it will not publish its findings unless
the government approves such a release.

International Backing

Significant expansion of water power is still possible, if it is done right. Experts are calling for smarter
development of hydropower rather than a simple bigger-is-better approach. With the right combination of
dams and operational practices, the country can generate the same amount of electricity while causing less
environmental damage.

Interested parties are working to promote the power source and ensure development is done properly. In
2016, the IFC and 100 entities involved in hydropower in Myanmar, including private firms, civil society
organisations, financial interests and government bodies, formed an association to promote hydropower in
Myanmar. The Hydropower Developers Working Group, as it is known, is expected to conduct annual
meetings and focus on topics such as procurement, documentation, environmental and social impact,
permits and licences. The group is being modelled on a similar group founded in Laos in 2013.

Other Alternatives

Several solar projects are also in development. In 2016 Kamrai Panit, a Thai firm, signed an agreement
with Myanmars Won Toll to build a 300-MW solar plant in the Ayeyarwady Region. The project is
valued at $1bn. ACO Investment Group is committing $480m for two 150-MW plants in the Mandalay
region, while Green Earth Power is investing $275m in a 220-MW plant in the Magway region.

Smaller-scale solutions are also being pursued. Sunlabob Renewable Energy, a Laotian company, has
been contracted to build 11 micro-grid solar projects in Myanmar. The transport, energy, and
infrastructure consultancy ABB Group has also been working to bring solar to the country since early
2015. As of the end of 2016, it had succeeded in bringing power to some 20 villages in the country.

Feasibility studies indicate that Myanmar has significant wind power potential. According to the studies,
10 sites tested in Chin State have total capacity of 1472 MW, another 10 in Rakhine State have a capacity
of 1484 MW, five in Ayeyarwady have 478 MW of capacity, and within Yangon Region two sites have a
potential capacity of 274 MW.

According to the Asian Development Banks Country Operations Business Plan: Myanmar, 2015-17
report there is a technical potential for the development of 4032 MW of wind energy. However, as wind
speeds are inconsistent, there are issues regarding the ability of wind energy to provide a reliable supply.
The best locations for wind power in Myanmar are the hilly areas of Chin State and Shan State, and the
coastal regions in the south, west and central parts of the country. Myanmars first wind power deal was
signed in the early stages of 2016. Under the terms of the memorandum of agreement, the China Three
Gorges Corporation will develop a 30-MW wind facility at Chaungtha, in the Ayeyarwady Region.

Billy Harkin, Chairman, Energize Myanmar: Interview

Billy Harkin, Chairman, Energize Myanmar: Interview

Interview: Billy Harkin

What is the current status of electrification efforts in Myanmar, and how can the rate of
electrification be increased in the coming years?

BILLY HARKIN: Collectively, across all of the various generation technologies, Myanmar has just over
5 GW of installed power generation capacity. In context, thats about one-fifth as much power per head of
population as neighbouring Thailand, which over the past 20 years has been very effective in getting
electricity nationwide to almost everyone. Various 2030 targets for increasing Myanmars installed
capacity have been proposed, with almost all of them agreeing that having 25 GW by then is a good
target. Respectfully, I simply dont agree. Not least because to do so would result in Myanmar 13 years
from now having only half as much power per head of population as Thailand. Why? For me, the target
for Myanmar must be to have at least as much power per head of population as the neighbouring
countries, which have impressively led the way.

A Myanmar target of 36 GW by 2030 would get us to where we need to be. Taking even a crude blended
technologies rule-of-thumb measure of, say, $1.25m per MW of new installed capacity, means we need
an investment of $38.75bn just for power generation alone. Transmission and distribution would require
at least another $10bn each. The international development multilateral organisations, which are
demonstrably keen to help, have planned a $1bn input over the next 10 years. Which focuses the mind on
where the other $37.75bn is going to come from. The answer is private sector financing. Happily, the
financial world is currently awash with low-yield-performing money, literally trillions of dollars, looking
for new and better homes. This is Myanmars historic opportunity, not just for electric power but across
the entire infrastructure spectrum.

How can Myanmar take advantage of its environment and promote itself as one of the worlds low-
carbon engine rooms?
HARKIN: Nature has already positioned Myanmar as a low-carbon engine room. Not many countries in
the world are blessed with the conditions and the opportunity to be not only 100% energy self-sufficient,
but also to be low-carbon 100% self-sufficient. Perhaps only Myanmar and Norway, I cannot think of any
others. Unlike Norway though, Myanmar has a dry season for half of the year. However, even then
Myanmar still has the luxury of being able to set policies such that a sufficient number of small and
medium-sized reservoir dam hydropower stations (say, up to 500 MW) could be built that have a
collective water storage capacity to meet demand for power in Myanmar all year round. This is perfectly
doable.

What potential role can combined-cycle gas turbine (CCGT) plants play in the expansion of the
countrys national grid?

HARKIN: CCGT power plants, especially if powered by high-quality, re-gassed liquefied natural gas
(LNG), are considered the champagne of fossil-fuelled power generation. These power plants have
approximately 70% less of a carbon footprint than albeit lower-cost clean coal power generation. CCGT
also has the benefit of much higher fuel conversion efficiency. With most experts saying that Myanmars
new natural gas potential will take at least 10 years and perhaps 15 years to be landed and become
useable, importing LNG will almost certainly be featured ahead of and likely instead of any imported
coal, as the back-up to lower-cost, indigenous resources like hydro-power generation. Myanmars own
coal, lignite and corrosively sulphur-rich resources are not deemed suitable for the countrys power
generation.

Industrial expansion in Myanmar increases demand for water

Industrial expansion in Myanmar increases demand for water

With an estimated 19,000 cu metres of water available per person per annum, Myanmar might be called a
regional water superpower. Its capacity for water storage is nine times that available in China, five times
that in Vietnam, and 16 times the amount in both Bangladesh and India. The total catchment area of its 10
main rivers covers some 737,800 sq km, with potential surfacewater resources amounting to 1082 cu km
and groundwater sources reaching 495 cu km.

Water is therefore seen as a great asset for the country, and its abundance has implications for energy,
agriculture, navigation and industry. Myanmars fortunate endowment of water resources could be a
significant factor in spurring the countrys development, placing it in a good position relative to countries
that face potential shortages, a common and increasing problem elsewhere.
A Vast Network

The country, a maze of rivers, tributaries and delta systems, is characterised by four main waterways. The
most important river system is the 2170-km Ayeyarwady, which is used for irrigation and is a significant
transportation asset. The 2815-km Salween River, also known as the Thanlwin, is more remote than the
Ayeyarwady and is used more for local, short-haul transportation. Both rivers have been targeted for the
construction of extensive dam systems. The third main waterway, the 1207-km Chindwin River, is the
largest tributary of the Ayeyarwady. Long a transportation waterway, it passes areas with valuable natural
resources, such as amber, teak and jade. The river is also known for its abundant fish resources. The
fourth, the 420-km Sittaung River, is of limited use for energy due to a tidal bore, but timber for export
can nonetheless be floated along it, and a canal has been built to the Bago river to avoid the bore. The
nations other minor rivers include the Lemyo, Mayyu, Nath, Kalatan, Atatran and Gyne rivers.

The rivers of Myanmar have been used for modern transportation since as far back as 1865. An estimated
8000 km of river is open for commercial navigation. This includes 1534 km on the Ayeyarwady, 730 km
on the Chindwin, 2404 km in the Ayeyarwady Delta, 380 km on Thanlwin and Mon state rivers, and 1602
km along the rivers of Rakhine state.

The formerly state-owned Inland Water Transport (IWT) operates over 400 craft on these rivers, moving
people and goods throughout the country, but private fleets also offer services. In addition to the countrys
inland waterways, Myanmar has an exceptionally long coastline of 1930 km, hosting numerous ports,
harbours and jetties. Deep sea ports are also being developed. These facilities will become more
important as the economy continues to grow and as its external trade expands. Myanmar has a coastal
fishing sector which is a major contributor to exports.

Turbulent Waters

While its sheer abundance contains great advantages, water is also the source of several significant
challenges for the country, bringing hardship in addition to the many benefits. For one thing, the
countrys port and river assets are in serious need of improvement and constantly under threat of decay,
especially from sedimentation. The fleets plying the waterways are distinctly low-tech, and even though
IWT was privatised in 2010, the firm still lacks the financial wherewithal to make the necessary
investments in its fleet.

Furthermore, ports are in need of dredging, better facilities and improved service vessels. One source of
such challenges is that rainfall is unevenly distributed across the country. While the rainfall averages are
impressive, some areas receive too much water and some too little. Droughts, which have become more
frequent recently due to the El Nio weather effect, have brought challenges over the years, causing water
levels to fall and threatening entire ecosystems.
Flooding is another major issue. The country was inundated in 2015 and 2016, affecting more than 1m
acres of farmland and causing a loss of about 250,000 animals. After water levels fell, houses and
transport routes were damaged and food shortages persisted. Additionally, Myanmar faces threats of
excess water delivered during powerful storms. Cyclones, for example, periodically bring devastation due
to flooding and high winds, which can cause storm surges. Cyclone Nargis in 2008, sustained winds of up
to 215 km per hour and claimed more than 100,000 lives.

The nation also faces less dramatic, but in the long term vitally important, water-related challenges.
Myanmar must cope with pollution and sanitation issues an estimated one-third of the country lacks
access to clean water and the aquifer, a key asset, needs constant attention.

The Hydro Factor

The development of hydropower has added to stresses on Myanmars water system. While the building of
dams has the potential to help the countrys water management, as the structures can be used to control
the flow of water and aid in irrigation, they can also negatively affect the environment, blocking fish
migration, flooding farmland and impeding transportation. The consequences can be devastating. It is
feared, for example, that proposed dams could put the countrys main rice-growing regions at risk. At the
same time, Myanmar is underutilising what it has. Water is a valuable strategic asset, but the country is
doing very little to harness its full potential. Only an estimated 5% of available resources are being used,
and most of this goes towards farming. Agriculture, which employs more than half the countrys workers,
accounts for 91% of the water consumed by Myanmar.

Policy Vacuum

Myanmar has long recognised the challenges, and efforts to develop better water management have been
ongoing for some time. The country established a National Water Resources Council (NWRC) in 2013
and has had a National Water Policy (NWP) since 2014. Under the NWP, a comprehensive framework
will be developed, laws written and institutions created to optimise the utilisation of water resources. The
policy is comprehensive, covering watersheds, rivers, lakes, reservoirs, aquifers, and coastal and marine
waters, and it seeks to develop all these resources in a integrated, holistic and inclusive manner. The goal
is for Myanmar to become efficient in a practice known as Integrated Water Resources Management
(IWRM) by 2020.

Some experts remain sceptical, however. Attendees of a three-day water conference in Yangon in early
2016 noted that very little has actually been accomplished. Under previous governments, relevant
measures were carried out in an inconsistent manner. They added that the NWRC was disbanded before
the new government came into power, and thus the country had no long-term strategy for water as of
2016. The government has been slowly moving to collect the data that is necessary to begin proper
management of this resource.

They emphasised the importance of getting it right, arguing that water cannot be treated like any other
part of the environment, as it plays a special role in the economy and ecosystem. Other nations make
water management a major priority; Myanmar, they said, should do the same. The NLD understands this,
recognising that the country needs a robust and comprehensive water programme if it is to effectively
utilise the resource and avoid the some of pitfalls that come if such resources not properly managed.

This has become more urgent of late. As Myanmar has opened to outside investment, spurring rapid
growth, its water systems are becoming increasingly strained. Urbanisation, economic growth and
industrialisation are all taxing resources heavily. International organisations are stepping in. The World
Bank has committed $100m to the Ayeyarwady Integrated River Basin Management Project, running
through to 2020, under which capacity will be built at the relevant institutions, data collection will be
improved and sustainable hydropower promoted. The aim is that rivers will become healthier and more
sustainable, water will become a valued national asset, and the lives of those living around rivers will be
enhanced