ADB: Solve legal issues before private sector can power Myanmar

Power lines are supported by wooden poles in Lake Inle, Myanmar. The country does not have enough energy supply to fuel its economic growth. Photo by: abrinsky / CC BY-NC-SA

Myanmar is widely viewed as one of the brightest lights for development efforts in Asia in the next few decades.

Donors are pouring in funds, aid implementers are setting up shop all over the country and investors are scrambling to be the first to tap into the seemingly limitless business opportunities, but there’s a catch — Myanmar just doesn’t have enough energy supply to fuel its economic growth potential.

Just three years after it started opening up after decades of international isolation, the country has made significant development strides particularly in energy coverage. Electrification rate increased significantly to 28 percent in 2012 from 16 percent in 2006, or one in every five households connected to the electricity grid.

This is a laudable achievement, but a far cry from the goal of putting light to every Burmese home.

Regulatory framework a must

For the Asian Development Bank, Myanmar’s energy development — particularly electrification coverage — can be fast-tracked best through the private sector.

But for that to happen, legal issues — including a proper national energy agenda, and laws that promote and create a business-conducive and investor-friendly energy sector in the country — must be resolved first.

“A good legal and regulatory framework that creates an enabling environment to attract private sector investments, both domestic and foreign, [is needed],” Chong Chi Nai, director of energy for the bank’s Southeast Asia department, said during an online discussion attended by Devex.

Jong-inn Kim, ADB’s lead regional energy specialist, meanwhile noted that there is no way around energy development without the private sector in Myanmar.

“The private sector involvement is inevitable to meet growing demand and necessary investments,” he explained. “Necessary energy infrastructure should be built. This cannot be done by the government alone. The private sector’s role and investment is crucial in developing energy infrastructure.”

The country’s current national energy law dates back from 1984 and doesn’t provide for updating in a quickly modernizing nation. ADB is helping the government and lawmakers work on new legislation that will set national distribution and transmission codes, as well as establish electric equipment standards. Kim said the new law is expected to be promulgated in the first quarter of 2014 following an ongoing public consultation.

Fixing priorities

Fortunately for Myanmar, the country is blessed with resources that can be harnessed to supply energy, including hydropower. As of June 2013, Kim said the power generation mix is largely composed of hydropower with over 70 percent, while gas and coal with 21 percent and 4 percent, respectively.

The government, however, seems more keen on continuing to export energy, mainly natural gas from the Andaman Sea.

“Currently, gas production is exported to meet existing contracts. However, the government recently announced that new gas production will be used for domestic needs first,” Kim said. “The dilemma facing the government is how to get gas for domestic power generation when it is already committed for export.”

Along with the legal issues are the tariffs and subsidies that will be imposed once power plants generate and distribute power to households all over the country.

Chi Nai said energy generation and distribution should be more efficient and sustainable to avoid steep pricing for the benefit of the people of a low-income country like Myanmar, all the while reminding the government that subsidizing electricity costs is the wrong way to address the problem.

“Development of the energy sector should be carried out in an environmental and sustainable manner with tariffs that reflect the cost of supply,” he explained. “Providing subsidies is not a good path to follow as it would lead to inefficient use of resources and would also impose a big fiscal burden on the government budget.”

Climate change concerns

Aside from the issue of supplying energy, there’s also the constant concern about climate change and environmental sustainability, catapulting renewable energy to the center of discussion. Despite the good praises regarding renewables, there have been arguments regarding their capacity — or the lack of it — to replace more expensive base load energy sources like coal and gas because renewables are less reliable.

For ADB, the solution for this base load vs. non-base load debate is to have a good energy mix in the country’s electricity grid.

“It is important to have a good generation mix … in order to have an optimal power system,” said Chi Nai.

Just a month ago, ADB approved a $60 million loan to improve the efficiency of Myanmar’s electrical distribution network. The loan will allow around 48,000 households in the country’s four regions to have better access to reliable electricity supply, on top of the bank’s initial plan of promoting more off-grid renewable energy in Myanmar’s remote areas.

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About the author

  • Lean 2

    Lean Alfred Santos

    Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.