Private Sector Development of Domestic Airports Postponed

By Kyaw Hsu Mon 2 July 2014

RANGOON — The Department of Civil Aviation (DCA) said on Tuesday that it is indefinitely delaying its plans to invite foreign and local companies to upgrade 30 out Burma’s 69 domestic airports.

“We’re also busy with the three other international airport development projects, so I think domestic airport projects will be tendered after we finish all these [international airports],” the new DCA Director General Win Swe Tun told The Irrawaddy. He declined to specify when the domestic airport projects could be offered up for a tender.

The DCA has been working with private investors to develop Rangoon’s new Hanthawaddy international airport and to upgrade the international airports of Mandalay and Naypyidaw. It could take several years before these projects are completed.

Win Swe Tun said a future tender is likely to invite investors to develop a smaller number of domestic airports than originally planned, adding, “It will be less than 30 airports because we checked the registry of interest last year.”

In November, the DCA called on companies to register their interest and proposals for improving 30 of Burma’s 69 domestic airports, in a process that served to inform the government agency of the plans of potential airport developers.

Win Swe Tun declined to reveal how many firms had registered an interest in taking over and developing the 30 domestic airports.

In April, the DCA still seemed confident that it could attract private investors and its then-Director General Tin Naing Tun said a tender for the 30 domestic airports would be issued by October.

The DCA wants to sign public-private partnership agreements in which it expects private investors to come with proposals and a budget to take over airport management and upgrade infrastructure and technology. The agency would continue to be responsible for airport security and air traffic control.

Win Swe Tun said, “Local or foreign companies will have to create market to attract airlines and passengers, and also they should have long term planning to handle income and expenses.

“Our aim is to reduce government budget for running these domestic airports while achieving better services, infrastructure and runways.”

Currently, local airports are small, unsafe and lack sophisticated technology, following decades of mismanagement and neglect under the previous military government. According to the DCA, the government currently spends about US $12 million annually on running the 69 domestic airports.

The delay of the planned tender for domestic airports casts doubts over the government’s plan to let the private sector foot much of the bill of the upgrade of local airports. Details of a policy or master plan for the development of Burma’s crumbling airports have also been scarce.

Economists, such as Burma specialist Sean Turnell, have noted that apart from tourist destinations Bagan, Inle Lake, Mandalay and the Mergui Archipelago, domestic airports in the country will not be commercially attractive and therefore hard to develop through private sector investment.

“Too out of the way, no viable tourist traffic and no reservoir of middle-class travelers or business activity to sustain them,” Turnell said of most domestic airport in a recent interview. “The sort of returns these airports could generate would not be sufficient for the relatively high capital outlays creating a modern airport would require.”

It’s not only domestic airports, however, that have struggled to secure private investment desired by DCA. Its approach to public-private partnership for the Hanthawaddy airport project has also run into problems.

The agency granted South Korea’s Incheon the tender to build Hanthawaddy last year, but differences arose over who would finance the project. The government eventually agreed to guarantee development loans for half of the project cost—estimated at approximately US $1.5 billion.

Last year, Japan’s Mitsubishi Corporation was awarded the tender to develop Mandalay airport. A subsidiary of Burmese conglomerate Asia World was awarded a $150 million contract to upgrade Rangoon’s old Mingalardon airport.