Myanmar Junta Waives Tax on Electricity Investment to Keep Lights On

By The Irrawaddy 27 February 2023

In a bid to attract foreign funds for the country’s electricity sector, which has been crippled since the coup, the junta has waived tax on investment in the sector.

The junta-appointed Myanmar Investment Commission has announced it will waive tax on production and distribution of renewable energy including solar power. The regime has made electricity a national priority for investment and will exempt or reduce tax on imported materials, machines, equipment, spare parts, and construction materials that are not available in Myanmar, according to the announcement.

Taxes will also be waived for businesses related to electric vehicles, it added.

However, a local businessmen working in the sector commented that electricity production is a long-term project, and foreigners will not be interested in investing unless the country has political and economic stability.

“Projects in the electricity sector take around seven years to break even and you only start to see profits after seven years. Even Chinese companies do not want to invest because of uncertainty in Myanmar. Also, investors would be paid in kyats for their electricity, and the kyat is depreciating. This is also a challenge to potential investors,” he said.

Junta chief Min Aung Hlaing’s family and their cronies have won licenses to operate solar power plants. But they themselves do not want to make huge investments for the long term, and are seeking business partners, he added.

An energy expert told The Irrawaddy: “Foreign investors consider country risk [the risk of investing or lending in a country] as more important than tax exemptions. If a country is unstable, and risk is high, international banks will not grant loans for investment in that country. So, we can’t expect foreign investors to come just because of low tax.”

Another local business owner engaged in electricity production said the regime has introduced tax exemption not out of a desire for electricity sector development but because junta leaders are interested in potential profits from the industry.

The World Bank and other international agencies that had been providing financial and technical assistance for Myanmar’s electricity sector suspended their assistance following the coup. Electricity projects have also stalled.

Suspended projects include a 35-million-euro hydropower plant on the Salween River to be built with loans from French development agency AFD, and a Japan-backed US$ 2 billion LNG (liquefied natural gas) power plant in Thilawa Special Economic Zone in Yangon.

Meanwhile, Hong Kong-based VPower halted electricity generation at its 400-megawatt (MW) LNG power plant in Yangon’s Thaketa Township and 350MW power plant in the Thilawa Special Economic Zone in July 2021, citing rising LNG prices in the international market and depreciation of the kyat against the dollar.

In September that year, VPower announced it had pulled out of two power projects, each with a capacity of 200MW, in Rakhine State’s Kyaukphyu and Mandalay Region’s Myingyan.

In May 2020, the now ousted National League for Democracy government invited bids for the construction of 29 ground-mounted solar projects capable of generating a total of 1 gigawatt of power under a 20-year build-operate-and-own contract. Chinese companies and their consortia won the bids to build 28 of the 29 plants.

The military regime cancelled tenders for 26 solar power projects and blacklisted the Chinese companies after they stalled on the projects following the coup.

Myanmar has suffered rolling blackouts since late 2021 since the regime ow mainly relies on hydropower plants to supply electricity.

The country’s total electricity production capacity currently stands at 3,600 megawatts, with Chinese companies accounting for about 2,000 megawatts and 56 percent of investment in Myanmar’s electricity sector, according to an August 2022 report of the Institute for Strategy and Policy.