Darkness Has Fallen Over Myanmar
By Lin Htet Myat 17 January 2023
The sentence “Darkness has fallen over Myanmar” is not only a metaphorical expression describing the dire conditions prevailing in the country since the coup in February 2021, but also a literal reference to the blackouts occurring across the country due to electricity shortages.
In early December, Yangon Electrical Supply Corporation (YESC), a state-owned enterprise, announced that due to the low level of dam water for hydropower plants and maintenance of gas turbines, power will be distributed in Yangon on a rotation basis by dividing the townships into different groups.
Even before this announcement was made, Yangon dwellers faced long power cuts, especially in peripheral townships. Hence, in the summer, even more severe outages in Yangon and other cities are very likely.
The chances for successful implementation of the National Electrification Plan (NEP) by 2030 (which calls for all of the over 10 million households in Myanmar getting access to electricity) are very dim under the military junta, the State Administration Council (SAC), as it is treading the same path as its predecessor, the State Peace and Development Council (SPDC), which ruled the country from 1988 to 2010.
Myanmar ranked lowest in electricity consumption per person (104 kwh/person) and electrification rate (only 13 percent of the population with electricity) in 2009 compared to neighboring Asian countries. During the SPDC era, blackouts were not uncommon and if one looks at the nocturnal satellite photos of Myanmar in the ’90s and 2000s, one will see darkness across the country with sporadic lights like fireflies.
There are five main reasons for the lower electricity consumption and electrification rate during SPDC rule.
The first is the misallocation of public resources. In the 2000s, while Myanmar’s electrification rate was the lowest in the region, the SPDC built the new capital Naypyitaw, in a classic case of a dictatorial regime implementing white elephant projects. The Naypyitaw project drained billions of dollars away from much needed infrastructure investments, particularly hydropower and gas-fired power plants.
Secondly, political capture and corruption contributed to electricity supply shortages. In various hydropower projects, both suspended and implemented during the SPDC’s time, two local crony companies mainly partnered with Chinese state-owned enterprises. They are IGE, which belongs to the brothers of incumbent naval commander-in-chief Admiral Moe Aung and the sons of the late, powerful minister Aung Thaung; and Asia World, owned by the late drug lord Lao Hsing Han’s son. In addition, IGE, despite having limited experience in gas pipeline construction, got a concession to build the 20-inch Southeast Pipeline to carry gas from the Yadana gas field to Yangon, where there are both state-owned and private gas-fired power plants providing electricity to city residents. This pipeline is running at far below capacity as IGE apparently used steel pipes, which are susceptible to corrosion.
Thirdly, poor planning in large infrastructure projects has impeded implementation of the NEP until now. According to the World Bank’s Myanmar Public Expenditure Review 2017, hydropower projects in the country usually encounter time and cost overruns, some with estimated or actual delays of five years and nearly 400 percent cost increases. For example, the Tha Htay hydropower project has been in the implementation phase since 2005-6 and is still not completed. Its estimated cost has risen by over 400 percent. In addition, average project implementation time for hydropower projects is 9.7 years.
Fourth, limited participation of private investment in the electricity sector during SPDC rule contributed to lower electrification and per capita consumption rates. Private investment in the power sector, particularly generation, is crucial to the NEP given the massive investment needs (the World Bank estimated an annual investment need of $2 billion over 15 years through 2030). However, as of 2015, private participation in the power sector in terms of installed capacity was only 10 percent of total installed capacity (68 percent of installed capacity was privately owned by 2019, according to an Independent Economists for Myanmar-IEM report citing an internal memo from the Department of Electric Power Planning-DEPP). This was attributed to the SPDC’s lack of legitimacy, which resulted in Western sanctions. Investors do not desire to invest in high-risk countries like Myanmar, as by their nature, infrastructure investments require political and macroeconomic stability. Multiple exchange rates and policy uncertainty at that time significantly hindered private participation in the power sector.
Lastly, Myanmar could not get access to international donors’ development assistance, which is essential to infrastructure development, and only received humanitarian assistance from the Global Fund for 3 Diseases and the Japan International Cooperation Agency (JICA). Even humanitarian assistance flows increased significantly only after Cyclone Nargis hit Myanmar in 2008. Development assistance is very important for attracting private investments in infrastructure projects in low-income, high-risk countries like Myanmar. Organizations like the World Bank’s Multilateral Investment Guarantee Agency (MIGA) play an important role in bringing about financial closure of power generation projects (signing Memorandums of Association and Power Purchase Agreement-PPAs). For instance, for the Myingyan 225 MW combined cycle gas-fired power plant project, MIGA and the Asian Development Bank (ADB) provided a political risk insurance guarantee of more than $100 million to Singaporean investor Sembcorp Power in 2015. Such guarantees are intended to reassure investors that if the Myanmar government does not fulfill its obligations, it will provide the loss incurred up to the guaranteed amount, which reduces the risks associated with the prevailing and future political situations.
During the previous decade, due to the improved political situation and relatively stable macroeconomic conditions under two pseudo-civilian governments, the electricity supply increased fourfold with more than 50 percent of households connected to the main grid. A plan was implemented under which, starting from 2020, 500,000 households per year would be connected under the NEP to provide electricity to all of the country’s over 10 million households by 2030.
Now all these hopes and plans for the NEP have been dashed, and all the above-mentioned five reasons have come back with a vengeance under the SAC military regime. Consequently, regular blackouts will not be uncommon across the country, as during the past SPDC rule.
Lin Htet Myat analyzes public policy with a focus on economic governance and Public-Private Partnership Projects in Myanmar.