One of the biggest challenges Myanmar faces is its alarmingly low electrification rates. Without reliable sources of electricity, it is impossible to rapidly industrialise a country and improve the lives of ordinary citizens. Blackouts and outages are common in Yangon and Nay Pyi Taw, the commercial and political hubs. Further afield, it is not unusual to behold swathes of pitch black for miles at night. Investors, especially in energy intensive industries, may think twice before setting up in Myanmar.
One bright light is that the government appears to be showing real commitment to prioritise access to energy. In the last 18 months, it has taken steps to form a National Energy Management Committee and is in the process of re-drafting the 1984 Electricity Law and formulating a 20-year long-term energy plan. It is also using funds from international organisations to improve the country’s ailing distribution network and increase capacity.
In addressing the power shortage, government decision makers face challenges in the short- to medium-term. Tackling these challenges and balancing the different perspectives will require some brave government decisions.
Power tariffs
For social reasons, many countries choose to keep tariffs low even if the cost of generation is high. This is no different in Myanmar, where tariffs are among the world’s lowest and production cost recovery and revenue collection are also low. Recent protests against tariff increases showed affordability is a politically charged issue, especially for the poorest. However, continued subsidies can lead to a financially weak state-owned off-taker and is often not sustainable in the longer-term.
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With increasing global focus on renewables, local residents are expressing their concerns about pollution and health risks associated with traditional thermal power plants such as coal
Fuel constraint
Although Myanmar is blessed with an abundance of natural resources, it is in danger of falling prey to the resources curse. It is essential there is full transparency of revenue earned from resources and sufficient secure supplies to fuel domestic demands. Allocations of resources toward downstream industries must also be priced competitively, so as to ensure that investment at the upstream level is also sustained.
Environmental concerns
With increasing global focus on renewables, local residents are expressing their concerns about pollution and health risks associated with traditional thermal power plants such as coal. Even green power such as large-scale hydropower comes at an environmental cost and is not always locally popular.
Legal and regulatory framework
Even with an updated electricity law, Myanmar needs to ensure that other legal and policy frameworks are in place to support its implementation. The various ministries need to speak with one voice, and to ensure that consistent messages are being sent to investors. Investors in other emerging economies like India and Indonesia often complain of protracted land acquisition processes and legal uncertainties, which they blame for causing bottlenecks in the development of infrastructure projects.
New generation vs rehabilitating/ upgrading existing infrastructure
Financial resources are limited and how they are divided among competing projects must be considered carefully. While private sector investment is critical, there should also be a balance with government-sponsored direct investments in shared energy infrastructure.
To overcome these challenges, it is essential to have a comprehensive energy policy that balances security of supply, affordability and sustainability. In some ways, the low electrification rates at present and lack of current infrastructure presents an opportunity for Myanmar to learn from the mistakes of other countries, optimise current technology and embrace a non-traditional energy mix. With an integrated, inclusive and well-thought-through energy policy, Myanmar will be better equipped for the future.
Nomita Nair is a partner at Berwin Leighton Paisner law firm. This post originally appeared in Myanmar Times.
