Myanmar: Solar Investment Opportunities Emerging Markets

ENERGY GEOGRAPHY
Myanmar is one the most poorly electrified countries in Southeast Asia, with an average electrification rate of only 39% at the end of 2017. Yangon, its largest city and the former capital, consumes almost half of the country’s electricity supply. Myanmar has tremendous solar resources and vast hydro potential. The International Growth Centre (Energy in Myanmar, 2016) estimates the country’s solar potential to be 51.973 TWh per year. The Asian Development Bank assesses the opportunity for solar in Myanmar up to 27 GWp. The average yearly total of PV power production varies between 1,150 kWh/kWp and 1,600 kWh/kWp with high values in the central region. In the mountains, the power production is lower by up to 20% (or even more, due to terrain shading).

DEMOGRAPHICS
Myanmar’s population is relatively young – according to the 2014 Census, half of the population is under 30 years old. However, life expectancy at birth is rising and reached 66 years in 2016. Despite significant progress made in poverty reduction (the poverty rates decreased by 33% between 2004/2005 and 2015 from 48.1% to 32.1%, IMF), the disparities between urban and rural areas remain very stark (14.5% compared to 38.8% in 2015, IMF). Around half of the population continues to live under the nearpoor line. Myanmar´s HDI values have increased constantly during the last decades so that Myanmar has entered the “medium” group in the year 2016, ranking now 148th out of 189 countries.

COMPARISON: EDUCATION MYANMAR VS. THAILAND

MACROECONOMIC CONTEXT
Myanmar is one of the fastest growing countries in Southeast Asia: as projected by the International Monetary Fund, the country’s GDP growth for 2018-2019 is expected to be in the range of 6.9%-7.0% (IMF, 2018). Myanmar is working on a series of economic reforms, one of them being the implementation of the Myanmar Sustainable Development Plan.

REAL GDP GROWTH (2000-2022)
INFLATION RATE, AVERAGE CONSUMER PRICES

The manufacturing sector in particular has a growing demand for low-cost electricity, which solar could provide. Because of its strategic geographical location, Myanmar is benefiting from proximity to China, Thailand, India and other fast-growing countries in ASEAN. Half of the trade is with China, while India is the third largest neighboring trade partner and one of the main investors in Myanmar. The countries are working on improving air, sea and road connectivity and boosting trade.

BUSINESS ENVIRONMENT
According to the Heritage Foundation’s Index of Economic Freedom 2018, Myanmar ranked 33rd among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages, which allows to conclude that the country is economically “mostly unfree”. The main concern is the conflicts over land titles and poorly established property rights. Corruption, especially among the police, is also one of the main issues.

ECONOMIC FREEDOM SCORE

Myanmar also scores rather poorly compared to other countries in East Asia and the Pacific region in the ranking of Doing Business (Ease of Doing Business in Myanmar, 2018). Although the ease of doing business significantly improved in 2015-2016 compared to previous years, the business conditions for getting credit, protecting minority investors and dealing with enforcement of contracts make Myanmar one of the most difficult countries for doing business in the world (Ease of Doing Business in Myanmar).

DOING BUSINESS EAST ASIA & PACIFIC, RANK (2018)

Banking sector From 1963 to 1990 Myanmar’s banking system was completely state-owned. However, according to the International Monetary Fund, private banks now account for more than half of banking system assets. In 2003, Myanmar suffered a severe banking crisis that was triggered by the collapse of ‘informal finance companies’ that offered high rates of return, while engaging in highly speculative investments.

Project financing There is no established practice for project financing in Myanmar so far. Most of the project finance is realized by international development banks and institutions, such as the International Finance Corporation (IFC), the World Bank, and the Asian Development Bank (ADB). KfW, the German development bank, is also realizing projects in the framework of the Rural Electrification Programme. According to the Myanmar Legal Services
Limited, the local banking sector has very limited capital to provide financial services required to support project financing in the country.

Legislation and regulatory framework The Myanmar Companies Law (MCL) was enacted on December 6, 2017 by the Directorate of Investment and Company Administration (DICA), and entered into force in August 2018. The law stipulates the provisions on registration and incorporation of companies (including overseas corporations) in Myanmar. MCL allows for up to 35% of foreign shareholding in companies classified as Myanmar companies.

Special Economic Zones (SEZ) The Myanmar Government enacted the Special Economic
Zone Law in 2014. There are currently three SEZs under development: Kyauk Phyu in Rakhine State, Dawei in the Thanintharyi Region and the Thilawa in Yangon Region. According to DICA, SEZs may be “Free Zones”, “Promotion Zones” and others. “Free Zones” are deemed to be situated outside the country and subject to custom duty and other tax exemptions, while “Promotion Zones” are based mainly on the domestic market (DICA).

POLITICAL AND SOCIAL CONTEXT After almost five decades of military regime, Myanmar is undergoing a period of political liberalization. The first democratic elections with participation of all opposition parties took place in 2012 and then again in 2015. National League for Democracy (NLD) leader, Aung San Suu Kyi, became State Counselor (Coface). The next general
elections are scheduled for 2021.

RISK RATINGS
POLITICAL RISK INDICATORS (SACE)

COUNTRY ENERGY SECTOR SITUATION
Because of poor electricity access, especially in rural areas of Myanmar, wood, kerosene, candles and diesel generators are still the main sources of lighting among the majority of the country’s population.

ELECTRICITY OUTPUT, COMPARISON
DEMAND FORECAST RESULTS

The Japan International Cooperation Agency (JICA), together with the Ministry of Electric Power (MOEP), worked on the creation of the National Electricity Master Plan in 2015. The installed capacity in the country was projected to rise from 5 GW (2017)3 to around 15 GW by However, as reported by the MOEE in its more
recent presentation (The Role of Renewable Energy in
Myanmar’s Future Energy Mix, 2017), the plan is currently
being updated. The new estimate of power demand in
2030 is 23.6 GW, which creates a gap of almost 8 GW
necessary to be filled in order to avoid power shortages
in the future. The gap could potentially be met by the
mix of solar and wind, plus biomass energy.

Source:SOLAR POWER EUROPE

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