How to put Myanmar on the grid

Electricity shortages are threatening Burma’s modernisation drive. Rather than a lightbulb moment, what the country really needs is a method to attract investments.

Myanmar is riding the wave of the digital era. People that weren’t connected to landlines a few years ago are now checking Facebook on the go and bluetooth headsets are glowing in the dark as dwellers talk shop at the evening market. Deemed ‘infrastructure-lite’, new technologies seem to be rolled out in less time than it takes to turn a dial.

Unfortunately, that doesn’t tell the whole story. Modern appliances may be small devices but they continue to rely on good old infrastructure, with a robust power network needed to charge mobile phones and telecom masts required to carry their signal. And herein lies Myanmar’s problem: its power infrastructure, already far from meeting current needs, is about to be further stretched as the country’s opening boosts economic growth.

To gauge the scale of the task ahead, a few stats can help. Myanmar’s electricity consumption per capita is one-fourth of India’s and one-twentieth of China’s. The average American citizen consumes as much power as 85 Burmese. With the country expected to grow 8.4 percent this year, pressure to lift the country’s generating capacity will come in strong. But reliability is also a major problem: Myanmar produces nearly three-quarters of its electricity from hydropower, which takes a hit during the dry season.

The government is aware of the challenge. It has brought responsibility for energy policy, previously spread across eight ministries, under the sole tutelage of the Ministry of Electric Power and Energy (MOEPE). And it has launched a National Electrification Plan aiming to provide countrywide access to power by 2030. As Tim Dobermann, an economist at the International Growth Centre, a UK-funded research outfit, recently told us, Myanmar is pretty much where Vietnam was 20 years ago. Faced with surging demand, Vietnam eventually pulled it off – quadrupling generating capacity between 2007 and 2015.

Vietnam’s example is encouraging, but early hiccups in the process also suggest ways in which Myanmar should progress differently. The government estimates that carrying out its plan will require about $10 billion of investment. One of the first things the country needs to do is to bump up prices, so that its power sector becomes financially viable. The average cost per kWh in Myanmar is $2.8 cents, compared to an ASEAN average of around $11.3 cents. Cutting subsidies above a certain consumption level would help unlock liquidity while protecting the poorest households.

Myanmar should also be more willing than Vietnam to shake up its vertically integrated, state-owned power sector. Privatising parts of the supply chain and creating wholesale electricity markets would encourage innovation, drive down costs and allow a supplier to step in when another fails. England, Wales and Chile provide illustrations of how this can be done. India, who’s recently struggled to eliminate blackouts despite boosting generation, offers an example of what happens when liberalisation remains bounded.

Crucially, the government needs to develop frameworks to secure private investment. In the wake of the successful financing of the 230MW Myingyan gas-fired plant, awarded through a competitive process and backed by a World Bank partial risk guarantee, the government should seek to create a replicable model for future baseload PPPs. But MOEPE should also encourage small-scale renewables through feed-in tariffs, so as to harness Myanmar’s potential for wind and solar. Faster to build, such facilities could also provide off-grid generation to areas the national network can’t yet reach.

Investors are, for the time being, looking at the country from afar. Given remaining uncertainties over the country’s policies, they probably won’t change their mind at the flick of a switch. What the government needs is a nuanced, methodical approach to gradually plug them in.