HLAN CHI PROGRAMME - British Chamber Myanmar

Cities & Infrastructure for Growth, MyanmarHLAN CHI PROGRAMMEGrowth, Infrastructure and Public Procurement in Myanmar: Mind the Gap

British Chamber of Commerce Myanmar: 30 07 20

Hlan Chi – Cities and Infrastructure for Growth

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• Aims to create sustainable and equitable economic growth• A UK Government Grant Facility of » USD 25 million – to assist Myanmar

accelerate its economic growth though sustainable urban development• Assists Myanmar’s cities improve infrastructure to help businesses grow by

creating & safeguarding economic and employment opportunities • Offers technical assistance to enable its partners implement their economic

development ambitions & objectives – this supports:‒ Linking spatial & economic planning, incorporating social aspects & climate change‒ All levels of government to better plan, deliver & manage infrastructure projects ‒ Leverage increased investment into infrastructure assets & services

‒ Maximising revenue for capital and recurrent investment in infrastructure & services

Context & Objectives

3

Improve the understanding of how major infrastructure sector procurement decisions are actually made and contracts are managed

Understand what firms are winning major infrastructure contracts

Analyse the procurement modes being used

Review the role and influence of the International Financing Institutions (IFIs)

Effective and efficient delivery of major

infrastructure projects crucial for Myanmar’s

development ambitions and prospects.

At least US$120bn of investment is needed

in the energy, transport and

communications sectors by 2030

Current infrastructure

investment deficit is high and capital

expenditure efficiency is about 75

per cent

Projects databaseq Total: 50 projects of US$42 bn across energy,

transport and urban development

q Energy: 34% (17 projects) of the total projects

with cumulative value of US$20.3bn are for the

energy sector.

q Transport: 46% (23 projects) of the total projects

with cumulative value of US$16.7bn are linked

to the transport sector.

q Urban Development: 20% (10 projects) of the

total projects with cumulative value of

US$5.3bn are linked to urban infrastructure

development.

17, 34%

23, 46%

10, 20%

Projects profile (number of projects and % of total)

Energy Transport Urban Infrastructure

20.3, 48%16.7, 39%

5.3, 13%

Projects profile (Value of projects in USD Billion and % of total)


17, 34%

23, 46%

10, 20%

Projects profile (number of projects and % of total)


20.3, 48%16.7, 39%

5.3, 13%

Projects profile (Value of projects in USD Billion and % of total)


Who’s dominating the procurements? q The Union Government Implementing Government

Authorities (IGAs) are the market driver in the infrastructure

sector; 40 projects with a cumulative value of US$36bn have

been initiated by the Union Government’s Ministries or SEEs;

q Ministries of: Electricity and Energy; Construction and,

Transport and Communications, are the lead players procuring

major projects

q Among the regional governments, Yangon and Mandalay

Regional Governments are the most active procurers in terms

of sub-national government agencies.

q Minimal large infrastructure procurement by city level

governments (YCDC, MCDC etc) – Only 1 project initiated by

YCDC

q Other city level Organisation (SPV) – NYDC, established

initiated more projects than YCDC

1.9

17.1 16.4

2.3

3.10.3

1.1

0

5

10

15

20

25

Energy Transport UrbanInfrastructure

USD

Bill

ion

Distribution based on Value of projects

4

1521

4

2

2

2

0

5

10

15

20

25


Num

ber o

f Pro

ject

s

Distribution based on number of projects

Regional Govt National Govt & SEEs. City Level Organisation

85%

11%4%


80%

12%

8%


National Govt & SEEs.

Regional Govt

City LevelOrganisation

Modalities of Procurement – EPC vs PPP q 74% of the projects that have been procured or are in process of

procurement are on PPP basis with a total value of US$37.4bn.

New solar RFPs in process.

q Variants of DBFOT (design, build, finance, operate and transfer)

exists with a majority involving either long-term concessions or

land leases.

q In the energy sector, most of the projects have a concession

period of 30 years. The exception is the 5-year concession period

for the recent fast track power procurements.

q In the transport sector, the ports and logistic hubs have been

tendered on 50-year land leases, with 10+10 extension option.

q The Department of Highways under MoC has a history of adopting

40 year, extendable up to 15 years in three tranches of 5 years

each, BOT contracts for highways.

q In the urban sector, primarily area based mixed use developments,

the projects have been tendered on 50-year land leases with an

option for two approval-based extensions of 10 years

0.3

4.3

0.2

20.0

12.4

5.1

0

5

10

15

20

25


USD

Bill

ion

Distribution based on value of projects

1

11

1

16

12

9

0

4

8

12

16

20


Num

ber o

f pro

ject

s


EPC PPP

0.3

16.8

3.1

4.3

12.1

0.3

2.3

1.1

0.2

1.7

4.6

31.2

0.0

4.5

0 5 10 15 20 25 30 35

EPC

PPP

EPC

PPP

EPC

PPP

City

Lev

elO

rgan

isat

ion

sN

atio

nal G

ovt

& S

EEs.

Reg

iona

l Go

vts

USD Billion



1

14

2

11

10

2

1

3

4

2

1

3

12

28

0

6

0 5 10 15 20 25 30

EPC

PPP

EPC

PPP

EPC

PPP

City

Lev

elO

rgan

isat

ion

sN

atio

nal G

ovt

& S

EEs.

Reg

iona

lG

ovts

Number of Projects


Modalities of Procurement –Direct Award vs Open Bidding q Sixteen projects, with an estimated combined project

cost of US$19bn, were awarded directly to private

operators without any open tender.

q In twenty-three projects, with an estimated combined

project cost of US$18.2bn, some form of open tender

was followed as part of the procurement process.

q For nine projects, with an estimated combined project

cost of US$3.3bn, the information available doesn’t

clearly indicate if some form open tendering was

followed or not; this suggests at least restricted

disclosure of the procurement processes followed.

4.30.3 0.2

13.9

18.9

3.0 1.70

5

10

15

20

Open Biddingfollowed insome form

Direct TenderAwarded

Not clear Yet to betendered

USD

Bill

ion


11

1 1

12

168

10

5

10

15

20

25

Open Biddingfollowed insome form

Direct TenderAwarded

Not clear Yet to betendered

Num

ber o

f Pro

ject

s


EPC PPP

214

1

19

33

61

16

40

4

0

10

20

30

40

50

RegionalGovernment

National Govt. City Govt.

Num

ber o

f Pro

ject

s


Direct Tender Awarded Open Bidding followed in some formNot clear Yet to be tendered

3.1

15.70.7

17.2

0.20.6

2.7

1.7

4.5

35.8

1.905

10

15

20

25

30

35

40

RegionalGovernment

National Govt. City Govt.

USD

Billi

on


Who’s Winning? – International Players

Energy Sector Procurements

Revenue (100 +Billion USD)

Revenue (50-100 +Billion USD)

Revenue (10-50 +Billion USD)

Revenue (<10 Billion USD)

Transport Sector Procurements

Urban InfrastuctureSector Procurements

TotalZhefu Holdings

SiemensMarubeni Corporation

Mitsui & Co. Sinohydro

Sumitomo Corporation

China Energy Engineering Group

Daewoo International

Sembcorp Utilities

Toyo-Thai Co., Ltd (TTCL)

VPower Group

HitachiChina Merchants Holdings

CITICMitsubishi

Charoen Pokphand (CP)

JFE Engineering Corp

GS Engineering & ConstructionAdani

TEDA Investment HoldingFujikura

Toyo ConstructionHazama Ando Corp.Tokyu ConstructionKerry Logistics

China Harbor Engineering Company

CCCC

PTT

Korea Land and Housing Corporation

Gail

Berjaya Land Bhd

GPSC

Japan China Thailand South Korea France Germany India Malaysia Hong Kong SingaporeNationality Color Legend:

q About 75% of the projects, worth US$35bn or 84% of the total

value of projects in the CIGM database, were won by international

firms directly or via majority positions in joint ventures with local

firms

q The scale and complexity (technology, contract management,

operations) of the major infrastructure tenders and awards is

generally outside the capability of domestic infrastructure players.

q As a result, international firms dominate the market. Market entry

and successful bidding has tended to favour JV arrangements with

local players in a minority position.

q The sector is dominated by Chinese, Japanese, Thai and Korean

firms, in part, linked to wider geo-political interests of their host

countries.

q Almost all the Chinese firms (Sinohydro, CITIC, China Merchants

Holdings, CCCC, China Energy Engineering group) are Chinese

State-Owned Entities (SOEs) with multi-billion-dollar revenues

Who’s Winning? – Local Private Sector q Myanmar firms are minority players in the major infrastructure

projects market; the domestic market structure is characterised

by firms of limited scale and capabilities.

q Of these local firms, only three companies perform well on the

Centre for Responsible Business scorecard: Max Myanmar, Shwe

Taung and Dagon Group are within the top ten ranked

companies.

q A common strategy to enter the large project market is to team

up with international players either through joint ventures or as

sub-contractors.

q Local players may of course exercise rent-seeking influence but

the extent of this is unclear; at a minimum, local interests are

mediated by the lead firm’s willingness to assume the weight of

commercial risks and the returns commensurate with those risks.

Yangon Central Railway Station Development

Yangon – Mandalay Rail Line Upgrading

Yangon Circular Railway

Road upgrade, Mandalay to Muse

Yangon Pyay Highway UpgradeDry Port, Mandalay and Yangon

Eco Green City, Hlegu Township mixed development

Amarapura urban development projectNew Mandalay Resort CitySmart District Project

Bus Terminal Upgrade, Chan Mya Shwe Pyi (Mandalay)

LNG gas-to-power, Mee Laung Gyaing (1390 MW)LNG gas-to-power project (135 MW),Kyaukphyu

Coal-fired, Launglon (500 MW)

Combined cycle, Kanbauk, IPP (200 MW)

Eden Group

24 Hour Mining and Industry

Myanmar UPA Company Limited (MUPA)

Min DhamaMax Highway

Shwe Taung Development

A1 Construction Co., LtdDagon Group

Oriental Highway

Alliance Star Group

Mandalay Business Capital City Development

Khin Myanmar DevelopmentCentral Irrawaddy Development

M-Development Corporation

Zeya Associates

4 Fast Track Projects

Energy SectorTransport Sector

Urban Infrastructure Sector

Resources Group Logistics

International Bulk Terminal Thilawa

Capital Diamond Star Group

1250 MW LNG gas-to-power, Thilawa SEZ, Yangon

Supreme Group

If Open Bidding of any kind is followed.If projects are awarded directly or the process is not clear

Performance Evidence I

q The current procurement system is not sufficiently

developed to meet Myanmar’s Sustainable Development

Plan’s ambitions or policy objectives.

q To the extent that there is a national procurement

framework, as given in the Presidential Directive 1/2017, in

practice it is highly restricted in terms of scope and

coverage.

q There is a need for better procurement planning across

IGAs and practical supporting guidelines and templates

q Conflict of interest safeguards and strategic oversight of the

procurement process are needed to strengthen

transparency, accountability and confidence.

Public Procurement Review

Performance Evidence II

q Current procurement practices are not efficiency driven.

About 50% of major projects reviewed used negotiated

direct awards or opaque procurement processes.

q There is no readily available evidence demonstrating how

non-competitive bids are assessed against efficiency criteria;

q There is no evidence of yardstick benchmarking or

comparative cost assessments to negotiate terms,

conditions and prices.

q There is no current, reliable and market tested schedule of

rates to assess bid costs.

q The choice of non-competitive negotiated direct contract

awards is high risk in terms of exposure to conflicts of

interest and rent-seeking.

Efficiency at Risk

Performance Evidence II

q Current procurement processes are not effective in delivering

much needed infrastructure in a value for money (VfM)

manner.

q Current procurement processes are not performing well in

terms of timely and cost-effective delivery of infrastructure,

with projects delayed and taking too long to achieve

operational status.

q Non-competitive tenders combined with weak procurement

planning, laws, regulations, guidelines and their enforcement

expose Myanmar to wider geo-political risks and influences

that may undermine the national interest.

q Overall, the current approach to procurement is falling well

short of national needs and not serving the public interest.

Effectiveness Compromised

Delivery Deficits and Infrastructure Gaps

13

0.71.9

13.8

3.42.1

2.7

17.7

2

4

16

6

11

56

0

2

4

6

8

10

12

14

16

18

0

2

4

6

8

10

12

14

16

18

20

Procurement ProcessOngoing.

Feasibility study inprocess.

Negotiationsongoing/Construction

yet to begin.

Construction ongoing. Operational (Full/Part) No information Temporarilysuspended/Stuck.

No.

of P

roje

cts

Cum

mul

ativ

e Va

lue

(USD

Bill

ion)

Current Status of projects

Procurement Process Ongoing.

2%

Feasibility study in process.

4%

Negotiations ongoing/Constructi

on yet to begin.33%

Construction ongoing.

8%Operational (Full/Part)

5%

No information6%

Temporarily suspended/Stuck.

42%

Procurement Process Ongoing.

4%Feasibility study in

process.8%

Negotiations ongoing/Constructio

n yet to begin.32%

Construction ongoing.

12%

Operational (Full/Part)

22%

No information10%

Temporarily suspended/Stuck.

12%

Distribution based on number of projects Distribution based on value of projects

Current Status of Projects Elapsed Time

5.5

7.4

1.0

7.5

11.09.8

1211

6

12

63

0246

8101214

0.0

2.0

4.0

6.0

8.0

10.0

12.0

No

of p

rooj

ects

Cum

mul

ativ

e Va

lue

(USD

Bi

llion

)

No of Years since EOI/MOU till Operations or Current statusValue of Projects (USD Billion) No of projects

1 year 2 years 3 years 4 years 5 years 6 years+

1.9

1.0

3.03.6 3.8

5.7

0

1

2

3

4

5

6

7

Feasibility study inprocess.

Procurement ProcessOngoing.

Negotiationsongoing/Construction

yet to begin.

Construction ongoing. Operational (Full/Part) Temporarilysuspended/Stuck.

Wei

ghte

d Av

erag

e El

apse

d Ti

me

(Yea

rs)

International Influences: CMEC q The BRI CMEC is a “game changer” in Myanmar, owing to its scale,

breadth and demands from GoM.

q To date, project identification and prioritisation have not been

transparent nor have they been subject to international standard

review and appraisal processes, including safeguards and long-term

sustainability .

q The scale and extent of the Peoples Republic of China’s (PRC’s) Belt

& Road Initiative (BRI) projects raises fiscal risks if not channelled

through formal and open procurement channels.

q It is understood that the main BRI projects will be subject to Project

Bank scrutiny.

q The BRI influence over procurement is one that sees sole sourcing

arrangements for project concept, project design, project financing

and project construction and implementation contained within the

one complete package.

Other Recent MOUs signed during Chinese President’s visit to Myanmar in 2020

Fourteen MOUs in

infra. sector

MOUs to promote regional

corporations between Yunnan

Province in China and Yangon & Mandalay Regions

Projects where MOUs have been signed & feasibility development ongoing

Mandalay-Tigyaing-Muse expressway project

Kyaukphyu -Naypyidaw highway project

Muse-Mandalay Railway (Estimated value: US$ 9 bn)

Phase 1 of New Yangon City Development (Estimated

cost: US$ 1.68 bn)

Projects agreed for implementation

SEZ Kyaukphyu Project(US$7.5 bn project; US$1.3 bn scaled down implementation)

China’s BRI: China Myanmar Economic Corridor (CMEC) current coverage

International Influences: IFIs & Bilateral Development Organization q IFIs (ADB and World Bank) play a crucial part in bridging

Myanmar’s infrastructure needs gap with their sovereign

lending programmes. Perhaps more importantly than finance,

the IFI ‘Finance-plus’ initiatives add further value to Myanmar’s

infrastructure sector

q IFIs and ODA partners have tended to promote greater

competition, openness and rigour in the projects they are

supporting with grants and loans.

q IFI procurement procedures are beneficial for transparency and

to establish price competitive infrastructure, no matter what

the source of funds. Some form of blended financing strategy is

needed to offset loss of asset risk.

IFIs

• World Bank (US$2.5bn)

• ADB (US$2.7bn)

Bilateral Capital Funding

• JICA - US$8.3bn• EU - US$1.13bn• Thailand’s NEDA -

US$164mn• AFD - US$39mn• KfW DB - US$95 mn• South Korea’s project

specific investments#

#Key projects (as covered in the large infrastructure database for the procurementanalysis) include Dala bridge financing, Industrial Zone development project in Nyaung NaPin village and Logistics hub at Shwe Lin Ban Industrial Zone in Hlaing Thar Yar township.

Changing Lanes

q For the power sector nearly USD18 billion is not under

transparent/competitive procurement

q The total procurement pool is USD$ 42 billion and 85% is delayed by

more than 12 months.

q CEMEC Projects make up USD$7.5 of the total known procurements

with multiple projects in pipeline for which MOUs have been

signed. These projects are not subject to transparent

competitive/procurement.

q Good procurement practice attracts good quality funds with lower risk

rates. Myanmar has not specifically targeted this proposition yet.

q Restrictive technical qualifications and stringent bid submission

timelines adopted as part of procurement process restrict competition

and often limit price, technical and service options available.

q Inclusiveness, safeguard impact assessments & management plans,

and climate change aspects of projects need to be embedded in

project design/procurement documents.

Signals for change

Benchmarking: Fitch’s Risk-reward index comparative mapping

1837

0

414

8

5

46

58

52

5159

53

54

Competitive Landscape

Construction-timelines

Construction-Contracts

Legal EnvironmentLT Economic Risk

LT Political Risk

Operational Risks

Risk-Reward Index Mapping

Myanmar Asia-Pacific Benchmark (100)

q The burden of weak institutional and regulatory frameworks weighs

heavily on the infrastructure sector, notwithstanding promising

fundamentals (a growing economy with immense infrastructure

requirements).

WEAKNESSES

q A well-defined strategy for infrastructure is still lacking; Excessive red

tape remains a barrier for investors; and Underdeveloped financial

and regulatory systems create problems for project financing and

execution.

THREATS

q “Remains to be seen if politically sensitive issues such as delays to

land and environmental clearances will be adequately addressed by

the government.”

The consequences are serious for attracting private capital into

the infrastructure sector.

Myanmar continues to rank last out of 21 in [the Fitch Solutions] Asia

Pacific Infrastructure Risk/Reward Index, despite the healthy pipeline.

Exposure to Influence and Mis-procurement Risks are High

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Need Assessment

Opaqueness of procurement

plans

No prior consultations &

safeguard assessment

Poor VFM assessment

Pre-procurement

approvals

Limited or no independent

oversight

Limited public information

dissemination

Autonomy to SEEs & SPVs

Tender documents preparation

Sub-optimal technical

qualifications

Preferential disclosure of information

Major flaws in the bid

documents

Tendering process

Limited open tendering

Prevalence of ad hoc processes for Unsolicited

Proposals

Incomplete bid documents

Bid Evaluation

Opaque & non-objective scoring

criteria

No financial viability, value for money and fiscal impact assessments

Preferential Negotiations without fair information

sharing

Bid Finalisation

Opaque bid award systems

Limited scope for grievances redressal from losing bidders

No public dissemination of

evaluation reports

Post Award Contract

Management

Opaque or no system for

performance evaluations

Opaque renegotiations in

the project scope during

implementation

Ad-hoc Safeguards

management

Comparing Myanmar’s Current Procurement Systems to Minimum Good Standards

Red – High Risk/ Amber – Medium RiskRed – High Risk/ Amber – Medium Risk “Risks are high due to key Institutional, regulatory and systemic

constraints accounting for poor public procurement effectiveness”

Key Policy, regulatory and institutional bottlenecks/gaps need to be addressed for improving procurement standards and practices

19

Requirement on publishing procurement

plans online

Requirement of aligning large procurements with

strategic plans

Authority-accountability alignment for

procurement initiation approvals

Regulatory coverage across PPP projects and

USPs

Policy clarity on land related procurements,

use of Land Value Capture instruments

Ministerial oversight & inter-IGA coordination

during the procurement process

Regulatory requirement on involvement of civil societies during pre-bid

meetings

Regulatory oversight related to conflict of

interests with potential bidders

Strict integrity enforcement,

transparency and oversight mechanism

for bid evaluations

Regulations & Institutional mechanism

related to grievance redressal

Centralised public procurement effectiveness

measurement.

Regulations on key issues: terminations, dispute resolution, renegotiations etc.

Regulations on transparency required for safeguard impacts

and management.

Due transparent processes related to blacklisting of firms.

Regulations related to use of Joint Ventures by

IGAs

Building IGA Capacity: Embedded TA and ‘learning by doing’

20

Project preparation & VFM assessments capacity

across IGAs for procurement initiation

Fiscal and economic risks assessment capacity of

PPPs

Standardized documents, SOPs, forms for tender

process, concession agreements

Tender preparation capacity at the

Regional/state/city level

Capacity related to PPP project structuring and

PPP models

Capacity related to governance and

monitoring mechanisms

Capacity related to integrating safeguard and

climate change aspects into project design &

procurement

Horizontal and vertical capacity scaling for

adoption of policies, and regulations

Institutional capacity to conduct VFM assessments as part of bid evaluation

Capacity related to setting KPIs for projects, adopting

& reporting monitoring frameworks

Capacity related to usage of Joint Ventures by IGAs

Capacity related to preparation of multi-year

investment plans

Recommendations for GoM: what should we be doing?

21

Procurement reform is on the critical path to improving GoM’s infrastructure delivery

capacity.

The “mindset” and institutional incentives of GoM need to be systematically encouraged to

embrace twin pillars (transparency and accountability) of good governance.

Enactment and enforcement of necessary laws, regulations and guidance combined with hands

on support to implement the reform process from conception through to transaction

execution;

Consideration of special GoM task force to review / accelerate priority major projects in

the energy and transport sectors.

MOPFI to take the lead role in championing procurement reform and engage with IGAs on

rolling out new systems.

Procurement reform can be “marketed” / communicated as part of wider political and

economic reforms and used to improve investor confidence.

Procurement Reform is Mission Critical to Breaching the Infrastructure Gap

CIGM Support / What more is needed?

22

CIGM focused on national level procurement capacity building

Project Bank focus: Better Business Cases to

make procurement easier to execute

Design Myanmar specific concept

and implementation

actions

Development partners’ meeting

q Aligns to addressing procurement constraints for accelerating investments under CIGM and acts as a COVID-19 fast stimulus to unblock investment;

q Anchored in the MoPFI: under the IIDM strategic initiative and coordinated with the PC work; q Twin tracks – national framework and then work with 3 IGAs and perhaps YRG and MRG to

bring this to State / Regional level and maybe SEE (MPA or Myanma Railways

q Selecting priority projects to be fast tracked with hands on support to demonstrate proof of concept of best / good practices within a non-IFI project environment.

Discussion point – How to improve large infrastructure delivery in Myanmar?

23

What are the perceived risks associated with large infrastructure

procurement?

How to mitigate and manage the risks?

How do the risks affect decision making?

• Transparency?• Competition?• International influence?• Project’s risk allocation?• Revenue clarity and security?• Bid conditions?• Policy and Regulatory clarity?• Environmental and social Safeguards?• Grievances and dispute-resolution?• Red tape in approval processes?• Project Finance availability?• ………

• What should GoM do?• How can DFID/Hlan Chi

play a role?• How to leverage on

BCCM partners?

Jamie Andrew Simpson ([email protected])Peter Benson ([email protected])Jo Daniels ([email protected])Bruce Pollock ([email protected])Ankush Sharma ([email protected])

© Hlan Chi Programme 2020. All rights reserved.

mailto:[email protected]

HLAN CHI PROGRAMME - British Chamber Myanmar

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