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Construction activity eased in 2015, as investors awaited the outcome of November’s historic
election and the passage of a new law governing the development of condominiums. The law was Last name
introduced in Parliament in 2012 and could potentially allow foreigners to buy property in the
country for the first time. Despite the political risks, Myanmar’s development needs remain Email
significant, particularly in infrastructure. With the victory of the National League for Democracy, it is
expected that 2016 will see an ongoing commitment to updating essential services, such as water Register for updates
supply and sewerage, upgrading airports and roads, and building better housing.

Rapid Growth
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The speedy expansion of the construction industry, underpinned by investment in infrastructure and Featured Sectors in Myanmar:
property development in Yangon and Mandalay, has fuelled sector GDP growth, which reached 7.7% in fiscal
year 2014/15, according to the Asian Development Bank, which expects growth to accelerate to 8.3% in Myanmar Energy 

2015/16, remaining close to this pace as long as construction activity remains robust. Myanmar Industry 

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In real terms, the construction industry’s output value recorded a compound annual growth rate (CAGR) of
7.4% between 2010 and 2014, according to the market research firm Research and Markets. This rate is Myanmar Construction 
expected to slow to about 6% between 2015 and 2019. Consultancy firm Solidiance predicts that Myanmar’s Myanmar Tourism 
construction market will be worth at least $6.6bn by 2018, compared with $2.4bn in 2011, making it the
fastest growing in South-east Asia. Featured Countries in
Construction:
Myanmar’s construction boom has had a dramatic impact on the skyline of Yangon. The country’s
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commercial heart is currently undergoing a process of modernisation, with high-rise office buildings, luxury
residential developments, international hotels, shopping malls, expressways and flyovers springing up Oman Construction 
around the city. Efforts are also being made to rebuild Yangon’s basic public services, which have been
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hindered by consecutive years of underinvestment.
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In terms of Yangon’s overall development, the city is lagging somewhat behind other South-east Asian urban
centres. Tony Picon, managing director of real estate firm Colliers International Myanmar, estimates that the
city is about 15 years behind even the Cambodian capital, Phnom Penh, which is home to a far smaller
number of people. On the whole, it is likely to take some years before development in Myanmar is brought in
line with its regional neighbours. Future development could come in the shape of public-private investments
(PPPs). “As a result of external restrictions, PPP’s are a fairly new concept in Myanmar,” U Han Thein Lwin,
managing director of High Tech Concrete, told OBG. “But they have the potential to play a substantial role in
infrastructure development.”

To speed up the development process, in June 2015 city officials unveiled an ambitious urban development
plan for Yangon, designed to modernise public utilities, upgrade roads and public transport, and build seven
new urban centres around the city by 2040. The towns are to feature large-scale residential estates as well
as areas for commercial and industrial activity. Developed in conjunction with the Japan International
Cooperation Agency, the developments are expected to cost some $7bn in total.

In past years, the majority of construction sector growth has come from infrastructure and residential
projects. Infrastructure’s contribution to the sector amounted to 45% in 2011, dipping to 37% in 2012 and
then 35% in 2013, while the residential segment’s contribution rose from 35% to 40% over the same period.
In comparison, the commercial segment’s contribution fell slightly by 1% between 2011 and 2013 to stand at
11%, while industrial activity grew from 8% to 14% over the period.

Obstacles To Expansion
There is substantial demand for property in Myanmar, particularly in Yangon, but the cost of construction is
high, partly due to the fact that most materials, with the exception of cement, sand and granite, have to be
imported – with the majority being supplied by China, Thailand and India. Inefficient logistics and opaque
land ownership laws also contribute towards rising costs.

“The lack of construction materials is a challenge,” Rui Barreto, managing director of Spiral Architects, told
OBG. “There isn’t enough cement available locally to meet demand. The majority of raw materials are
imported. Myanmar has extensive raw materials, including wood, steel and rubber, but local industries need
to be developed so that we can use these resources efficiently and therefore import less from other
countries, such as China and Thailand.”

Colliers International Myanmar estimates that, compared to Thailand, the cost of materials for an equivalent
project in Myanmar usually adds about 20% to the cost of construction. This is further exacerbated by the
decline in the value of the kyat. The currency dropped about 20% to 30% against the US dollar in 2015,
making imported goods more expensive. “Speculation in the currency market has led to a significant
depreciation of the kyat, which has resulted in rising construction costs because most materials are
imported,” U Thura Aung, managing director of AMPS Construction, told OBG.

Permit Process
Securing permits remains time consuming, although the introduction of online applications in 2015 has
helped to simplify the process. U Toe Aung, director of the Urban Planning Division, the Yangon City
Development Committee (YCDC) told OBG that, while it is possible for proposals for buildings under eight
stories to secure approval from the YCDC, approval for high-rise buildings of more than eight stories must be
obtained from the High-Rise Building Inspection Committee, while prospective projects above 12 floors must
submit to inspections by the Quality Control for High-rise Projects, as well as regulatory approvals involving
other government agencies. In theory, with all documentation in order, the process takes around two
months, according to U Toe Aung. For bigger projects, however, it could take as long as a year or more to
secure all necessary approvals. In addition, such permits usually require that construction be completed
within a certain time frame, although contractors can apply for extensions.

Cement Demand
Although Myanmar imports more than 40% of its cement needs, sand, granite and cement are also available
locally and Mandalay has at least five cement factories.

The imposition of building regulations coupled with the expectation of more stringent building codes and
the use of more sophisticated methods, including reinforced steel structures, has meant that the local
cement producers are under pressure to keep up with demand. However, local production is set to increase
in the next few years, with some domestic producers undertaking factory upgrades to meet demand and the
entrance of foreign investors to the market.

Thailand’s Siam Cement is building its first Myanmar-based plant at a cost of some $373m. The plant will
have an annual capacity of around 1.8m tonnes and will be situated in Mawlamyine, where it has a plentiful
supply of limestone and has water access to Yangon. The company, which expects the market to grow at a
rate of 10% a year up to 2018, plans to start operations in the middle of 2016.

Semen Indonesia, meanwhile, is constructing a $200m plant, with the capacity to produce 1m tonnes of
cement a year once it starts operations, scheduled for 2017. Steel scaffolding, which is popular with foreign
construction companies, is also a growing industry, displacing the traditional bamboo scaffolding that has
long been preferred in Myanmar.

The more sophisticated building techniques have exposed the lack of skills in Myanmar’s construction
industry. Supervisors often have to be brought in from overseas, increasing companies’ wage bills at a time
when labour costs in general are rising. The daily wage for unskilled labourers rose to $6 in 2015, compared
with $4.50 in 2014. A government-mandated minimum wage of MMK3,600 ($3.24) for an eight hour work
day, was introduced in September 2015. The minimum wage applies to all companies and industries except
for small businesses and family-run groups with fewer than 15 employees.

“The country has the potential to employ one million people in the manufacturing sector in the next few
years,” U Khin Maung Aye, chairman of Lat War Group of Companies, told OBG, “a massive increase from two
hundred thousand but with the minimum wage now set at MMK3600, some factories will have to reduce
staffing by as much as 30 to 40 percent.”

Upskilling
Unsurprisingly, efforts are under way to improve technical skills within the construction industry. “Myanmar
is in transition,” U Win Khaing, president of the Myanmar Engineering Society (MES), told OBG. “It was a free
for all before. You could do whatever you liked. We are now trying to construct quality buildings, so you need
qualified engineers, technicians and skilled workers.”

MES is a regulatory body with 50,000 members and is working to lift standards to the level of Myanmar’s
ASEAN neighbours, in line with the economic integration initiatives of the ten-member body. In 2015 MES
held more than 200 seminars and workshops, providing professional development programmes that are now
a requirement for all certified engineers. According to U Win Khaing, Myanmar currently has just 260
engineers sufficiently qualified to oversee the kind of high-rise buildings that are becoming increasingly
common in Yangon, while some 3000 workers have applied to undertake training to become registered
senior engineers. Training programmes will include elements that focus on safety and building codes. The
Society expects that, by March 2016, it will have identified and certified the leading contractors in each
regional town.

Improving professional standards will, in turn, help to improve the quality of new buildings, which experts
say remain below par. “It is important for local companies to train their staff,” U Ko Ko Htwe, chairman of the
Taw Win Family Company, told OBG. Especially in today’s environment when the retention of staff remains a
significant challenge. Workers need to feel valuable to an organisation”

New Building Code

Myanmar’s current building code dates from 2012 when there were few, if any, high-rise buildings in the
country. As a result, the majority of the larger projects that have been built in the country in recent years
have tended to follow either US or British guidelines.

Amendments to the code have been under way since 2013 and apply to all buildings, with a special focus on
the construction of municipal buildings, such as schools and hospitals. Also to be included in the code are
fire safety, extreme weather and natural disaster measures. While there have been no big earthquakes for
some time, Yangon is vulnerable to seismic activity. In 1930 the 7.3 magnitude Bago earthquake resulted in
50 fatalities at a time when the city’s population was only 400,000. Cyclone Nargis, which tore through
southern Myanmar in 2008 exposed the country’s vulnerability to natural disasters.

The new code will require approval from the Ministry of Construction before it can be implemented, but U
Win Khaing told OBG he was confident this would be achieved in early 2016, and some architects and
contractors have already begun to employ some of its recommendations, according to the local press.

Improving Regulations
As part of efforts to raise building standards, the YCDC is updating regulations concerning building
contractors. The amount required for a licence deposit has been increased from MMK5m ($4500) to
MMK20m ($18,000) for small contractors and from MMK20m ($18,000) to MMK50m ($45,000) for larger
operators. Contractors are required to obtain a licence before undertaking any kind of building work in
Myanmar.

Other laws governing construction date from Myanmar’s colonial past and are also in the process of being
updated, while city masterplans aim to ensure proper zoning of areas for industrial, commercial or
residential use. U Win Khaing told OBG that he expects the new regulations to improve the quality of
buildings and prevent construction companies from cutting corners. “In three to four years time, builders
will just have to follow the rules,” he said. “The cost may be a little higher, but we should have better quality
buildings, fewer issues on safety, improved standards to follow and proper materials.”

The YCDC is also involved in drafting a National Land Use Policy that will ensure greater transparency in
terms of land ownership, according to U Toe Aung, who told OBG that there are currently a number of issues
concerning land and titles which need to be resolved, as well as a lack of publicly available information,
which gives some people an unfair advantage over others when it comes to land transactions.

Identifying A Partner
The main investors in Myanmar’s real estate and construction industry are from Asia and are led by
Singapore, Thailand, Japan, Hong Kong and China. Many developers have also brought their own architects,
project managers and urban planners with them. Singapore’s Surbana, which grew out of the city-state’s
Housing and Development Board, has emerged as a major player in new township developments in Yangon.

Western firms are more nervous about investing in Myanmar, as businesses tend to be hugely diversified and
key individuals remain subject to sanctions. While most US and EU sanctions were lifted in 2012, the US
maintains a blacklist of some 200 individuals or organisations. All US companies or individuals planning
investments of $500,000 or more in Myanmar must also report their plan to the State Department and
provide a yearly update to the government.

A report on investing in Myanmar by the law firm VDB Loi states that all foreign investors are required to
find a local partner to invest in Myanmar property. The local stakeholder must own at least 20% of the
venture. Only in the tourism sector or a build-operate-transfer agreement with the government, which are
generally utilised for key infrastructure projects such as airports, can a foreign entity own 100% of a project.
Moreover, given the inadequate legal framework for disputes and lack of clarity over land issues, due
diligence is imperative in order to find a trusted partner, according to Stephanie Ashmore, executive
director of the British Chamber of Commerce Myanmar, which was set up in 2014 to provide guidance to
firms looking to invest in the country.

Leader Of The Pack

Few developers in Myanmar possess the technical experience and expertise to work on the large-scale
projects that tend to appeal to larger investors, and so most join forces with established companies, such as
Yoma Strategic Holdings (Yoma), the Singapore-listed unit of the conglomerate, Serge Pun and Associates.
Trading on the Singapore Stock Exchange for over a decade and the first Myanmar company to list its shares
in the city state, over 90% of Yoma’s sales revenues are from property development. The Singapore
connection is seen as providing some assurance to prospective foreign partners in terms of both risk and
reputation. Yoma has been described as the “go-to” partner for foreign investors in Myanmar, not only in
construction and property – its core business – but also in other arenas in which the company is expanding
its presence, such as fast food.

Myanmar’s bigger developers are becoming increasingly transparent, according to the Myanmar Centre for
Responsible Business (MCRB), which publishes an annual survey of 100 companies. The report noted that
leading companies had started to include financial information on their websites, as well as social impact
assessments. “Myanmar’s leading large companies continue to demonstrate a commitment to transparency
and good corporate governance,” Vicky Bowman, director of the Myanmar Centre for Responsible Business,
said in a statement. “They see it as fundamental to gaining and retaining their social licence to operate.” In
the report’s rankings, which are based on corporate governance and business practices and include tackling
corruption, organisational transparency, health and safety, and the environment, Serge Pun came first, with
Max Myanmar in second place and KBZ Group third.

Outlook
With so many large-scale developments planned for Myanmar’s larger cities, the potential for future
construction industry growth is considerable. Prospects are improved even further by the current efforts to
tighten regulations and streamline building permit processes, which will reduce project timelines and
improve building standards and quality.

Although a tightening of the rules may serve to drive up costs in the short term and put some developers off
the market, this effect will be far outweighed by the long-term benefits of having a stronger, more
sustainable industry. Moreover, ongoing efforts to upskill industry workers at home will go some way to
ensuring that Myanmar can begin to supply some of its future development needs domestically, thus helping
to secure future long-term growth.

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