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SPECIAL ISSUE:
• 82nd Annual Meeting of ICOLD, Bali
• Hidroenergia 2014, Istanbul
T
The momentous transformation of Myanmar’s political and economic landscape, which began in 2010, has created many investment
opportunities, particularly in the hydropower sector. Myanmar is uniquely fortunate to have growing electricity demand both domestically
and from its neighbours, eager to buy clean power, as well as a wealth of potential hydropower resources. Rapid economic growth is being
experienced across nearly every sector, with a significant focus on energy and infrastructure. According to the International Monetary Fund,
GDP per capita in Myanmar as of October 2013 was US$ 1040, an increase of 20 per cent since 2012. In addition, pledged foreign direct
investment in Myanmar is also at record levels, exceeding US$ 44 billion in 2013 and showing no signs of slowing.
he transition process from military to civilian detail later in this article, is reflective of a shift in pol-
rule in Myanmar, being led by President U icy towards the easing of access for foreign companies
Thein Sein, has included widespread reforms, in to invest in a hydropower sector that is growing at an
an effort to modernize the legal and regulatory envi- annual average rate of nearly 18 per cent.
ronments to reflect international norms. A number of Until recently, broad government-to-government
new laws have been ratified, such as the Foreign agreements for the sale and purchase of a specific
Investment Law, while a new Electricity Law is amount of energy over a given time period
expected later this year. Myanmar’s geostrategic posi- (Memoranda of Understanding or MoUs) were typi-
tion between nations with populations totalling nearly cally the method through which the Myanmar
2.5 billion people with an insatiable demand for ener- Government negotiated power trading deals with its
gy, in combination with its own growing domestic neighbours. Myanmar signed an MoU with Thailand
electricity requirements, are enormous incentives to in 1997 for the trade of 1500 MW of electricity, which
develop the energy infrastructure necessary to capital- expired in 2010 and has not been renewed. According
ize on those demands. This is most notable in the to the Ministry of Power, Energy, and Mineral
hydropower sector, where less than 10 per cent of Resources of Bangladesh, negotiations are currently
Myanmar’s proven potential is currently being uti- underway for the purchase of 500 MW of hydropower
lized. by Bangladesh from Myanmar by 2017. However,
In H&D Issue One, 2007, James Finch, the founding apart from this pending agreement, no other broad
partner of DFDL’s Yangon office in 1995, wrote a power-trading MoUs are reported to be under consid-
paper on the regulatory framework for hydropower eration.
projects in Myanmar. This topic is revisited here, The Myanmar Government instead appears to be
seven years on, and after many changes made during negotiating project-specific MoUs with its neighbours,
the recent transformation of Myanmar’s legal and to help encourage regional investment into its energy
political system. This article will also look at other key infrastructure. India’s National Hydroelectric Power
issues and changes in Myanmar legal and regulatory Corporation (NHPC) signed an MoU with the
environment related to hydropower project develop- Myanmar Government in 2004 for the development of
ment. the 1200 MW Tamanthi dam on the Chindwin river,
with an estimated 80 per cent of the power going to
India. A new agreement was signed in 2008 between
NHPC and the Myanmar Hydroelectric Power
Across its four major rivers and numerous tributaries, Department to form a joint venture with NHPC for the
1. Industry overview
Myanmar harbours an estimated 40 000 MW of development of the Tamanthi and Shwesayay dams.
exploitable hydropower potential. However, rolling Thailand is reported to be in negotiation for up to
brownouts plague consumers who do have access to 10 000 MW of hydroelectricity from Myanmar over an
electricity, and for nearly 75 per cent of the population unspecified time period. This MoU is linked directly to
electrical access is currently unobtainable and will the Salween dam projects, five proposed dams along
remain so for the immediate future. In response to the the Salween river, which would have a combined
growing domestic demand for electricity, the capacity of more than 18 000 MW. Specifically,
Government of Myanmar has announced plans to Thailand will receive most of the power from the
increase its electricity generating capacity five-fold 7110 MW TaSang dam, which is planned along its bor-
within the next 15-20 years. Private sector participa- der with Myanmar. Thailand, through its generating
tion and finance will be essential in this effort. authority EGAT, is also to receive the majority of
There are currently 20 hydropower projects operat- power generated from the 1200 MW Hatgyi dam, cur-
ing in Myanmar with a capacity greater than 5 MW, 17 rently under construction, as well as the Weigyi dam,
of which are owned by the Government, one that is with an estimated total capacity of up to 5600 MW.
locally owned, and two that are joint ventures between Both are to be located in northeastern Karen State.
the Myanmar Government and Chinese state-owned EGAT has announced that power from the Hatgyi dam
enterprises. However, according to the Ministry of will be supplying the Thai national grid by 2019.
Electric Power, the number of hydro projects in the Although Thailand has significant investments,
planning stages is significantly weighted towards joint China is by far the largest financier of hydropower in
ventures, standing at 44 to date. This, in combination Myanmar, and has a number of MoUs signed for vari-
with the new Foreign Investment Law, discussed in ous power trading arrangements. Chinese state-owned
implementing rules, Notification 11/2013, on 31 Law (FXML) replaces the 1947 Foreign Exchange
January 2013. The FIL focuses on which industries Regulations Act, in an effort to introduce liberaliza-
and international companies are permitted to enter par- tion components into the foreign exchange regime.
ticular markets and in what form. The FXML replaces the strict approval requirement
Foreign participation in the generation of electrici- by the Central Bank of Myanmar for all foreign cur-
ty is possible only as a joint venture with a govern- rency transactions, by breaking foreign payments
ment entity. Foreign companies are also restricted to into capital account transactions and current account
a 20 per cent ownership in electrical generation transactions, with only capital account transactions
facilities that have a capacity of less than 10 MW. requiring Central Bank approval. However, the
The minimum capital requirement under the FIL for implementing regulations for the FXML have not yet
an investment into industry by a foreign company is been published, so there is a lack of clarity at present
US$500 000; although in practice the Government regarding the operational procedures for a new for-
tends to set the requirement at levels higher than eign exchange system.
what is stipulated under the FIL. The foreign capital Transferring funds out of Myanmar remains problematic,
may be in kind or in cash. Foreign currency and in- except in cases of profits and liquidation of funds under
kind contributions such as machinery, equipment, the FIL, which is a reason why the FIL is widely used.