Investment from China spurs large-scale construction in Myanmar

Mandalay is booming on the back of rising international investment and government efforts to foster the northern city as an engine of national growth. Local officials expect the economy to grow by 8.1% in 2019, outpacing national GDP growth of 6.1% and the city’s 2018 growth rate of 7.2%, the regional chief minister, U Zaw Myint Maung, told local press in March 2019. “Situated between India and China, Mandalay will experience a housing and infrastructure boom in the future that will position the city as one of the most important hubs in the region,” U Han Thein Lwin, CEO at Shwe Taung Engineering and Construction, told OBG.

The city is in the centre of plans to secure trading access for China to the India Ocean via the China-Myanmar Economic Corridor (CMEC). This multibillion-dollar initiative will link the deepwater port and planned special economic zone (SEZ) at Kyaukphyu with the south-west Chinese province of Yunnan via motorways, and a 430-km rail network between Mandalay and the Chinese border town of Muse. The latter is among Myanmar’s busiest trading posts, handling more than $4.9bn in annual trade in FY 2018/19.

New City Mega-Project

As part of the CMEC, the 4050-ha New Mandalay Resort City (NMRC) will be located on the outskirts of the township of Pyin Oo Lwin. Initially envisaged as an ICT centre, plans for the city have since expanded to include three phases. The first phase will see the development of a number of industrial and residential zones, a convention centre, an integrated resort, a golf course and ecotourism facilities. It is scheduled to be completed within eight years once construction gets under way, likely in 2020. The second phase includes developing zones for luxury and affordable housing, commercial outlets, medical facilities and a railway station. The third and final phase of the NMRC will install an agricultural park next to an agri-business cluster. The central government is overseeing the first and third phases, while the regional government is expected to manage the second phase.

Singapore-based engineering firm Surbana Jurong drew up the master plan for the NMRC. It will not only be a tourism resort, but a fully functional agri-business and industrial centre positioned to take advantage of the redeveloped highway to Muse. According to stakeholders involved in the project, cash crops that will be grown at the NMRC for export to China include berries, tea and coffee. Furthermore, the resort will include research institutes in order to train farmers on agricultural best practices. Construction materials for the project are to be sourced from across the Chinese border, with some steel products delivered from plants in the Thilawa SEZ 25 km south of Yangon.

The new city project, and the rail and road routes to Muse are all listed in the government’s Project Bank of priority infrastructure projects. As such, they are well positioned to attract private investment. Khin Myanmar Development Company, Central Irrawaddy Development Company and Shwe Taung Development Company are involved in the project, and in April 2019 a $470m contract was awarded to China Railway International Group to provide basic infrastructure.

Chinese Interest

As part of the CMEC, the NMRC is expected to attract significant investment from and involvement by Chinese companies. However, given that these companies typically employ Chinese workers from overseas rather than subcontracting to local companies, the initial economic impact of the new city may be muted. Investors are monitoring the progress of the New Yangon City Development project’s tendering process and the public-private partnership arrangements they entail before committing to similar opportunities.

There are also concerns over a lack of transparency surrounding the initial bidding for participation in the project. The impact of ongoing clashes between members of ethnic armed groups and the Myanmar military and in Shan State along the route of the proposed trade and transport links also raises a question mark.