Vivek Pathak, Director for East Asia and the Pacific, International Finance Corporation (IFC): Interview

Interview: Vivek Pathak

What priorities has the IFC identified in financing the expansion of Myanmar’s national grid?

VIVEK PATHAK: Only about a third of Myanmar’s population has access to the electricity grid. The existing gas-fired power plants, which supply about 30% of the country’s power generation, are obsolete and inefficient. Expanding access to electricity is crucial to Myanmar’s long-term growth and job creation. To help Myanmar meet growing domestic power demands, IFC plans to invest in an energy mix of hydropower, solar and liquefied natural gas.

We believe that hydropower will play a critical role in facilitating Myanmar’s energy security, but hydro projects need to consider environmental and social impacts on affected communities. IFC is helping the government undertake a strategic environmental assessment that will help in risk assessment and in determining which projects to pursue. The government will need $2bn per annum by 2030 to help the sector meet power demands while maintaining economic growth rates. To meet this level of investment, the public and private sectors, as well as local and international organisations, need to work together. Well-structured public-private partnerships (PPPs) provide such opportunities.

In 2014 IFC worked with the Ministry of Electric Power and Energy to choose an independent power producer (IPP) to implement a greenfield 225-MW combined-cycle gas turbine plant in the Mandalay region. Together with other international lenders, we will invest up to $75m to support this first competitively bid IPP in Myanmar. IFC is also helping transform the state-operated Yangon Electricity Supply Corporation into a commercially viable corporate entity.

What influence will refined corporate governance have on the country’s economic development?

PATHAK: Developing a strong private sector is critical to unlocking Myanmar’s economic potential and attracting much-needed foreign direct investment, which stands at less than one-third of Thailand’s by comparison. One of the keys to unlocking this potential will be a strong private sector, which can attract much needed foreign investment to fuel this expansion. In developing a strong private sector, it is crucial that firms in Myanmar adopt high standards of corporate governance in order to remain competitive and to attract foreign investment. Eventual entry into the ASEAN community further hastens the need to raise governance standards. Numerous studies have shown that investors have greater confidence in companies with good governance and in markets that are backed by sound legal and regulatory regimes. For example, one regional study showed that both firm-level improvements to governance and country-level investor protections in Asia can reduce the cost of capital. Thus, Myanmar companies need to raise their corporate governance levels to become more competitive and attractive to investors.

How can the banking sector develop further and better serve the Myanmar economy?

PATHAK: The banking sector is still in the early stages of development in Myanmar and needs to grow quickly to sufficiently serve the growing economy. It would also benefit from further expanding access to financial products and services, while, importantly, improving their quality and depth as well. Installing internal core banking systems is the first step to solving the access issue, and it should be a priority for all banks. The Central Bank of Myanmar should install a national electronic infrastructure for real-time settlement of interbank payments and retail payments. Together, these modernised systems will pave the way for an increase in the number of alternative delivery channels, such as ATMs, and point-of-sale outlets. Improving access to finance, especially for smaller businesses, is another area of extreme importance.