September 8, 2014
By Masahiko Tanaka
As Myanmar builds its record of strong economic growth, the demand for electricity will increase sharply. According to the on-going National Electricity Master Plan study, which is supported by JICA, by 2030 it will reach 5 to 8 times the level in 2012. Dramatic as this may seem, it is consistent with the experiences of other countries. Given the low access to electricity today (about 30% of households), the demand for electricity is certain to expand much faster than the economy. Failing to meet this rising requirement for electricity will be disastrous.
Nepal's experience illustrates this point vividly. After the restoration of democracy in 1990, Nepal too undertook sweeping economic reforms and its growth prospects brightened. Yet, GDP growth (per capita) has averaged only 2.4% since 1990, and exceeded 5% only once. Political instability is to be blamed for much of this disappointment, but a shortage of electricity has also been damaging. In 1995, a major hydropower project (Arun III) was cancelled because of the pressures from environmental lobbies and inter-party politics that ignored national interests. The successive governments never devised an alternative to fill the large gap, and power generation capacity has increased by only about 3 times in the last 25 years, falling far behind the growth in demand. In the dry season, Nepalese industries and households now often receive only 8 hours of electricity a day. No economy can thrive with such a severe handicap. It will take decades to undo the egregious error.
Unfortunately, Myanmar too seems to lack a coherent energy strategy. With much public support, the controversial Myitsone Dam project was suspended, but how will the large gap thus created in the future supply plan be filled? Many gas-fired power stations are planned, but where will the additional gas supply come from? The Government sees the private sector as the main solution to the power supply problem. It has signed some 50 ‘memoranda of understanding' (MOUs) with ‘independent power producers' (IPPs) to develop hydropower and thermal-power plants. In reality, however, most are moving so slowly that they will not assure steady increases in electricity supply.
Yet, in the current plans of the Ministry of Electric Power, IPPs will account for 80% of the future supplies, a level of dependence on IPPs few other countries have. This exposes Myanmar to serious risks. First, since the priority of many IPPs in Myanmar is exporting electricity (with relatively small amounts set aside for domestic users), the pace of investment is dictated by the convenience of the importing countries, not the necessities of Myanmar. Second, IPPs will typically pass on any cost fluctuations to the users. When they are based on oil or gas, this could lead to disruptive surges in price, as seen in Cambodia.
Every country's strategy will be different, given its resource endowment and other circumstances. Thailand has favored gas-fired thermal power plants and IPPs, while Vietnam has used hydropower and natural gas more evenly and relied on IPPs sparingly. In defining its own approach, Myanmar will be well served to consider the following issues.
Myanmar can avoid the blunder that Nepal had made in the power sector, for the problem is entirely predictable. Still, actually meeting the rising electricity needs will take a serious and sustained commitment by the whole nation. Political leaders, both inside and outside the government, must promote public debate on the right strategy, help forge a national consensus on bearing the burden of heavy investments, and ensure implementation of effective public policies in a sustained fashion. There are no easy solutions. Nevertheless, guiding the nation to make important but difficult collective decisions is the job of the country's political leaders, is it not?
Mr. Tanaka is the Head of the JICA Office in Myanmar