A strong economic growth outlook and an easing of sanctions are attracting international logistics players to Myanmar. The inclusion of a global port operator, big-name container lines and major logistics firms is already having a positive impact, with transport times slashed and shipping connectivity increased. There is still a lot of work to be done however in the logistics market, as Myanmar still lags behind its peers. This continued development offers further growth opportunities for logistics firms, with BMI expecting more big names to set up operations in Myanmar.
High growth and an easing of trade sanctions attracting big name logistics firms;
New logistics players already having a positive impact, with Myanmar's shipping connections increased and transport times reduced;
Potential role as a transhipment hub and maritime gateway could boost Myanmar's position in the global supply chain;
Trade focus on its neighbours to continue, with road haulage companies the main beneficiaries;
Long-term diversification potential for Myanmar's river and railway freight sectors, but plans would need to be supported by the country's neighbours.
Logistics Entrants Already Having A Positive Effect
BMI forecasts that over the medium term (2013-2017), Myanmar's economy will expand by an annual average of 7.4% placing the country in joint second position with Tonga and one below Papua New Guinea in real GDP growth terms out of the 35 Asian counties that BMI's Asian Country Risk offer forecasts for. Myanmar's strong growth projections stem from the fact that the country is developing from a low base and because a relaxation in trade sanctions by the US and EU is boosting trade and attracting investment and international firms to the country.
| Growth Outlook The Key Attraction |
|Asia Top 10 2013-2017 Real GDP Annual Average % Change|
Logistics companies were some of the first to enter Myanmar following the relaxation of sanctions. Among these were firms associated with infrastructure logistics; Myanmar is a major growth market for infrastructure firms. BMI's Infrastructure Teams Key Projects Database records that there are currently 38 infrastructure projects at different stages of development underway in Myanmar; these are worth over US$25.8bn.
BMI highlights that one of the first logistics firms catering for the infrastructure sector to enter Myanmar was Rickmers-Linie, a German ship operator which specialises in shipping break-bulk and heavy lift cargoes associated with infrastructure projects.
Commercial logistics firms have also been quick to expand into Myanmar over the last 12 months. BMI highlights that the majority of logistics firms breaking into the country are Asian companies; Japanese businesses have been especially prominent among these. One of the country's major container lines, Mitsui OSK Lines (MOL), launched a direct feeder linking Singapore and Yangon in March 2012, thereby connecting Myanmar to the world's second-largest container port and a major transhipment hub. In February 2013 Japan's Mitsubishi Logistics Corp and Hong Kong-based Jupiter Global Ltd announced they were setting up a joint venture called Jupiter MLC Logistics to operate in Myanmar, with a base in Yangon.
Other international firms operating in Myanmar's maritime sectors are MCC Transport, the intra-Asia shipping firm belonging to the world's largest box carrier, Maersk Line. The company now operates four sailings per week from Yangon. The development of Myanmar's maritime sector is being further boosted by the inclusion of Hutchison Port Holdings - the world's largest port operator - which operates Myanmar International Terminals Thilawa (MITT), near the mouth of the Yangon River.
The rapid expansion of international players into Myanmar's shipping and logistics sectors is already being felt. The increase in container lines offering services to Myanmar has boosted the country's liner connectivity. In 2004 UNCTADstat ranked Myanmar as last on its Asia Liner Connectivity Index (out of 21 states). In 2013 the country has climbed two places to overtake Cambodia and Brunei.
| Getting Connected |
|LHC: 2004 UNCTADstat Liner Connectivity Index. RHC: 2013 UNCTADstat Liner Connectivity Index|
The increased container line connections has also boosted box throughput at the nation's ports. No data has yet been released for 2012, but throughput figures from 2007-2011 highlight the emerging role Myanmar is playing in container shipping. Between 2007-2011, box throughput at the nation's ports grew by 18% from 170,000 twenty-foot equivalent units (TEUs) in 2007 to 200,879 TEUs in 2011.
| Just The Beginning Of Myanmar's Growth Story |
|LHC: Myanmar UNCTADstat Liner Connectivity Index. RHC: Myanmar Ports Container Throughput (TEU)|
The inclusion of international logistics firms such as Mitsubishi Logistics Corp is also having a positive impact shore-side. According to World Bank data, Myanmar's lead times for imports and exports has been slashed. In 2010 Myanmar's lead time for imports and exports stood at 8.4 days and 4.6 days respectively. In 2012 the lead times for both imports and exports had been reduced to just one day.
| International Logistics Players Having A Positive Effect |
|LHC: Asia Lead Time To Import and Export (Days). RHC: Myanmar Lead Time To Export and Import (Days) 2010 and 2012|
However, there is still a lot of work to be done to improve Myanmar's logistics sector and therefore there is a lot of expansion potential for freight and shipping firms in this market. Myanmar's liner connectivity has improved the country's regional position; although it is no longer ranked last out of 21 Asian states, its position of 19th highlights how a lot more work is needed to attract more liner firms.
From Zero To Transhipment Hub
Nevertheless, Myanmar is not lacking in logistics development plans, with the country seeking to jump from playing a very minor role in the container shipping sector to becoming a transhipment hub. The Dawei Port project aims to operate as a maritime gateway for goods into Thailand, offering the country a port on the other side of the Malacca Straits.
| Transhipment And Gateway Potential? |
However, the project has been beset by delays, and construction work is unlikely to begin until at least 2014. The issue of funding remains the key obstacle and it appears the scope of the project is now being downgraded.
The latest information on the Dawei project is that the planned expansion of a motorway linking the planned port with Thailand has been postponed. BMI also highlights that Thailand is investigating another port initiative on the other side of the Malacca Straits - the planned port of Pak Bara has a timeframe for completion in 2020. This project has also attracted its fair share of criticism, but could act as an alternative for Thailand to the Dawei project. Thailand is the key driver behind the plans for a port at Dawei, with Italian-Thai Development Plc, the Thai company which was originally in charge of spearheading the project, stating in December 2012 that 'the project won't benefit Myanmar much, but mainly Thailand'.
Neighbourly Trade Focus To Continue
Although international firms are focusing on Myanmar, the country's logistics demands are set to remain weighted toward regional trade, specifically with the country's neighbours. According to data from the IMF's Direction of Trade Statistics Myanmar's largest trade partners are China and Thailand. China accounts for 38.8% of the country's imports and 36.7% of its total exports and Thailand is responsible for 22.6% of Myanmar's imports and 18.8% of its exports.
| Trade With Neighbours Dominates |
|Myanmar Export and Import % of Total 2011|
This trade focus on its neighbours means that Myanmar is heavily reliant on its internal transport network. Dominating the country's freight transport sector is road freight, with Myanmar's road network stretching for 150,800km, of which 21.8% is paved. The country's road network is Myanmar's main link to its neighbours and remains the key transport mode; the Dawei port project is planned to link Thailand by road.
Road freight accounts for 74.8% of Myanmar's total internal freight mix (based on 2011 figures for the country's road, rail and waterway volumes). The freight mode is set to continue dominating Myanmar's freight mix, with road freight volumes expanding by 9% y-o-y in 2011.
| Road Reliant |
|Myanmar Freight Transport Breakdown|
Water freight on Myanmar's river network is the country's second-largest freight mode, after road, accounting for 13.3% of the total carried in the country in 2011. Myanmar's river network extends for 12,800km, making it the 10th-largest in the world. The country's largest river and its main commercial waterway is the Irrawaddy River, which flows from the north of the country to the south. The river plays a major role in Myanmar's internal domestic water freight network, but it is the country's position on the Mekong River that offers Burma freight waterway links with its neighbours.
| River Offers Natural Connections |
The Mekong River flows through the Yunnan province in China, Myanmar, Laos, Thailand, Cambodia and Vietnam, offering Myanmar a natural freight route for trade. The river's navigation conditions vary greatly however, with seasonal variations in water levels curtailing the amount of trade that can be shipped. BMI believes that further investment to develop the Mekong River's potential is likely, thereby opening up more freight options for Myanmar to trade with its neighbours and other states in the region.
Rail freight in Myanmar is underdeveloped, accounting for just 11.9% of the total freight carried in the country in 2011. The country's railway network extends for just 5,031km. BMI believes that the relative lack of use of Myanmar's railway network for freight is due to the country's lack of rail links with its neighbour, the country's railway network being used to meet domestic needs.
Rail Network Overview
| || Rail Network Gauge || Rail Network Length |
|Source: CIA World Factbook |
|Myanmar ||5,031km ||Narrow |
|Bangladesh ||2,622km ||Narrow |
|India ||6,3974km ||Broad- 54,257km, Narrow 7,180km |
|Laos ||0km ||n/a |
|Thailand ||4,071km ||Narrow |
|China ||86,000km ||Standard |
BMI highlights that there is potential for Myanmar to develop rail links with its neighbours. Myanmar operates a narrow-gauge railway and so could easily connect with the narrow-gauge networks of its neighbours in Thailand and Bangladesh. However, India and China use different gauges on their railway network, broad and standard gauge respectively, making connections harder, increasing time and cost.