dry port research in myanmar 01

i

(Final Draft before UNESCAP’s editing)

Prefeasibility Study of

Establishing a Dry Port in Mandalay region,

the Republic of Union of Myanmar

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(October, 2012)

Constructive discussions on this Prefeasibility Study of Establishing a Dry Port

research report are welcome and highly appreciated.

ဤ Prefeasibility Study of Establishing a Dry Port

Myo Nyein Aye

Assistant General Manager Myanma Port Authority, Ministry of Transport. Tel: (95 9) 510 8613 email: [email protected] PhD candidate Shipping, Port and International Logistics Program, Shipping Management Department, Korea Maritime University,

i

The views expressed in the project report are those of the authors and do not necessarily reflect

the views of the United Nations secretariat. The opinions, figures and estimates set forth in this

report are the responsibility of the authors, and should not necessarily be considered as reflecting

the views or carrying the endorsement of the United Nations.

The designations employed and the presentation of the material in this report do not imply the

expression of any opinion whatsoever on the part of the secretariat of the United Nations

concerning the legal status of any country, territory, city or area, or of its authorities, or

concerning the delimitation of its frontiers or boundaries.

Mention of firm names and commercial products does not imply the endorsement of the United

Nations.

The report is issued without formal editing.

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EXECUTIVE SUMMARY

Myanmar is facing many challenges for developing its economy and international trade.

The economy of Myanmar has maintained steady growth over the last two decades with annual

growth of approximately 10 per cent. The newly elected government encourages the

development of all sectors and international investors are also interested in starting their

business investment in Myanmar. International trade has dramatically increased year by year and

there are many potential development projects at the feasibility stage.

The Myanmar government is also ready to sign the intergovernmental agreement on dry

ports which was drafted in July 2012. Myanmar has already proposed seven potential sites of

international importance for dry ports in accordance with the liberalized economic policy of the

newly elected government. Mandalay has been selected as the most important city for the

development of a dry port in Myanmar.

Mandalay is the second largest economic city of Myanmar and contributes about 7 per

cent of the country‟s GDP. The location of the Mandalay is strategically favourable to become a

logistics hub of upper Myanmar for both domestic and regional border trade. With the

development of transport infrastructure it is expected the cargoes through Mandalay will

maintain steady growth in the future. With the increasing volume of trade and transport through

Mandalay, a dry port with logistics functions need to be put in place to facilitate cargo transport.

This prefeasibility study report presents the essential issues of establishing a dry port in

Mandalay region. Chapter I provides the general background of the prefeasibility study report.

Chapters II through IV investigate the context of developing dry ports in Mandalay region

including topics such as overview of socio-economic features in Myanmar and Mandalay area,

policy and regulations on development of dry ports and a review of logistics and transport in

Mandalay area. Chapters V through IX examine freight demand forecast, functions, locations,

economic and financial analysis, social and environmental issues of development of a dry port in

Mandalay region. The last Chapter X concludes the study report with some recommendations.

To conduct this prefeasibility study both desk research and site visit approaches were

employed by the project team. Essential information and data were collected and analyzed at the

stage of desk research as well as during the site visit. During 2-6 July 2012, the project team

visited related various public/private organizations and government departments in Yangon,

Naypyitaw and Mandalay in Myanmar.

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The future cargo traffic volume through dry port is projected based on time series

analysis, various data and factors relating to demand for dry port. In 2016 total container volume

handled in the dry port is forecasted to be 12,775 TEUs and the dry port is expected to handle

47,815 TEUs in 2035. For annual conventional cargo traffic, cargo handling volume would

amount to 502,240 tons in 2016 and increase to 1,881,940tons by 2035.

It is recommended that a dry port be established near Merchandise Center in Mandalay

and provide logistics function such as cargo consolidation and distribution, cargo storage,

customs, and intermodal transport. It would serve the trade and transport between Mandalay and

overseas countries through a seaport such as Yangon port and the border trade between

Mandalay, and China and India.

Based on the forecast of cargo traffic in dry port it is proposed to build a dry port with an

area of 8.5 hectares. The dry port project will require a total project investment of approximately

10.5 million US dollars.

The financial internal rate of return (FIRR) of the dry port project is 8.31 per cent and its

economic internal rate of return (EIRR) is 19.15 per cent. In comparison with weighted average

cost of capital (WACC) values both FIRR and EIRR exceed the benchmark level of the WACC.

This means this project is financially and economically feasible.

According to the social and environmental impact assessments this project has minor

negative impacts on the local community. However, there are positive impacts on national and

local economy by generating income and creating an employment opportunity for local

residents.

The results of this prefeasibility study present that the proposed dry port is financially,

economically, socially and environmentally feasible, thus it would be worthwhile to proceed to

the feasibility study stage. It is recommended that the relevant ministries or departments at both

central and local government levels be involved in promoting the development of a dry port in

Mandalay.

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CONTENTS

EXECUTIVE SUMMARY ........................................................................................................................................... III

CONTENTS ............................................................................................................................................................... V

TABLES .................................................................................................................................................................. VII

FIGURES ................................................................................................................................................................. IX

I. INTRODUCTION .................................................................................................................................................... 1

A. BACKGROUND ..................................................................................................................................................... 1 B. APPROACHES FOR UNDERTAKING PREFEASIBILITY STUDY................................................................................................. 2 C. STRUCTURE OF THE FEASIBILITY STUDY REPORT ............................................................................................................ 2

II. SOCIO-ECONOMIC FEATURES AND INTERNATIONAL TRADE OF MYANMAR AND MANDALAY AREA............ 4

A. OVERVIEW OF SOCIO-ECONOMIC FEATURES OF MYANMAR ............................................................................................ 4 B. OVERVIEW OF SOCIO-ECONOMIC FEATURES OF MANDALAY REGION ............................................................................... 12 C. TRADE AND TRANSPORT SITUATION IN MANDALAY REGION .......................................................................................... 15 D. MERCHANDIZE CENTERS AND RELATED ACTIVITIES IN MANDALAY REGION ....................................................................... 17 E. INDUSTRIAL ZONES AND SPECIAL ECONOMIC ZONES NEAR MANDALAY REGION .................................................................. 19 F. POTENTIAL PROJECTS NEAR MANDALAY REGION......................................................................................................... 20 G. SUMMARY AND CONCLUDING REMARKS .................................................................................................................. 22

III. POLICY AND INSTITUTIONAL ISSUES ON THE DEVELOPMENT OF A DRY PORT IN MYANMAR ......................... 24

A. POLICY ISSUES ON DEVELOPING DRY PORTS IN MYANMAR ............................................................................................ 24 B. INSTITUTIONAL AND REGULATORY ISSUES ON DRY PORTS IN ASIA.................................................................................... 26

(1). Institutional framework .......................................................................................................................... 26 (2). Regulatory framework ............................................................................................................................ 28 (3). Investment modalities ............................................................................................................................. 29

C. INSTITUTIONAL AND REGULATORY ISSUES ON DRY PORTS IN MYANMAR ........................................................................... 31 (1). Land Acquisition Law .............................................................................................................................. 32 (2). Transport Law ......................................................................................................................................... 33 (3). Trade Law ............................................................................................................................................... 33 (4). Customs Law ........................................................................................................................................... 34 (5). Investment Promotion Law ..................................................................................................................... 34

D. SUMMARY AND CONCLUDING REMARKS .................................................................................................................. 34

IV. DEVELOPMENT OF TRANSPORT AND LOGISTICS IN MYANMAR AND MANDALAY AREA ............................ 35

A. GENERAL SITUATION OF TRANSPORT AND LOGISTICS IN MYANMAR ................................................................................ 35 (1). Road Transport ....................................................................................................................................... 35 (2). Railway Transport ................................................................................................................................... 40 (3). Inland waterways Transport ................................................................................................................... 44 (4). Air Transport ........................................................................................................................................... 45 (5). Port Sector .............................................................................................................................................. 45 (6). Logistics performance ............................................................................................................................. 54

B. ROAD TRANSPORT LINKING BANGLADESH, INDIA, CHINA, LAO PDR AND THAILAND .......................................................... 56 C. REVIEW OF LOGISTICS, TRANSPORT AND TRADE FACILITIES NEAR MANDALAY REGION ......................................................... 60 D. SUMMARY AND CONCLUDING REMARKS .................................................................................................................. 62

V. FREIGHT DEMAND FORECAST OF DRY PORT IN MANDALAY ............................................................................ 64

A. RATIONALE OF DEVELOPING A DRY PORT IN MANDALAY AND THE KEY FUNCTIONS OF DRY PORT ........................................ 64 B. LOCATION AND CAPACITY OF DRY PORT ............................................................................................................... 66 C. SUMMARY AND CONCLUDING REMARKS .............................................................................................................. 69

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VI. PHYSICAL DEVELOPMENT PLAN ....................................................................................................................... 71

A. PROPOSED SITE FOR DRY PORT ........................................................................................................................... 71 B. OVERALL LAYOUT OF DRY PORT .......................................................................................................................... 72

(1). Container Yard (CY) ................................................................................................................................. 75 (2). Container freight station (CFS) ................................................................................................................. 77 (3). Conventional cargo area .......................................................................................................................... 77 (4). Customs clearance area ........................................................................................................................... 78 (5). Customs office ......................................................................................................................................... 79 (6). Operator office ........................................................................................................................................ 80 (7). Maintenance workshop ........................................................................................................................... 80 (8). Gate and fencing ..................................................................................................................................... 81 (9). Rail cargo buffer zone .............................................................................................................................. 81 (10). Parking area .......................................................................................................................................... 81

C. FREIGHT HANDLING EQUIPMENT AND UTILITY ........................................................................................................ 82 (1). Freight Handling Equipment .................................................................................................................... 82 (2). Water supply ........................................................................................................................................... 83 (3). Electricity ................................................................................................................................................. 84 (4). Telecommunication ................................................................................................................................. 84 (5). Sewage treatment ................................................................................................................................... 84 (6). Other utilities........................................................................................................................................... 84

D. SUMMARY AND CONCLUDING REMARKS............................................................................................................... 84

VII. COST ESTIMATES ............................................................................................................................................. 85

A. LAND ACQUISITION ......................................................................................................................................... 85 B. CIVIL WORK COST ESTIMATE .............................................................................................................................. 85 C. BUILDING WORK COST ESTIMATE ........................................................................................................................ 86 D. ACCESS ROAD ................................................................................................................................................ 87 E. RAILWAYS FACILITY ......................................................................................................................................... 88 F. CARGO HANDLING EQUIPMENT .......................................................................................................................... 88 D. TOTAL COST ESTIMATE ..................................................................................................................................... 88

VIII ECONOMIC AND FINANCIAL ANALYSIS............................................................................................................ 90

A. FINANCIAL ANALYSIS ....................................................................................................................................... 90 (1). Conditions to calculate project revenue ................................................................................................... 90 (2). Implementation schedule ........................................................................................................................ 90 (3). Lifespan of the project ............................................................................................................................. 90 (4). Cash inflow and cash outflow of the project ............................................................................................ 90 (5). Project revenue........................................................................................................................................ 91 (6). Project cost after cost adjustment ........................................................................................................... 92 (7). Calculation of project FIRR ....................................................................................................................... 94

B. ECONOMIC ANALYSIS ...................................................................................................................................... 95 (1). Introduction ............................................................................................................................................. 95 (2). Economic benefits.................................................................................................................................... 95 (3). Economic costs ........................................................................................................................................ 99 (4). Calculation of project EIRR ..................................................................................................................... 100

C. SUMMARY AND CONCLUDING REMARKS............................................................................................................. 101

IX. ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT ................................................................................... 103

A. ENVIRONMENTAL AND SOCIAL ANALYSIS ............................................................................................................ 103 B. ENVIRONMENTAL MANAGEMENT PLAN .............................................................................................................. 106 C. SUMMARY AND CONCLUDING REMARKS............................................................................................................. 107

X. CONCLUSIONS AND RECOMMENDATIONS ...................................................................................................... 108

A. CONCLUSIONS ON DEVELOPMENT OF DRY PORT IN MANDALAY ................................................................................ 108 B. RECOMMENDATION FOR FULL-SCALE FEASIBILITY STUDY ........................................................................................ 109 C. RECOMMENDATION FOR UTILIZING THIS PREFEASIBILITY STUDY ................................................................................ 110

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TABLES

Table 1: Socio-economic indicators of five GMS countries in 2010 ...................................................................... 4

Table 2: Key economic indicators and long-term trends of Myanmar ................................................................ 6

Table 3. Structure of economy of Myanmar (% of GDP) ............................................................................................ 6

Table 4: Structure of economy of Myanmar (Annual growth rates of GDP, Consumption and Investment) ............................................................. 7

Table 5: Trade Value from (2005-06 to 2011-12) ........................................................................................................ 7

Table 6. Direction of trade (Export) of Myanmar .......................................................................................................... 8

Table 7: Direction of trade (Imports) of Myanmar ....................................................................................................... 9

Table 8: Structure of international trade of Myanmar ............................................................................................. 10

Table 9: Foreign Investment of Permitted Enterprises as of (31-7-2012) .................................................... 10

Table 10: Per capita GDP for each township in Mandalay ..................................................................................... 13

Table 11: Value of Production, Services and Trade for Mandalay Region ...................................................... 13

Table 12: Ratio of Mandalay GDP compared with GDP of Myanmar ................................................................ 14

Table 13: Statement of IN/ OUT Cargo Transportation by truck (tons) ......................................................... 15

Table 14: Statement of IN/ OUT Cargo Transportation with truck (by vehicles)....................................... 16

Table 15: Export Border trade volumes with neighbouring countries ............................................................ 16

Table 16: Import Border trade volumes with neighbouring countries ........................................................... 16

Table 17: China Border trade volume as percentage of all border trade........................................................ 17

Table 18. the Dry Ports of International Importance in Myanmar. ................................................................... 25

Table 19: Policy and regulations relevant to dry ports ........................................................................................... 29

Table 20: Potential dry port investors ............................................................................................................................. 30

Table 21: Road infrastructure in Myanmar (June, 2012) ....................................................................................... 35

Table 22: Road progress in Myanmar .............................................................................................................................. 36

Table 23: Freight transported by railways .................................................................................................................... 42

Table 24: Airborne cargoes and traffic in Myanmar ................................................................................................. 45

Table 25: Number of vessels calling at Yangon Port (including Thilawa terminals) ................................ 48

Table 26: Seaborne trade of the Yangon Port (including Thilawa) ................................................................... 49

Table 27: Volume of containers handled in port of Yangon (including Thilawa) ....................................... 50

Table 28: Logistics performance index for Myanmar and selected countries, 2010 ................................ 54

Table 29: Road infrastructure under Ministry of Construction........................................................................... 61

Table 30: Forecast of annual container traffic through dry port ........................................................................ 68

Table 31: Forecast of annual conventional cargo traffic through dry port .................................................... 69

Table 32: Forecast of daily container traffic through dry port ............................................................................ 72

Table 33: Forecast of daily conventional cargo traffic through dry port ........................................................ 73

Table 34: Summary of total area required for the dry port ................................................................................... 74

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Table 35: Space required for container storage for road cargo ........................................................................... 75

Table 36: Space required for container storage for rail cargo .............................................................................. 75

Table 37: Space required for container yard for road cargo ................................................................................. 76

Table 38: Space required for container yard for rail cargo .................................................................................... 76

Table 39: Space required for CFS ........................................................................................................................................ 77

Table 40: Space required for conventional cargo storage for road cargo ....................................................... 78

Table 41: Space required for conventional cargo storage for rail cargo.......................................................... 78

Table 42: Space required for customs clearance......................................................................................................... 79

Table 43: Space required for customs office ................................................................................................................. 79

Table 44: Space required for operator office ................................................................................................................ 80

Table 45: Space required for maintenance workshop.............................................................................................. 80

Table 46: Space required for parking area ..................................................................................................................... 81

Table 47: Summary of freight handling equipment at the dry port ................................................................... 82

Table 48: Consumption of water at the dry port ......................................................................................................... 83

Table 49: Cost estimate for civil work .............................................................................................................................. 85

Table 50: Cost estimate for the buildings ....................................................................................................................... 86

Table 51: Cost estimate for access road .......................................................................................................................... 87

Table 52: Cost estimate for railway facility ................................................................................................................... 88

Table 53: Cost estimate for the cargo handling equipment ................................................................................... 88

Table 54: Total cost estimate for the dry port project .............................................................................................. 89

Table 55: Cash inflow and cash outflow included in project FIRR ..................................................................... 91

Table 56: Summary of revenue for dry port .................................................................................................................. 91

Table 57: Summary of dry port charges .......................................................................................................................... 91

Table 58: Summary of dry port development cost ..................................................................................................... 92

Table 59: Distribution of dry port development cost ............................................................................................... 92

Table 60: Cargo handling equipment cost ...................................................................................................................... 92

Table 61: Labour cost ............................................................................................................................................................... 93

Table 62: Fuel cost ..................................................................................................................................................................... 93

Table 63: Summary of operational costs ......................................................................................................................... 93

Table 64: Calculation of project FIRR ............................................................................................................................... 94

Table 65: Annual employment benefit ............................................................................................................................. 96

Table 66: Opportunity cost of vehicle and cargo through time ............................................................................ 98

Table 67: Logistics cost savings ........................................................................................................................................... 99

Table 68: Summary of economic development cost ............................................................................................... 100

Table 69: Calculation of project EIRR ............................................................................................................................ 100

Table 70: Project weighted average cost of capital (WACC)............................................................................... 101

Table 71: Project activities and impacts identification ......................................................................................... 103

Table 72: Environmental and social impact assessment of the dry port project ..................................... 104

Table 73: Potential socio-economic impacts of the dry port project.............................................................. 106

Table 74: Environmental management plan for the dry port project ............................................................ 106

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FIGURES

Figure 1: Organization of the study report ...................................................................................................................... 3

Figure 2: Map of Republic of Union of Myanmar ........................................................................................................... 5

Figure 3: Yearly Approved Amount of Foreign Investment .................................................................................. 11

Figure 4: Foreign Investment in Myanmar (by country) ........................................................................................ 11

Figure 5: Mandalay location map ....................................................................................................................................... 12

Figure 6: Map of Mandalay and its region ...................................................................................................................... 12

Figure 7: Per capita GDP of Mandalay city Vs. Mandalay division...................................................................... 14

Figure 8: Mandalay Highway Bus terminals and Merchandise Center (plan) .............................................. 18

Figure 9: Mandalay Highway Bus terminals and Merchandise Center (satellite) ...................................... 18

Figure 10: Construction of warehouse in Merchandise Center (4.7.2012).................................................... 19

Figure 11: Industrial zones in Myanmar ......................................................................................................................... 20

Figure 12: Scale-model of the new city project in Mandalay Region (proposed) ....................................... 21

Figure 13: Proposed site for river port development project .............................................................................. 22

Figure 14: Proposed dry ports in Myanmar .................................................................................................................. 26

Figure 15: Agencies involved in operation of Lat Krabang dry port, Thailand ............................................ 28

Figure 16: Policies and regulations relevant to dry ports ...................................................................................... 28

Figure 17: Current roads network of Myanmar .......................................................................................................... 37

Figure 18: Asian and ASEAN highways network ........................................................................................................ 39

Figure 19: Economic corridor highways of GMS countries ................................................................................... 40

Figure 20: Existing Rail routes of Myanmar .................................................................................................................. 41

Figure 21: Segment of the Trans-Asia Railway Network in Myanmar ............................................................. 42

Figure 22: Total inland waterways length (km) in Myanmar .............................................................................. 44

Figure 23: Map of Yangon river estuary with Yangon and Thilawa port area ............................................. 46

Figure 24: Vessels calling at Yangon port (2001-02 to 2011-12) ...................................................................... 48

Figure 25: Seaborne trade of the Yangon port (including Thilawa) (2001-02 to 2011-12).................. 49

Figure 26: Volume of containers handled in port of Yangon (including Thilawa) (by TEU in thousands, 2000-01 to 2011-12) ................................................................................................................. 50

Figure 27: Map of Kyauk Phyu ............................................................................................................................................ 51

Figure 28: Dawei deep seaport (New commercial Gateway) ............................................................................... 52

Figure 29: Correlation between LPI and Income per Capita ................................................................................. 55

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Figure 30: Myanmar’s LPI Scores ....................................................................................................................................... 55

Figure 31: The main transport corridors in GMS countries ................................................................................... 57

Figure 32: Alternative transport routes passing through Myanmar ................................................................. 58

Figure 33: The Singapore–Kunming rail link network ............................................................................................. 59

Figure 34: Proposed road from Dawei to Bangkok .................................................................................................... 60

Figure 35: Distances and driving hours for major cities from Mandalay ........................................................ 60

Figure 36: 105 mile Trade Zone (Muse) .......................................................................................................................... 62

Figure 37: Basic functions and cargo flows of dry port............................................................................................ 65

Figure 38: Location of Mandalay ......................................................................................................................................... 66

Figure 39: Projected annual container traffic volume through dry port ......................................................... 68

Figure 40: Projected annual conventional cargo traffic volume through dry port ..................................... 69

Figure 41: Proposed location of the dry port in Mandalay ..................................................................................... 71

Figure 42: Forecast of daily container traffic through dry port ........................................................................... 73

Figure 43: Forecast of daily conventional cargo traffic through dry port....................................................... 73

Figure 44: The physical layout of the dry port ............................................................................................................. 75

Pre-feasibility Study of Dry Port in Myanmar

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I. INTRODUCTION

A. BACKGROUND

The Republic of the Union of Myanmar1 is situated in South East Asia and it is the

largest country in the region with a total land area of 677,000 square kilometers. Myanmar has a

long coastline with 2,229 kilometers at the South-western part of the country.

Myanmar is a member of ASEAN (Association of South East Asia Nations) and it is the

most western part of ASEAN geographically (especially for the continental countries of

ASEAN). Along the coastline of Myanmar, there are 8 ports for the coastal and international

maritime traffic. Among them, the Port of Yangon is the premier port of Myanmar and handles

about 90 % of the country's normal exports and imports up to now. Cargo throughput using

Yangon port has been increasing markedly each year. Containerized cargo passing through the

Yangon Port (including Thilawa terminals area) has been also increasing time by time. Yearly

growth rate of the container handled volume in Yangon port is about 16% for the last 6 year

period. On the other hand, border trade has been increasing gradually year by year. Among

them, border trade volume and value with China has noticeably increased year by year.

According to the 2011-2012 records, border trade value within China is more than 16% of the

country‟s total trade.

Nowadays in Myanmar, more than 50% of the containerized export cargoes (by weight)

are agricultural products, mainly beans and pulses and most of these beans and pulses are

dominantly cultivated in the middle part of Myanmar (around Mandalay region). Additionally,

most of the import goods from the China border are transported to Mandalay first and then these

are distributed to other regions of the country. For the regional development prospects,

Mandalay is situated on the Asian Highway (AH1 and AH14) and future Trans-Asian Railway

network (TAR-S1 and TAR-S2). Moreover, Mandalay is the second largest economic city and it

has naturally very good access with an inland waterway by the longest river of Myanmar, the

Ayeyarwaddy. All these situations favour Mandalay to be an important logistics hub in

Myanmar for both domestic and international trade.

This prefeasibility study report, as its name suggests, covers the essential issues of

establishing a dry port in Mandalay region. In the meantime, the vicinity of Mandalay has 1 In this prefeasibility study report, the Republic of the Union of Myanmar is referred to as Myanmar


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already been selected as a planned or potential dry port in Myanmar for a prefeasibility study by

Ministry of Rail Transport, Myanmar.

B. APPROACHES FOR UNDERTAKING PREFEASIBILITY STUDY

Both desk research and site visit approaches were employed by the project team.

Essential information and data were collected and analyzed at the stage of desk research. During

2-6 July 2012, the project team comprising the UNESCAP secretariat staff, an external- project

team activities consultant and the focal point from Myanmar visited related various Public/

Private organizations and government departments in Yangon, Naypyitaw and Mandalay in

Myanmar. The project team held discussions with relevant stakeholders including government

officials, customs officers, transport operators, and regional authorities to gather information for

the prefeasibility study during the site visit. Comprehensive analysis was conducted after the site

visit, which led to this prefeasibility study report.

C. STRUCTURE OF THE FEASIBILITY STUDY REPORT

The study report comprises four components, as illustrated in Figure 1. The first

component (chapter I) provides the general background of the prefeasibility study report. The

second component (chapters II through IV) investigates the context of developing dry ports in

Mandalay region including topics such as overview of socio-economic features in Myanmar and

Mandalay area, policy and regulations on development of dry ports and a review of logistics and

transport in Mandalay area.

The third component of this study report (chapters V through IX) examines the

functions, locations, economic and financial analysis, social and environmental issues of

development of a dry port in Mandalay region. The last component (chapter X) concludes the

study report with some recommendations.


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Component 1:

the general background of

the prefeasibility study report

Ch I. Introduction

Component 2:

Social and economic context

of developing a dry port in

Mandalay region area

Ch II. Socio-economic features and international

trade of Myanmar and Mandalay area

Ch III. Policy and institutional issues of

development of dry port in Myanmar

Ch IV. Development of transport and logistics in

Myanmar and Mandalay area

Component 3:

Functions, locations,

economic and financial

analysis, social and

environmental issues of

development of a dry port in

Mandalay region.

Ch V. Freight demand forecast of dry port in

Myanmar and Mandalay area

Ch VI. Physical development plan

Ch VII. Cost estimates

Ch VIII. Economic and financial analysis

Ch IX. Environmental and social impact

assessment

Component 4:

Conclusion

Ch X. Conclusions and recommendations

Figure 1: Organization of the study report


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II. SOCIO-ECONOMIC FEATURES AND INTERNATIONAL TRADE OF MYANMAR AND MANDALAY

AREA

A. OVERVIEW OF SOCIO-ECONOMIC FEATURES OF MYANMAR

According to the classification by the United Nations, Myanmar is one of the least

developed countries (LDC)2 similar to Lao PDR and Cambodia within ASEAN countries. Figure

2 shows the geographic location of Myanmar on a UN official map.

Myanmar shares borders with 5 neighbouring countries. They are Bangladesh with the

length of 194 kilometers, India with the length of 1,463 kilometers, China with the length of

2,185 kilometers, Laos with the length of 235 kilometers and Thailand with the length of 1,800

kilometers. The total length of the border is about 5,900 kilometers.

Myanmar is a member of the United Nations (UN), Association of Southeast Asian

Nations (ASEAN), Bay of Bengal Initiative for Multi Sectoral Technical and Economic

Cooperation (BIMST-EC) and the Greater Mekong Sub-region (GMS) - including Cambodia,

Yunnan Province and Guangxi Zhuang Autonomous Region in China, Lao PDR, Myanmar,

Thailand, and Viet Nam. The selected key socio-economic indicators of five GMS countries in

Table 1 show that GMS countries vary from each other in terms of population, GDP, GNI per

capita and area. Thailand has the largest economy measured by GDP; Lao PDR is the smallest in

terms of population and GDP; Myanmar is the largest according to the area of the country, while

Viet Nam has the largest population.

Table 1: Socio-economic indicators of five GMS countries in 2010

Country Population

(million)

GDP (US$

billions)

GNI per

capita (USD)

Rural Pop (%

total)

Area

(sq. km.)

Cambodia 14.3 11.2 750 80 176,500

Lao PDR 6.23 7.3 1,050 68 230,800

Myanmar 59.8 54.416* 379.6

** 67 677,000

Thailand 67.3 318.5 4,150 65 510,900

Vietnam 86.5 106.4 1,160 70 310,100

Source: World Bank (http://devdata.worldbank.org/AAG/mmr_aag.pdf), „JICA-IDCJ studies‟,

*(http://www.gfmag.com/gdp-data-country-report) and **

(http:// http://data.un.org/CountryProfile )

2 UNCTAD(2011), “THE LEAST DEVELOPED COUNTRIES REPORT 2011”, United Nations


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Source: www.un.org

Figure 2: Map of Republic of Union of Myanmar

http://www.un.org/


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The key economic indicators and long-term trends of Myanmar in Table 2 reveal that the

economy of Myanmar has maintained steady growth over the last two decades with annual

growth of approximately 10 per cent.

Table 2: Key economic indicators and long-term trends of Myanmar

1990 2000 2009 2010

GDP (US$ billions)

Gross capital formation/GDP 13.4 12.4 18.9 22.7

Exports of goods and services/GDP 1.9 0.5 0.1 0.1

Gross domestic savings/GDP 11.7 12.3 18.9 22.7

Gross international savings/GDP - - - -

(average annual growth) 1990-00 2000-10 2009 2010 2010-14

GDP 7.0 12.3 10.6 10.4 -

GDP per capita 5.6 11.7 9.8 9.6 -

Exports of goods and services 8.8 2.4 -2.0 16.1 -

Source: World Bank (http://devdata.worldbank.org/AAG/mmr_aag.pdf)

Tables 3 and 4 show the main pillars for the economy in Myanmar. Agriculture has been

the vital role for the economy of Myanmar. However, its relative importance has declined over

time because of increases of the other sectors. But no sectors have had rapid growth.

Table 3: Structure of economy of Myanmar (% of GDP)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

(% of GDP)

I. GOODS 64.20 63.16 63.73 62.94 62.64 62.36

Agriculture 38.40 36.01 35.34 31.59 29.36 27.55

Livestock and Fishery 7.66 7.38 7.57 8.28 8.34 8.42

Manufacturing 12.80 13.99 14.89 16.82 18.10 19.52

Construction 3.76 3.87 3.83 4.23 4.48 4.54

II. SERVICES 14.09 15.77 15.21 15.94 17.03 17.80

Transportation 10.44 10.97 10.86 11.89 12.62 12.95

III. TRADE 21.71 21.07 21.06 21.12 20.32 19.84

Source: Compile data from Central Statistics Organization (CSO), Ministry of National Planning and Economic

Development


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Table 4: Structure of economy of Myanmar

(Annual growth rates of GDP, Consumption and Investment)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

(annual growth, Percent)

I. GOODS 13.8 12.5 11.3 9.5 9.6 9.7

Agriculture 10.7 9.2 7.5 4.8 4.2 4.1

Livestock and Fishery 18.8 12.2 10.9 10.1 12.3 7.5

Manufacturing 21.9 22.1 21.2 18.3 19.0 20.3

Construction 11.0 15.2 17.2 18.1 13.8 12.5

II. SERVICES 15.2 16.2 15.6 14.5 15.3 13.2

Transportation 16.2 16.0 14.4 16.7 15.9 13.9

III. TRADE 12.1 12.9 11.6 9.6 9.9 10.3

Source: Central Statistics Organization (CSO), Ministry of National Planning and Economic Development

Table 5 indicates the foreign trade value of Myanmar. It shows normal trade and border

trade separately. Border trade is mainly with China and Thailand. In the last year, the trade

imbalance amounted to less than 1% of the total trade.

Table 5: Trade Value from (2005-06 to 2011-12)

(USD million)

No. Item 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1 Export (total) 3,557.21 5,232.68 6,401.71 6,778.85 7,586.94 8,861.01 9,135.60

(a) Normal Trade 3127.73 4585.47 5655.03 6121.55 6922.59 7746.66 7107.21

(b) Border Trade 429.48 647.21 746.68 657.3 664.35 1114.35 2028.39

2 Import (total) 1,984.41 2,936.73 3,353.42 4,543.45 4,181.40 6,412.73 9,035.06

(a) Normal Trade 1692.78 2491.33 2770.57 3852.27 3462.07 5396.89 7695.46

(b) Border Trade 291.63 445.4 582.85 691.18 719.33 1015.84 1339.60

3 Total Trade

Value 5,541.62 8,169.41 9,755.13 11,322.30 11,768.34 15,273.74

18,170.6

6

4 Trade

imbalance 1,572.80 2,295.95 3,048.29 2,235.40 3,405.54 2,448.28 100.54

Source: CSO and DOBT

Table 6 & 7 show the main trading partners of Myanmar. Measured by value of export,

the main trading countries/groups of Myanmar include ASEAN countries (within ASEAN

countries, Thailand took the largest portion of it), EU countries (within EU countries, Germany


- 8 -

has the biggest amount but it is comparatively less than neighbouring countries), China,

Republic of Korea, Japan, United States, India, Bangladesh and others. Table 6 is for export

trading partner countries and table 7 is for import trading partner countries.

Table 6: Direction of trade (Export) of Myanmar

(USD million)

No Countries/ Groups 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1 Major trading partners 5040.79 6161.281 6466.58 7193.711 8534.615 8745.024

a ASEAN countries 2836.197 3504.957 3853.41 4141.03 3930.84 4676.692

Brunei 1.04 1.22 0.98 0.75 0.37 1.33

Cambodia 0 0 0.04 0.36

Indonesia 88.23 86.58 28.45 37.43 41.11 40.94

Lao PDR 0.01 0.07 0.04 0.02 0.03

Malaysia 88.47 119.03 311.69 152.61 437.8 152.04

Philippine 10.28 7.66 8.99 27.21 22.3 34.32

Singapore 182.59 400.56 832.75 670.41 456.99 542.75

Thailand 2407.347 2809.647 2630.93 3197.87 2905.18 3823.832

Vietnam 58.23 80.19 39.58 54.75 67.03 81.09

b EU Countries 210.27 200.06 159.9 132.05 120.88 131.52

c China 972.847 1345.574 1291.15 1582.668 3098.25 2255.768

d Republic of Korea 61.54 73.82 63.22 75.58 148.39 214.82

e Japan 166 185.86 183.5 177.35 237.43 320.2

f United States 3.46 2.24 0.82 2.56 2.21 29.45

g India 733.91 727.25 803.82 1013.137 871.591 1045.989

h Bangladesh 56.566 121.52 110.76 69.336 125.024 70.585

2 Others 191.89 240.43 312.27 393.23 326.39 390.58

Total (Export) 5232.68 6401.711 6778.85 7586.941 8861.005 9135.604

Source: CSO + DOBT


- 9 -

Table 7: Direction of trade (Imports) of Myanmar

No Countries/ Groups 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1 Major trading partners 2840.873 3218.005 3971.56 3994.095 6006.663 8627.61

a ASEAN countries 1566.34 1556.9 2042.75 1922.137 2840.6 4020.57

Brunei 0 0.03 0.02

Cambodia 0.06 0.03 0.06 0.18 1.36 1.11

Indonesia 94.06 206.68 210.35 140.07 275.49 431.82

Lao PDR 0.4 0

Malaysia 110.41 115.51 350.48 159.52 145.32 303.41

Philippine 9.77 12.25 16.44 14.16 16.97 14.64

Singapore 1034.66 821.52 1050.28 1202.19 1645.32 2516.13

Thailand 304.51 383.44 395.09 378.677 709.09 691.15

Vietnam 12.87 17.47 19.65 27.31 47.05 62.29

b EU Countries 71.76 92.19 99.45 96.34 161.98 253.17

c China 754.153 1016.015 1240.89 1268.971 2176.962 2796.55

d Republic of Korea 84.9 107.54 189.4 224.06 304.23 451.93

e Japan 156.54 243.3 166.05 259.11 256.35 502.17

f United States 43.15 22.03 79.93 18.52 59.47 263.62

g India 159.95 173.51 146.38 193.515 195.46 325.38

h Bangladesh 4.08 6.52 6.71 11.442 11.611 14.22

2 Others 95.86 135.41 571.89 187.3 406.07 407.453

Total (Import) 2936.733 3353.415 4543.45 4181.395 6412.733 9035.063

Source: CSO + DOBT


- 10 -

Table 8: Structure of international trade of Myanmar

(USD million)

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

1

Export 5232.68 6401.71 6778.85 7586.94 8861.006 9135.604

(a) Agriculture 931.13 1221.22 1403.17 1678.36 1800.391 2372.983

(b) Animal product 10.3 13.07 10.16 24.15 93.773 92.896

(c) Marine product 491.58 554.5 464.9 466.9 498.608 705.931

(d) Mining 499.36 741.99 708.13 1017.57 2274.066 897.06

(e) Forestry 620.43 640.02 516.65 561.52 644.701 643.845

(f) Manufacturing 2329.46 2826.07 2686.18 3238.9 2907.954 4007.805

(g) Others 350.42 404.84 989.66 599.54 641.513 415.084

2

Import 2936.727 3353.424 4543.45 4181.400 6412.733 9035.063

(a) Capital goods 839.767 1146.930 1824.400 1530.530 2480.684 3843.306

(b) Raw materials 1377.800 1254.890 1597.380 1635.980 2628.972 3451.053

(c) Others goods 719.160 951.604 1121.670 1014.890 1303.077 1740.704

3

Total trade 8169.407 9755.134 11322.300 11768.340 15273.740 18170.670

Source: CSO + DOBT

According to the statistics of foreign investment, Table 9 shows the sector-wise volume

of Foreign Investment in Myanmar.

Table 9: Foreign Investment of Permitted Enterprises as of (31-7-2012)

(USD Million).

Sr.

No Particulars

Permitted Enterprises %

No. Approved Amount

1 Power 5 19067.498 46.41

2 Oil and Gas 113 14181.972 34.52

3 Mining 66 2814.360 6.85

4 Manufacturing 176 1826.282 4.44

5 Hotel and Tourism 45 1064.811 2.59

6 Real Estate 19 1056.453 2.57

7 Livestock & Fisheries 25 324.358 0.79

8 Transport & Communication 16 313.906 0.76

9 Industrial Estate 3 193.113 0.47

10 Agriculture 9 182.751 0.44

11 Construction 2 37.767 0.09

12 Other Services 6 23.686 0.06

Total 485 41086.957 100.00

Source: http://www.dica.gov.mm/dicagraph.htm


- 11 -

The total investment amount from foreign investors reached about $41 billion till end of

July, 2012. That foreign direct investment amount is highly dependent upon the investment

policy and political weather of the country. Figure 3: shows the formation of the foreign

investment in Myanmar from 1989-90 to 2011-12.

(USD million)

Source: see footnote

3

Figure 3: Yearly Approved Amount of Foreign Investment

Additionally, Figure 4 shows the top 15 countries which have invested in Myanmar up to

the end of July, 2012.

(USD million)

Source: extract data from http://www.dica.gov.mm/dicagraph1.htm

Figure 4: Foreign Investment in Myanmar (by country)

3 Trade & Investment Environment in Myanmar, presented by Capt. Aung Khin Myint (Chairman, MIFFA) on 11 May 2012.

449

280

30

100

400

1400

700

2800

800

40

58.1

50

217.6

88

19.0

02

86.9

48

91.1

70

158.2

83

6065.6

75

719.7

02

205.7

20

984.7

64

329.5

80

19998.9

65

4369.4

81


- 12 -

B. OVERVIEW OF SOCIO-ECONOMIC FEATURES OF MANDALAY REGION

Mandalay is the second-largest city and the

last royal capital of Myanmar. It is located about 380

miles (600 km) – along the new express road access -

north of Yangon on the east bank of the

Ayeyarwaddy River and is the capital of Mandalay

region. Administratively, Mandalay region consists of

seven townships, namely Mandalay, Pyin Oo Lwin,

Kyauk Se, Meik Hti Lar, Myinghan, Yamethin and

Nyaung Oo. Mandalay is the economic hub of upper

part of Myanmar in terms of location, commerce,

road, rail and inland waterway access. Mandalay is

also considered as the distribution center of the trade from China passing through the border

with China. Figure 5 shows the location of Mandalay on the Myanmar map and Figure 6 shows

the map of Mandalay region.

Figure 6: Map of Mandalay and its region

Per capita GDP data of Mandalay region is as shown in Table 10. Mandalay township

itself is twice the average of the whole region.

Figure 5: Mandalay location map

http://en.wikipedia.org/wiki/Yangon

http://en.wikipedia.org/wiki/Irrawaddy_River

http://en.wikipedia.org/wiki/Mandalay_Region

http://en.wikipedia.org/wiki/Mandalay_Region


- 13 -

Table 10: Per capita GDP for each township in Mandalay

(USD)

No. Township 2006-07 2007-08 2008-09 2009-10 2010-11

1 Mandalay 416.24 571.10 690.49 938.13 1,358.06

2 Pyin Oo Lwin 159.21 218.30 273.61 351.11 500.08

3 Kyauk Se 288.56 375.73 417.25 498.53 724.10

4 Meik Hti Lar 223.76 311.04 354.78 457.27 661.88

5 Myinghan 164.42 227.82 254.02 319.65 453.03

6 Yamethin 150.43 210.55 236.36 286.54 399.06

7 Nyaung Oo 143.96 199.16 229.65 278.78 400.10

Mandalay Division 222.97 304.11 354.20 453.98 655.60

Source: Planning department4

The value of production, services and trade for Mandalay region are as shown in Table

11. Under production there are 8 sub-categories, namely agriculture, livestock and fishery,

forestry products, energy, minerals, mechanical and construction. Among them, agriculture

product value is about 50% of the total product value. Under services, there are five sub-

categories, namely transportation, communication, monetary, social and management, and

others. Among them transportation is about 80 % of the total services value.

Table 11: Value of Production, Services and Trade for Mandalay Region

Year

(in Million Kyats) Est. USD

(million)

Est.

Exchange

rate Production Services Trade Total

04-05 296,124.10 83,905.80 105,459.70 485,489.60 693.56 700.00

05-06 902,949.80 306,844.20 308,585.20 1,518,379.20 1,265.32

1,200.00 06-07 1,007,994.60 369,808.20 340,410.50 1,718,213.30 1,431.84

07-08 1,095,698.10 434,101.60 369,818.90 1,899,618.60 1,583.02

08-09 1,201,857.40 477,883.10 404,881.50 2,084,622.00 1,667.70 1,250.00

09-10 1,293,655.70 562,397.60 433,628.10 2,289,681.40 2,081.53 1,100.00

10-11 1,415,305.80 640,121.60 472,402.30 2,527,829.70 2,407.46 1,050.00

Source: Planning department

Table 12 shows the ratio of Mandalay GDP compared with GDP of Myanmar for the

past several years.

4 This per capita GDP was expressed in local currency (Kyats) and the exchange rate calculation on the related table is dependent on market exchange rate records and estimates


- 14 -

Table 12: Ratio of Mandalay GDP compared with GDP of Myanmar

Year GDP in Kyat

% Mandalay Myanmar

2004-05 485,489.60 9078928.5 5.3%

2005-06 1,518,379.20 12286765.4 12.4%

2006-07 1,718,213.30 16852757.8 10.2%

2007-08 1,899,618.60 23336112.7 8.1%

2008-09 2,084,622.00 29233288.0 7.1%

2009-10 2,289,681.40 33905665.6 6.8%

2010-11 2,527,829.70 40507942.0 6.2%

Source: Compile data from CSO and planning dept.

From financial year 2006-2007, Naypyitaw (Pyinmana township) became a separate

division and it became the new government capital of Myanmar. According to this affect, the

percentage contribution of the Mandalay GDP as part of national GDP has been gradually

decreasing. But per capita GDP of the Mandalay division and Mandalay city itself has been

increasing year by year as shown in Figure 7.

(USD)

Figure 7: Per capita GDP of Mandalay city Vs. Mandalay division

0

200

400

600

800

1000

1200

1400

1600

2006-07 2007-08 2008-09 2009-10 2010-11

Mandalay city Mandalay Division


- 15 -

The local government of Mandalay region mainly has been promoting the following

areas (related with transport and trade) for development:

1). Transit service at the border from China;

2). Merchandizing of the agricultural products, mainly beans and pulses;

3). Training of the Ayeyarwaddy river to use the transit cargo from China;

4). Establishing the inland water ports along the Ayeyarwaddy river; and

5). Establishing industrial zones;

C. TRADE AND TRANSPORT SITUATION IN MANDALAY REGION

The location of Mandalay, favours it becoming a logistics hub for trade in the middle

part of Myanmar, both domestic trade and border trade. Mandalay is also known as a base of

manufacturing facilities with rich cultural tradition and modern agricultural equipment. From the

industrial zones of the Mandalay region, the consumer products and capital goods have been

distributed to the surrounding regions.

Mandalay is about 445 miles (716 km)5 far from Yangon which is the major port for

international trade. Whenever the cargoes have to be exported, these cargoes have to be moved

to Yangon or the Yangon region first where all the documentation procedures are completed.

This is the reason for the dense traffic of cargo trucks between Yangon and Mandalay being

significantly high. According to the truck traffic data collection from the Truck Supervising

Committee of Yangon Division, the average percentage of the cargo trucks to/from Mandalay

region is about 25% to 30% of all the 16 regions (including Yangon internal region) in

Myanmar. Table 13 & 14 show cargo volumes transported in and out of Yangon region.

Table 13: Statement of IN/ OUT Cargo Transportation by truck (tons)

Period Yangon with Mandalay region Yangon with all the regions

% In Out Total In Out Total

Jul~Dec, 2010 443185 399217 842402 1534639 1045926 2580565 30.97%

Jan~Jun, 2011 243728 324884 568612 1066330 1037514 2103844 27.03%

Jul~Dec, 2011 191068 230993 422061 793182 660684 1453866 29.03%

Jan~Jun, 2012 163722 161374 325096 673349 530376 1203725 27.01%

Source: Truck Supervising Committee (Yangon Division)

5 That distance is along the old route from Mandalay to Yangon. Even when the first expressway between Mandalay and Yangon has been opened in 2012, the cargo trucks and container trucks are not allowed to use that express route that is only 365 miles in length.


- 16 -

Table 14: Statement of IN/ OUT Cargo Transportation with truck (by vehicles)

Period with Mandalay region with all the regions

% In Out Total In Out Total

Jul~Dec, 2010 17397 17262 34659 77269 50031 127300 27.23%

Jan~Jun, 2011 17979 17724 35703 82657 56122 138779 25.73%

Jul~Dec, 2011 16558 12701 29259 70367 42545 112912 25.91%

Jan~Jun, 2012 15989 11947 27936 72174 44708 116882 23.90%

Source: Truck Supervising Committee (Yangon Division)

From another point of view, Mandalay is situated as the hub of the distribution center of

cargo arising from border trade with India and China. The volume of the China border trade

makes up a high portion of the whole border trade as shown in Table 15 (export) and 16

(import).

Table 15: Export Border trade volumes with neighbouring countries

(USD million)

Country 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Thailand 157.60 148.96 137.86 139.22 151.62 175.16

China 453.12 555.48 490.85 500.16 937.83 1821.90

India 11.02 10.91 5.48 7.79 8.28 8.87

Lao 0.01 0.07 0.04 - 0.02 0.03

Bangladesh 6 25.46 31.26 23.07 17.18 16.60 22.43

Total (export) 647.21 746.68 657.3 664.35 1114.35 2028.39

Source: Calculation data from Ministry of Commerce

Table 16: Import Border trade volumes with neighbouring countries

(USD million)

Country 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Thailand 142.63 155.78 189.49 135.43 147.36 168.14

China 296.64 421.95 495.75 576.65 862.45 1163.52

India 4.75 3.92 4.40 5.95 4.52 6.54

Lao - - 0.40 - - -

Bangladesh 5*

1.38 1.20 1.14 1.30 1.51 1.40

Total (import) 445.40 582.85 691.18 719.33 1015.84 1339.69


6 Border trade with Bangladesh (import/export) figures is an estimated calculation whereby the total volume was reduced by subtotals of China, Thailand, India and Lao PDR.


- 17 -

Table 17 shows the percentage of the China border trade of the total border trade volume

has been increasing gradually year by year. Most of the cargo from the China border trade is

carried to Mandalay first and then has to be distributed to the rest of the regions. The percentage

of the China border trade is more than 80% of the total border trade value and it has been

increasing noticeably year by year.

Table 17: China Border trade volume as percentage of all border trade

(USD million)

Year China border trade Total border

trade

% of

Total Export Import Total

2006-07 453.12 296.64 749.76 1092.61 68.62%

2007-08 555.48 421.95 977.43 1329.53 73.52%

2008-09 490.85 495.75 986.6 1348.48 73.16%

2009-10 500.159 576.652 1076.811 1383.68 77.82%

2010-11 937.83 862.452 1800.282 2130.19 84.51%

2011-12 1821.898 1163.52 2985.418 3367.99 88.64%


Business activities in Mandalay have been increasing with goods from the China border

trade (export-import goods) passing through the city. This border trade between Myanmar and

China has been growing year by year. In 2011-12, the value of the Myanmar-China border trade

was about US$ 3,000 million which is almost three times the value from last two year period.

There is still great potential to develop in the future as well.

D. MERCHANDIZE CENTERS AND RELATED ACTIVITIES IN MANDALAY REGION

Mandalay is located at the middle part of Myanmar and it is the dry zone region with low

levels of annual rainfall. That is the reason why the main agricultural products of the Mandalay

and nearby regions are beans, pulses and cotton. One of the major export cargoes from Myanmar

is beans and purses. Mandalay is the biggest market place and distribution hub for these beans

and pulses from Mandalay itself, and nearby regions, to Yangon for export.

Agriculture related equipment and fertilizer are the main import cargoes from China and

the main distribution area is Mandalay city. Mandalay City Development Committee (MCDC)

established the new Mandalay highway bus terminals and the Merchandise Center project in the

western part of Mandalay city area (about 20 km far from the city center). The project has a land

area of 65.95 acres and the following buildings:


- 18 -

Shop house (30' x 80') = 160 units

Shop house (40' x 60') = 34 units

Warehouse (60' x 80') = 236 units

Extra block = 13 units

Landscaping = 1 unit

Total buildings = 346 units

Total Area = 61.589 acres

Including 2 x 30' access roads = 65.950 acres

(for the better arrangement of traffic the road area is about 42.59% of the total area.)

Figure 8 shows the site plan of the merchandise center of the Mandalay Highway Bus

terminals and Merchandise Center and Figure 9 shows a recent satellite photo of it.

Figure 8: Mandalay Highway Bus terminals and Merchandise Center (plan)

Figure 9: Mandalay Highway Bus terminals and Merchandise Center (satellite)


- 19 -

Figure 10: Construction of warehouse in Merchandise Center (4.7.2012)

E. INDUSTRIAL ZONES AND SPECIAL ECONOMIC ZONES NEAR MANDALAY REGION

M

andalay

Industrial

Zone is

one of the

biggest

zones

around the

country.

There are

a total of

18 main

Industrial

Zones and

28 branch

zones in

Myanmar.

M

andalay

Industrial

Zone was

Mandalay Ind. Zone Myingyan Ind. Zone Meiktila Ind. Zon

Monywa Ind. Zone Kalay Ind. Zone

Pakokku Ind. Zone Yenanggyaung Ind. Zone

Pathein Ind. Zone Myangmya Ind. Zone

Hinthada Ind. Zone

Myeik Ind. Zone

Pyay Ind. Zone

Mawlamyine Ind.Zone

Taunggyi Ind. Zone


- 20 -

Figure 11: Industrial zones in Myanmar

established in 1990 at the east side of the Yangon-Mandalay highway road, in Pyigyitagon

township, Mandalay Division. It is 1820 acres in area and it has 3530 blocks.

Mandalay region itself has been saturated as the center of the country and main location

for the distribution of the border trade from China and India as well. Thus Mandalay industrial

zone has more advantages over other industrial zones.

In the Mandalay industrial zone, there are

406 large scale industries7, 323 medium scale

industries and 722 small industries. In total there

are 1442 industrial sites. Total investment amounts to about 33.372 billion Kyats (about 33

million USD with the exchange rate of that time).

Production value for Mandalay Industrial Zone are as below:

(a) 2006-07 83,500 million Kyats (est. 66.80 million usd8)

(b) 2007-08 99,800 million Kyats (est. 83.17 million usd)

(c) 2008-09 119,200 million Kyats (est. 108.36 million usd)

(d) 2009-10 134,600 million Kyats (est. 134.60 million usd)

(e) 2010-11 127,001 million Kyats (est. 158.75 million usd)

(f) 2011-12 127,900 million Kyats (est. 155.98 million usd)

F. POTENTIAL PROJECTS NEAR MANDALAY REGION

Regarding the regional transportation routes, the most important Asian Highway routes

are AH1 (from Myawaddy-border with Thailand to Tamu-border with India) and AH14 (from

Mandalay to Muse-border with China). Because of the strategic geographic location, Mandalay

regional commercial trade will be growing continuously and there are many potential projects

for development undergoing feasibility study or in the development stages, such as new

Mandalay city development projects, re-training of Ayeyarwaddy River and development of the

Inland Water ways ports projects.

7 the classification of the size of the industries is according to the Notification No. 23/1991 of the Ministry of Industry-1 as below: Small Scale Private Industrial Enterprise has manpower of up to 50, using house power from 3 and up to 25, Medium Scale Private Industrial Enterprise has manpower from 51 up to 100, using house power from above 25 and up to 50, and Large Scale Private Industrial Enterprise has manpower above 100, using house power from above 50 8 exchange rate that was used in this calculation is estimated from annual average market rate


- 21 -

Many urbanization projects are being planned in Myanmar these days. Most noticeable

potential projects are in Yangon region and Mandalay region. Different ministries and regional

organizations have also been organizing a series of workshops and seminars related to regional

development in the Mandalay region. Two examples, “Road Transport Development workshop

in Mandalay” which is related to the ASEAN Free Trade Area in 2015, and a workshop on

“Development of hotels and tourism sectors in Mandalay” arranged by Ministry of Hotels and

Tourism, were held recently.

Recently, one of the potential city development projects is “The new city project” and it

will cover 22,000 acres of land, and is located within five and a half miles of the Mandalay

International Airport, according to information from the local development company of that

intended project. All these situations show that there will be driving forces and demands for the

development of the city itself too. Figure 12 shows a scale-model of the proposed new city

project in Mandalay Region.

Figure 12: Scale-model of the new city project in Mandalay Region (proposed)

Another potential project relating to inland water transport is at the east bank of

Ayeyarwady river (about 70 km north-west of Mandalay city center) as shown in Figure 13.

That project is intended to be built within 3 months with the objective of reducing the

transportation cost for cargoes from Yangon and the lower part of Myanmar by using inland

water transport along the Ayeyarwaddy river9.

9 Project information was obtained from the local news journal (The Voice Weekly Vol. 8/No. 34).


- 22 -

Figure 13: Proposed site for river port development project

That inland waterway river port project will cover a land area of 370 acres and the

intended construction period is about 30 months. The berth length is about 5000 ft and it can be

used by up to 3000 DWT local barges and vessels. The intended project consists of other related

industries including developing warehouses for agricultural products, packing factories, other

industrial zones and so on. A study report on the impact on environmental and social sectors has

been started for the development of that project.

G. SUMMARY AND CONCLUDING REMARKS

Myanmar is an LDC and faces many challenges for developing its economy and

international trade. Myanmar joined the Association of South East Asia Nations (ASEAN) in

July 1997 together with Lao PDR and about two years earlier than Cambodia. Myanmar was

under military rule from 1988 to the end of March, 2011. Under the military rule, there were

partial liberalizations of trade and the economy with the open market policy. But, there were

many bad situations with low FDI compared to other regional countries. Economic sanctions

from EU and United states resulted in few concrete developments in that era.

In April, 2011, a new democratically elected government took over power from the

military government. After reform of the political system, much progress can be seen such as

improved international relationships with other countries, the economic sanctions have been

lifted, the banking and financial system has been reformed, and many local and international

workshops and seminars regarding reform and development of various sectors have been held.


- 23 -

Analysts from Asia Development Bank (ADB) say that Myanmar‟s economy can triple in size

by 2030 if sufficient reforms are undertaken in the coming years10

.

The newly elected government encourages the development of all sectors and

international investors are also interested in starting their business investment in Myanmar.

Moreover, regional trade (including border trade) has dramatically increased year by year. There

are many proposed and potential development projects at the feasibility stage in parallel with

each other.

Mandalay is the second largest economic city of Myanmar and capital of upper

Myanmar. Mandalay division contributes about 7% of the country‟s GDP and per capita GDP is

also higher than national per capita GDP. The location of the Mandalay region is strategically

favourable for it to be a distribution and economic hub of other regions in upper Myanmar and

China and India border trade as well. Mandalay is situated on the east bank of the river

Ayeyarwaddy and it is also the biggest port city along the river. Moreover, it was the last royal

capital of Myanmar and rich in cultural sites and tourist attractions. There are so many regional

development project plans and city development plans being continuously considered and

launched for the Mandalay region, especially nowadays.

The border trade between China and Myanmar has been developing year by year. The

volume of the border trade with China plays a vital role in the country‟s border trade and it is

about 80% of the whole border trade volume. Most of the cargo from China is distributed at

Mandalay and almost all of the export cargo going to China passes through the Mandalay region

too. All these factors are the driving force for Mandalay to be a logistics center of upper

Myanmar for both domestic and regional border trade.

10 The Irrawaddy: Burma’s Economy Can Triple by 2030: ADB, BY SIMON ROUGHNEEN on August 21, 2012 retrieved from http://www.irrawaddy.org/archives/

http://www.irrawaddy.org/archives/


- 24 -

III. POLICY AND INSTITUTIONAL ISSUES ON THE DEVELOPMENT OF A DRY PORT IN MYANMAR

A. POLICY ISSUES ON DEVELOPING DRY PORTS IN MYANMAR

Like many other countries in the world, there is not a single policy or regulation

exclusively designated for dry ports in Myanmar. There was no specific law in Myanmar

exclusively designated to dry ports but the Multimodal Transport Law had been drafted and was in

the process of being enacted as a state law11. Instead, development and operation of dry ports are

under the auspices of different rules and regulations.

The Myanmar government well understood that the geographical location of the country

itself favours the country to be a land-bridge connecting South-East Asia and South Asia as well

as with China12

. The advantages of the geographical location of Myanmar provides large

potential for it to be a regional hub of the continental South East Asia and Greater Mekong Sub-

region (GMS). Myanmar is keen to develop the transportation sector with its own resources, and

through better cooperation and integration with development partners from local and overseas as

well.

UNESCAP member countries have to consider the following suggestions by the

secretariat of UNESCAP about the implementation of a dry port in their respective countries;

(i) prioritizing development of dry ports in their country;

(ii) assessing challenges and opportunities for development of dry ports; and

(iii) institutionalizing development of dry ports at the national level.

Myanmar, as a member of the UNESCAP, government policy has to be in line with

UNESCAP‟s intentions. Myanmar has already proposed seven potential sites of international

importance for dry ports in accordance with the liberalized economic policy of the newly elected

government. The Myanmar government is also ready to sign the intergovernmental agreement

on dry ports which was drafted in July 201213

.

11 the discussion of Myanmar delegation at the Regional Expert Group Meeting on the Development of Dry Ports along the Asian Highway and Trans-Asian Railway Networks, Bangkok, 1-3 November 2010 12 Country report (Myanmar), Ad Hoc Intergovernmental Meeting on an Intergovermental Agreement on Dry Ports, Bangkok, 20-22 June 2012. 13 E/ESCAP/CTR(3)/2 , United Nations Economic and Social Commission for Asia and the Pacific, Committee on Transport, Finalized draft intergovernmental agreement on dry ports, 31 July 2012.


- 25 -

The potential proposed places for the development of a dry port in Myanmar are

Mandalay, Tamu, Muse, Mawlamyine, Bago, Monywa and Pyay. Table 18 shows these potential

places with the priority of implementation of the Dry Ports of International Importance in

Myanmar.

Table 18: the Dry Ports of International Importance in Myanmar.

Priority Name of

city

modes of

transport Description

1. Mandalay

(Trimodal)

Rail, Road,

Inland water

* Capital of Mandalay Division

* The 2nd

largest economic city

* AH1, AH 14, TAR-S1, TAR-S2

* on the bank of Irrawaddy river

* adjacent to the Industrial zone

2. Tamu (Bimodal)

Rail, Road

* border station to India

* transshipment (break of gauge)

* AH1, TAR-S1, TARS2

3. Muse (Bimodal)

Rail, Road

* border station to China

* transshipment

* AH14, TARS1

4. Mawlamyine

(Trimodal)

Rail, Road,

Inland water

* Capital of Mon state

* AH 112, TAR-S1,

* on the bank of Than Lwin River

5. Bago (Bimodal)

Rail, Road

* Capital of Bago division

* Junction railway station of TAR-S2 & Yangon -

Mandalay rail line, AH 1

* Junction of Yangon – Mandalay line & Mawlamyine

- Bago line

6. Monywa

(Trimodal)

Rail, Road,

Inland water

* Large hinterland

* Capital of Sagaing division

* AH 1, TAR-S1, TAR-S2

* on the bank of Chindwin River

7. Pyay

(Trimodal)

Rail, Road,

Inland water

* Large hinterland

* on the bank of Irrawaddy

* the most potential city forecasted by an expert team.

Source: see footnote 14

14 Extracted from Country report Presentation of Thura U Aung Myo Myint, Deputy General Manager, Myanma Railways, Ministry of Rail Transportation, Union of Myanmar that was shown at Ad Hoc Intergovernmental meeting on an Intergovernmental Agreement on Dry Ports, in 20-22 June, 2012, Bangkok, Thailand.


- 26 -

Most of the proposed places are located on the paths of Asian Highway (AH1) and the

future Tran-Asian Railway (TAR-S2). Among them, Mandalay is highest priority and it has

many comparative advantages over others. Figure 14 shows the location of the potential dry port

places in Myanmar.

Source: Country report (Myanmar)

Figure 14: Proposed Dry Ports in Myanmar

B. INSTITUTIONAL AND REGULATORY ISSUES ON DRY PORTS IN ASIA

(1). INSTITUTIONAL FRAMEWORK

Development of dry ports involves various governmental agencies concerned with

transport, trade, commerce, finance, environment, customs, ports and logistics as well as private

sector organizations, financing companies and banks. Therefore, planning, development and

operation of dry ports requires considerable coordination and collaboration.

Planning, development and operation of dry ports involve, amongst other things, the

issuance of licenses, provision of guidelines on investment policies and guidelines on land use

for development as a consequence, and the coordination of many agencies is essential. One of

the ways of improving coordination could be through clearly defining the roles of various

departments and agencies as well as the process involved in implementing legislation and


- 27 -

regulations. Familiarity with the existing institutional and regulatory environment would allow

dry port project developers to follow the prescribed processes necessary and to obtain the

necessary approvals.

In most cases both central and local governments are involved in dry ports, often at the

planning and approval stage of a project as well as during its operation. For example in Lao

PDR, the Department of Transport, Ministry of Public Works and Transport is the main

government department dealing with dry ports and other institutions involved in their planning,

development and operations, along with other departments such as Department of Customs,

Ministry of Finance, Department of Immigration, Ministry of Public Security and Department of

Quarantine, Ministry of Agriculture and Forestry respectively. In Indonesia, the Ministry of

Transportation, Ministry of Finance and Governor of West Java were involved in approving the

Cikarang dry port project. The location, construction and operation permit was issued by the

Ministry of Transportation, while the Ministry of Finance issued permits for temporary storage

areas (TPS) and implementation of the Customs Advance Trade System (CATS). Therefore,

even though there may be different structures coordination among various levels of government

is also necessary.

At the Regional Expert Group Meeting on the Development of Dry Ports along the Asian

Highway and Trans-Asian Railway Networks in Bangkok (2010), Institutional and regulatory

issues have been outlined, emphasizing the direct impacts from the development of dry ports. The

following issues15

have to be considered by UNESCAP member states for the promotion and

development of the dry ports in their countries;

(i) Developing institutional and regulatory frameworks for dry ports in their countries;

(ii) Coordinating different government ministries/departments and the private sector to

create an environment that is conducive to development of dry ports;

(iii) Harmonizing relevant policies and regulations guiding the development and

operation of dry ports; and

(iv) Sharing the best experiences of promoting the development of dry ports among

member countries.

At the operational stage government departments, including customs and other

inspection departments are directly involved in the daily operations of dry ports. Figure 15

shows an example of relevant government department/agencies involved in operations at Lat

Krabang dry port in Thailand.

15 Report of the Regional Expert Group Meeting on the Development of Dry Ports along the Asian Highway and Trans-Asian Railway Networks, Bangkok, 1-3 November 2010


- 28 -

Source: the project team

Figure 15: Agencies involved in operation of Lat Krabang dry port, Thailand

(2). REGULATORY FRAMEWORK

Regulations on dry ports in a country or region are often embedded in regulations on

infrastructure, transport or multimodal transport, land, logistics, port, investment, and trade and

transport facilitation. Figure 16 shows linkages between dry port development with various

sectoral policies. Table 19 provides further details on these policies and linkages. All these

policies and regulations can have direct impacts on dry ports in terms of the time and cost of

approval of a dry port project in the early stages and costs and revenues at the operational stage.


Figure 16: Policies and regulations relevant to dry ports


- 29 -

Table 19: Policy and regulations relevant to dry ports

Infrastructure A dry port can be considered as an infrastructure and relevant

infrastructure policy could be applicable to the development of dry ports.

Transport and trade

facilitation

It is highly desirable to have customs clearance and relevant inspection

facilities at dry ports. However, this depends on the policy of a country.

Land Land policy decides whether the land can be granted to build dry ports

and has direct implications on the costs

Environment

Dry ports might be treated as important means to encourage mode shift

cargoes from road to rail to create more environmentally friendly

transport. However, development of dry ports inevitably has

environmental impacts during construction and operation on the

surrounding areas and will have to follow environmental guidelines of

the local and central government.

Transport and

multimodal transport

Dry ports are an important element in the transport chain and can be

largely influenced by transport or intermodal transport policy. For

instance, a dry port can only be „rail‟-based if railway authority approves

trains to use dry port and relevant railway connection is available.

Logistics In some countries, dry ports are categorized as logistics service centres

and relevant logistics policies and regulations are applicable to dry ports.

Port In some countries, dry ports are categorized as ports and relevant

policies and regulations on ports are applicable to dry ports.

Investment

Investment policies can directly decide who can invest in dry ports. For

instance, in some countries, foreign investment might not be allowed for

dry ports. In another instance, public-private partnership might be

encouraged.


(3). INVESTMENT MODALITIES

Historically, many dry port projects in Asia have been developed and financed

domestically. This is in contrast to container terminals at seaports which have attracted

investment from well-known terminal operators such as Hutchison Port Holdings (HPH), PSA

International (PSA), APM Terminals (APMT), DP World (DPW) and COSCO Pacific.

Table 20 provides a selected list of different categories of investors in dry port projects in

Asia. With the development of trade and rail and road transport networks in the region, it is

possible for the dry ports to attract more and more investments from various sources including

international terminal or transport operators.


- 30 -

Table 20: Potential dry port investors

Investors Examples

Government Nepal: Birgunj dry port (with involvement of World Bank)

Port authority or

terminal operator

China: Hutchison port holdings invests and operates Shenzhen Hutchison

Inland Container Depots (SHICD)

Railway

Authority

Islamic Republic of Iran: Iranian Railways operates Sarakhs Multimodal

Transportation Center and Bafq Multimodal Transportation Center

Malaysia: Malaysian State Railway and four other public companies

(port authorities) invested in Ipoh ICD

India: The Container Corporation of India (Concor) invests and operates

numerous dry ports in the country

Thailand: The State Railway of Thailand (SRT) is the landlord of Lat

Krabang ICD

Russian Federation: Trans Container company owns a network of rail-

side container terminals located at 46 railway stations from St Petersburg

to Vladivostok

Liner shipping

companies

Container Corporation of India (Concor) and Maersk jointly invested in,

and operate, India's largest inland container depot (ICD) with a 1-million

TEU capacity at Dadri near New Delhi

Private India: Faridabad Inland Container Depot

Cambodia: So Nguon Dry Port

Build-Operate-

Transfer (BOT)

Private sector contractors build, equip, manage and operate the site for a

specified period (usually not less than 30 years).

Governments provide the land and road/rail access to the gate of the

facility

o Example: Korea: Uiwang (near Seoul) and Yangsan (near Busan) in

Republic of Korea

Concessions

Governments invest in terminal infrastructure and retain ownership

Private sector invest in cargo handling and transport equipment needed at

the facility and operate them

o Examples: Lad Krabang dry port, Bangkok, Thailand



- 31 -

C. INSTITUTIONAL AND REGULATORY ISSUES ON DRY PORTS IN MYANMAR

According to the current situation of the government structure and administration in

Myanmar, six main ministries and several city development committees16

are involved in the

transport sector of Myanmar. They are

(i) Ministry of Transport (MOT)

(ii) Ministry of Rail Transportation (MORT)

(iii) Ministry of Construction (MOC)

(iv) Ministry of Progress of Border Areas and National Races and Development

Affairs

(v) Ministry of Defence17

(vi) Ministry of Home Affairs (MOHA)

(vii) Yangon, Mandalay, and Naypyitaw city development committees

In addition planning, development and operation of the dry port covers much wider

scope than the transport sector itself. The following government ministries/departments and

other private sector organization will be involved in their respective roles for the planning,

development and operation of a dry port in Myanmar;

(i) Ministry of Transport

(ii) Ministry of Construction

(iii) Ministry of Rail Transportation

(iv) Ministry of Trade and Commerce

(v) Ministry of Finance and Revenue

(vi) Ministry of Home Affairs

(vii) Ministry of Health

(viii) Private Associations like Forwarding Associations, Shipping lines, Freight Truck

Associations and others:

Regional Governments and City Development Committees also play a vital role in

developing dry ports in Myanmar. Often Regional Government has its master plan to develop

the transport system and trade facilitation in the area. These master plans may have direct

impacts on establishing a dry port in the area.

In the case of developing a dry port in Mandalay region, all the above-mentioned

government ministries/departments, the regional government of Mandalay division and

16 These ministries and committees list came from the discussion on the draft of Myanmar Transport Sector Assessment from Asia Development Bank (ADB), June 2012. 17 some of the roads have been developed under the management of Ministry of Defense


- 32 -

Mandalay City Development Committee (MCDC) will play important roles in terms of

approving the land, issuing licenses, and making particular arrangements such as concessions for

the owner of the dry port.

In terms of the operation of a dry port in Mandalay region, Department of Customs

(Ministry of Finance and Revenue), Directorate of Trade and Department of Border Trade

(Ministry of Trade and Commerce), Department of Immigration (Ministry of Population) and

Department of Quarantine (Ministry of Health) will play an essential role. Also, Traffic

Department (Myanma Port Authority, Ministry of Transport) may be involved in the dry port

operation18

. For instance, these departments may carry out cargo clearance and inspection at the

dry port to facilitate import and export of cargo.

Myanmar was under a socialist system until 1988 and then a military government had

power through to March, 2011. Since a newly elected semi-civilian government came to power

in April 2011, Myanmar has embarked on an ambitious program of sweeping reforms to end its

isolation and integrate its economy with the global system. To complete the structural reforms

for every sector, the legal industry has been one of the fundamental and important sectors. Some

of the laws and acts have been operating since the time under British colony with additional

amendments. Most of the laws and acts are not relevant to the existing situation and there must

be amendments, updating or replacements within a short period. Nowadays, most of the foreign

investors for the various sectors in Myanmar have been waiting for strong legal grounds to

establish their businesses in Myanmar.

Regarding the development of a dry port in Myanmar, there is also a lack of an

appropriate legal environment in Myanmar. A series of notifications have been issued and

announced by the relevant government departments and organizations. The following laws,

regulations and notifications have direct impacts on the establishment and operations of a dry

port.

(1). LAND ACQUISITION LAW

Myanmar still uses “The Land Acquisition Act (1894)” and “The Burma Land Purchase Act

(1941) [Repealed 1992]”19, but there are a series of notifications relating to investment and land use

for development projects. With the aim of facilitating investment procedures and getting better

18 There are no clear instructions and operation procedures in this moment for the operation of a dry port in an inland place. Near Yangon port area, there is a so called dry port operation (as inland container depot) and Myanma Port Authority has been involved at that operation. 19 S. Leckie & E. Simperingham (2009), “HOUSING, LAND AND PROPERTY RIGHTS IN BURMA: THE CURRENT LEGAL FRAMEWORK”, Displacement Solutions & The HLP Institute


- 33 -

opportunities in doing business, the Government has issued one notification relating to land use. The

Government of the Republic of the Union of Myanmar issued the Notification No. 39/201120 on 30

September, 2011. In that notification, it is stated that relating to “Lands Allowed to be leased” in

Chapter II as follows:

“This Commission may, to carry out any business permitted by the Commission, permit to

lease the land of the person entitled to lease land or to use land to investor the following lands with

prior approval of the Union Government:

(a) government-owned lands;

(b) land owned by the government department, organization;

(c) private land owned by citizens.”

Additionally, it is stated relating to “Determining Term for the Land Use” in Chapter II as

follows:

“The Commission may permit the investor to lease the land for the term actually required

based on the category of business and investment volume up to an initial 30 years from a person

entitled to lease the land or a person the right to use land.”

Currently the new drafts of “the Citizen Investment Law” and “the Foreign Investment Law”

have been under a process to be accepted and to be promulgated by the Union Government.

(2). TRANSPORT LAW

The transport sector also faces a similar situation to others. All the existing laws and acts

have been under examination to be updated or to be revoked for relevance to the current situation of

the country. The Multimodal Transport Law has been drafted for submission to the Union

Government to get their approval. In the draft of the Multimodal Transport Law, there are 14

chapters and all the chapters and articles are organized and prepared according to the ASEAN

AGMT: “ ASEAN Framework Agreement on Multimodal Transport” and UNCTAD MT

Rules: “ Implementation of Multimodal Transport Rules”.

(3). TRADE LAW

For the operation of a dry port in Myanmar, in the past the main governing law for the trade

sector is “the Control of Import and Export (Temporary) Act 1947”, which was recently revoked

with the new “Import/ export Law” on 7th September 2012. The new Import/ Export law is

20 Directorate of Investment and Company Administration (DICA), Ministry of National Planning and Economic

Development, http://www.dica.gov.mm/30-2011.htm


- 34 -

administered by the Ministry of Commerce, and from time to time, necessary orders, notifications

and directives have been issued on all export/import matters.

(4). CUSTOMS LAW

In Myanmar, customs duties and license fees on imported goods are administered by the

Customs Department (CD), which is one of the major tax authorities under the Ministry of Finance

and Revenue. The laws relating to customs in Myanmar are “the Sea Customs Act 1878” and “the

Land Customs Act 1924”21. These Acts were overlaid with amendments from time to time up to

1960. In 1992 the State Law and Order Restoration Council enacted the Tariff Act, which repeals

“the Tariff Act of 1953”. Ever since the adoption of a more liberalized economic system based on a

market-oriented economy in 1988-89, the Customs Department has made reforms in its

administrative procedures to ensure greater facilitation of external trade of the country. There are no

direct relevant laws and acts for the dry port operation at this moment. Amendments and

notifications will be needed.

(5). INVESTMENT PROMOTION LAW

Following the setting up of the country‟s newly elected government in 2011, many potential

investors from within the country and foreign countries have been coming to express interest to

establish new businesses in Myanmar. As a result the Myanmar Economic Zones Law was

promulgated in January 2011. The new government welcomes and encourages investors to invest in

various sectors. Also the new “Myanmar Citizen Investment Law” and “Foreign Investment Law”

will be promulgated within a short period.

D. SUMMARY AND CONCLUDING REMARKS

This chapter has reviewed the policy, institutional and regulatory issues on developing

and operating a dry port in Myanmar. Like many other countries there is no policy, regulations

or rules in Myanmar exclusively designated for a dry port. Instead, issues on developing and

operating dry ports have been addressed by more general policies relevant to national transport

and logistics, and more general laws and regulations such as those related to customs, land,

trade, transport and investment.

21 http://www.asosai.org/asosai_old/R_P_government-revenues/chapter_16_myanmar.htm


- 35 -

IV. DEVELOPMENT OF TRANSPORT AND LOGISTICS IN MYANMAR AND MANDALAY AREA

A. GENERAL SITUATION OF TRANSPORT AND LOGISTICS IN MYANMAR

(1). ROAD TRANSPORT

In Myanmar, there are several departments and organizations concerned with the

construction of the roads. Myanmar has about 148690 Km (June, 2012) of road networks around

the country. The lengths of various categories of road are as below:

• Union Highways 19503 km

• Township network road 19580 km

• Major city road and other roads 27507 km

• Village and boundary area roads 82100 km

Union Highways and main roads including ASEAN Highways are under the control of

the Ministry of Construction (MOC) while other categories of roads are under the various

departments and organizations including MOC itself.

Table 21: Road infrastructure in Myanmar (June, 2012)

No. Department

Concrete

Road

(Km)

Bituminous

Road

(Km)

Gravel

Road

(Km)

Metalled

Road

(Km)

Earth

Road

(Km)

Donkey

Road

(Km)

Total

(Km)

Ministry of Construction, Public Works

1 Highway 611.7 11733 2440.8 2700.3 1973.5 44.1 19503

2 Regional & State Roads 49.7 5451.8 3299.6 2941.4 6497.1 1340 19580

Sub-total 661.3 17185 5740.3 5641.7 8470.6 1384 39083

Ministry of Progress of Border Area and National Races

3 Urban Road 6.6 4880.7 2215.5 660.8 3509 - 11273

4 Village & Border Road 120.1 4073 17042 4976.7 55889 - 82100

Sub-total 126.7 8953.8 19257 5637.5 59398 - 93373

5 Yangon CDC22

1239.7 1747.5 12.9 454.9 472.9 - 3928

6 Mandalay CDC 10.8 573.4 119.7 - 309.8 - 1013.8

7 Naypyitaw CDC 246.1 129.3 43 734.9 1130.8 - 2284.1

8 Army Corps of Engineer 393.4 61.8 605.3 166.4 6822.7 - 8049.5

9 Ministry of Electrical Power-1 48.3 88.5 542.1 - 280.2 - 959.2

Total 2726.3 28739 26320 12635 76885 1384 148690

Source: see footnote23

22 CDC = City Development Committee


- 36 -

Table 21 shows the lengths of the various types of road controlled by respective

Departments such as Ministry of Construction, Ministry of Progress of Border Area and

National Races, City Development Committees for Yangon, Mandalay and Naypyitaw cities,

Army Corps of Engineer under Ministry of Defense, and some access roads for the hydro-

electric power plants under the Ministry of Electrical Power (No.1).

Table 22 shows road progress from 2004 until June 2012. Every year, total paved road

length has been just about 20% of the length of the whole country. For the lengths of the roads

under the Public Works, Ministry of Construction is about 45% of total. This shows a significant

amount of important roads are unpaved.

Table 22: Road progress in Myanmar

Year

Under Ministry of

Construction The Whole Country Ratio

of Paved

to Total Total Road

Length Paved Road

Total Road

Length Paved Road

2004 29497 km 14126 km 90713 km 22153 km 24.42%

2005 29825 km 14356 km 92859 km 22830 km 24.58%

2006 30433 km 14956 km 104058 km 23955 km 23.02%

2007 30711 km 15213 km 111737 km 24670 km 22.08%

2008 30902 km 15387 km 125355 km 25553 km 20.38%

2009 32070 km 15583 km 127942 km 26333 km 20.58%

2010 34178 km 16550 km 136749 km 28569 km 20.89%

2011 37784 km 17260 km 142395 km 30879 km 21.68%

2012 39081 km 17846 km 148690 km 31464 km 21.16%

Source: Same as Table 21

Myanmar has a 30 years long-term road development plan and its general objective is to

develop transport linkages and economic corridors between the neighboring countries and to

develop roads and bridges standing along the roads among Regions and States, and the Union

Highways. Figure 17 show the current roads network of Myanmar.

23 Presentation of “Road Infrastructure Current Situation and Future Development Plan” by U Kyaw Linn, Managing Director, Public Works, Ministry of Construction


- 37 -

Source: Ministry of Construction

Figure 17: Current roads network of Myanmar


- 38 -

According to the 30 years plan, project implementation will be carried on step by step

according to the serial priority; first priority: ASEAN and ASIAN highways, second priority:

upgrading the current Union highways and third priority: upgrading of other highways and new

construction projects24

.

There are several major highways linked to neighboring countries passing through

Myanmar. They are Asian highways, ASEAN highways, Greater Mekong Sub-region GMS-

highways, BIMSTEC, India-Myanmar-Thai Tripartite highways, India Myanmar highways and

GMS East-west economic corridor highways and GMS North-south economic corridor

highways.

There are 4 Asian highways passing through Myanmar in the Asian Highway Network.

These Asian Highways are named AH1, AH2, AH3 and AH14 and link to the neighboring

countries China, India and Thailand and provide access to Yangon which is the major port of

Myanmar currently. They are also important land bridges to South and South-East Asia

countries. Myanmar is working to maintain and upgrade the main road network, including Asian

highways, with private sector participation. In the Asian Highway Network, the Myanmar road

sections are as follows:

(a) AH1 - Myawaddy-Payagyi(Yangon)-Meikhtila-Mandalay-Tamu(1665 Km)

(b) AH2 - Tachilak-Kyaing Tong-Meikhtila-Mandalay-Tamu (807 Km)

(c) AH3 - Mongla-Kyaing Tong (93 Km)

(d) AH14 - Muse-Lashio-Mandalay (453 Km)

Figure 18 shows a map of Myanmar with the Asian Highway network and ASEAN

highway networks. Most of the portion of these two ASEAN and Asian Highways are along the

same route.

24 Extract from the presentation of “Road Infrastructure Current Situation and Future Development Plan” by U Kyaw Linn, Managing Director, Public Works, Ministry of Construction


- 39 -

Figure 18: Asian and ASEAN highways network

Also, regarding the GMS countries‟ economic corridor highways, there are a total of 9

corridors in 6 countries. Among these 9 corridor highways, Myanmar is involved in 4 corridors,

namely North-South corridor (Kuming-Bangkok), East-West corridor (Mawlamyine-Danang),

Northern corridor (Fancheng-Tamu) and Western corridor (Tamu-Mawlamyine). Figure 19

shows a map of the 9 GMS corridors connecting the 6 GMS countries. Inside Myanmar, North-

South, East-West, Northern and Western Corridors pass through.


- 40 -

Source: ADB

Figure 19: Economic corridor highways of GMS countries

(2). RAILWAY TRANSPORT

In terms of rail transport, this is monopolized by the state owned transport enterprise,

Myanma Railways under the management of Ministry of Rail Transport. There is a total of

3652.52 mile length of the railways and 926 railway stations around the country. In comparison

to the total area of Myanmar, there is only one route mile per 71.5 square miles. There is only

one city- circular railway line in Yangon. Rail transport is a carrier of bulk freight traffic. Rail

transport of containers has been under the testing and implementation stage and there will be

more progress in the future, in parallel with development of related legal issues, infrastructure

and so on. Nowadays, local cargo transport by rail is minor compared with road transport

because of the limited infrastructure for rail transport. Figure 20 shows the rail routes of

Myanmar and Table 23 shows the freight traffic by rail for 5 years25

.

25 Facts about Myanmar Railways (2011-2012), Ministry of Rail Transportation


- 41 -

Source: Facts about Myanmar Railways (2011-2012)

Figure 20: Existing Rail routes of Myanmar


- 42 -

Table 23: Freight transported by railways

Classification Year

2007-08 2008-09 2009-10 2010-11 2011-12

Tons carried (million) 2.93 2.95 3.33 3.41 3.58

Ton/Day (thousand) 8.03 8.09 9.12 9.34 9.83

Ton Miles (10 million) 53.54 56.99 65.83 69.78 72.27

Avg: Lead Miles/Ton 182 193 198 205 200

Source: Facts about Myanmar Railways (2011-12)

On the Trans-Asian Railway (TAR) Network, according to the definition of railway lines

of international importance described in the Intergovernmental Agreement, Figure 21 shows the

existing rail line segment and missing rail linkS of the TAR in Myanmar. The blue colour shows

the width of rail track used in Myanmar is one meter.

Source: www.unescap.org/ttdw/common/Maps/TAR-map-GIS.pdf

Figure 21: Segment of the Trans-Asia railway network in Myanmar

Under the current condition of the TAR Network, the following railway sections falls

under this category26

.

Mandalay-Yangon (617 km)

Mandalay-Lashio (313 km) [ Muse (border station and break of gauge)-Rueli(China)]

Mandalay-Kalay (539 km) [ Tamu (border station and break of gauge)-Jiribam

(India)]

Bago (Junction) – Thanpyuzayat (Junction) (270 km) [Three Pagoda Pass (border station)-

Namtok (Thailand)]

26 Country Report (Myanmar), Ad Hoc Intergovernmental Meeting on an Intergovernmental Agreement on Dry Ports, Bangkok, 20-22 June 2012.


- 43 -

There are three missing lines to connect the neighbouring countries along the TAR

Networks. These are Kalay-Tamu (about 135 km**27

to India), Lashio-Rueli (about 141.8 km**

to China) and Thanbyuzayat-Three Pagoda Pass (about 110 km** to Thailand).

Regarding the link between Myanmar and India, the missing length between Kalay and

Tamu is 135 km in Myanmar territory. A survey team from Rail India Technical and Economics

Services (RITES) made a feasibility study for that link in 2004 and is waiting for further

discussions.

Regarding the link between Myanmar and China, a feasibility study and general

alignment of Muse (border with China) - Kyaukphyu has been completed and submitted to the

governments in April 2012. This project starts from Ruili to Muse and terminates at Kyaukphyu

Port after passing through Lashio, Mandalay, Magway, Minbu and Ann in Myanmar. The total

length of the railway line is 813.015 km, 4.2 km in China and 808.8 km in Myanmar. This line

will be a standard gauge and a single line. The running speed will be 120km/hr. This project will

be implemented on a BOT basis and is expected to be finished before 2015.

Regarding the link between Myanmar and Thailand, a feasibility study for

Thanphyuzayat-Three Pagoda Pass (Myanmar)-Namtok (Thailand) was done by KOICA and

submitted in April 2007. That route was found to be not feasible. There is an on-going project in

Myanmar for building a deep sea port and a special Economic Zone at Dawei. It is a BOT

project with Italian Thai from Thailand, as developer. The project includes a road link as well as

a rail link from Kanchanaburi (Thailand) to Dawei deep sea port (Myanmar). This railway line is

expected to play a much larger role in the regional transportation network28

.

Regarding the signing of the TAR Agreement, Myanmar has faced technical and

financial constraints to upgrade the existing railway lines in conformity with the guiding

principles for technical characteristics of the TAR network. Actual moving dimensions, axle-

loads, signaling and operating conditions are very poor and too far from the specifications of the

TAR standards. There will be a heavy burden on the national economy to reconstruct the whole

rail network. That is the main reason why Myanmar hasn‟t entered the member list signing the

Intergovernmental Agreement for TAR.

27 ** The route lengths of missing lines are referred from feasibility reports

28 All the international rail links information is from the Country Report (Myanmar), Ad Hoc Intergovernmental Meeting on an Intergovernmental Agreement on Dry Ports, Bangkok, 20-22 June 2012.


- 44 -

(3). INLAND WATERWAYS TRANSPORT

In terms of Inland Water Transport, there are four major rivers in Myanmar. Usually,

these rivers flow from north to south. According to the statistics from AJTP information

platform, there is around 12,775 km length of navigable waterways and 235 river ports

networks. These are mainly based on the Ayeyarwaddy and Chindwin rivers and the extensive

channel system in the Ayewaddy Delta. This inland waterway navigable length has become

shorter and shorter as shown in Figure 22, because of climatic changes and other environmental

effects on the depth of the rivers.

Source: AJPT website

Figure 22: Total inland waterways length (km) in Myanmar

There is one government agency, namely Inland Water Transport (IWT), under the

management of the Ministry of Transport. IWT is responsible for both long haul passenger and

freight services, and cross-river ferry services in various places along the rivers. Statistics in

2011 show IWT could carry about 5 million tons of freight along the main rivers. It is about 1.5

times the volume carried by Myanma Railways. Additionally, there are some private barges

which carry bulk cargo (such as fuels, crops, stones for road construction, fertilizer) along the

rivers. The total volume of shipments handled in all the domestic shipping services was about

6.687 million tons29

.

During the low water season, from November to May, many of the inland water transport routes

do not provide sufficient water depth for inland waterway vessels to operate safely. Improving

river channels and navigation aids would benefit all providers of inland water transport services,

IWT vessels and private vessels as well.

Nowadays there are so many development projects to drain the main Ayeyarwaddy river

and inland river ports along the river. If there are upgraded river ports to use integrated transport

services in the future, there will be a better playing field for the logistics and transport operators

in Myanmar.

29 That cargo volume was contributed by both of IWT vessels and private vessels. (ref: ASEAN logistics survey, March, 2012)

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011


- 45 -

(4). AIR TRANSPORT

In terms of Air Transport, Myanmar has two international airports in Yangon and

Mandalay, and one international airport project has been under construction in Naypyitaw where

the new government capital city of Myanmar is located. Apart from these international airports,

there are 30 domestic airports around the country30

.

Table 24 shows airborne cargoes, both domestic and international, and they are

increasing every year. Total international airborne cargo increased more than 50 percent for the

five years from fiscal 2006 to fiscal 2011. International aircraft traffic cargo almost doubled

from 2005 to 2011. Major destinations of the airborne cargoes include Guangzhou, China; Hong

Kong; Bangkok; and Hanoi. As described above, however, most commodities destined to these

cities are transported via Bangkok or Singapore31

.

Table 24: Airborne cargoes and traffic in Myanmar

Indicator name Unit/scale of

measurement 2005 2006 2007 2008 2009 2010 2011

Domestic air cargo Thousand ton 1.52 0.86 2.21 0.74 3.39 0.76 41.34

International air cargo

(export) Thousand ton 4.74 5.09 5.38 5.88 7.16 9.31 9.64

International air cargo

(import) Thousand ton 4.56 4.62 4.73 6.35 6.28 6.36 6.33

International aircraft

traffic Count 7,870 8,026 8,602 7,184 7,889 11,234 14,150

Source: data for AJTP web

(5). PORT SECTOR

The Yangon Port which is the river port and premier port of Myanmar lies along the

Yangon River at Yangon city. The Yangon Port (including Thilawa terminal area) at present is

the only international port for the country and it can accommodate 24 ocean liners at 24 wharves

(18 at Yangon Port and 6 at Thilawa port). Figure 23 shows the Yangon river estuary and

location of Yangon port and Thilawa port area. All these port areas are situated on the bank of

the Yangon river. Yangon port is about 32 km inland from Elephant Point on the Gulf of

Martaban which is the mouth of the Yangon river and Thilawa port is just half way to the

30 Actually there are a total of 69 airports including small airport cities that can be used for some type of aircrafts. According to the ICAO standard, Myanmar had only 30 domestic airports and 2 international airports in the 2011 statistics. 31 ASEAN logistics survey, March 2012


- 46 -

Yangon port from the mouth of Yangon river. For all vessels calling to the Yangon Port,

pilotage is compulsory if they are over 200 GRT.

Source: Myanmar Port Authority

Figure 23: Map of Yangon river estuary with Yangon and Thilawa port area

Currently all vessels calling to the Yangon Port and Thilawa Port have generally been

sailing on flood tides, crossing both the Inner Bar and Outer Bar at near high tide to assure

sufficient water depths. In view of natural conditions and the meanderings of the Yangon River,

Yangon Port is accessible by vessels of 167m LOA, 9m draft, 15,000 DWT and Thilawa Port is

accessible by vessels of 200m LOA, 9m draft, 20,000 DWT.

The number of vessels calling at Yangon Port in the 2011-12 fiscal year was 1833. The

port handled more than 408,0430 TEU and 20.408 million metric tons of cargo in the same

fiscal year. Table 25 shows the number of vessels calling at Yangon Port (including Thilawa

INNERBAR

YANGON PORT

Pazundaung Creek

BRIDGE THANLYAN Liffey

SECONDARY CHANNEL

Chokey pt.

THILAWA PORT AREA

Kyauktan Creek

THANTE

EASTEN GROVE FLATS -5

-3

-10

ELEPHANT pt.

OUTER BAR

Main Channel d Silva Pt.

N

YANGON RIVER


- 47 -

terminals) for five years and Figure 24 shows the trend in the number of vessels over the past 11

years calling at Yangon port.


- 48 -

Table 25: Number of vessels calling at Yangon Port (including Thilawa terminals)

No F. Year MPA MITT AWPT MIPL MIP MOGE MPE HCB LPM Total (+/-)

1 2007-2008 441 163 267 29 68 124 173 28 - 1293 12%

2 2008-2009 406 172 324 32 84 120 150 1 - 1289 (0.3%)

3 2009-2010 654 214 380 43 93 108 106 - - 1598 24%

4 2010-2011 656 267 373 48 139 73 88 31 100* 1775 11%

5 2011-2012 632 241 356 38 149 74 112 89 142* 1833 2%

Source: Myanmar Port Authority32


Figure 24: Vessels calling at Yangon port (2001-02 to 2011-12)

32 Description; MPA: Berths owned by MPA (including Boaungkyaw Street Wharves –BSW); MITT: Myanmar International Terminals Thilawa; AWPT: Asia World Port Terminals; MIPL – Myanmar Integrated Port Limited; MIP: Myanmar Industrial Port; MOGE: Myanmar Oil and Gas Enterprise (wharf for fuel oil); MPE: Myanmar Petroleum Enterprise (wharf for fuel oil); HCB: Hteedan Coal Berth (actually it has been used for GC vessels); LPM: Lanthayar Pilot (anchoring for medium size liquid bulk carriers) * From 2010, government allowed investment in the fuel import and distribution business by private sector. So, medium size liquid bulk carriers have been anchoring at LCM.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1098

951 9711087 1102

1153

1293 1289

1598

17751833

Number of vessels calling to the Yangon Port


- 49 -

Regarding the cargo throughput and container throughput of the Yangaon port, Tables 26

and 27 show the past 6 year records of all types of cargo and containerized cargo throughput

respectively. Moreover, Figures 25 and 26 show trends in cargo throughput from 2001-02 to

2011-12 at Yangon port as well.

Table 26: Seaborne trade of the Yangon port (including Thilawa)

(M.Ton in Thousands)

No Year Import Export Total Yearly Growth

Rate%

1 2006-2007 5623 5332 10,955 7%

2 2007-2008 6240 5619 11,859 8%

3 2008-2009 6150 6166 12,316 4%

4 2009-2010 9492 6655 16,147 31%

5 2010-2011 12307 6131 18,438 14%

6 2011-2012 12590 7818 20,408 11%


(M.Ton in Thousands)


Figure 25: Seaborne trade of the Yangon Port (including Thilawa) (2001-02 to 2011-12)


- 50 -

Table 27: Volume of containers handled in port of Yangon (including Thilawa)

No Year Import Export Total

(TEU)

Total

(M.T in

thousand)

Yearly

Growth

Rate%

1 2006-2007 99,942 97,337 197,279 3148.324 15%

2 2007-2008 115.267 111.236 226.503 3462.489 15%

3 2008-2009 133.712 130.294 264.006 3937.131 17%

4 2009-2010 152.077 151.333 303.410 4372.025 15%

5 2010-2011 175,315 171,327 346,642 4,571,902 14%

6 2011-2012 207,540 200,503 408,043 5,594,589 18%



Figure 26: Volume of containers handled in port of Yangon (including Thilawa)

(by TEU in thousands, 2000-01 to 2011-12)

All these statistics show gradual development of cargo throughput at Yangon Port

(average 15% for containerized cargo for 6 years continuously). To cope with the seaborne

traffic growth resulting from the economic liberalization program of the country, port

development has been carried out by inviting local and foreign investment at Yangon and the

Thilawa Port area. Myanma Port Authority is planning to implement the Yangon Port


- 51 -

Improvement Project which will be able to accommodate bigger size vessels up to 35,000 DWT

at Yangon Port and Thilawa Port.

In parallel, it may need to upgrade existing port infrastructure which shall include, but

not be limited to, wharf strengthening, installation of modern cargo handling facilities, providing

navigation aids and other related facilities to cater for 35,000 DWT vessels and to cope with the

growth of seaborne cargo traffic. MPA has been planning to conduct a detailed feasibility study

on Yangon River Improvement and Strengthening of Existing Port Facilities by inviting foreign

and local interested parties to cooperate.

Apart from the existing Yangon port, Myanmar has other potential projects related to

implementation of the deep seaports in Kyauk Phyu (western part of Myanmar in Rakhine State

at Bay of Bengal) and Dawei (Southern part of Myanmar in Tanintharyi Division) area.

In Kyauk Phyu area, there are two potential

maritime infrastructure development projects. They

are the development of Oil and Gas Pipe Lines and

Terminal at Kyaukphyu Region, and Kyaukphyu

Economic and Technological Development Zone,

Deep Sea Port and Railway Projects.

Regarding the development, operation and

management of the Myanmar Crude Oil Pipe Line

Project, a Memorandum of Understanding (MOU)

was signed between the Ministry of Energy of the

Union of Myanmar and China National Petroleum

Corporation of the Republic of China in June,

2009. The total investment amount of the project is

estimated over US$ 2.0 billion. The construction

work of the oil and gas terminal will be completed

by December, 2012 while construction of the

Work-boat Wharf at the project area was started in

October 2010.

Regarding the Kyaukphyu Economic and

Technological Development Zone, Deep Sea Port and Railway Projects, the Memorandum of

Understanding (MOU) was signed between Ministry of National Planning and Economic

Development, the Union of Myanmar and CITIC Group, People's Republic of China in

Kyaukpyu

Figure 27: Map of

Kyauk Phyu


- 52 -

December 2009. The MOU proposed to construct development zone facilities with port,

railroad, airfield and municipal facilities in Kyaukphyu.

Total expected investment cost of the project is about US$ 75 billion including US$10

billion for development of a deep sea port. The deep sea port is expected to handle 250 million

tons per year. In phase-1 of the development plan, a deep sea port to accommodate 50,000 DWT

vessels will be developed with an investment of US$ 0.21 billion within three years.

In the scope of the Development of Dawei Deep Sea Port, Industrial Estate and Road &

Rail Link to Thailand, there will be a deep sea port, industrial zone and road and rail links to

Thailand. The Framework Agreement in respect to this project was signed between Myanma

Port Authority and Italian-Thai Development Public Co., Ltd in November, 2010. The Dawei

Project is sitting on a strategic location along Tanintharyi coast of Myanmar. The project will

provide a competitive advantage as a communication link with direct access from GMS

countries and China to the Andaman Sea and India Ocean for the transportation of goods and

commodities. The project will serve as a new commercial gateway providing an alternative sea

route to India, China, Middle East, Europe and Africa as shown in Figure 28. This can lessen the

dependence on the congested Straits of Malacca and reduce transportation and logistics costs as

well33

.

Source: Dawei deep seaport project presentation

Figure 28: Dawei deep seaport (New commercial Gateway)

33 These notes were obtained from the handouts and presentation booklets of the Implementation of Dawei deep seaport project, Myanmar Port Authority


- 53 -


- 54 -

(6). LOGISTICS PERFORMANCE

Measuring the overall performance of logistics in Myanmar, one perspective comes from

the World Bank‟s logistics performance index (LPI) in which a higher value up to 5 indicates

better performance. Table 28 shows the LPI index list for Myanmar and selected countries. The

LPI consists of both descriptive and objective measures and has three parts: perceptions of

trading partners on each country‟s logistics environment, information on the logistics

environment, and real time-cost performance data. On this index table, China is ranked 27th

and

highest amongst the neighboring countries and Thailand is ranked 35th

in the world, while

Myanmar is the weakest country (with 133rd

ranking), below Lao PDR and Cambodia.

Table 28: Logistics performance index for Myanmar and selected countries, 2010

Int.

LP

I R

an

k

Cou

ntr

y

LP

I

Cu

stom

s

Infr

ast

ru

ctu

re

Inte

rn

ati

on

al

ship

men

ts

Logis

tics

com

pete

nce

Track

ing &

tracin

g

Tim

eli

ness

27 China 3.49 3.16 3.54 3.31 3.49 3.55 3.91

35 Thailand 3.29 3.02 3.16 3.27 3.16 3.41 3.73

47 India 3.12 2.7 2.91 3.13 3.16 3.14 3.61

53 Vietnam 2.96 2.68 2.56 3.04 2.89 3.1 3.44

79 Bangladesh 2.74 2.33 2.49 2.99 2.44 2.64 3.46

118 Lao PDR 2.46 2.17 1.95 2.7 2.14 2.45 3.23

129 Cambodia 2.37 2.28 2.12 2.19 2.29 2.5 2.84

133 Myanmar 2.33 1.94 1.92 2.37 2.01 2.36 3.29

Source: World Bank, Logistics Performance Index,

(http://www1.worldbank.org/PREM/LPI/tradesurvey/mode1b.asp)

According to the ASEAN Strategic Transport Plan 2011-2015 (Final report), the LPI

index for Myanmar with a lower GNI per capita is located below the curve as shown in Figure

29. The graph shows that Myanmar has achieved a lower logistics performance than its income

group. The key issue pointed out in that report is that the trade supply chain of Myanmar (Lao

PDR and Cambodia as well) is only as strong as its weakest link. This situation is one of the

major challenges for AMSs and they have to find out how to support these low performing

countries so they can benefit from a global trading system. Accordingly Myanmar needs to make

substantial improvements in logistics competence, processes, and business practices.

http://www1.worldbank.org/PREM/LPI/tradesurvey/mode1b.asp


- 55 -

Source: ASEAN Strategic Transport Plan 2011-2015 (Final report)

Figure 29: Correlation between LPI and Income per Capita

Moreover, as the ASEAN Strategic

Transport Plan 2011-2015 (Final report) shows,

logistics related performance indicators for

Myanmar are far below ASEAN and world

averages (Figure 30)34

. The ASEAN Strategic

Transport Plan 2011-2015 highlighted weak

logistics competence, poor logistics quality and

undeveloped infrastructure as major constraints in

Myanmar. Also, the availability and quality of

trade-related infrastructure seems a major

constraint to the performance of Myanmar.

But, Myanmar is now on a new track

under the newly elected government since 2011.

Improvements can be seen including better

international relationships, aid from international

institutions, and restructuring of the internal and external affairs of the country. Logistics related

transport and trade will also improve in the near future.

34 Source: ERIA Study Team, based on data quoted from “Logistics Performance Index 2010” Note: World average and ASEAN average were calculated as simple arithmetic averages.

Figure 30: Myanmar‟s LPI Scores


- 56 -

B. ROAD TRANSPORT LINKING BANGLADESH, INDIA, CHINA, LAO PDR AND THAILAND

As discussed earlier, Myanmar has 5 neighbouring countries, namely Bangladesh, India,

China, Lao PDR and Thailand. Among them, the shortest border is with Bangladesh but there

was no air link, no road link and no coastal shipping connection with Bangladesh up to last

year35

. A bilateral relationship with Bangladesh has been looking to enhance the potential of

both countries including Multi-modal transport connectivity. Myanmar is also one of the

member countries of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic

Cooperation (BIMST-EC) with Bangladesh and India. Thus future road transport linkages with

Bangladesh will be available.

With India, Myanmar has had regular border transport and trade for many years. The

Asian Highway route AH1, proposed Tran-Asia Rail Network and GMS Northwestern corridor

routes pass through Tamu, the border city of Myanmar, with India. Also there are many bilateral

projects between India and Myanmar. Some of the transport related projects are upgrading and

resurfacing of the 160 km. long Tamu-Kalewa-Kalemyo road; construction and upgrading the

Rhi-Tiddim road in Myanmar and the Kaladan river Multimodal Transport Project. After

finishing these intended transport related projects, the transport and trade between Myanmar and

India will be more secure and smoother than before.

The most dominant neighbouring country with Myanmar on transport and trade is China

which has about 2,185 kilometers length of border. Relevant international and regional transport

networks between Myanmar and China are the Asian Highway Road AH-14, GMS northern

corridor route and Trans-Asian Rail network path (segment of Singapore-Kunming Rail Link

network as well). The border city of Myanmar is Muse and Ruili in Yunnan Province, China.

Figure 31 shows the main transport corridors in GSM countries and road access from Ruili to

Yangon is the western window of Yunnan Province which is a land-locked region of China.

In 2010, Myanmar and China signed an MOU on development and cooperation in the

China-Myanmar Corridor Project to link Ruili and Kyaukpyu. According to the Corridor

Project, China would help Myanmar construct a railway and motorway from Kyaukphyu

Township in Rakhine State to Ruili in China36

.

35 “Bangladesh-Myanmar relations step into a new gear” By Barrister Harun ur Rashid, Thursday, 01 September 2011 15:41 from http://www.encburma.net/index.php 36 “MoU on China-Myanmar Corridor Project inked”, The New Light of Myanmar, May19, 2010. extract from China’s “Look South”: China-Myanmar Transport Corridor, Institute of International Relations and Area Studies, Ritsumeikan University


- 57 -

Source: ADB, http://www.adb.org/GMS/Economic-Corridors/NSEC-Stocktaking-Initiatives.pdf

Figure 31: The main transport corridors in GMS countries


- 58 -

In order to streamline regulations and reduce non physical barriers for border crossing in

the GMS, GMS countries are working on ratifying and implementing the Agreement on Cross-

Border Transportation of People and Goods in the GMS (CBTA for short), which covers the

following areas:

• single-stop/single-window customs inspection;

• cross-border movement of persons (i.e., visas for persons engaged in transport

operations);

• transit traffic regimes, including exemptions from physical customs inspection, bond

deposit, escort, and agriculture and veterinary inspection;

• requirements that road vehicles will have to meet to be eligible for cross-border

traffic;

• exchange of commercial traffic rights; and

• infrastructure, including road and bridge design standards, road signs, and signals.

Cambodia (2008), China (2008), Lao PDR (2007) and Viet Nam (2009) have ratified/

accepted all CBTA annexes and protocols. As of November 2010, Thailand had ratified 14

annexes and protocols. Myanmar signed the CBTA, but the annexes related to multimodal

transport (namely: Annex 13a: Multimodal Carrier Liability Regime and Annex 13b: Criteria for

Licensing of Multimodal Transport Operators for Cross-Border Transport Operations) have yet

to be ratified37

.

Even though, neighbouring with Lao PDR for about 235 kilometers along the Mekong

river, there has been little transport and trade activity between the two countries. Recently,

comparative analysis of logistics relating to

alternative transport corridors was carried out by

ADB‟s fund, namely, R3E, T3W and Mekong

River routes (see Figure 3238

). According to the

analysis, transport via R3W and R3E was about 75

percent more expensive than using the Mekong

River and R3W route through Myanmar has not

been widely used because of conflicting policies

related to transit goods and the sub-standard

quality of the roads.

37 From the Presentation of the Department of Transport, Ministry of Transport. 38 Source: ADB, The North-South Economic Corridor: Progress towards a Full-Fledged Economic Corridor

Figure 32: Alternative transport routes

passing through Myanmar


- 59 -

Thailand has the second longest border length of about 1800 kilometers with Myanmar

and there are many border checkpoints along the border. There are many types of relationship

between Myanmar and Thailand. Regarding the Asian and ASEAN regional cooperation

aspects, Asian Highway AH1 passes through Myawadi (border city of Myanmar) and AH2

passes through Tachilek (border city of Myanmar) to Thailand. ASEAN highway network route,

AH123 is going to pass from Dawei and Maesamee to Bangkok and AH112 is going to pass

through Khong Loy (border city of Myanmar) to Thailand.

From the rail network point of view between Myanmar and Thailand, the Tran-Asian

Railway network and the Singapore–Kunming Rail Link network are going to pass through the

border between the two countries. Figure 33 shows the missing link of the rail network within

the region. After completing this link, transport options between Myanmar and Thailand will be

more convenient than previously.

Source: Association of Southeast Asian Nations's Fact Sheet - www.aseansec.org

Figure 33: The Singapore–Kunming rail link network

The new deep seaport project of Dawei in Myanmar has road & toll highways and the

rail road construction plan to connect project sites to Thailand is a crucial economic corridor for

Myanmar, Thailand and for the region as well. The distance between Dawei to Myanmar-Thai

border is about 170 km and Dawei to Bangkok is only about 360 km. Once fully complete this

road will have up to eight lanes of international standard highway linking Dawei to the

Myanmar-Thai border. The road will reach the GMS Southern Corridor that leads to Vung Tau

and Quy Nhon in Vietnam through Sisiphon in Cambodia via Bangkok in Thailand (Figure 34).


- 60 -

Source: Dawei deep seaport project proposal

Figure 34: Proposed road from Dawei to Bangkok

C. REVIEW OF LOGISTICS, TRANSPORT AND TRADE FACILITIES NEAR MANDALAY REGION

As mentioned earlier, Mandalay is situated in the central part of Myanmar and the 2nd

largest economic city in Myanmar. It is also in a strategically favorable location between China

and India. According to the regional development transport network, Asian highways AH1 and

AH14 are passing through Mandalay, as will the Tran-Asian Rail Network (TAR-S1, TAR-S2).

In addition the main river flowing west of Mandalay city, the Ayeyarwaddy, provides vital

inland river transport.

City Distance (km) Time (hour: minute)

Monywa 131 2:19

Kalay 359 5:49

Tamu 700 13:00

Shwebo 110 1:41

Banmaw 405 5:19

Myitkyina 540 7:12

Lashio 277 4:00

Muse 450 7:39

Taunggyi 282 7:15

Terchilek 825 12:20

Naypyitaw 453 6:15

Taunggu 542 8:12

Yangon 849 12:00

Note: all the distances and times are calculated upon the

cargo transport routes

Source: Project team

Figure 35: Distances and driving hours for major cities from Mandalay


- 61 -

Figure 35 shows the cargo transport routes from Mandalay and related distances and

driving hours. Some of the routes are sub-standard quality roads and travel therefore takes

longer. However, Mandalay is the centre of the region in so many respects such as agricultural

cultivation, local industrial zones, and a distribution center for upper and middle Myanmar.

The roads and streets in the Mandalay metropolitan city area are under the management

of Mandalay City Development Committee (MCDC), while major highway roads and inter- city

roads are under the management of Public Works, Ministry of Construction. Mandalay region

has the highest percentage of modern concrete road infrastructure and about 45% of the concrete

roads in the whole country. Table 29 shows the roads infrastructure for each region (state and

division) in Myanmar.

Table 29: Road infrastructure under Ministry of Construction

State / Division

Concrete

Road

(Km)

Bitum

Road

(Km)

Gravel

Road

(Km)

Metal

Road

(Km)

Earth

Road

(Km)

Donkey

Road

(Km)

Total

(Km)

Kachin 18.910 564.075 660.233 1062.167 660.837 774.296 3740.518

Kayah 0.101 337.560 70.811 186.483 209.718 - 804.672

Kayin - 627.041 213.439 208.008 762.829 - 1811.317

Chin - 497.287 470.733 7.242 936.035 65.782 1977.079

Sagaing - 1888.364 612.959 706.904 965.606 149.065 4322.899

Tanintharyi - 858.585 433.115 1.609 70.409 - 1363.718

Bago Region 263.530 1284.659 160.934 234.964 223.699 - 2167.786

Magwe Region - 2080.278 270.973 504.529 465.302 - 3321.083

Manadalay 296.924 1813.127 203.180 152.888 48.280 - 2514.399

Mon State - 604.309 8.047 89.117 32.187 - 733.660

Rakhine State - 738.287 547.177 229.533 230.136 - 1745.132

Yangon Region 61.155 648.465 126.736 73.125 70.811 - 980.292

Shan State 2.213 3958.987 1807.092 1657.223 3350.453 276.807 11052.773

Ayeyarwady 17.502 1057.641 335.146 559.750 577.151 - 2547.189

Total 660.334 16958.664 5920.575 5673.541 8603.452 1265.95 39082.516

Source: Public Works, Ministry of Construction


- 62 -

Regarding railway infrastructure, there are 183 stations and 657.43 route miles in the

Mandalay region. This is the highest number of railway stations and the greatest density of

railway routes (one route mile per an area of 21.74 square miles compared with the whole

country density of about 71.5). There are only two major diesel locomotive workshops: one is in

Yangon and one is in Ywataung near Mandalay. Ywataung is also the home of a Railway

Technical Training Center which was built and operated with assistance from Germany39

.

Mandalay is about 450 km far from Muse (border city to China). Because of the nature

and quality of the road, it takes about 7.5 hours from there. Muse is the border trade city from

the Myanmar side and almost all of the border trade from China passes through Muse which is

the biggest border trade zone in Myanmar. Figure 36 shows the Customs Department x-ray

machine and cargo loading operation at 105 mile Trade zone (Muse).

Source: Presentation from Ministry of Commerce

Figure 36: 105 mile Trade Zone (Muse)

The Mandalay Merchandize Center project can give better logistics facilities than

previously mentioned. Mandalay City Development Committee (MCDC) has had a well-

developed plan to organize the warehouse and truck/transportation facilities in that compound

area, including cargo consolidation and distribution to enhance the development of logistics and

transport industries of the region. From a holistic point of view, all these attributes and potential

development projects related to the transport sector in Mandalay region are ready to make it the

logistics hub of Myanmar.


This chapter has reviewed the transport infrastructure, facilitation and operation issues in

Myanmar, including road, railway, inland waterway transport, air transport, the port sector,

39 Facts about Myanmar Railways (2011-2012), Ministry of Rail Transportation


- 63 -

bilateral and sub-regional transport agreement and the logistics and various transport and trade

facilities in Mandalay region.

This chapter finds that Mandalay has served as the logistics hub of Myanmar especially

in the consolidation of domestic cargo (particularly agricultural products) and as a distribution

center for the trade between Myanmar and China. With the future construction of transport

infrastructure such as Asian highways and other regional development, and implementation of

transport agreements, Mandalay region will play an increasingly important role in enhancing

national trade and regional economic corridor activities.

This chapter has also examined the development of logistics, transport and trade facilities

near Mandalay region. It shows that the existing road, railway and trade facilities in Mandalay

region and various transport related potential development projects are the driving forces for it to

be a logistic hub of the country. They favour the development of a dry port in Mandalay region.


- 64 -

V. FREIGHT DEMAND FORECAST OF DRY PORT IN MANDALAY

A. RATIONALE OF DEVELOPING A DRY PORT IN MANDALAY AND THE KEY FUNCTIONS OF DRY PORT

Mandalay is the second largest city and one of important logistics cities in Myanmar. It

is an important location for logistics services of domestic and international cargoes. Most of the

cargoes handled at the city are either import and export cargoes traded with China(via Muse)

and India(via Tamu), or exported and imported through the port of Yangon. Imported cargoes

from border trade are distributed to municipalities in Southern Myanmar. The border trade with

China accounts for about 70 per cent of Myanmar‟s total border trade. It is growing gradually by

the favorable political and security conditions of the border areas in Muse and the transport route

between Muse and Mandalay. In addition, with the economic development of Myanmar it is

expected that international cargo traffic to and from Mandalay through ports will be increasing.

In order to examine the need to establish a dry port, it is essential to examine the market

demand for such dry port. As discussed in Chapters III through IV, trade volumes via Mandalay

has been increasing over the past decades. With the development of transport infrastructure it is

expected the cargoes through Mandalay will maintain steady growth in the future. With the

increasing volume of trade and transport through Mandalay, a dry port with logistics functions

need to be put in place to facilitate cargo transport. A dry port will provide logistics function

such as cargo consolidation and distribution, cargo storage, customs, and intermodal transport.

The dry port will serve the trade and transport between Mandalay and overseas countries

through a seaport such as Yangon port in Myanmar and the border trade and transport between

Mandalay, and China and India.


- 65 -


Figure 37: Basic functions and cargo flows of dry port

More specifically, the dry port will include the following functions.

Cargo consolidation and distribution: Small shipments which have the same

destination are transported to dry port by road or rail and then stuffed into the same

container. Alternatively, containers transported by road or rail to dry port are

unstuffed and distributed by small vehicles.

Customs Clearance: Export and import procedure as well as customs inspection is

carried out in dry port.

Conventional cargo facility: Conventional cargoes such as agricultural products,

fertilizer, construction materials, and forest products can be loaded on or unloaded

from truck or rail, and stored temporarily.

Container yard: Empty or laden containers are stored and loaded on or unloaded from

truck or rail. Container cargo movements will increase gradually and a container

depot is required to handle containers.

Intermodal transport handling: Myanmar is geographically located at the cross roads

between East and West, North and South of Asia continent as a natural link between

the Asian countries. Mandalay is located in the center of an arid area. It is an

important point for road and rail transport services. Most of the cargoes handled at

the city are imports from China (via Muse) and India (via Tamu). They are bound for

Mandalay, from which they are distributed to municipalities in southern Myanmar by

road and rail transport. Export cargoes from Mandalay are transported by road and

railway to Yangon port where they are loaded on cargo vessels.

Mandalay

Dry Port

Import Cargo

Export Cargo

• Function of Dry Port : cargo consolidation and distribution, cargo storage, customs, intermodal transport handling etc. • Type of Cargo : container, conventional cargo etc.• Transport Mode : road, rail transport

Mandalay


- 66 -

A number of alternative operations in this respect include: 1) moving container from one

vehicle to another vehicle; 2) change chassis from one vehicle to another vehicle; 3) move

cargoes from one vehicle to another. In this process, the form of package of the cargoes may be

changed. For instance, it is possible to unstuff a container and move cargoes from a container

vehicle to a vehicle for general purposes.

B. LOCATION AND CAPACITY OF DRY PORT

Figure 38 shows the location of Mandalay city and the main transport routes. According

to the discussions with government officials, transport operators, customs officials as well as

other stakeholders of dry port during the field mission by the project team, it was decided that

the potential location of dry port is near the Merchandise Center in Mandalay which is under

construction.

Source: www.google.com

Figure 38: Location of Mandalay

In order to develop a dry port it is necessary to forecast demand for a dry port. In

forecasting the traffic volume through dry port in Mandalay in the future, the project team has

considered the following data and factors.

1. Cargo throughput of Yangon port (including Thilawa port)

- Import of conventional and container cargo (2001-2011)

- Export of conventional and container cargo (2001-2011)

- Average ratio of import and export cargo (import 55%, export 45%)

http://www.google.com/


- 67 -

- The ratio of import and export cargo is applied to cargo volume between Yangon and

Mandalay

- Use Brown‟s Exponential Smoothing Method to forecast cargo traffic of Yangon port

from 2016 until 2035

- SPSS software used for time series analysis

2. In/out cargo transportation from Yangon port and between Yangon and Mandalay by

truck

- Total cargo volume moving in/out of Yangon(food stuff, consumer products, machinery

etc.) from Feb 2010 to Jun 2012

- Cargo volumes between Yangon and Mandalay by truck from Feb 2010 to Jun 2012

- Share of cargo volume between Yangon and Mandalay

3. Domestic freight movement by mode

- Cargo volume from 2004-2011 by road, railway, river

- Average ratio of cargo volume from 2004-2011 by road, railway, river(road 76%,

railway 10%, river 14%)

- This average ratio is applied to cargo volume of dry port

4. Ratio of container cargo handling volume in Uiwang ICD in Korea

- GDP and GRDP of major cities(Seoul and Gyeonggi Regions) near Uiwang ICD(2002-

2010)

- Container throughput in major container ports in Korea(2002-2010)

- Estimation of container cargo generated in Seoul and Gyeonggi regions(2002-2010)

- Container handling volumes in Uiwang ICD(2002-2010)

- Average ratio of container handling volume in Uiwang ICD is 33%

5. Myanmar‟s GDP and Mandalay GDP

- Ratio of Mandalay GDP(2004-2011)

- Average ratio of Mandalay GDP out of Myanmar‟s GDP is 7.7%

6. Myanmar‟s border trade

- Ratio of China‟s border trade with Myanmar (1999-2008)


- 68 -

- Border trade with China accounted for 70% of Myanmar‟s total border trade

- Mandalay is a main trading partner city with China11

The future cargo traffic volume through dry port is projected based on time series analysis,

various data and factors relating to demand for dry port. Cargo volume using dry port was

forecasted according to type of cargo and transport mode. Cargo is divided into container and

conventional cargo and transported either by road or rail. Table 30 shows forecast of annual

container traffic from 2016 until 2035. In 2016 total container volume handled in the dry port

amounts 12,775 TEUs and its annual average growth rate is 7 percent. In 2035 dry port is

expected to handle 47,815 TEUs.

Table 30: Forecast of annual container traffic through dry port

Year Road Rail

Total (TEU)

Import Export Import Export

2016 6,205 5,110 730 730 12,775

2020 8,760 7,300 1,095 1,095 18,250

2025 13,140 10,950 1,825 1,460 27,375

2030 17,885 14,600 2,190 1,825 36,500

2035 23,360 18,980 2,920 2,555 47,815



Figure 39: Projected annual container traffic volume through dry port

-

10,000

20,000

30,000

40,000

50,000

60,000

2016 2020 2025 2030 2035

TEU

Road Import

Road Export

Rail Import

Rail Export

Total (TEU)


- 69 -

Table 31 presents forecast of annual conventional cargo traffic and its annual average

growth rate is 7 percent. In 2016 cargo handling volume amounts to 502,240ton and increases to

1,881,940ton by 2035.

Table 31: Forecast of annual conventional cargo traffic through dry port

Year Road Rail

Total (Ton)


2016 244,185 199,655 32,120 26,280 502,240

2020 344,560 281,780 45,260 37,230 708,830

2025 515,380 421,940 67,890 55,480 1,060,690

2030 689,850 564,290 90,885 74,095 1,419,120

2035 914,690 748,250 120,450 98,550 1,881,940



Figure 40: Projected annual conventional cargo traffic volume through dry port

C. SUMMARY AND CONCLUDING REMARKS

This chapter is mainly focused on addressing rationale of developing a dry port in

Mandalay and its key function, discussing the location of dry port in Mandalay and forecasting

the traffic volume. The potential location will be further discussed in chapter VI.

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2016 2020 2025 2030 2035

Ton

Road Import

Road Export

Rail Import

Rail Export

Total (Ton)


- 70 -

Mandalay, the second largest city in Myanmar, has long played a role as a logistics base

due to its geographical location and international trade activities. There is an increasing

international cargo movement between Mandalay and neighboring border countries such as

China and India by land, and overseas countries through seaports with the construction of

transport infrastructures such as ports, roads, and bridges.

According to forecast of cargo traffic through Mandalay its annual growth rate is 7

percent. In order to handle the increasing volume of trade and transport efficiently, it is

necessary to build a dry port which provides logistics function such as cargo consolidation and

distribution, cargo storage, customs, and intermodal transport.


- 71 -

VI. PHYSICAL DEVELOPMENT PLAN

A. PROPOSED SITE FOR DRY PORT

Mandalay is the capital city of the Mandalay Division situated in the middle of the

country with overland road access to the China border in the north, the Indian border in the west,

and to the new political capital Na Pyi Taw and Yangon in the south. The city‟s primary

functions are as a center for transit trade, a logistics hub, and as a base of manufacturing

facilities. Mandalay is at the important junction of Asian Highway Route AH1 from Myawaddy

to Tamu and AH14 from Mandalay to Muse.

As passenger and cargo vehicles are passing through Mandalay city, the Mandalay

Highway Bus Terminal & Merchandise Center project is planned for establishing a terminal area

between Hton Bo-Myitnge Shortcut Road and Phyut Seik Gone Village in Pyigyi Tagun

Township. The Mandalay Highway Bus Terminal & Merchandise Center Project has a land area

of 65.95 acres. Plans are to construct 360 business-apartments, a merchandise center for cargo

vehicles plying between industrial zones, warehouses, factories, and the Yatanarpon Cyber City.

The intention is to keep cargo in the center before uploading onto vehicles bound for China and

Thailand.

Figure 41: Proposed location of the dry port in Mandalay


- 72 -

Figure 41 shows the proposed location of the dry port in Mandalay and the main

transport routes. According to the discussions with government officials, transport operators,

customs officials as well as other stakeholders of dry port during the field mission by the project

team, it was decided that the potential location is near Merchandise Center which is now under

construction.

B. OVERALL LAYOUT OF DRY PORT

In order to estimate the size and design of the dry port facility daily cargo volume is

calculated. Daily demand for the dry port is shown in Table 32 and Table 33. In calculating

space required for container and conventional cargo, a daily cargo volume of each cargo in 2025

was considered. It is assumed that the operation of dry port starts in 2016 and lifespan of the

project is 20 years after the start of operation. The space of dry port is estimated based on its full

capacity in 2025.

In 2016 daily container volume to be handled in the dry port is 35 TEUs in which 31

TEUs are moved by road and 4TEUs transported by rail. It will reach by 131 TEUs in total in

2035.

Table 32: Forecast of daily container traffic through dry port

Year Road Rail

Total (TEU)


2016 17 14 2 2 35

2020 24 20 3 3 50

2025 36 30 5 4 75

2030 49 40 6 5 100

2035 64 52 8 7 131



- 73 -


Figure 42: Forecast of daily container traffic through dry port

In terms of daily conventional cargo traffic dry port needs a facility to handle 1,376tons of

cargo in 2016 and 5,156tons in 2035.

Table 33: Forecast of daily conventional cargo traffic through dry port

Year Road Rail Total

(Ton) Import Export Import Export

2016 669 547 88 72 1,376

2020 944 772 124 102 1,942

2025 1,412 1,156 186 152 2,906

2030 1,890 1,546 249 203 3,888

2035 2,506 2,050 330 270 5,156



Figure 43: Forecast of daily conventional cargo traffic through dry port

-

20

40

60

80

100

120

140

2016 2020 2025 2030 2035

TEU

Road Import

Road Export

Rail Import

Rail Export

Total (TEU)

-

1,000

2,000

3,000

4,000

5,000

6,000

2016 2020 2025 2030 2035

Ton

Road Import

Road Export

Rail Import

Rail Export

Total (Ton)


- 74 -

There are two types of cargoes using a dry port in Mandalay. One is border trade cargo

imported to and exported from Mandalay and the other is international cargo imported to and

exported from Mandalay through seaports in Myanmar. The dry port comprises the following

facilities.

Container yard (CY)

General cargo area

Container freight station(CFS)

Railway terminal

Customs clearance area

Customs office

Operator‟s office

Maintenance workshop

Parking area

Space required for each facility is calculated by using equations and assumptions in the

recent dry port project.40

The total area required for development of the dry port is estimated to

be 84,992 m2. The areas for different functions are summarized in Table 34.

Table 34: Summary of total area required for the dry port

Item Required Area(m2)

Conventional cargo area 50,216

Container yard(CY) 16,531

Container freight station(CFS) 9,912

Customs clearance area 998

Customs office 269

Operator's office 1,569

Maintenance workshop 609

Railway terminal 2,357

Parking area 2,530

Total area 84,992


40 UNESCAP(2011), Prefeasibility Study of Establishing a Dry Port in Luangnamtha Province, Lao People’s Democratic Republic.


- 75 -

Figure 44: The physical layout of the dry port

(1). CONTAINER YARD (CY)

In calculating the space required for container yard, consideration was given to the space

for container storage and maneuvers of stacking equipment such as reach stackers or forklifts.

The space required for the container storage depends upon the maximum number of containers

to be stored at any time, the dwell time of each container, the space of each container, the stack

height and safety factor, as shown in the following equation.

Container storage space = daily cargo(TEU) * dwell time * space per container / stack

height * safety factor

In this study, the average dwell time is assumed to be 3 days for imports, 3 days for

exports and 3 days for empty container. The space requirement for container storage for road

and rail cargo is shown in Table 35 and Table 36 respectively.

Table 35: Space required for container storage for road cargo

Daily

Cargo

Dwell

Time

Space per

Cargo

(m2/TEU)

Stack

Height

Safety

Factor

Space Requirement

(m2)

Import 36 3 21 3 1.2 907

Export 30 3 21 3 1.2 756

Empty 6 3 21 3 1.2 151

Total 72

1,814 Source: the project team


- 76 -

Table 36: Space required for container storage for rail cargo

Daily

Cargo

Dwell

Time

Space per

Cargo

(m2/TEU)

Stack

Height

Safety

Factor

Space Requirement

(m2)

Import 5 3 21 3 1.2 126

Export 4 3 21 3 1.2 101

Empty 1 3 21 3 1.2 25

Total 10

252 Source: the project team

Apart from the space required for storage of containers, additional space is required for

turning radius of reach stacker, access for chassis and parking of reach stackers. The space

required for the operation of reach stacker is estimated at 7 times the space required by container

storage area. Therefore the total space required for the container yard for road and rail cargo is

shown in Table 37 and Table 38 respectively.

Container yard space = daily cargo(TEU) * dwell time * space per container / stack

height * safety factor * 7

Table 37: Space required for container yard for road cargo

Daily

Cargo

Dwell

Time

Space per

Cargo

(m2/TEU)

Stack

Height

Safety

Factor

Space

Requirement

(m2)

Import 36 3 21 3 1.2 907

Export 30 3 21 3 1.2 756

Empty 6 3 21 3 1.2 151

Space for

storage 72

1,814

Space for cargo handling equipment maneuvering 12,701

Total 14,515 Source: the project team

Table 38: Space required for container yard for rail cargo

Daily

Cargo

Dwell

Time

Space per

Cargo

(m2/TEU)

Stack

Height

Safety

Factor

Space

Requirement

(m2)

Import 5 3 21 3 1.2 126

Export 4 3 21 3 1.2 101

Empty 1 3 21 3 1.2 25

Space for storage 10

252


Total 2,016 Source: the project team


- 77 -

(2). CONTAINER FREIGHT STATION (CFS)

The CFS is a facility designed for less than container load (LCL) consolidation and

segregation. It is where containers holding more than one consignment are packed or unpacked.

The CFS comprises a covered shed with a loading apron for trucks accessing containers stacked

inside a shed. The shed should be divided into two sections, one for export cargo and another for

import cargo. The size of the CFS can be computed as follows.

CFS size = daily LCL cargo * (a) * (b) * (c) * dwell time * safety factor

Where (a)=Floor space occupied by an average container load

(b)=The amount of space required for a forklift truck to maneuver

(c)=A factor for covering peak workloads during the day

The Handbook on the Management and Operation of Dry Ports by UNCTAD suggested

that for a flat floor shed, the fix factors (a), (b) and (c) an be combined as equal to 40. Therefore,

the required space for CFS is calculated as shown in Table 39.

Table 39: Space required for CFS

Daily Cargo

(TEU)

LCL

cargo(TEU) (a)*(b)*(c)

Dwell

Time

Safety

Factor

Space

Requirement

(m2)

Import 44 22 40 7 1.2 7,392

Export 35 18 40 3 1.2 2,520

Total 79 40

9,912


(3). CONVENTIONAL CARGO AREA

Conventional cargo area is a paved space provided for storage of conventional cargo for

a short time period. The space requirement for the conventional cargo area can be computed as

follows.

Conventional cargo storage = daily cargo(ton) * dwell time * space per cargo * safety

factor

The average dwell time for conventional cargo is assumed to be 3 days and the machine

maneuvering factor is 3 times the total space requirement. The space requirement for

conventional cargo handling for road and rail cargo is shown in Table 40 and Table 41

respectively.


- 78 -

Table 40: Space required for conventional cargo storage for road cargo

Daily

Cargo

Dwell

Time

Space per Cargo

(m2/ton)

Safety

Factor Space Requirement (m

2)

Import 1,412 3 1.2 1.2 6,100

Export 1,156 3 1.2 1.2 4,994

Space for storage 11,094


Total 44,375


Table 41: Space required for conventional cargo storage for rail cargo

Daily

Cargo

Dwell

Time

Space per Cargo

(m2/ton)

Safety

Factor Space Requirement (m

2)

Import 186 3 1.2 1.2 804

Export 152 3 1.2 1.2 657

Space for storage 1,460


Total 5,841


(4). CUSTOMS CLEARANCE AREA

The customs clearance area is a paved space near the customs office. The function of

customs clearance area is mainly a buffer space for import and export containers to dwell during

customs inspection. The space requirement for the customs clearance area is calculated as

follows:

Customs clearance area = daily cargo(TEU) * 5% * dwell time * space per container

* machine maneuvering * safety factor

The average dwell time for customs clearance is assumed to be 1 day and the machine

maneuvering factor is 3 times of the total space requirement. The space required for customs

clearance area is shown in Table 42.


- 79 -

Table 42: Space required for customs clearance

Daily

Cargo

Ratio of

Cargo

Volume

for

Customs

Clearance

Dwell

Time

Space per

Cargo

(m2/TEU)

machine

maneuvering

Safety

Factor

Space

Requirement (m2)

Import 36 5% 1 21 3 1.2 136

Export 30 5% 1 21 3 1.2 113

Space for storage 249

Space for cargo handling equipment maneuvering 748

Total 998 Source: the project team

(5). CUSTOMS OFFICE

The customs office is a building provide for the day-to-day operation of customs offices.

The size for the customs office building is determined by the needs of the customs officer. The

assumption for the space usage for customs office is as follows.

Total number of customs staff is 12 people in 2025

Total office space require per person is 6 m2 for office use and additional 10 m

2 for co

nference use and/or document handling

Additional open space requirement is 40%

Customs office = total number of customs staff * (office space per person(6m2) +

additional space(10m2)) * additional open space(40%)

The space required for customs office is shown in Table 43.

Table 43: Space required for customs office

Customs Staff Space per Person and Additional

Space

Additional Open

Space

Space

Requirement

(m2)

12 16 1.4 269



- 80 -

(6). OPERATOR OFFICE

The space required for the operators working at the dry port is calculated based on the

following assumption.

Total number of staff is 70 in 2025

Total office space required per person is 6 m2 for office use and additional 10 m

2 for c

onference use and/or document handling

Additional open space requirement is 40%

Operator office = number of staff * (space per person(6 m2) + additional space(10 m2)

* additional open space(40%)

The space required for operator office is shown in Table 44.

Table 44: Space required for operator office

Office Staff Space per Person and

Additional Space

Additional Open

Space Space Requirement(m

2)

70 16 1.4 1,569


(7). MAINTENANCE WORKSHOP

The maintenance workshop is an area set up for maintenance of service vehicle and

container and perform minor repair. The total space required for the maintenance workshop is

calculated based on the assumption that 3 per cent of daily container and conventional cargo

converted into TEU require maintenance at the dry port. The space required for maintenance

workshop is shown in Table 45.

Maintenance workshop = daily cargo(TEU) * dwell time * space per container *

machine maneuvering * safety factor

Table 45: Space required for maintenance workshop

Daily

Cargo

Dwell

Time

Space per

Cargo

(m2/TEU)

Machine

Maneuvering

Safety

Factor

Space Requirement

(m2)

Import 4 1 21 3 1.2 305

Export 4 1 21 3 1.2 305

Total

609 Source: the project team


- 81 -

(8). GATE AND FENCING

The gate is the controlled entry and exit point in the dry port. All vehicles must present

documentation and report to security staff upon entry and exit from the dry port. The security

staff at the gate should be able to receive documents from drivers without requiring them to

alight from their vehicle. For the design of dry port, two gates will be required for the normal

operation.

The areas inside the dry port should be secured by perimeter fencing and lighting. The

length of the fencing is calculated from the total perimeter of the dry port and is calculated to be

1,200 meters.

(9). RAIL CARGO BUFFER ZONE

A railway terminal will be constructed at the dry port. It is calculated that required space

for rail cargo storage is 2,016 m2

for container cargo and 5,841 m2 for conventional cargo. It is

assumed that the required space for rail cargo buffer zone is 10 per cent of rail cargo storage

space. The required space for railway terminal is assumed to be 3 times the space required for

rail cargo buffer zone. The size of railway station is 2,357 m2 .

(10). PARKING AREA

Parking area is provided outside the perimeter fencing for arrival trucks (both import and

export) to process the documentation or waiting for shipment. It is assumed that average space

for container truck is 29 m2 and 19 m

2 for conventional cargo.

The space required for the parking

area is calculated as follows.

Parking area = (number of daily container truck * space per container truck) +

(number of daily conventional cargo truck * space per conventional cargo truck) *

dwell time * safety factor

Table 46: Space required for parking area

Daily

Container

(TEU)

Number of

Container

Truck

Daily

Conventional

Cargo(ton)

Number of

Conventional

Cargo Truck

Dwell

Time

Safety

Factor

Space

Requirement

(m2)

Import 39

1,497

Export 31

1,225

Total 70 35 2,722 181

Average

18

91 1 1.2 2,530 Source: the project team


- 82 -

C. FREIGHT HANDLING EQUIPMENT AND UTILITY

(1). FREIGHT HANDLING EQUIPMENT

The summary of freight handling equipment at dry port is summarized in Table 47.

Table 47: Summary of freight handling equipment at the dry port

Equipment Amount Usage Location

Reach Stacker 1 One at CY

Forklift(5 tons) 6 One for container cargo, five for conventional cargo handling

Forklift(2 tons) 10 Two for CFS, eight for conventional cargo handling

Total 17


(A)REACH STACKER

A reach stacker is a heavy-duty vehicle for loading and unloading of container.

Containers are lifted from the top by a rotating spreader fixed to the mast of a mobile

chassis. The equipment is very flexible and in small throughput situation, reach stacker

could be used for handling loads both at the railhead and in stacking operations.

The total handling volume for one reach stacker was calculated by

Handling volume = operation hour / (loading/unloading time per TEU * safety factor)

The average loading and unloading time per one TEU of reach stacker is

6mins/TEU. Assuming 10 hours of operation per day, therefore the average handling

volume per reach stacker can be calculated as

Handling volume of reach stacker = 10 / (6/60 * 1.2) = 83TEUs/day

Since the total FCL container volume at CY and at railhead for the dry port is 38

TEU/day, thus one reach stacker will be sufficient for the operation in 2025.

(B) FORKLIFT

Forklift is designed for carriage of conventional cargo which could be handled

with lifting for such as palletized cargo, crates and large bales of cargo. Forklift is

mainly used for the loading and unloading of general cargo to and from trucks, stacking

of cargo in the CFS as well as packing and unpacking of containers.


- 83 -

The average loading and unloading time per one ton of a forklift with a load

capacity of 5tons is 1.5mins/ton. Assuming 10 hours of operation per day, therefore the

average handling volume per forklift (5tons) can be calculated as

Handling volume of forklift = 10 / (1.5/60 * 1.2) = 333tons/day

Since the total handling volume at conventional cargo storage in the dry port is 2,906

tons/day, thus 9 forklifts will be needed for the operation in 2025. Considering various types of

cargoes are handled in dry port it is assumed that two different types of forklifts are needed. One

is a forklift with 5tons load capacity and the other one is with 2tons of load capacity. So, total 13

forklifts with a combination of five forklifts with 5tons load capacity and eight forklifts with 2

tons of load capacity, are required to handle conventional cargoes in the dry port in 2025.

In addition, daily cargo handling volume in CFS is 40 TEUs (40 TEUs x 15tons = 600

tons). It is estimated that one forklift with 5tons load capacity and two forklifts with 2tons is

required to use in CFS.

(2). WATER SUPPLY

The usage of water in the dry port is mainly for the consumption of staff. The average

consumption of water at the dry port was calculated based on the assumption that the staff

consumes 100 liter/person/day. The consumption of water at the dry port can be calculated as

shown in Table 48.

Table 48: Consumption of water at the dry port

Consumption Unit

Consumption

Rate

(liter per day)

Safety

Factor

Water

Consumption

(liter per day)

Water

Consumption

(m3)

Staff

Customs

Office 12 100 1.2 1,440 1.44

Operation

Office 70 100 1.2 8,407 8.41

Total

9,847 9.85 Source: the project team

It is recommended that a water reservoir with a pump is installed under the ground of

the dry port. The recommended volume of a reservoir is above 4.10 m3 (10 hour operation per

day: 9.85/24 * 10 = 4.10 m3)


- 84 -

(3). ELECTRICITY

The electrical supply for Mandalay region is transmitted from electrical generation from

various sources of hydro power electric generation plants such as Shwe Li, Law Pi Ta and Ye

Ywar via 230 KVA transmission lines. All these power generations are under the management

of government ministry, Ministry of Electrical Power. The dry port can be equipped with on-site

33 KVA electric power distribution sub-station from the main source.

(4). TELECOMMUNICATION

Telecommunication is the backbone of operation in the dry port. Each office at customs,

operator office, CFS, railhead and workshop will have a fixed telephone line and Internet

connection.

(5). SEWAGE TREATMENT

A centralized sewage treatment system would be adopted due to concern for the

environment in the dry port and its surrounding area. This sewage collection system is designed

to collect only wastewater from domestic sewage (9.85 m3/day of wastewater from staff in the

dry port). Wastewater generated from each building will be gravitated to the treatment plant

installed in the dry port.

(6). OTHER UTILITIES

Mandalay is served by Ayeyarwaddy river which provides adequate water supply for the

area. The source of drinking water also comes from underground water in the area.


This chapter provides the technical design of the dry port in Mandalay based on the

estimated traffic volume at the dry port. It is proposed to have a dry port with an area of 8.5

hectares. The most important functions at the dry port include container yard(CY), conventional

cargo area, container freight station(CFS), customs clearance area, railway terminal, customs

office, operator‟s office, maintenance workshop and parking area.


- 85 -

VII. COST ESTIMATES

Major cost items to develop a dry port include land acquisition, civil work, building

work, access road work, equipment cost, administration cost, consultant cost and contingency.

A. LAND ACQUISITION

The project team estimated the land acquisition fee by using the lease price from the

Government near Mandalay. The price is between 0.5 to 2 USD for one square meter per year.

Considering some of the semi-government development projects and public company receive

the permission to use the land with cheap price, it assumes that the land lease price of the dry

port is 0.5 USD per square meter per year. Accordingly, the land acquisition fee for the dry port

is estimated to be 42,496 US dollars one square meter per year.

B. CIVIL WORK COST ESTIMATE

The cost estimate for civil work is separated into five items including earth work,

pavement, utility, green area and others. The unit cost used in this study is based on the unit cost

of Merchandise Center in Mandalay which is now under construction and from sources of a

local construction company. The details of costs are shown in Table 49.

Table 49: Cost estimate for civil work

Item Unit Cost(USD) Quantity Cost(USD)

Site Preparation 0.35 /m2 84,992 29,747

Earth work Excavation 2.5 /m

3 32,297 80,742

Filling 3.5 /m3 30,597 107,089

Slope protection 3.5 /m2 1,700 5,949

Pavement Pavement area 45 /m

2 65,443 2,944,956

Internal road 40 /m2 8,499 339,966


- 86 -

Table 49: Cost estimate for civil work (Cont…)

Item Unit Cost(USD) Quantity Cost(USD)

Utilities Drainage system 175 /m 850 148,735

Water treatment 1500 /piece 1 1,500

Well 400

/piece

(for 10 m) 50 20,000

Water tank 5000 /piece 4 20,000

Water pipe 6 (PVC) /m

(dia 4 inch) 850 5,099

Electrical line 120

/m

(Material +

service fees)

1,700 203,980

Lighting 600 /piece 85 50,995

Telecommunication 80

/m (1 point

(complete

set))

850 67,993

Green Grass 2.8 /m2 6,799 19,038

Tree 10 /m2 1,700 16,998

Other Fencing 50 /m 1,260 63,000

Total Cost of Civil Work

4,125,788


C. BUILDING WORK COST ESTIMATE

For the construction of building and offices in the dry port, the cost estimate for civil

work is separated into 6 items including container freight station, customs office, operator

office, gate, maintenance workshop and parking. The details of cost estimate are provided in

Table 50.

Table 50: Cost estimate for the buildings

Item Description Unit Cost

(USD/m2)

Quantity

(m2)

Cost (USD)

CFS

Slate structure

300 9,912 2,973,600

High rised floor

Load = 3t/m2

H = 5.5 m from floor

Shutter

Slope for a forklift


- 87 -

Table 50: Cost estimate for the buildings (Cont…)

Item Description Unit Cost

(USD/m2)

Quantity

(m2)

Cost (USD)

Customs office Slate structure 212 269 56,965

Operator office Slate structure 212 1,569 464,823

Gate Reinforced concrete

6,250

Maintenance

workshop Slate structure 212 609 100,800

Parking With roof 80 2,530 593,280

Total Cost of Building Work 4,195,718


D. ACCESS ROAD

For the construction of access road of the dry port, the cost estimate is separated into 3

items including earth work, pavement and utilities. The detail of cost estimate is provided in

Table 51.

Table 51: Cost estimate for access road

Item Unit Rate (USD) Quantity Cost(USD)

Earth work

Clearing and Grubbing 0.5 /m2 7,649 3,825

Excavation 4.5 /m3 3,825 17,211

Filling 1.5 /m3 3,825 5,737

Slope Protection 3.5 /m2 15,298 53,545

Pavement Asphalt Concrete 45 /m2 7,649 344,216

Utilities Street Light 600 /no. 60 36,000

Total Cost of Access Road

460,533



- 88 -

E. RAILWAYS FACILITY

It is necessary to build a railway facility to load and unload containers and general

cargoes within dry port compound. There are two different costs. The cost of the concrete

platform for railway station area is 41.36 USD per square meter and one meter railway costs 345

USD. The detail of cost estimate is provided in Table 52.

Table 52: Cost estimate for railway facility

Item Unit Rate(USD) Quantity Cost(USD)

Railway 345 /m 50 17,250

Railway station 41.36 /m2 1,500 62,040

Total Cost of Railway Terminal

79,290


F. CARGO HANDLING EQUIPMENT

For the cost of purchase of equipment to be used in the dry port, the cost estimate is

separated into two items including a reach stacker and forklift. The detail of cost estimate is

provided in Table 53.

Table 53: Cost estimate for the cargo handling equipment

Equipment Quantity Unit Cost(USD) Total Cost(USD)

Reach Stacker 1 450,000 450,000

Forklift(5 tons) 6 50,000 300,000

Forklift(2 tons) 10 30,000 300,000

Total 17 1,050,000


D. TOTAL COST ESTIMATE

The total cost estimate for the dry port is shown in Table 54. The construction cost

excludes any VAT and import tax. The administration cost and consultant cost are estimated as

3% and 6% of total construction cost. Contingency including physical contingency and price

escalation is estimated as 10% of the sum of the construction cost and the consultant cost. As a

result, the total cost for the dry port project is about 10.5 million US dollars.


- 89 -

Table 54: Total cost estimate for the dry port project

Item Total Cost(USD)

Land concession 1,019,898

Civil work 4,125,788

Building work 4,195,718

Railway terminal 79,290

Access road 460,533

Total Construction Cost 8,861,329

Equipment cost 1,050,000

Administration cost 265,840

Consultant cost 531,680

Contingency 939,301

Total project cost without land concession fee 10,598,149



- 90 -

VIII ECONOMIC AND FINANCIAL ANALYSIS

A. FINANCIAL ANALYSIS

This section presents the preliminary financial analysis of the feasibility of the dry port

project. To evaluate the desirability of the project financial internal rate of return (FIRR) of the

project is measured. FIRR is the discount rate at which the net present value of costs of the

investment equals the net present value of the benefits of the investment. To determine the

financial attractiveness of the project, it is necessary to compare FIRR of a project with

Weighted Average Cost of Capital (WACC)41

. The WACC serves as a proxy for the financial

opportunity cost of capital (FOCC) to assess the financial viability of projects. If the FIRR

exceeds the value of WACC, the project is financially feasible.

(1). CONDITIONS TO CALCULATE PROJECT REVENUE

The freight volumes between 2016 and 2035 were estimated as described in chapter V.

The detailed estimation of daily demand for container cargo and conventional cargo has been

presented in chapter VI. For the purpose of estimating revenue, the daily volume was multiplied

by the assumed number of operating days a year (365 days). The dry port is assumed to reach

full capacity in 2025. After 2025 the level of traffic is maintained constant.

(2). IMPLEMENTATION SCHEDULE

It is assumed that the operation of dry port starts in 2016.

(3). LIFESPAN OF THE PROJECT

Lifespan of the project is 20 years after the start of operations. This means that the

operations end in December 2035.

(4). CASH INFLOW AND CASH OUTFLOW OF THE PROJECT

The assumption is made that the implementation body is one single unit. This section

presents the estimation of project revenue, costs, and internal rate of return. The included cost

and revenue items are presented in Table 55.

41 ADB, Financial Management and Analysis of Projects, June 2005.


- 91 -

Table 55: Cash inflow and cash outflow included in project FIRR

Cash outflow Construction cost, equipment cost, operation and maintenance cost(O&M)

and land rental for dry port

Cash inflow CFS storage charge, stuffing/unstuffing charge, value added service charge,

CY storage charge, lift on/off charge, conventional cargo storage charge


(5). PROJECT REVENUE

The following revenue is anticipated from the dry port facilities, as shown in Table 56.

Table 56: Summary of revenue for dry port

Facility Revenue

CFS CFS storage charge, stuffing/unstuffing charge, value added

service charge

CY CY storage charge, lift on/off charge

Conventional cargo storage Conventional cargo storage charge


The charges used for the analysis have been described in Table 50. All containerized cargo

is expected to use container yard and CFS. Conventional cargo will be handled by the

conventional cargo facilities.

Table 57: Summary of dry port charges

Facility Charge Unit Value

(US$) Assumptions

CFS

Storage charge Export(TEU/day) 2 Applied to LCL cargo

Import(TEU/day) 2 Applied to LCL cargo

Stuffing/unstuffing Export(TEU/day) 30 Applied to LCL export cargo

Import(TEU/day) 30 Applied to LCL import cargo

Value added services per package 0.9 33 packages per TEU

CY

Storage charge

Export(TEU/day) 2 Applied to 50% of FCL export

cargo

Import(TEU/day) 2 Applied to 50% of FCL import

cargo

Lift on/off Export(TEU) 16 All export FCL container cargo

Import(TEU) 16 All import FCL container cargo

Conventional

cargo storage Storage charge

Export(Ton) 2 Applied to 50% of export cargo

and unit cost of 2 USD/Ton

Import(Ton) 2 Applied to 50% of import cargo

and unit cost of 2 USD/Ton Source: the project team


- 92 -

(6). PROJECT COST AFTER COST ADJUSTMENT

The development cost estimation of the project has been described in chapter VII. The

development costs, after price adjustment using the GDP deflator on the IMF World Economic

Outlook website, are shown in Table 58.

Table 58: Summary of dry port development cost

Item Cost(USD) Note

Construction cost 9,570,235

Administration cost 287,107 3% of total construction cost

Consultant cost 574,214 6% of total construction cost

Contingency 1,014,445 10% of total construction and consultant cost

Total project development cost 11,446,001


The total development cost has been distributed as shown in Table 59.

Table 59: Distribution of dry port development cost

Year Ratio of Investment Cost(USD)

2012 5% 572,300

2013 35% 4,006,100

2014 50% 5,723,001

2015 10% 1,144,600

Total

11,446,001


According to demand forecast of the dry port in chapter V cargo traffic is growing

steadily since 2016. It is more reasonable to invest in cargo handling equipments in accordance

with the increase of cargo handling volumes. The equipment is assumed to be replaced every 10

years.

Table 60: Cargo handling equipment cost

Year Reach Stacker Forklift(5 tons) Forklift(2 tons) Total(USD)

Quantity Amount Quantity Amount Quantity Amount

2016 1 450,000 3 150,000 5 150,000 750,000

2018 - - 1 50,000 - - 50,000

2020 - - - - 1 30,000 30,000

2021 - - - - 1 30,000 30,000

2022 - - - - 2 60,000 60,000

2023 - - - - 1 30,000 30,000

2024 - - 1 50,000 - - 50,000

2025 - - 1 50,000 - - 50,000


- 93 -

The operation cost of the dry port consists of the following cost items: 1) Labour cost, 2)

Fuel cost; and 3) Indirect cost (the utility cost of working area and public space). It is assumed

that the dry port employs 70 staff for operation. Those employed in customs functions were

excluded from the financial analysis, as they are employed by the customs authority and not by

the dry port. The distribution of staff across levels of responsibility and their respective wages

when the dry port is full capacity are presented in Table 61.

Table 61: Labour cost

Role Number Annual wage(USD) Total value

Manager 1 2,177 2,177

Assistant manager 1 1,769 1,769

Office staff 11 1,361 14,775

Operator 34 1,633 55,522

Worker 23 1,088 25,242

Total 70

99,485 Source: the project team

The annual fuel expenditure when the dry port is in full operation amounts 321,200

US$. It is assumed that fuel cost is 1 US$ per liter. The detail of fuel consumption is presented

in Table 62.

Table 62: Fuel cost

Equipment Quantity Fuel

consumption(l/h)

Operational Hrs per Year

(365 X 8hr = 2,920)

Amount

(USD)

Reach Stacker 1 22 2,920 64,240

Forklift (5 tons) 6 8 2,920 140,160

Forklift (2 tons) 10 4 2,920 116,800

Total 17

321,200


Finally, the indirect costs are estimated. The utility cost of working area is assumed to

be 30% of labour costs, and utility cost of public space is estimated at 1% of total development

cost. The indirect costs are also incurred annually. All operational costs are summarized in Table

63.

Table 63: Summary of operational costs

Cost items Annual cost(USD)

Labour 99,485

Fuel 321,200

Utility cost of working area 29,846

Utility cost of public space 14,923

Total 465,454



- 94 -

(7). CALCULATION OF PROJECT FIRR

Table 64 shows the annual revenue, cost, and net cash flow for the project from the

financial point of view. The cash flows have been estimated for each year of operation until the

end of year 20 (2035). In the final year, residual value of the dry port is listed. This is the value

of land preparation, road work, and cargo handling equipment that remains, even if the dry port

is not operating.

As discussed previously, the cost of maintenance and operations is assumed to be

constant. Revenue for the dry port increases from 2016 to 2025 in line with increase in the

freight handled. After 2025, the annual revenue is held constant. The FIRR of the project is

calculated to be 8.31 per cent, as shown in Table 64.

Table 64: Calculation of project FIRR

Years

from

start

of

con

stru

cti

on

Years

from

start

of

op

erati

on

Year

Cash

inflow Cash outflow

Revenue Development

cost

Land

rental

Equipment

cost

O & M costs

Total Net cash

flow Labour

cost

Fuel

cost

Utility

cost

1

2012 0 572,300 50,995 0 623,295 -623,295

2

2013 0 4,006,100 50,995 0 4,057,095 -4,057,095

3

2014 0 5,723,001 50,995 0 5,773,995 -5,773,995

4

2015 0 1,144,600 50,995 0 1,195,595 -1,195,595

5 1 2016 1,113,524 50,995 720,000 52,256 181,040 44,768 1,049,060 64,464

6 2 2017 1,228,280 50,995 30,000 58,376 192,720 44,768 376,859 851,421

7 3 2018 1,330,316 50,995 50,000 64,495 216,080 44,768 426,338 903,978

8 4 2019 1,453,832 50,995 67,348 216,080 44,768 379,191 1,074,640

9 5 2020 1,582,093 50,995 30,000 72,106 227,760 44,768 425,629 1,156,463

10 6 2021 1,715,829 50,995 60,000 80,959 251,120 44,768 487,842 1,227,986

11 7 2022 1,890,700 50,995 30,000 84,225 262,800 44,768 472,788 1,417,912

12 8 2023 2,035,751 50,995 30,000 89,667 274,480 44,768 489,910 1,545,841

13 9 2024 2,240,133 50,995 50,000 92,933 297,840 44,768 536,536 1,703,596

14 10 2025 2,370,584 50,995 50,000 100,551 321,200 44,768 567,514 1,803,069

15 11 2026 2,370,584 50,995 720,000 100,551 321,200 44,768 1,237,514 1,133,069

16 12 2027 2,370,584 50,995 30,000 100,551 321,200 44,768 547,514 1,823,069

17 13 2028 2,370,584 50,995 50,000 100,551 321,200 44,768 567,514 1,803,069

18 14 2029 2,370,584 50,995 100,551 321,200 44,768 517,514 1,853,069

19 15 2030 2,370,584 50,995 30,000 100,551 321,200 44,768 547,514 1,823,069

20 16 2031 2,370,584 50,995 60,000 100,551 321,200 44,768 577,514 1,793,069

21 17 2032 2,370,584 50,995 30,000 100,551 321,200 44,768 547,514 1,823,069

22 18 2033 2,370,584 50,995 30,000 100,551 321,200 44,768 547,514 1,823,069

23 19 2034 2,370,584 50,995 50,000 100,551 321,200 44,768 567,514 1,803,069

24 20 2035 2,370,584 -3,815,334 50,995 -59,141 100,551 321,200 44,768 -3,356,960 5,727,544

FIRR 8.31%



- 95 -

B. ECONOMIC ANALYSIS

(1). INTRODUCTION

This section provides the information relating to the approach taken to the economic

evaluation of the dry port project. The purpose of the evaluation is to examine the economic

feasibility of the project. The economic costs and benefits of the dry port project which are not

captured by conventional financial analysis are identified based on some assumptions used in a

similar prefeasibility study42

. An economic analysis using the discounted cash flow method is

used to determine the Economic Internal Rate of Return (EIRR) of developing the dry port.

(2). ECONOMIC BENEFITS

(A) ASSESSMENT OF ECONOMIC EFFECT

The implementation of the dry port project is expected to bring, inter alia, the

following economic benefits:

The dry port will generate employment for the local residents;

The dry port will generate value added as no dry port operations take place

currently;

Without the customs facilities at the dry port, there would be more congestion

at the seaport and border crossing in the future. This can lead to an increase in

the opportunity cost of cargo and vehicles;

The dry port and its users may create demand for small businesses in the area

and create further employment opportunities.

In this study, the dry port employment benefit, opportunity cost, value added and

logistics cost savings have been quantified and valued. The other effects have not been

formally valued due to the complexity of the calculation though these benefits should be

acknowledged.

The estimation of economic benefits in particular depends on a large number of

assumptions and is subject to a large degree of uncertainty. At the same time, many

benefits cannot be quantified. The presented results should therefore be viewed as an

indication of some of the benefits which may be experienced, rather than an exhaustive

evaluation of economic value.

42 UNESCAP(2011), Prefeasibility Study of Establishing a Dry Port in Luangnamtha Province, Lao People’s Democratic Republic.


- 96 -

(B) EMPLOYMENT EFFECT

The dry port will provide employment to the local area, which has a few job

opportunities. It is likely that employment by dry port can offer some households in the

area a more stable income and help alleviation of poverty.

In the estimation of the employment effect, a few assumptions specific to

employment are made:

All staff is from Mandalay region;

Employment is valued using annual wage;

Given the limited social security available, it is assumed that the alternative to

working at the dry port is either other employment or low-skilled labour;

It is assumed that the salaries are in line with salaries elsewhere for a given

level of responsibility and skills;

It is assumed that workers are less skilled and have limited opportunities to

move elsewhere. In absence of the dry port, they will engage in low-skilled

labour and earn minimum wage;

Operators and office staff are assumed to have more skills and therefore better

employment opportunities in general. To account for the regional shortage of

opportunities, it is assumed that 50% of operators and office staff are not able

to find a corresponding job, and will engage in low-skilled labour earning

minimum wage;

Assistant managers and managers are able to find corresponding employment.

The annual economic employment benefit is presented in Table 65.

Table 65: Annual employment benefit

Role Number

With case Without case

Total

value

Economic

benefit Annual

wage

(USD)

Total

value

Minimum wage = 219USD

Earning non-

minimum wage

Earning

minimum wage

Manager 1 2,177 2,177 1 0 2,177 -

Assistant

manager 1 1,769 1,769 1 0 1,769 -

Office staff 11 1,361 14,775 6 6 9,480 5,295

Operator 34 1,633 55,522 17 17 31,484 24,038

Worker 23 1,088 25,242 0 23 5,081 20,162

Total 70

99,485

49,991 49,494



- 97 -

(C) OPPORTUNITY COST OF VEHICLE AND CARGO

The port of Yangon which is a main port in Myanmar is facing a chronic

congestion due to a lack of space and poor performance of container loading and

unloading activities, generating a problem of long waiting time. In addition, in Myanmar,

customs officers are responsible for inspecting all import and export cargoes, either

unpacking or X-ray inspections. As a consequence, there is a long delay to have

commodities pass all necessary inspections.

Having customs facilities at the dry port could result in less congestion at ports

and borders, if most of formalities can be cleared before arrival at customs inspection

centers at either ports or borders. It is also likely that vehicles from the dry port will have

a fast lane which allows them to bypass the queue.

In a benefit-cost analysis, the value of travel time is calculated for truck and

cargo. If the truck is empty or carrying cargo, then the value of time is essentially the

average hourly labor cost for truck drivers. Cargo can also have a time value. It is based

on the interest costs of the value of the cargo. The cargo user (i.e., the shipper or

recipient) bears excess costs of late pickup or delivery. The gains in terms of opportunity

cost are based on the following assumptions and the results are presented in Table 66.

Customs inspection and clearance will be carried out for 5% of annual

container cargo volumes at the dry port;

It is assumed that travel time value for truck drivers is 170% of average

hourly wage. Regarding time value for cargo, a value of inventory carrying

cost is US$1.78/hour and user cost of cargo delay is US$2/hour43

;

The average wage of truck drivers is assumed to be US$0.63 per hour.

It is assumed that as customs clearance will be conduced at the dry port, each

vehicle and cargo will save 2 hours for customs inspections.

43 http://bca.transportationeconomics.org/benefits/travel-time/categories-of-travel-time

http://bca.transportationeconomics.org/benefits/travel-time/categories-of-travel-time


- 98 -

Table 66: Opportunity cost of vehicle and cargo through time Y

ear

With case Without case

Ben

efi

t

Cu

stom

s

cle

aran

ce

tim

e

Veh

icle

s

Tim

e v

alu

e

Cargo v

alu

e

Tota

l valu

e

Cu

stom

s

cle

aran

ce

tim

e

Veh

icle

s

Tim

e v

alu

e

Cargo v

alu

e

Tota

l valu

e

2016 1 566 600 2,139 2,738 3 566 1,799 6,416 8,215 5,476

2017 1 621 658 2,345 3,003 3 621 1,973 7,036 9,010 6,006

2018 1 675 716 2,552 3,268 3 675 2,147 7,657 9,805 6,536

2019 1 748 793 2,828 3,622 3 748 2,379 8,485 10,865 7,243

2020 1 803 851 3,035 3,887 3 803 2,554 9,106 11,660 7,773

2021 1 876 929 3,311 4,240 3 876 2,786 9,934 12,720 8,480

2022 1 967 1,025 3,656 4,681 3 967 3,076 10,969 14,044 9,363

2023 1 1,040 1,103 3,932 5,035 3 1,040 3,308 11,796 15,104 10,070

2024 1 1,132 1,199 4,277 5,476 3 1,132 3,598 12,831 16,429 10,953

2025 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2026 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2027 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2028 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2029 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2030 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2031 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2032 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2033 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2034 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660

2035 1 1,205 1,277 4,553 5,830 3 1,205 3,830 13,659 17,489 11,660


(D) CREATION OF VALUE ADDED

Value added is the difference in sale price and cost of production, i.e. the net

value of output that is created by modifying inputs. In the case of this project, there is no

alternative dry port in the province. In absence of any dry port facilities, it is likely that

cargo would be processed outside Mandalay. This means that the additional value

created by dry port activities would not be experienced by Mandalay and represents an

economic benefit lost.

As the cost of production is included as an economic cost and there is no

alternative revenue for Mandalay, the economic benefit in terms of value added is the dry

port revenue presented earlier.

(E) LOGISTICS COST SAVINGS

By operating a dry port customers such as shippers, transport operators, freight

forwarders, and other logistics organizations using the dry port will have a benefit of


- 99 -

saving logistics cost due to time savings in documentation and business process. It is

assumed that one hour time savings will be incurred. The gains in terms of logistics cost

savings are based on the following assumptions and the results are presented in Table 67.

A value of logistics cost savings is US$1.89/hour for conventional cargo and

US$3.78/hour for container cargo

Table 67: Logistics cost savings

Year

Annual

conventional

cargo

Logistics

cost savings

Annual

container

cargo

Logistics cost

savings

Total

logistics cost

savings

2016 502,240 949,234 12,775 48,290 997,523

2017 547,135 1,034,085 14,235 53,808 1,087,893

2018 596,775 1,127,905 15,330 57,947 1,185,852

2019 650,430 1,229,313 16,790 63,466 1,292,779

2020 708,830 1,339,689 18,250 68,985 1,408,674

2021 772,705 1,460,412 19,710 74,504 1,534,916

2022 842,785 1,592,864 21,900 82,782 1,675,646

2023 917,975 1,734,973 23,360 88,301 1,823,274

2024 1,000,100 1,890,189 25,915 97,959 1,988,148

2025 1,060,690 2,004,704 27,375 103,478 2,108,182


(3). ECONOMIC COSTS

The economic investment cost was estimated from the financial investment cost. The

contingency cost was excluded, and the remainder was converted to an economic cost by using

the standard conversion factor of 96.4 per cent44

. Conversion factor is applied to non-trade

inputs to correct for price distortions in the local market. In the case of construction, all inputs

are considered to be non-tradable. The cost is allocated using the dame distribution across years

as for financial analysis.

The economic investment cost is presented in Table 68. For cargo handling equipment

and operational costs, the economic cost equals the financial cost. It is not necessary to adjust

the financial costs for taxes, as materials and equipment for logistics parks are exempt of import

tax and value added tax. The O&M costs are unchanged from the financial analysis.

44 UNESCAP(2011), “Prefeasibility Study of Establishing a Dry Port in Luangnamtha Province, Lao People’s Democratic Republic.


- 100 -

Table 68: Summary of economic development cost

Item Financial cost

(USD)

Percentage included

in economic

analysis

Economic cost

Construction cost 9,570,235 96.4% 9,225,707

Administration cost 287,107 96.4% 276,771

Consultant cost 574,214 96.4% 553,542

Contingency 1,014,445 0 -

Total project development cost 11,446,001

10,056,020


(4). CALCULATION OF PROJECT EIRR

Table 69 shows the annual economic benefit, economic cost and net (economic) cash

flow for the project for the 20 years of operation. As in financial analysis, the residual value of

the dry port has been listed for the final year. The project EIRR is estimated to be 19.15 per cent.

Table 69: Calculation of project EIRR

Yea

rs f

rom

sta

rt o

f

op

erati

on

Yea

r

Economic benefit Economic cost

Net

cash

flow

Em

plo

ym

ent

Op

port

un

ity

cost

of

veh

icle

s

an

d c

arg

o

Valu

e ad

ded

Logis

tics

cost

savin

gs

Tota

l

Eco

nom

ic

con

stru

ctio

n

cost

Lan

d r

enta

l

Eq

uip

men

t co

st

O & M costs

Tota

l

Labour

cost Fuel cost

Utility

cost

2012 0 0 0 0 0 502,801 50,995

0

553,796 -553,796

2013 0 0 0 0 0 3,519,607 50,995

0

3,570,602 -3,570,602

2014 0 0 0 0 0 5,028,010 50,995

0

5,079,005 -5,079,005

2015 0 0 0 0 0 1,005,602 50,995

0

1,056,597 -1,056,597

1 2016 49,494 5,476 1,113,524 997,523 2,166,018

50,995 720,000 52,256 181,040 44,768 1,049,060 1,116,958

2 2017 49,494 6,006 1,228,280 1,087,893 2,371,674

50,995 30,000 58,376 192,720 44,768 376,859 1,994,815

3 2018 49,494 6,536 1,330,316 1,185,852 2,572,198

50,995 50,000 64,495 216,080 44,768 426,338 2,145,860

4 2019 49,494 7,243 1,453,832 1,292,779 2,803,348

50,995 0 67,348 216,080 44,768 379,191 2,424,157

5 2020 49,494 7,773 1,582,093 1,408,674 3,048,034

50,995 30,000 72,106 227,760 44,768 425,629 2,622,404

6 2021 49,494 8,480 1,715,829 1,534,916 3,308,719

50,995 60,000 80,959 251,120 44,768 487,842 2,820,876

7 2022 49,494 9,363 1,890,700 1,675,646 3,625,203

50,995 30,000 84,225 262,800 44,768 472,788 3,152,415

8 2023 49,494 10,070 2,035,751 1,823,274 3,918,588

50,995 30,000 89,667 274,480 44,768 489,910 3,428,678

9 2024 49,494 10,953 2,240,133 1,988,148 4,288,728

50,995 50,000 92,933 297,840 44,768 536,536 3,752,191

10 2025 49,494 11,660 2,370,584 2,108,182 4,539,919

50,995 50,000 100,551 321,200 44,768 567,514 3,972,405

11 2026 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 720,000 100,551 321,200 44,768 1,237,514 3,302,405

12 2027 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 30,000 100,551 321,200 44,768 547,514 3,992,405

13 2028 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 50,000 100,551 321,200 44,768 567,514 3,972,405

14 2029 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 0 100,551 321,200 44,768 517,514 4,022,405

15 2030 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 30,000 100,551 321,200 44,768 547,514 3,992,405

16 2031 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 60,000 100,551 321,200 44,768 577,514 3,962,405

17 2032 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 30,000 100,551 321,200 44,768 547,514 3,992,405

18 2033 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 30,000 100,551 321,200 44,768 547,514 3,992,405

19 2034 49,494 11,660 2,503,955 2,108,182 4,539,919

50,995 50,000 100,551 321,200 44,768 567,514 3,972,405

20 2035 49,494 11,660 2,503,955 2,108,182 4,539,919 -3,352,007 50,995 -59,141 100,551 321,200 44,768 -2,893,633 7,433,553

EIRR 19.15%



- 101 -


According to Asian Development Bank (ADB)‟s Guidelines on governing the financial

management of investment projects, it is recommended that the financial internal rate of return

(FIRR) and economic internal rate of return (EIRR) of a project need to compare with the

Weighted Average Cost of Capital (WACC) to assess whether the project concerned is

financially and economically viable.

The WACC is the discount rate to be used in financial benefit-cost analyses and

represents the cost incurred by the entity in raising the capital necessary to implement the

project. Since most projects use several sources to raise capital and each of these sources may

seek a different return, the WACC represents a weighted average of the different returns paid to

these sources 45

. If the calculated FIRR or EIRR of a project is above the expected WACC, the

project is financially and economically feasible.

According to the recent feasibility studies from ADB in relation to building transport

infrastructure, one project used 2.18 per cent of WACC value46

and the other one‟s WACC was

3.0 per cent47

. The WACC for this dry port project is conservatively calculated for comparison

with the FIRR and EIRR value. It is assumed that the dry port project is financed from two

different sources. One is from ADB grant and the other is from co-financier loan. Nominal costs

are assumed to be 6 per cent and 12 per cent for ADB grant and co-financier loan respectively.

As a result, WACC is estimated to be 6.06 per cent.

Table 70: Project weighted average cost of capital (WACC)

Particular Financing component

Total ADB Grant Co-financier loan

Principal amount (USD) 3,494,994 8,154,987 11,649,981

Weight 30.0% 70.0% 100%

Nominal cost(relending rate) 6.00% 12.00%

Tax rate 25% 25%

Tax adjusted nominal rate 4.50% 9.00%

Inflation rate 1.50% 1.50%

Real cost 2.96% 7.39%

Weighted component of WACC 0.89% 5.17% 6.06%


45 ADB, Financial Management and Analysis of Projects, June 2005. 46 ADB, Socialist Republic of Vietnam: Feasibility Study on the GMS Ha Noi-Lang Son Expressway Project, June 2011. 47 ADB, Lao People’s Democratic Republic: Prefeasibility Study Report TA 7243: Implementation of Asian City Transport Vientiane Sustainable Urban Transport Project, February 2012.


- 102 -

The FIRR and EIRR of the dry port project were estimated to be 8.31 per cent and 19.15

per cent respectively. Both FIRR and EIRR values were above the benchmark level of the

WACC values. This dry port project is both financially and economically viable.


- 103 -

IX. ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT

A. ENVIRONMENTAL AND SOCIAL ANALYSIS

This chapter examines the potential environmental and social impacts associated with the

construction and operation of the dry port. All possible impacts were identified based on

relevant literatures. The aim of the impact identification is to highlight all possible residual risks

associated with the interaction of the dry port facility with the surrounding environment.

Whereas some impacts could be of short term significance, others could be of long term due to

the cumulative impact of the dry port operations during the project period. Table 71 presents a

summary of the main activities and the potential receptors affected by the dry port project. The

described impacts are potential impacts from the main activities starting from land preparation

and construction of the dry port, and activities occurring on the dry port site.

The elements that are affected by the project‟s activities whether on-site or off-site are

classified into two categories: the social & economic environment, and the physical

environment. The social & economic environment includes social concerns such as human

resources, services, local economy, human attitude and adaptation that could have influences on

social characteristics of surrounding communities. The physical environment is concerned with

potential contamination of soil erosion, groundwater contamination, air emissions, water

pollution, noise, waste management, and soil contamination all of which could lead to

alterations in the biotic and biotic environment.

Table 71: Project activities and impacts identification

Activity Duration Receptor

Land preparation and construction Short-term

- Air quality, Water quality & Soil

quality

- Health and safety

- Noise

- Socio-economic

Rehabilitation of some roads leading

to the dry port Short-term

- Air quality & Water quality

- Road access

- Traffic & Noise

- Socio-economic

Dry port site (CY, Storage area, CFS,

Rail terminal, Maintenance workshop,

administration)

Long-term

- Air, Water & Soil quality

- Health and safety

- Noise and Sanitation

- Socio-economic



- 104 -

Impacts are measured based on their type as they could be directly or indirectly affected

by the whole project, nature reflects if the impact is positive or negative, duration emphasizes if

the impact is permanent or temporary within the project time duration, and magnitude is the

power of the impact on a certain component. Data for the environmental and social impact

assessment were collected during the site visit by the project team. The likely type and

magnitude of the impacts has been indicated based on professional judgment as well as

experience from similar facilities as reported in the literature. The environmental and social

impact assessment of the dry port project is presented in Table 72.

Table 72: Environmental and social impact assessment of the dry port project

Impact Description Type Nature Duration Magnitude

Soci

al e

nvir

onm

ent

Involuntary

resettlement

There is no village near the

project area and no inhabitant

inside the area.

Direct Negative Temporary None

Local economy and

employment

opportunity

The project would contribute to

the local and national economy

and provide an employment

opportunity for local people.

Direct Positive Permanent High

Land use and

utilization of local

resources

There would be no major

impact on current land use in

terms of agricultural or other

business activities that generate

income for local people.

Direct Negative Temporary Low

Poor, indigenous and

ethnic people

No immediate impact on

existing livelihoods is foreseen. Direct Negative Temporary None

Cultural heritage

There is no cultural or

archaeological heritage inside

or near the project area


Local conflict of

interest

There would be no conflict of

interest with local residents Direct Negative Temporary None

Sanitation

Waste water and sewage from

construction work and

operation may affect the project

area and its adjoining areas in

terms of sanitary condition.

Direct Negative Permanent Moderate

Hazards infectious

diseases

There would be no infectious

diseases in and around the

project area due to influx and

efflux of people.


Accident

During the construction and

operation of the dry port

increasing traffic may increase

the risk of accident.



- 105 -

Table 72: Environmental and social impact assessment of the dry port project (continued) P

hysi

cal

envir

onm

ent

Topography and

geographical features

Land preparation works may

have some impacts on current

topography and geographical

features to certain extent.


Soil erosion

Land preparation works may

cause soil erosion to certain

extent.


Ground water

Without proper sanitation

system ground water quality

may be affected.


Hydrological situation

Existing hydrological situation

may be affected as a result of

land preparation works.


Flora, fauna and

biodiversity

The project area is not

categorized as protected area

but land preparation works and

its construction would affect

the flora, fauna and biodiversity

in the project area and

adjoining area.

Direct Negative Temporary Moderate

Air pollution

Deterioration of air quality may

occur due to construction and

operation of the dry port.


Water pollution

Water pollution may occur

during construction and

operation of the dry port due

to efflux of wastewater and

sewage.


Soil contamination

Waste and sewage from dry

port construction and operation

may cause soil contamination

to the project area and

adjoining area.


Noise and vibration

Construction machineries and

vehicles, operation of cargo

handling equipments and cargo

vehicles would generate noise

and vibration in and around the

project area.



Impact Description Type Nature Duration Magnitude


- 106 -

Table 73 shows the potential socio-economic impacts of the dry port project. These

impacts can be commonly identified from similar projects48

. From social and economic point of

view building a dry port in Mandalay will have more positive impacts.

Table 73: Potential socio-economic impacts of the dry port project

Impact Beneficial Adverse

Economic Employment generation

Expenditure of wages in local area

House purchase and rental

Equipment and services procurement

Local authority business tax revenue

Increase in property value

Negative economical impacts are not anticipated

Social Indirect beneficial community impacts

from employment and provision of

skilled workforce

Provide educational benefit as well as training for employees and workers

Positive impact on human rights from operating according to international

standards

Risks of occupational and

environmental health issues

Nuisance to nearby villages due to increased dust, noise,

emissions, traffic and level

of activities


B. ENVIRONMENTAL MANAGEMENT PLAN

The Environmental Management Plan (EMP) for the dry port project identifies the

measures that will be used to control and minimize the environmental and social impacts of all

construction and operational activities associated with the project. It is intended to complement

the environmental and social impact assessment of the project. Table 74 presents the actions that

can be undertaken to minimize or eliminate the major negative impacts while improving the

positive impacts.

Table 74: Environmental management plan for the dry port project

Impact Mitigation measures

Local economy and

employment opportunity

Promote jobs for local communities

Provide education and job training for workers

Accident

Avoid public access by proper fencing and guarding

Provide drivers with a transport management plan

Use adequate signs and safety barrier

Provide personal with proper personal protection equipment

48 http://www.miga.org/documents/buchanan_fuel_ESIA.pdf


- 107 -

Table 74: Environmental management plan for the dry port project (Cont…)

Impact Mitigation measures

Sanitation

Avoid littering in the open fields

Educate workers on sorting waste

Raise worker awareness of hazardous waste and proper management

Flora, fauna and

biodiversity

Ensure proper management of solid and liquid wastes

Promote plantation of trees around the site

Prohibit any action that leads to the destruction of the ecological

system

Air pollution

Ensure proper maintenance of engines and any machine used on-site

Set slow speed limits for trucks

Ensure that vehicles are turned off when not in use

Prohibit any kind of smoke or fire on-site

Water pollution

Present oil spills and ensure proper containment

Ensure proper storage of oil and lubricants

Avoid littering or discharge of any debris into nearby water bodies

Soil contamination

Train and instruct workers on proper segregation and management of

different waste materials

Provide proper containment of stored liquids and avoid any leakages

Noise and vibration

Limit vehicle circulation near residents to daily working hours

Reduce noise emissions by enclosing any continuous source of noise

e.g. generator



This chapter assessed the potential environmental and social impacts associated with the

construction and operation of the dry port. The main activities and the potential receptors

affected by the dry port project were presented. The elements that are affected by the project‟s

activities are classified into two categories: the social & economic environment, and the physical

environment. Impacts are measured based on their type, nature, duration, and magnitude.

The Environmental Management Plan (EMP) for the dry port project was suggested to

control and minimize the environmental and social impacts of all construction and operational

activities associated with the project. The mitigation measures recommended could help the

project owner and responsible party to eliminate the major negative impacts while improving the

positive impacts.


- 108 -

X. CONCLUSIONS AND RECOMMENDATIONS

A. CONCLUSIONS ON DEVELOPMENT OF DRY PORT IN MANDALAY

The economy of Myanmar has been growing over the last two decades with annual

growth of about 10 per cent and international trade including both maritime trade and border

trade is also increasing steadily. There are 8 ports for the coastal and international maritime

traffic. Among them, the port of Yangon is the main port of Myanmar handling about 90 per

cent of the country‟s export and import cargo. The growth rate of container cargo throughput in

Yangon port is about 16 per cent for the last 6 years. Border trade with China and Thailand is

also growing year by year. Main export cargoes are agricultural products such as beans and

pulses, dominantly cultivated around Mandalay region. Most of the import cargoes from the

China border are transported to Mandalay where the goods are distributed to other regions of the

country.

Mandalay is the second largest city and the economic hub of upper part of Myanmar in

terms of location, commerce, road, rail and inland waterway access. Mandalay division

contributes about 7 per cent of the country‟s GDP and per capita GDP is higher than national per

capita GDP. The value of production, services and trade for Mandalay region is about 2,407

millions in 2011. About 50% of the total product value is agriculture product value. Among

services value, transportation is about 80%. Mandalay Industrial Zone is one of the biggest

zones in Myanmar and its total size is 1,820 acres. There are 406 large scale, 323 medium scale

and 722 small scale industries. Mandalay regional commercial trade will be increasing

continuously and there are many potential development projects such as new Mandalay city

development project, called “The new city project” in 22,000 acres of land, and development of

the inland waterway river port projects to boost inland water transport along the Ayeyarwaddy

river. Mandalay City Development Committee (MCDC) is constructing new Mandalay highway

bus terminal and Merchandise center in 65.95 acres of land about 20 km away from the city

center. Some of export and import cargoes will use this facility to store and distribute.

Mandalay is located on the Asian Highway (AH1 and AH14), future Trans-Asian

Railway network (TAR-S1 and TAR-S2) and the longest river of Myanmar, the Ayeyarwaddy.

Because of its geographic location it plays a role as a logistics hub in Myanmar for the

distribution of domestic and international cargoes. Business activities in Mandalay have been

increasing with goods mostly from the China border trade passing through the city and

international cargoes moving between Mandalay and the port of Yangon.


- 109 -

Myanmar government has proposed seven potential sites for dry ports in accordance

with the liberalized economic policy of the newly elected government and is ready to sign the

intergovernmental agreement on dry ports which was drafted in July 2012. Among the proposed

sites, Mandalay is highest priority and has many comparative advantages over others. Ministry

of Rail Transport, Myanmar has selected Mandalay as a potential dry port for a prefeasibility

study.

This prefeasibility study drew a preliminary conclusion that a dry port located in

Mandalay should be developed based on the analysis of financial, economic, environmental and

social aspects. It is recommended that a full-scale feasibility study should be carried out.

According to forecast of cargo traffic through Mandalay, its annual growth rate is 7 per cent. In

order to handle the increasing volume of trade and transport efficiently, it is necessary to build a

dry port which provides logistics services.

It is forecasted that annual container traffic through dry port would be 47,815 TEUs in

2035 and annual conventional cargo would be 1,881,940 tons in 2035. The space required to

develop a dry port is estimated to be 8.5 hectares and the site of dry port should be adjacent to

Merchandise Center in Mandalay. The key functions of the dry port should include cargo

consolidation and distribution, cargo storage, customs clearance function, conventional cargo

handling, container yard, intermodal transport handling, and transloading and transit.

The financial internal rate of return (FIRR) of the dry port project is 8.31 per cent and its

economic internal rate of return (EIRR) is 19.15 per cent. In comparison with WACC values

both FIRR and EIRR exceed the benchmark level of the WACC. This means this project is

financially and economically feasible.

According to the social and environmental impact assessments this project has minor

negative impacts on the local community. However, there are positive impacts on national and

local economy by generating income and creating an employment opportunity for local

residents.

B. RECOMMENDATION FOR FULL-SCALE FEASIBILITY STUDY

The results of this prefeasibility study present that the proposed dry port is financially,

economically, socially and environmentally feasible. Accordingly, it would be worthwhile to

proceed to the feasibility study stage. In order to fulfill full-scale feasibility study the following

factors need to be taken into consideration.


- 110 -

Data collection: During the preparation of this prefeasibility study useful data and

information has been collected and included in this prefeasibility study report. Any

duplicated work of data collection could be avoided at the stage of feasibility study.

Expertise required: To conduct a feasibility study expert knowledge is required to

investigate the potential site of dry port, civil engineering for the construction of dry

port, financial and economic analysis, and social and environmental impact

assessment of dry port project.

Location that feasibility study team should visit: The potential site for dry port in

Mandalay should be visited by the feasibility study team. In particular, it is

recommended that the feasibility study team needs to visit Mandalay Merchandise

Center and investigate its function and possibility to use part of its site as a dry port.

C. RECOMMENDATION FOR UTILIZING THIS PREFEASIBILITY STUDY

With the continuous growth of economy and international trade it is important to

develop a dry port in Mandalay to handle cargo efficiently and reduce logistics costs. According

to the outcomes of the prefeasibility study there are broader social and economic benefits for the

country. It is recommended that the relevant ministries or departments at both central and local

government levels be involved in promoting the development of a dry port.

The current prefeasibility study provides valuable information for further full-scale

feasibility study and the relevant government department or ministries can use the key outcomes

of the prefeasibility study report to promote and attract the investment of the dry port project

from potential investors.

dry port research in myanmar 01

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