Railway construction to connect large cities in Myanmar is about to get a kick-start with help from Japan. Buoyed by public- and private-sector technical expertise and government support in the form of official development assistance (ODA), the project would upgrade a 600 km railway line linking the country’s largest city, Yangon, and the economic hub of Mandalay. Under a plan being prepared by the Japan International Cooperation Agency (JICA), Japanese firms are expected to win contracts to supply rolling stock and signaling systems. Upgrades to Myanmar’s key economic corridor are also intended to help prepare an attractive investment environment for Japanese firms.
The project involves upgrading the main trunk line of Myanmar’s national railway network, linking Yangon and Mandalay via the capital city, Naypyidaw. The majority of rail investments in the country are directed towards new lines, and with the boost in railway capacity, the age of existing trunk lines has become a hot button issue.
The Japanese and Burmese governments will hold a joint meeting between vice-ministers in the respective transportation ministries, discussing potential assistance strategies from Japan such as ODA. Japan currently plans to begin offering yen loans in spring 2014, with JICA beginning work on local studies and surveying work sometime in FY2014. Contracts would be awarded in FY2015 after a multi-national competitive bidding process, according to a railway improvement plan developed by JICA.
The JICA plan would include Japanese-standard signaling and track systems. Consortiums led by general trading companies such as Mitsui & Co. (三井物産), Marubeni Corporation (丸紅), and Itōchū Corporation (伊藤忠商事), partnering with railcar manufacturers such as Kawasaki Heavy Industries (川崎重工業), Hitachi (日立製作所), and Kinki Sharyō (近畿車両), are expected to be the main bidders on the project. As a multi-national bidding process, Japanese firms aren’t guaranteed a win, but are expected to have a leg up thanks to pre-bidding discussions between the Japanese and Burmese governments.
Japan would begin construction as soon as FY2016, prioritizing the 270 km section from Yangon. The remaining segments to Mandalay would be completed around 2030. The plans also include a speed upgrade from the current 30-40 km/h to 100 km/h, eventually halving the travel time between Yangon and Mandalay from 16 hours to 8 hours and improving freight and passenger capacity.
Myanmar’s geographical location makes it suited as an expansion hub into the continental Asian market, and combined with the cheap labor, the country is an attractive investment location. Yangon is also located next to port facilities, and if a goods distribution infrastructure can be established connecting Yangon with the country’s second city and economic hub in Mandalay, the project could become a catalyst for expanding opportunities for Japanese firms in automobile, textile, food, and other industries.
Foreign investment is on the rise in Myanmar, widely viewed as the “last frontier” of Asia, and there is increasingly fierce competition for contracts among multinational companies. In the infrastructure market, Japanese firms lost out to competitors from China and Korea in an airport contract in August, but it is hoped that railway projects may turn out differently.