The Burmese economy has been growing in fits and starts since opening up last year. While Burma is rich in natural resources, the country chose to open up at a time when the world economy remains weak and many companies are shunning large scale investments. Now, Burma will receive a major shot of funding as the World Bank has announced a $140 million loan to help the country develop its energy sector.
World Bank’s engagement with countries
Compared to its sister agency, the IMF, the World Bank has been quiet in recent months. While the IMF looks to ensure global financial stability, the World Bank generally aims to help countries develop their economies through a mix of grant and loan programs. As such, loans to develop basic infrastructure, such as electricity, are often the cornerstone of the World Bank’s engagement with a country.
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Burma is in desperate need of upgrading its dilapidated energy sector, with 70 percent of the country’s population living without access to energy. Even in major cities, such as Yangon, access to energy can be sporadic and power cuts and black-outs are frequent. Beyond depriving citizens of power, many businesses have been weary of setting up operations and offices in a country where access to electricity is far from guaranteed.
Burma to upgrade gas turbine plant
The World Bank loan will allow Burma to upgrade a vital gas turbine plant in the Southern Mon state. After the turbines are placed, the plant will be able to produce three times as much electricity. This will allow the plant to meet about 50 percent of the state’s demand for electricity, though it will only meet about 5 percent of overall demand for electricity in the country.
Currently, the Mon state supports one of the larger manufacturing bases within the country. The state has also been a major site for natural gas exploration and other activities that are drawing in foreign direct investment. Increased access to electricity should help support economic expansion in the region. It should also help support the expansion of the local provision of goods and services.
World Bank’s electricity development
So far, it appears that the World Bank is more interested in supporting electricity development in rural areas. By doing so, the Bank hopes to build up rural infrastructure and lead to the establishment of schools, hospitals, and other vital resources. Interestingly, this could leave the capital city and economic hub of Yangon in the dark. Currently, only 63 percent of residents in the capital have regular access to electricity.
Still, the World Bank hopes that the power plant in Mon will be able to serve as an example of how Burma can develop its electricity sector. Private investors and funders themselves can provide funding and investments to drive the development of electricity grids in Yangon and other major cities. So far, however, most companies and offices have been forced to rely on expensive and inefficient gasoline/diesel generators, leaving companies and individuals who cannot afford such equipment in the dark.
For now, Burma’s economic growth will likely be curtailed until the national infrastructure can be brought up to par with world standards. Many areas of the country lack passable roads, while electricity is in short supply. Clean, safe drinking water must often be brought in by tankers and bottles, as local purification plants—if they exist at all—are not up to task. If Burma is unable to develop its infrastructure at a reasonable pace, the luster of the country’s investment environment may eventually cool and foreign investors will begin to look elsewhere.