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Energy exports to drive 8.6pc GDP growth: ADB

By By Thomas Kean (Volume 26, No. 504)

ENERGY exports, mining and construction will fuel annual Gross Domestic Product (GDP) growth of 8.6 percent to 2030, an Asian Development Bank (ADB) report says.

Electrification, or the percentage of households connected to the electricity grid, is projected to rise to 80pc over the same period, while primary energy demand will increase by 2.6pc annually, slightly above projections for the region and almost double the global average.

Mr Edito Barcelona, a consultant with the ADB who worked on the report, Energy Outlook for Asia and the Pacific, said the GDP growth projection was based on government policies and other information reported by Myanmar government officials during ASEAN meetings and workshops.

“In modelling, we assumed that this GDP growth could come from energy exports such as oil, natural gas and hydroelectricity which would also spur growth in other sectors of the economy,” Mr Barcelona said.

Dr Sean Turnell, a professor of economics at Australia’s Macquarie University and editor of Burma Economic Watch, said natural gas sales would not provide any new impetus to GDP growth until new projects came online in 2013.

“It’s true that Myanmar’s energy sector will be the source of rising export surpluses into the future – and hence a net positive contributions to GDP growth – but there’s no reason to see this sector being a growing contributor to this end in the coming year,” Dr Turnell.

“I think there will be growth in Myanmar and the report is right to note the stimulus of the pipeline construction and various other energy investments – but these are not large and have small multipliers into the broader economy, as Chinese construction often involves imported Chinese workers, for instance,” Dr Turnell said.

Natural gas exports are expected to almost double over the next decade as the Shwe and Zawtika projects come online and Mr Barcelona said these profits, augmented with foreign investment, could then be used to fund the electrification.

“To reach 80pc [electrification] in 2030, Myanmar needs to invest in increasing its electricity generating facilities, extension of its transmission and distribution lines as well as substation capacities to currently un-electrified areas in the country,” he said.

While Mr Barcelona would not be drawn on how much would be required to fund electrification in Myanmar, the ADB estimates countries in the Asia and Pacific region must invest between $7 trillion and $9.7 trillion in the energy sector from 2005 to 2030 to meet the rapidly growing demand for energy in the region.

Despite the threat of global warming, up to 80pc of the region’s energy demand will be met by fossil fuels, such as coal, oil and gas by 2030.

While Myanmar is also expected to tap these energy sources, it will rely almost exclusively on hydropower for electricity generation by 2030, Mr Barcelona said.

“Myanmar has huge potential for hydroelectric generation and is even capable of exporting electricity beyond 2030,” he said.

One possible downside is the availability of water during dry season but this could be averted if Myanmar is able to interconnect its power system with Mekong-region neighbours.

“It is ideal for the government to consider a more balanced electricity generation – to ensure supply security – as the country also possesses other energy resources, such as coal and natural gas,” he said.

The growing demand for energy is expected to provide a boost for previously untapped coal resources in Myanmar, he said.

“The projected GDP growth of Myanmar would entail a corresponding growth in infrastructure and will bring about growth in industrial and trade activities. As infrastructure is developed, there would be growing demand for cement which could be produced locally. As cement production needs coal, this would encourage coal production.”

Myanmar has about 4 million tonnes of recoverable coal reserves and 90 million tonnes of potential reserves, according to the Ministry of Energy. “For these resources to be developed, exploration activities to determine the recoverable reserves should be carried out.”