Myanmar

Key development challenges

Myanmar is a lower middle-income country. Since the coup d’état overthrew the democratically elected government in February 2021, international development cooperation has largely been suspended. The country’s $65 billion GDP accounts for 1.9% of the regional economic output of Southeast Asia. With a population of more than 53 million, Myanmar’s GDP per capita is $1,210 — the lowest in the region.

After a series of shocks, including the Covid-19 pandemic, the military takeover, internal conflict, and displacement of ethnic populations, Myanmar has seen a reversal of much of its development progress in recent years. Due to the coup, the latest data on the economy is unreliable. The World Bank estimates that poverty has potentially doubled, with about 40% of the population living below the national poverty line in 2022. The number of internally displaced persons is expected to reach 2.7 million by the end of 2023.

Myanmar’s Human Development Index ranking is 149th out of 191 countries. Political violence, economic isolation, corruption, and governance are considerable constraints on progress. Myanmar ranks 157th out of 180 countries in Transparency International’s Corruption Perceptions Index for 2022.

From 2015 to 2021, more than 15,000 projects were implemented by 76 development partners in Myanmar, amounting to a total of more than $17 billion disbursed or an average of $2.4 billion per year.

Overview of development finance trends

In real terms, overseas development finance (ODF) flows to Myanmar grew from 2015 and peaked in 2020, before halving in 2021 after the coup d’état. Myanmar received the third-highest amount of ODF in 2020, but this fell to the sixth-highest in 2021. ODF disbursed to Myanmar averaged $2.4 billion per year, accounting for around 9% of regional ODF through the period.

There was a significant decline in spent ODF in 2021, with grants, concessional loans, and semi-concessional loans falling across all major development partners, including China, Japan, and the Asian Development Bank (ADB). However, the decline in loans was more significant than the decrease in grants. ODF as a proportion of GDP trended down prior to 2020, due to Myanmar’s fast-growing economy, before rising sharply in 2020 after the onset of the Covid-19 pandemic.

Commitments roughly tracked disbursements between 2015 and 2020. In 2021, however, significant commitments of $7.6 billion were offered by China via semi-concessional loans for the Mandalay–Kyaukphyu railway project Mya051 and the Kyaukphyu Special Economic Zone (KPSEZ) deep-sea port project. But no disbursement on these projects has been registered in the period.

Main development partners

Myanmar’s major development partners were Japan, China, the World Bank, and the United States. Japan averaged $613 million disbursed annually, while the next largest development partner was China, which averaged $319 million. The second tier of development partners comprised the United States, the United Kingdom, EU institutions, and the Asian Development Bank, which combined accounted for about 23% of total development financing spent in the country during 2015–21.

Between 2015 and 2021, Japan’s disbursements in Myanmar were mainly focused in the transport and storage sector (25%) and the industry, mining, and construction sector (13%). These were infrastructure-focused projects primarily funded through semi-concessional loans and some smalller grants. In 2018, Japan became the largest development partner in Myanmar, overtaking China, after ODF expanded by more than 45% from 2015 levels. The vast majority of Japan’s projects were financed by the Japan International Cooperation Agency (JICA) and the Japanese Ministry of Foreign Affairs. Among the most notable were the Yangon–Mandalay Railway Improvement Project (2014003078 - JICAMY-P4; 2018003027 - JICAMY-P26, 2017003011 - JICAMY-P21), which started in 2017. Its aim was to improve railway facilities and to enhance transportation capacity between Yangon and Mandalay. Another major project was JICA’s Covid-19 Crisis Response Emergency Support Loan 2020003068 - JICAMY-C2 made in 2020, worth $280 million. The project supported the implementation of the Covid-19 Economic Relief Plan and focused on promoting investment, trade, and activity in Myanmar’s financial sector by providing budget support.

China’s role in Myanmar’s development dates back to 1988, when Myanmar was internationally isolated following a coup d’état. China increased its trade and investment, primarily in infrastructure. China’s development finance has focused on industry, mining, and construction, with bilateral oil and gas projects accounting for more than half of total spending between 2015 and 2021. The agriculture, forestry, and fishing sector and the energy sector have also received significant funding from China.

China’s development finance has been primarily delivered by the Chinese government, China National Petroleum Corporation (CNPC), and the Export–Import Bank of China. Total Chinese ODF reached $872 million in 2015. However, China’s ODF to Myanmar has been in steep decline, falling in 2021 in real terms to only 14% of 2015 levels. The largest project is the Myanmar–China Oil Pipeline Construction Project Mya057, which starts from Maday Island on the western coast of Myanmar and enters China at Ruili in Yunnan Province. The pipeline runs 771 kilometres in Myanmar and 1,600 kilometres in China, with transmission capacity of 22 million tons per year. The pipeline is jointly invested and constructed by CNPC and Myanmar Oil and Gas Enterprise (MOGE), with each holding a 50.9% and 49.1% stake respectively. Another major program was the Loan for the Ministry of Cooperatives Mya047-1, which provided $300 million to support microfinancing for farmers in the country.

The World Bank’s development finance to Myanmar during 2015–21 was mostly directed towards the energy sector (34%) and the government and civil society sector (19%). It was delivered primarily through semi-concessional loans, with a small amount through grants. The National Electrification (P132500) and Electric Power (P152936) projects accounted for more than one-third of total World Bank development finance throughout this period.

Between 2015 and 2021, 82.8% of the development support provided to Myanmar was concessional in nature, much higher than the regional average of 47%. In 2021, over 99% of development finance was concessional, which is explained by the cessation of a significant amount of non-concessional development support in response to the military takeover.

In terms of implementing partners, the central government of Myanmar was the major recipient of development flows from the international community. However, this was followed by China National Petroleum Corporation and Myanmar Oil and Gas Enterprise (MOGE) due to the major pipeline project from Maday Island to Yunnan Province.

Sectors

Compared to total ODF provided to other countries in Southeast Asia, ODF to Myanmar was focused on acute poverty reduction and humanitarian aid rather than economic development. China’s large investments also pushed industry, mining, and construction sector flows to above the regional average. Development finance was well above the regional average in the health, humanitarian aid, and agriculture, forestry and fishing sectors, while the energy, transport and storage, and banking and financial services sectors were substantially below the regional trend.

The government and civil society sector received the largest contribution due to the provision of general budget support, totalling 18.5% of ODF flows over the period. This included a $280 million concessional loan from JICA in 2020 to support economic relief from Covid-19 2020003068 – JICAMY-C2 and two general budget support loans from the IMF Concessional Trust Funds (2021000056-12; 2020000026) in 2020 and 2021. The health sector received significant funding for STD prevention and treatment programs that focus on HIV, accounting for the three largest projects and at least 21% of total development financial flows within the sector.

ODF for humanitarian aid focused on emergency relief — including shelter, water, and food for crisis-affected people — accounted for more than 37% of disbursements in the sector. The largest investment was the Project for Emergency Food Assistance in Ethnic Areas 2016010005 with a total disbursement of $20 million financed by Japan’s Ministry of Foreign Affairs.

The industry, mining, and construction sector received funding above regional trends due to the joint oil pipeline between China National Petroleum Corporation and the Myanmar Oil and Gas Enterprise Mya057. Within the sector during 2015–21, this project accounted for 99% of spending in upstream oil and gas and 62% of total development finance spending. Its total value was six times more than the next largest project in the sector. The energy sector, which was substantially below regional trends in terms of development finance, mainly focused on the construction of electrification infrastructure in Myanmar, providing centralised electric power transmission and distribution grids.

Infrastructure spending trended upwards between 2015 and 2020, with a particularly large increase in 2020 due to the Nationwide Data Connectivity Project XM-DAC-46004-52200-001-LN3777, worth a total of $350 million and funded by the ADB. Human development spending fell from 2016 before rising from a trough in 2018 to reach a peak in 2020. However, 2021 saw a significant drop in both infrastructure and human development spending due to the large withdrawal of development support after the military takeover in February 2021. For the human development sector, that fall was partially moderated by a donation of Covid-19 vaccines from China worth $100 million Mya058 in July 2021.

Climate

The Southeast Asia Aid Map uses an adapted version of the Organisation for Economic Co-operation and Development’s (OECD’s) climate marking system to sort projects into three distinct categories: principal, where climate change mitigation or adaptation is explicitly stated as fundamental to the project; significant, where climate change mitigation or adaptation is explicitly stated but not fundamental; and not climate-related, where climate change is not targeted in any significant way.

Total climate financing constituted only 20% of total development disbursements in Myanmar during 2015–21. “Principal” climate financing constituted just under 4% of total disbursements. It did increase from 2.6% in 2015 to 7% in 2020 but has since dropped back to 2.4% in 2021 after the military coup. Among the most notable projects were the ADB’s Greater Mekong Subregion Highway Modernization Project XM-DAC-46004-47087-003-LN3747, worth $195 million, and the Urgent Rehabilitation and Upgrade Project 2013003067 - JICAMY-P2 to improve power supply reliability, which was a $112 million project funded by Japan.

Most of the climate development finance in the country was invested in the energy sector, notably in electricity grid improvements, hydro-electric power plants, and energy planning and policy. Total climate development finance was split roughly between grants and concessional loans, with the top development partner being Japan by a large margin and then the United Kingdom and the World Bank.

Myanmar as an ODF provider

Although Myanmar is considered an aid recipient, Naypyidaw has contributed annual funding to the ASEAN Coordinating Centre for Humanitarian Assistance on Disaster Management (MN-AHA), which aims to facilitate cooperation and coordination among ASEAN countries and with relevant United Nations and international organisations, in promoting regional collaboration in disaster management and emergency response.