Muse-Mandalay Railway Project
Source: Future Southeast Asia https://futuresoutheastasia.com/muse-mandalay-kyaukphyu-railway/
Muse-Mandalay Railway Project
The Muse-Mandalay Railway project is a proposed 431-kilometre long standard-gauge railway project situated across the China-Myanmar border with an estimated cost of USD $9 billion. The railway is planned to connect Kunming, the capital of China’s southern Yunnan province, to Mandalay in central Myanmar. It represents a major part of the China-Myanmar Economic Corridor (CMEC). Under the CMEC framework, other projects were also proposed to extend the line from Mandalay to the Kyaukphyu Special Economic Zone (KP SEZ) and the New Yangon City, the two other key sites of China-Myanmar infrastructure projects.
The CMEC projects promote a more robust China-Myanmar trade relationship and improve connectivity between China’s land-locked Yunnan province and the Indian Ocean, offering China with shipping routes for goods and energy resources that bypass the Malacca Strait. In addition, studies suggest the upgrades to Myanmar’s railway could aid in Burmese economic development. According to business owners and other stakeholders surveyed, lack of infrastructure was one of the key barriers to starting a business in Mandalay, suggesting that the railway infrastructure could boost growth. Despite its benefits, there are other considerations such as ongoing funding for maintenance, debt-trap diplomacy, and armed conflict in the area.
Official action on the Muse-Mandalay Railway project began with the signing of a memorandum of understanding (MOU) in 2011 between China and Myanmar, but work was suspended in 2014 due to strong objection from local people. The project was revived in 2018 during the National League of Democracy (NLD) government’s term. As of 2021, the Muse-Mandalay Railway project remains in the planning stages. However, it can be expected that the military junta—the State Administration Council (SAC)—would approve the construction without due considerations, largely due to the political legitimacy and diplomatic protection the Chinese government can offer at the international forum.
Infrastructure development was named as a key part of the NLD government’s twelve-point economic policy announced in 2016, with a preference for the PPP model as a means to meeting the country’s massive infrastructure investment needs. This push for infrastructure investment led to the development of the CMEC framework under the NLD in 2018. Daw Aung San Suu Kyi stated at the 2017 BRI Forum that BRI projects would be in accordance with Myanmar’s national development plan and that they must be national priorities linked to its Myanmar Sustainable Development Plan (2018-30). In addition, each project must pass through a competitive tender process, and financing will be multilateralized. However, it is not as yet clear whether the Muse-Mandalay Railway project will be implemented under CMEC as a bilateral cooperation PPP project or if it must pass through an open tender process.
The key entities involved are Myanmar Railway (MR) and China Railway Eryuan Engineering Group Company Limited (CREEC), both of which are state-owned enterprises. The financing structure of Muse-Mandalay appears to be undetermined at the time of writing, but it is most likely a joint venture between the two government SOEs, set up through a special purpose vehicle (SPV) to be implemented under the PPP model—specifically, a Build-Operate-Transfer (BOT) model—under which CREEC would pay for construction and operate the rail for a set period of time before returning to MR.
Though the Muse-Mandalay Railway project was initiated by CREEC in 2011, it remains in an early phase of the project cycle. This delay could be attributed to the governance deficits and lack of proper project planning and implementation plan during President Thein Sein’s administration, and the previous period of military rule. In addition, implementing government agencies (IGAs) have limited capacity with respect to the systematic use of PPP for infrastructure development. On the factors of strategic investment plans, financial risk management, institutional capacity and line ministries’ current practices, Myanmar ranked poorly and requires significant work in capacity building. Moreover, Myanmar Railway (MR), a Myanmar government state-owned enterprise (SOE) under the control of the Ministry of Transport and Communication, lacks the capacity to properly govern this mega infrastructure PPP project, and needs to address many issues, including shortfalls against operational costs, misguided investment priorities, financial restructuring, governance reforms, setting up regulatory institutions, and the commercialization of MR.
The proposed route for Muse-Mandalay Railway would run through conflict-afflicted Northeast Myanmar. Since the military coup, there has been an increase in drug trafficking activity in these areas coinciding with the increased conflict and deterioration of security and governance. The construction and operation of Muse-Mandalay Railway would most likely require increased security from the military junta or its border guard forces, and with the increased armed presence, tensions between the military junta and ethnic armed groups and ethnic populations would likely increase. However, the SAC has removed the public consultation clause from the BRI Working Committee’s guidelines in order to facilitate faster implementation of BRI projects for the sake of political expediency and official recognition by the Chinese government. With the increased tension, the project should be postponed until it is possible to conduct proper consultation with affected communities and undertake a transparent land acquisition process.
No access to feasibility studies
None of the three feasibility studies conducted for this project appear to be available, making it difficult to judge the true costs and benefits of the project. Furthermore, all feasibility studies have been conducted by MR and CREEC, the same entities that would implement the project, creating a conflict of interest that throws the reliability of these studies into doubt. Besides, risks are rising since the military takeover, thus the previous risk assessment needs to be reassessed.
To capture different practices, quality and level of transparency, researchers are asked to answer six related questions for each data point. 1 point is assigned for each question to which the answer is “yes.” Each data point therefore has a total score between 0 and 6, where “0” means no information was publicly available at the time of research (not transparent) and “6” means full transparency.
|Project & Contract Phase||Project Information||Score||Response||Link to Information|
|Project Identification||Project owner||Myanmar Railways (MR), Ministry of Transportation and Communication, Myanmar/ China Railway Eryuan Engineering Group Company Limited (CREEC)||https://mmtimes.com/news/route-new-muse-mandalay-express-railroad-selected.html|
|Sector, subsector||Infrastructure: Transportation||Muse-Mandalay-Kyaukphyu Railway (futuresoutheastasia.com)|
|Project name||Muse-Mandalay Railway Project||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Project Location||The 431-kilometer long rail line will connect China-Myanmar border town, Muse with Myanmar’s third largest city, Mandalay.||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Purpose||To improve connectivity in Southeast Asia and to promote Chnia-Myanmar economic and trade cooperation||https://www.irrawaddy.com/news/burma/analysis-muse-mandalay-railway-agreement-china-raises-debt-conflict-fears.html|
|Project description||The project is 431-kilometer long standard-gauge and single track railway project with a design speed of 160 kilometers per hour at the total estimated cost of US$9 billion. It will connect Muse, the largest trade portal between two nations and Mandalay, the central Myanmar’s commercial hub and the country’s third largest city. It is part of China-Myanmar Economic Corridor CMEC and also entry point of Bejing’s Y-shaped strategic railway link that plans to build from Ruili to Mandalay then extends east and west to New Yangon City and to Kyaukphyu deep sea port and SEZ in Rakhine State.||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Project Preparation||Project Scope (main output)||The 431-kilometer long standard-gauge and single track railway project. It expected to be designed for electric train with speed of 160 kilometers per hour. Along the railway, 60 tunnels, 124 bridges, 724 road crossings and 36 stations will be constructed.||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Environmental impact||There are some major environmental and social impacts including the loss of protected forests and watersheds, waste problems, noise and air pollution, as well as land confiscations, loss of livelihoods and other social problems caused by the massive migration that will likely be prompted by the railway project, according to the Green Tech Environmental Services and Training Co. Ltd which carried out the Environmental Impact Assessment. The EIA report has not been publicly available. According to the feasibility study, 60 tunnels, 124 bridges, 724 road crossings and 36 stations will be constructed along the railway.||https://www.irrawaddy.com/features/mysterious-signs-impending-china-backed-railway-worry-villagers-myanmars-shan-state.html|
|Land and settlement impact||The railway will pass through a total of 11 townships in Mandalay, Pyin Oo Lwin, Naung Cho, Kyaukme, Lashio, Kutkai, Hsipaw, Nam Un, Theinni, Nam Hpak Ka and Muse in northern Shan State near the Chinese border. While the railway route has been finalized, neither side has made it public yet. It’s still unknown how many people and households will be affected and how many farmlands could be seized, and how many protected areas and watersheds will be destroyed by the project. The local communities would face possible problems such as land confiscations, farmland loss and harmed livelihoods.||https://www.irrawaddy.com/features/mysterious-signs-impending-china-backed-railway-worry-villagers-myanmars-shan-state.html|
|Contact details||China Railway Eryuan Engineering Group (Chengdu) No. 3 Tongjin Road, Chengdu, Sichuan [email protected]||https://www.creegc.com/en/tabid/212/Default.aspx|
|Funding sources||China Railway Eryuan Engineering Group Co.,Ltd. Proposed but just finished feasibility study||https://www.irrawaddy.com/features/mysterious-signs-impending-china-backed-railway-worry-villagers-myanmars-shan-state.html|
|Project Budget||It is estimated that the project will cost almost US$8.9 billion. CREEC have covered the full cost of the study, including the assessment of environmental and social impacts of the proposed railway line. The officials from Ministry of Transport and Communication said that “The Chinese company only worked on the feasibility study. We will invite international tenders for the project.” However, further details information is not disclosed yet.||www.unescap.org/sites/default/files/Rail%20Sector%20Development%20Activities%20in%20Myanmar-Mr.%20Ba%20Myint%2C%20Managing%20Director%2C%20Myanmar%20Railways.pdf|
|Project budget approval date||Not started and discussed about project to be implemented in 2022. (before military coup in Feb 2021)||https://futuresoutheastasia.com/muse-mandalay-kyaukphy-railway/|
|Project Completion||Project status (current)||Preparation (feasibility study submitted) stage||www.unescap.org/sites/default/files/Rail%20Sector%20Development%20Activities%20in%20Myanmar-Mr.%20Ba%20Myint%2C%20Managing%20Director%2C%20Myanmar%20Railways.pdf|
|Completion cost (projected)||Not relevant|
|Completion date (projected)||Not relevant|
|Scope at completion||N/A|
|Reasons for project changes||N/A|
|Reference to audit and evaluation reports||N/A|
|Procurement||Procuring entity||Myanmar Railways (MR)||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Procuring entity contact details||Naypyitaw, Myanmar (+95)6777061, (+95)6777131, (+95)6777132||https://www.railways.gov.mm/en_US/contact/|
|Procurement process||Feasibility study review process||https://www.irrawaddy.com/news/burma/myanmar-pulls-swiss-firm-scrutinize-chinas-bri-project.html|
|Contract type||Not available yet|
|Contract status (current)||pre-award||https://www.irrawaddy.com/news/burma/myanmar-pulls-swiss-firm-scrutinize-chinas-bri-project.html|
|Number of firms tendering||Call for tender stage – not yet|
|Cost estimate||US $ 8.9 billion||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Contract administration entity||Myanma Railways (same)||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Contract title||Muse-Mandalay Railway Project||www.crecg.com/english/12665/39709/39775/index.html|
|Contract firm(s)||Myanma Railways||https://www.irrawaddy.com/news/burma/china-backed-muse-mandalay-railway-cost-9-billion.html|
|Contract scope of work||Not relevant|
|Contract start date and duration||Not started and discussed about project to be implemented in 2022. (before military coup in Feb 2021)|
|Implementation||Variation to contract price||N/A|
|Escalation of contract price||N/A|
|Variation to contract duration||Not relevant|
|Variation to contract scope||Not relevant|
|Reasons for price changes||Not relevant|
|Reasons for scope & duration changes||Not relevant|