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Does Myanmar need a deep-sea port?

JASON CHIANG 21 SEP 2017 (mmtimes) - Myanmar is one of the fastest growing economies in the Southeast Asia region, with GDP having risen by an average of 7 percent in the past decade. The economy has expanded on the back of rising trade.

Since 2010, the volume of containers arriving in Myanmar’s ports is up three times, reaching 1 million twenty-foot equivalent units (TEUs) in 2017. This rise is projected to continue, with the International Monetary Fund forecasting GDP growth of 7.3pc on average in the next five years.

With the growth of trade, sea ports have become an important node in the logistics network as the bulk of the cargo is moved by sea. It is also pertinent to note that trade in Myanmar is imbalanced, with imports exceeding exports by around four times.

As such, it is important that the country’s ports are operating in a productive manner which lowers the overall logistics cost for shipping lines and shippers alike. In Myanmar, three key issues need to be addressed to facilitate port development.

Firstly, the cargo bottlenecks in the logistics supply chain are concentrated at the Yangon and Thilawa ports, where more than 95pc of cargo is handled. Consequently, any disruption in port operations would result in costly delays. This was never more pronounced than in June 2016, when peak congestion at the ports resulted in vessels waiting for a berth for up to 14 days.

Secondly, both the Yangon and Thilawa ports are restricted by drafts of up to ten metres, allowing ships of no more than 2,100 TEUs in size to serve the market. These vessels are significantly smaller than the 18,000-20,000 TEU ships deployed on Asia-Europe routes. Hence, shipping costs for goods moved on smaller ships are also higher.

Thirdly, vessels calling at the ports are restricted by navigation issues. For example, the ships can move in the narrow river channel only during high tide and daylight hours. Compounded by low port productivity, vessels have to berth for as long as 48 hours on each trip.

In light of these issues, stakeholders in the maritime industry recognise there is potential for reduction in logistics costs. Ideally, shipping lines would seek to deploy larger ships to realise cost savings and higher productivity. The cost savings would then be passed on to shippers in a competitive market environment.

Shippers, on the other hand, are mainly concerned with collecting their cargo in a fast and low cost manner. This would mean the ability to collect cargo at all hours of the day and from a location which is in close proximity to their factories and warehouses.

Building a deep-sea port in Myanmar might seem like an obvious solution to all these issues. In fact, this is evident in neighbouring countries, where river ports close to the city are supported by deep-sea ports with good connectivity to the hinterland.

Examples include the Sihanoukville port (deep-sea) and Phnom Penh (river port) in Cambodia, the Bangkok (river port) and Laem Chabang (deep-sea) ports in Thailand and the Ho Chi Minh (river port) and Cai Mep Thi Vai (deep-sea) ports in Vietnam.

In Myanmar, various sites for a deep-sea port have been proposed, each with its own set of issues. These include Kyaukphyu, Dawei and Pathein. The key issue is the proposed locations are far away from the main hinterland in Yangon and Mandalay.

The more favourable option for now is best summarised by feedback from a local freight forwarder. When asked about where the ideal location for a deep-sea port might be, he said: “In the long term, as close to my warehouse in Yangon as possible. In the short term, we just use Singapore and Malaysia. Let them build and foot the cost!”

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