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Power struggle: Myanmar’s energy crisis dissected

Electricity supplies are one of the greatest challenges to living and doing business in Myanmar. In a recent survey of businesses, interviewees said that electricity that was the single greatest obstacle in the business environment, placing it above other oft-cited challenges including an independent judiciary, property rights, corruption and skills of the workforce.

Improving the electricity supply could provide immediate benefits for the economy by allowing factories and shops to operate longer, uninterrupted business days and reducing the cost of back-up systems like generators.

But doing this involves more than just increasing the amount of power produced – it also involves revising the way that power is priced. This means charging large consumers of electricity a price that is the same or more than the cost to produce that electricity, while subsidizing small consumers to ensure that even the poor can still access electricity. This pro-poor reform would reduce government losses on power production, eliminate an inefficient subsidy, and free up those funds to be spent elsewhere.

Myanmar presently has three options available to expand its electricity supply:

1. Funding new power projects with government or investor money while maintaining or marginally increasing current prices.

2. Attracting foreign capital by allowing a portion of production to be exported to markets with higher (and commercially viable) electricity prices.

3. Revise the domestic electricity pricing structure to raise the average price of electricity to a commercially-viable level.

While progressive residential pricing would help provide additional funding for investment in the power sector, it is not by any means a cure-all. The government still faces massive losses in the electricity grid and the distribution system is highly inefficient.

The government’s cost of producing power is high by international standards, and could be brought down. But these issues wouldn’t prevent a revision in the pricing structure of electricity in Myanmar, which could go a long way towards improving the country’s electricity sector.
This article is a short version of a paper entitled: “Firm Perceptions of Myanmar’s Business Climate: Electricity and the Quick Win of Progressive Power Pricing,” presented at the International Academic Symposium “Myanmar in Reform 2012” at Hong Kong University, June 2012.
For full article, get the February 28 edition of M-ZINE+.

M-ZINE+ is a business weekly available in print in Yangon through Innwa Bookstore and through online subscription at
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