Myanmar is now seeking international loans to rejuvenate the stalled construction of the Hanthawaddy Airport to the tune of $750 million, about half of the estimated $1.5 billion it would take to fund the entire project.
The government initially selected a consortium led by South Korea’s Incheon International Airport Corporation to develop the new airport, which will be built in Pegu Division, about 60 miles outside Yangon, the country’s commercial center. The group originally intended for the project to be wholly funded by private companies, but talks with Incheon failed as investors sought guarantees that the project would be profitable, the Irrawaddy, a Burmese newspaper, reported on Tuesday.
“Our government position [was]: When that financing is being done, it’s a private undertaking,” said Khin Maung Myint, an adviser for the Department of Civil Aviation (DCA), speaking to the difficulties that arose in the negotiation. “So the government cannot give a guarantee.”
The DCA is now asking the three other consortia, led by Singapore and Japan’s Yongnam, Japan’s Taisei Corporation and France’s Vinci Airport, regarding funding options. With the delay, Hanthawaddy will not be completed by 2018, the original projected date of completion.
In addition, the government will apply for official development assistance (ODA) for discount rate loans to fund about half of the project, while the other half would be the developer’s responsibility.
“Now the government decided 50 percent of the project loan can come from ODA,” Khin Maung Myint said, according to the Irrawaddy. “The government will guarantee that they get the loan, but the payment of the interest … the company has to take that responsibility.”
Both of Myanmar’s existing international airports will also be renovated and expanded. Pioneer Aerodrome Services, a subsidiary of Burmese firm Asia World Group, will upgrade Yangon International Airport to accommodate 6 million passengers per year, up from its current 2.7 million, while Mandalay International Airport will be upgraded by Japan’s Mitsubishu and Jalux.
Last year, more than 1 million tourists arrived in Myanmar, some 600,000 by air. By 2020, the country is projected to host 7.5 million tourists annually, making its airport expansion a top priority.