March 29, 2018

Signing of Japanese ODA Loan Agreement with Myanmar: Comprehensive support for socioeconomic development

On March 29, the Japan International Cooperation Agency (JICA) signed loan agreements with the Government of the Republicof the Union of Myanmar in Nay Pyi Taw, the capital city, to provide Japanese ODA loans of up to a total of 117.04 billion yen for
four projects.
Under a new administration led by the National League for Democracy (NLD) since March 2016, the Government of Myanmar
has prioritized economic and industrial development and improvements to the quality of life. The recent real rate of economic
growth has been around seven percent due to the lifting of economic sanctions, the promotion of investment and trade and otherfactors. However, Myanmar faces many challenges in its basic infrastructure that hinder sustainable economic growth, poverty
reduction including in regional and rural areas, and further promotion of investment. Furthermore, the financial system andservices available for small and medium-sized enterprises (SMEs) and home-purchasing households are inadequate, inhibiting
the stimulation of SME economic activities and the supply of appropriate housing to citizens.
The signed loan agreements consist of the following four projects, which will comprehensively support socioeconomic
development in Myanmar.
(1) Agriculture Income Improvement Project (loan amount: 30.469 billion yen)
(2) Project for the Development of Finance for Small and Medium-sized Enterprises (Phase 2) (loan amount: 14.949 billion yen)(3) Housing Finance Development Project (loan amount: 15 billion yen)
(4) Yangon-Mandalay Railway Improvement Project Phase II (I) (loan amount: 56.622 billion yen)signing ceremony

Details for the projects are provided below.
(1) Agriculture Income Improvement Project(a) Objective and Summary
The objective of the project is to improve the agriculture income in the Shwebo area of Sagaing Region, the largest irrigable area in Myanmar with a total of approximately 200,000
hectares, by rehabilitating irrigation facilities and the distribution infrastructure as well as strengthening agriculture extension and mechanization, thereby contributing to theeconomic growth in the rural areas in Myanmar.
(b) Background and Necessity
In Myanmar, almost 60 percent of the population is engaged in agriculture but the annual income of rural residents is lower than that of urban residents, and this income disparity
between urban and rural areas has become an urgent issue that needs to be solved. In order to reduce the income gap between urban and rural areas for balanced economicgrowth, income improvement through the development of agriculture, which is main source of income in rural areas, is urgently needed.
The Shwebo area of Sagaing Region, the project target area, is the largest irrigable area in Myanmar and has a high potential for agricultural development as most of “Shwebo PawSan”, popular high quality rice which is distributed in the domestic market, is produced in this area. However, the irrigation system in the Shwebo area supplies water to an averageof only 58 percent of the farming land during the dry season due to a lack of irrigation facility rehabilitation and a low pavement ratio of rural roads, which increase transportation
costs. Therefore, rehabilitating the irrigation facilities and distribution infrastructure is a priority.
(c) Executing Agency
Irrigation and Water Utilization Management Department, Ministry of Agriculture, Livestock and Irrigation
Address: Building (15) Nay Pyi Taw, Myanmar
Phone: + 95-67-410-188, fax: +95-67-410-539
Agricultural Mechanization Department, Ministry of Agriculture, Livestock and Irrigation
Address: Building (50) Nay Pyi Taw, Myanmar
Phone: +95-67-431172, fax: +95-67-431172
Department of Agriculture, Ministry of Agriculture, Livestock and Irrigation
Address: Building (15) Nay Pyi Taw, Myanmar
Phone: +95-67-410007, fax: +95-67-410-138
Department of Agricultural Land Management and Statistics, Ministry of Agriculture, Livestock and IrrigationAddress: Building (15) Nay Pyi Taw, Myanmar
Phone: +95-67-410-136, fax: +95-67-410-136
Department of Rural Road Development, Ministry of Construction
Address: Hospital Road, Pyinmanar, Myanmar
Phone: +95-67-724829, fax: +95-67-724829(d) Planned Implementation Schedule
1. Completion of project: November 2024 – when the facilities are put into service
2. Issuing of letters of invitation for consulting services (including construction supervision): April 2018
3. Tender announcement of initial procurement package for international competitive bidding on project construction:Procurement package titles:
・ Procurement of Maintenance Machineries
・ Procurement of Land Consolidation Machineries
・ Equipment Procurement for Maintenance Workshop and Agricultural Machineries Testing Center・ Equipment Procurement for Seed Center
Release date: August 2018(2) Project for the Development of Finance for Small and Medium-sized Enterprises (Phase 2)(a) Objective and Summary
The project will provide financing to small and medium-sized enterprises (SMEs) through intermediary financial institutions and support capacity-building at intermediary financial
institutions and the like, thereby strengthening SME financing by financial intermediaries and expanding production and investment by SMEs, which will contribute to industrial
development and job creation in Myanmar.
(b) Background and Necessity
As described in the “Investment Policy” in December 2016 which encourages investment for SME development, the Government of Myanmar prioritizes SME development. The
approximately 120,000 SMEs in Myanmar are said to account for more than 90 percent of all companies in the country. As SME economic activities have increased with economic

development, the need to procure loans from financial institutions has also grown, but loan periods are typically short and there are stringent conditions, such as the requirement ofreal estate collateral. Because these obstacles make it difficult for many SMEs to access lending from financial institutions, personal and family loans are typically used by SMEs tostart up and conduct business.
In the Project for the Development of Finance for Small and Medium-sized Enterprises (loan agreement signed in June 2015), for which a Japanese ODA loan was provided, twostep loans were provided by the Myanma Economic Bank through six local financial institutions to solve the financing procurement challenges for SMEs, and approximately 4.7
billion yen was loaned to 269 local SMEs in Myanmar in the short period of one and-a-half years. As such an outcome indicates, in order to respond to the strong demand for loans
among SMEs, an increase in loans to SMEs is urgently needed.
(c) Executing Agency
Myanma Economic Bank
Address: Building No.26, Nay Pyi Taw
Phone: +95-67-407027, fax: +95-67-407027(d) Planned Implementation Schedule
1. Completion of project: October 2021 – with completion of two-step loan disbursement
2. Issuing of letters of invitation for consulting services (including project implementation support, and capacity-building for the executing agency and intermediary financial
institutions): April 2018
3. Tender announcement of initial procurement package for international competitive bidding on project construction: Although there will be no bidding for construction, procurement
is expected to be implemented by the sub-projects funded by intermediary financial institutions.
(3) Housing Finance Development Project(a) Objective and Summary
The project will promote supply of housing to low- and middle-income households by providing housing loans through participating financial institutions, strengthening the capacity of
the institutions and relevant organizations, and developing a housing finance system, thereby contributing to an improvement in the living standard of citizens and to thedevelopment of the housing sector in Myanmar.
(b) Background and Necessity
Myanmar faces a rapid population increase and a lack of appropriate housing in major cities against a background of rapid economic growth. The Government of Myanmar has
formulated a plan to provide citizens, especially those of low- and middle-income households, with one million houses by both public and private suppliers by 2030.
Although a semi-government bank with a focus on providing housing financing was established in 2013, the number of housing loans actually provided has been limited due toinsufficient funding with long-term and low-interest rates. Additionally, several private financial institutions also have been providing housing loans. However, the number of housing
loans and their operations have been limited because of a lack of a proper registration system for mortgages as well as a lack of funding. Under such circumstances, much more
provision of long-term and low-interest housing loans for Myanmar citizens, especially those of low- and middle-income households, are urgently needed.
(c) Executing Agency
Myanma Economic Bank
Address: Building No.26, Nay Pyi Taw
Phone: +95-67-407027, fax: +95-67-407027(d) Planned Implementation Schedule
1. Completion of project: December 2022 – with completion of two-step loan disbursement
2. Issuing of letters of invitation for consulting services (including project implementation support and capacity-building of the institutions and relevant organizations): May 2018
3. Tender announcement of initial procurement package for international competitive bidding on project construction: Bidding will not be conducted for construction in this project.
(4) Yangon-Mandalay Railway Improvement Project Phase II (I)(a) Objective and Summary
This project will rehabilitate and modernize the degraded equipment and facilities between Toungoo and Mandalay on the Yangon-Mandalay Line; Yangon and Mandalay are the top
two commercial cities in Myanmar. The rehabilitation of degraded equipment and the procurement of new rolling stock will contribute to safety and high-speed transportation, and willincrease the capacity of passenger and cargo transportation, thereby leading to the economic development of Myanmar.
(b) Background and Necessity
The total rail network length in Myanmar extends 6,072 kilometers (2015), and in recent years, the greater part of the railroad budget has been for new construction, such as the2,985 kilometers of new lines laid since 1988, leading to degradation of existing transportation facilities and equipment. Safety and the reduced transportation services are therefore
priorities.
The Yangon-Mandalay Line is a particularly important line as it connects Yangon, the largest commercial city in the country, and Mandalay, the second largest commercial city in thecountry, via Nay Pyi Taw, the capital city. The population in the peripheral areas of Yangon, Bago and Mandalay, is 19.55 million people, accounting for 37 percent of the overall
population of the country (2014). Because the demand for passenger and cargo transportation is predicted to grow significantly with economic development, rehabilitation andmodernization of the line are urgently needed.
(c) Executing Agency
Myanma Railways, Ministry of Transport and Communications
Address: Nay Pyi Taw Central Station Compound, Pobba Thiri Township, Nay Pyi Taw
Phone: +95-67-77001, fax: +95-67-77016(d) Planned Implementation Schedule
1. Completion of project: December 2024 – when all of the facilities are in service
2. Issuing of letters of invitation for consulting services: March 2018
3. Tender announcement of initial procurement package for international competitive bidding on project construction:
Procurement package titles:
・ Rolling Stock・ FD Clip
Release date: January 2019

Terms and Amounts of Loans
Annual interest rate (%)
Project title

Amount(million yen)

Project

Consulting
services

Repayment
period(years)

Graceperiod(years)

Procurement

Agriculture Income Improvement Project

30,469

0.01

0.01

40

10General untied

Project for the Development of Finance for Small andMedium-sized Enterprises (Phase 2)

14,949

0.01

0.01

40

10

General untied

Housing Finance Development Project

15,000

0.01

0.01

40

10

General untied

Yangon-Mandalay Railway Improvement Project Phase
II (I)

56,622

0.01

0.01

40

10

General untied

Total

117,040