Japanese ODA Loan
Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: The Republic of the Union of Myanmar
Project: Yangon-Mandalay Railway Improvement Project Phase I (II)Loan Agreement: March 1, 2017
Loan Amount: 25,000 million yen
Borrower: The Government of the Republic of the Union of Myanmar
2. Background and Necessity of the Project(1) Current State and Issues of the Railway Sector in Myanmar
The overall length of the railway network in Myanmar is 6,106 km (2014), and all lines
are managed and operated by Myanmar Railways (MR). Nearly all trunk lines wereconstructed during the British colonial period, thereafter MR worked to build new linesand double-track existing lines. Between 1988 and 2010, MR built new lines thattoday comprise nearly half of its railway network. MR has appropriated the majority of
its annual investments to the construction of new lines; as a result, renovating existingtransport facilities and equipment has become a major issue to address. Among all
MR lines, the approx. 620-km-long, double-tracked Yangon-Mandalay line is an
important one that connects Yangon, Myanmar's largest commercial city; Nay Pyi Taw,the capital city; and Mandalay, the country's second largest commercial city. TheYangon-Mandalay section belongs to the Central North-South Corridor, the main
artery of Myanmar's economy; if all modes of transport are combined, it has both thelargest passenger and cargo traffic in Myanmar, accounting for approximately 50% ofpassenger traffic and 45% of cargo traffic in the country (2013). A total of 19.55 million
people, 37% of the population, live in the Yangon, Bago, and Mandalay areas throughwhich the Yangon-Mandalay line runs (2014). In the future, the population in theseareas is expected to further increase as Myanmar's economy develops. Against thisbackdrop, the number of passengers in the Central North-South Corridor isanticipated to increase from 42.8 million/km in 2014 to 230.8 million/km in 2030. The
amount of cargo is projected to increase from 41.3 million t/km in 2014 to 216.9 million
t/km in 2030. As described above, as overall transport demands increase, it isnecessary to increase the efficiency of all modes of transport, including railways, for
the Yangon-Mandalay region. However, while demands for passenger and cargotransport through the Yangon-Mandalay line have increased, events such as
reductions in train speed, delays, and derailments continue to occur, and declines intransport services are becoming an issue to address. To meet fast-growing demandand improve railway services, replacing and modernizing antiquated transportfacilities and equipment have become an urgent issue.
(2) Development Policies for the Railway Sector in Myanmar and Priority of theProject
Myanmar's government worked out the National Comprehensive Development Plan(NCDP) to present strategic national development goals. It has also drawn up theNational Spatial Development Plan to clarify the country's overall development vision,and each sector has formulated specific plans based on the national plan. Thetransport sector formulated the National Transport Master Plan in collaboration withJICA, and the Master Plan was approved at a cabinet meeting in December 2015.
The Master Plan views the Yangon-Mandalay Railway Improvement Project as apriority project that should be implemented with haste, and Myanmar's government
views the project as one to which it should give top priority among the Japanese ODA
loan projects requested in October 2013. In September 2014, a Japanese ODA Loan
Agreement was concluded for the first period of Phase I of the Yangon-Mandalay
Railway Improvement Project. The new administration, which came into being inMarch 2016 and is led by the National League for Democracy (NLD), unveiled its new
economic policy in July 2016; in this policy, it emphasized that it would pay particularattention to the swift development of basic economic infrastructures. In the 100-DayAction Plan it launched after the change of administrations, the Ministry of Transportand Communications described the improvement of the Yangon-Mandalay railway as
the top priority for the railway sector. Thus, the Project is positioned as one of the newadministration's important undertakings.
(3) Japan and JICA's Policy and Operations in the Railway Sector
The Japanese government's economic cooperation policy for Myanmar (formulated inApril 2012) views “Assistance for development of infrastructure and related systems
necessary for sustainable economic development” as a priority area, citing
improvement and modernization of railway operations as one specific measure. The
Project meets this policy goal. The Project, which connects the major cities of Yangon,Nay Pyi Taw, and Mandalay, also satisfies Item IV, "Strengthening of Transport
Infrastructure to Connect Urban and Rural Areas," a priority area in theJapan-Myanmar Cooperation Program, which was developed jointly between thegovernments of Japan and Myanmar. The results of support for Myanmar's railway
sector include the following ODA loan cooperation projects: the Kyangin Cement Plant
Railway Reinforcement Project (1982), the Railway Modernization Plan (1982 and1984), and the Vehicle Improvement Project (1984).
(4) Other Donors' Activities
Germany supported the establishment of the Railways Technical Training Centre in1981, and provided technical support to maintain railway facilities during the 1990s.
While China is currently helping to build rolling stock factories (for locomotives andpassenger trains) and to procure rolling stocks (locomotives and passenger trains)through loans, India now supports rolling stock procurement using the same means offunding. South Korea helped to establish the Myitnge passenger train manufacturingfactory in 1969 and concluded a contract to support procuring new passenger trains
through its economic development cooperation fund in 2015. These activities do not
overlap with the Project.
(5) Necessity of the Project
The Project, which plans to improve and modernize part of the existing railway thatconnects Yangon, Myanmar's largest city, with Mandalay, its second largest, is inaccordance with Myanmar's development tasks and Japan's economic cooperation
policy. It also contributes to the construction of robust infrastructures by increasing
railway transport capabilities and is expected to contribute to the achievement ofSustainable Development Goal 9. For these reasons, it is highly necessary for JICA toimplement the Project.
3. Project Description(1) Project Objective:
The objective of the Project is to improve the capacity of railway transportation byrehabilitating and modernizing the existing railway and related facilities from Yangon
to Toungoo in part of Yangon-Mandalay Railway, thereby contributing to economic
development of Myanmar.
(2) Project Site/Target Area
The Project covers the approximately 260-km-long Yangon-Taungoo section(excluding the Yangon-Pazundaung section, which is covered by the grant aid
cooperation "Central Railway Monitoring Center and Maintenance Equipment
Improvement Plan") of the existing railway between Yangon and Mandalay(approximately 620 km). Plans call for the Yangon-Mandalay Railway Improvement
Project Phase II to cover the remaining Taungoo-Mandalay section (approximately360 km).
(3) Project Components:
Existing railways and related facilities and equipment along the approx. 260-km-long
Yangon-Taungoo section of the existing railway between Yangon and Mandalay(approximately 620 km)
1) Construction works (repair and improvement of civil engineering structures,
including tracks, as well as new depot and workshop construction)2) Railway systems (renovation of signal communication facilities)3) Rolling stocks (including introduction of new vehicles)4) Electric facilities(including 66kv/6.6kv transformer substations)5) Consulting services (such as bidding assistance and construction supervision)
Major changes from the first period: As a result of detailed design, depot construction
has been moved forward from the following phase, and tracks have been changed tohigh-standard ones based on ASEAN's standards.
(4) Estimated Project Cost: 112,735 million yen (91,291 million yen covered by theJapanese ODA loan, including 25,000 million yen covered by this period)

(5) Schedule:
The Project will last for 125 months from September 2014 to January 2025. The
Project will be deemed complete upon completion of construction work in January
2023. (Since construction work will be implemented on a live railway, the railway will
be brought into service as soon as construction work is completed for the relevant
section.)(6) Project Implementation Structure1) Borrower: Government of the Republic of the Union of Myanmar2) Executing Agency: Myanmar Railways (MR)
3) Operation and Maintenance System:
After completion of the Project, MR will operate and maintain the renovated section.
(7) Environmental and Social Considerations/Poverty Reduction/Social Development
1) Environmental and Social Considerations① Category: B② Reason for categorization:
The Project does not fall under large-scale projects in the railway sector as listed in
the JICA Guidelines for Environmental and Social Considerations (published in April2010) because its adverse effects on the environment are not considered to beserious. Its characteristics are not considered to be those that are likely to affect theenvironment as listed in the Guidelines, nor is its site considered to be one where theenvironment is likely to be affected.
③ Environmental Permit:
The environmental impact assessment report for the Project was approved by theEnvironmental Conservation Department of the Ministry of Environmental
Conservation and Forestry in October 2014. The new depot and workshop added to
the Project do not require additional environmental procedures under Myanmar's
environmental laws and ordinances.
④ Anti-Pollution Measures:
It is assumed that the effects of air pollution and water contamination expected during
construction work will be minimized by reducing dust by sprinkling water and taking
the conciliatory approach of installing spillways and grit chambers as required;moreover, the noise expected to be generated will be controlled by adjusting workprocesses and maintaining construction equipment so that noise is kept to minimallevels. After the railway comes into service, noise due to train operation and otherpublic nuisances is expected, but it is assumed the railway will not have serious
effects because it is located away from residential areas.
⑤ Natural Environment:
The Project site is not a national park or other area where the environment is likely tobe affected, and it is assumed that the adverse effects of the Project on the naturalenvironment will be minimal.

⑥ Social Environment:
The Project will affect 32 people from 7 households; of these, 31 from 6 households
must be physically relocated, and a total of 80 acres of land are expected to beacquired. The residents will be relocated, and the land will be acquired, in accordancewith Myanmar's laws and ordinances and the Abbreviated Resettlement Action Plan
formulated based on the JICA Guidelines for Environmental and SocialConsiderations. No particular objections have been expressed in discussions with theresidents.
⑦ Other/Monitoring:
During construction work, MR will monitor water quality, noise levels, and so forth.
After the railway comes into service, MR will continue to monitor noise levels and soforth.
2) Promotion of Poverty Reduction: N/A
3) Promotion of Social Development: HIV measures will be taken during construction
work.
(8) Collaboration with Other Donors: N/A
4. Target Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicators)
Baseline(Recorded in 2013)

Indicator

Target (2027)(4 years after completion)

No. of passengers transported(persons/km/day)*

3,317,908

27,524,873

Amount of cargo transported(t/km/day)*

2,789,477

15,815,649

27.5

164

rolling

11,11252,119

Travel time between Yangon andTaungoo (for passengers)

6 hrs. 54 min.

3 hrs. 20 min.

No.
of(trains/day)trainsDistance traveledstocks (km/day)

operatedby* The effects of all sections between Yangon and Mandalay will be measured.

(Note) Construction work for Phase I (Yangon-Taungoo section) will be completed in 2023, but thetargets have been set for two years after the completion of improvement and modernization workfor the Yangon-Mandalay section, which is scheduled for 2025.

(2) Qualitative Effects: Safe train operation, revitalization of the regional economy, andinvigoration of logistics(3) Internal Rate of Return
Based on the following assumptions, the Economic Internal Rate of Return (EIRR) forthe Project is 24.3%, while the Financial Internal Rate of Return (FIRR) is 13.0%.
[EIRR]
Costs: Project costs (excluding tax) and operation/maintenance costs
Benefits: Shorter travel times for railway users, reduced automobile driving costs,
reduced automobile driving times, and increased fare revenue
Project life: 30 years[FIRR]
Costs: Project costs (including tax) and operation/maintenance costs
Benefits: Fare revenue and cargo transport revenue
Project life: 30 years
5. External Factors and Risk Control
・Procuring sleepers and ballasts for track improvement without delay (by MR using itsbudget)・Completing embankment at the site where a new depot and workshop will be
constructed without delay (by MR using its budget)
6. Lessons Learned from Past Projects(1) Lessons Learned from Similar Projects
The lesson learned mainly from the results of an evaluation of the "Depok Depot
Construction Project" in the Republic of Indonesia after its completion is that if
facilities are designed to mechanize work processes and make operations efficient, it
is important to assess the executing agency's technical level, to design facilities thatenable appropriate operation and management, and to consider comprehensive
technical support, including facility operation and management, because introduced
equipment cannot be fully utilized unless corresponding technology is introduced.
(2) Application of Lessons Learned to the Project
The Project also plans to introduce relatively high-performance machinery andequipment for depots, vehicles, signal systems, and so on. Therefore, it plans to not
only transfer technology through consulting services but also to provide necessary
technical support through the technical assistance project, "The Project on
Improvement of Railway Service and Rolling Stock Maintenence" (to be launched inMarch 2017) based on the results of the “Data collection Survey on Maintenance on
Rolling-Stock in the Republic of the Union of Myanmar” completed in December 2016.
7. Plan for Future Evaluation(1) Indicators to Be Used
1) No. of passengers transported (persons/km/day)
2) Amount of cargo transported (t/km/day)
3) No. of trains operated (trains/day)
4) Distance traveled by rolling stocks (km/day)
5) Travel time between Yangon and Taungoo(2) Timing of the Next Evaluation

Four years after the completion of the Project (to be evaluated two years after thecompletion of the next phase, when sufficient evaluation of the EIRR is expected)