“Government Guarantees for PPP Projects in Myanmar” seminar held in Nay Pyi Taw on 31 March 2017

On Friday March 31^st 2017 the VDB Loi and Latham & Watkins hosted an event entitled “Government Guarantees for Public Private Projects in Myanmar” in Nay Pyi Taw, Myanmar. In attendance were H.E. Kyaw Win, Union Minister of Planning and Finance, U Aung Nai Oo, Director General DICA, U Win Khant, Permanent Secretary Ministry of Planning and Transport and communications and other government officials from MOEE, DICA and the Department of Budget.

In this event, the private sector was invited to discuss the goals and opportunities with government officials and representatives in providing the legal and practical framework around Myanmar providing a government guarantee and undertaking (“GGU”) in public private partnership (“PPP”) projects.  

Experts from the region who are developing projects in Myanmar discussed the necessity of providing GGUs. Essentially, the panelists introduced similar projects that have been procured in nearby countries. The panelists discussed the necessity of building Myanmar’s reputation as an attractive place to conduct business by offering GGUs as part of a suite of project conditions which are recognized internationally.

While we have built a number of assurances which rise to the level of a GGU in a power purchase agreement, achieving each guarantee in this fashion would then have to be negotiated on a per project basis. This can add a layer of risk in that it is possible the project may not be awarded each guarantee the sponsor is seeking which may deter potential financing parties or increase the project finance cost. Further, in drafting GGUs on a per project basis, the timeline for procuring a project can be extended in an indeterminable time. Alternative to the granting of a GGU on a project by project basis, the framework for offering GGUs is already contemplated in the Public Debt Management Law of 2016. However, the framework for offering a GGU under this law has not yet been developed.

The conversation turned to identifying the appropriate group within the government which should be tasked with issuing and approving GGUs. It was agreed that the group cannot be elected. The choice to offer and implement GGUs should not be a politically motivated decision and therefore the group responsible for GGUs should be appointed to permanent positions.

Once a group has been charged with the responsibility of providing GGUs, the question then must turn on identifying which risks the marketplace can absorb and which risks must be hedged by offering a GGU.

Many unanswered questions were raised during the day, hence VDB Loi has been tasked with leading the development and drafting of the framework and policy surrounding the issuance of GGUs in Myanmar. For this, VDB Loi will continue to work with leaders in the private sector and those within the relevant ministries to draft a framework which will lead to the continued and successful development of PPPs in Myanmar. These steps will only further incentivize project sponsorship in Myanmar as it will continue to become an attractive place to do business.