Photo: Hong Sar/World Bank URBAN TRANSPORT IN YANGON AND MANDALAY Review of Sector Institutions, Expenditures, and Funding Report No: AUS0001291 © 2020 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Photos, including cover picture: World Bank, 2019 Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions This work is available under the Creative Commons Attribution 4.0 IGO license (CC BY 4.0 IGO) Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank Group. Urban Transport in Yangon and Mandalay. Washington, DC: World Bank Group. License: Creative Commons Attribution CC BY 4.0 IGO. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. URBAN TRANSPORT IN YANGON AND MANDALAY Review of Sector Institutions, Expenditures, and Funding i TABLE OF CONTENTS ACKNOWLEDGEMENTS vi ABBREVIATIONS vii EXECUTIVE SUMMARY ix INTRODUCTION 1 1 URBAN MOBILITY IN YANGON AND MANDALAY 5 A. URBANIZATION IN MYANMAR 6 B. YANGON 9 C. MANDALAY 15 D. URBAN TRANSPORT INDICATORS AND PERFORMANCE BENCHMARKING 17 E. SOCIAL INCLUSION IN URBAN TRANSPORT 26 2 URBAN TRANSPORT POLICY AND INSTITUTIONS 39 A. DECENTRALIZATION AND SERVICE PROVISION AT THE SUBNATIONAL LEVEL 40 B. URBAN TRANSPORT POLICY FRAMEWORK 41 C. INSTITUTIONS 43 3 YANGON BUS SYSTEM - FINANCIAL AND OPERATIONAL REVIEW 48 A. PUBLIC TRANSPORT DEMAND AND SUPPLY IN YANGON 50 B. STRUCTURE AND CHARACTERISTICS OF THE YANGON BUS SERVICE 56 C. BUS SYSTEM FARE BOX REMUNERATION 61 4 URBAN TRANSPORT EXPENDITURES AND FINANCING POTENTIAL 67 A. SCOPE OF EXPENDITURE REVIEW 68 B. ROAD SECTOR 68 C. URBAN BUS TRANSPORT 76 D. URBAN RAIL TRANSPORT 77 E. WATER (RIVER) TRANSPORT IN YANGON 78 F. PUBLIC EXPENDITURE NEEDS 78 G. OVERVIEW OF THE BUDGET PROCESS 80 H. PUBLIC INVESTMENT MANAGEMENT 83 I. MOBILIZING PRIVATE SECTOR FINANCE 85 5 URBAN TRANSPORT FUNDING 91 A. URBAN TRANSPORT FUNDING INSTRUMENTS 92 B. FUNDING SOURCES FOR URBAN TRANSPORT IN YANGON AND MANDALAY 96 C. CONSIDERATIONS FOR FUNDING MOBILIZATION 107 6 SUMMARY OF POLICY RECOMMENDATIONS 113 REFERENCES 117 ii Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding FIGURES Figure 1.1. Share of Urban-Rural Population in Association of Southeast Asian Nations (ASEAN) 6 Countries Figure 1.2. Transport Network (left) and Land Use in Greater Yangon (right) 10 Figure 1.3. Modal Split in Yangon (excluding walking) 10 Figure 1.4. Map (Open Street Map) and Description of Yangon Circular Line 11 Figure 1.5. Map of Yangon Water Bus Routes 13 Figure 1.6. Growth in Registered Vehicles by Type in Yangon Region 14 Figure 1.7. Land Use in Mandalay City 15 Figure 1.8. Mandalay Trip Modal Split 16 Figure 1.9. Growth in Registered Vehicles by Type in Mandalay 16 Figure 1.10. Tiers of Cities by Mass Transit Network Supply and Demand 18 Figure 1.11. Average Time in Minutes Commuting to Work (one way) 20 Figure 1.12. Access-Mobility Framework to Identify Transport-Underserved Populations 21 Figure 1.13. Accessibility Analysis for Yangon 21 Figure 1.14. Accessibility Indicator Results in Latin American Cities 22 Figure 1.15. Public Transport Modal Share, Selected Cities 23 Figure 1.16. Road Fatalities per 100,000 Inhabitants 23 Figure 1.17. Fatalities by Road-User Category 23 Figure 1.18. Urban Air Pollution in Selected Cities in Southeast Asia (PM10 concentration) 24 Figure 1.19. Transport as a Share of Household Expenditures (%) 33 Figure 1.20. Transport as a Share of Household Expenditures (%) 33 Figure 1.21. Distribution of Transport Expenditures among Households using Transport Services 34 (% of households) Figure 1.22. Share of Household Income Spent on Public Transport 35 Figure 3.1. Mode Share by Vehicle Ownership and Monthly Household Income Level 51 Figure 3.2. Peak-hour AM Boarding (left); Peak-hour AM Alighting (right) 51 Figure 3.3. Number of Bus Passengers and Passenger-Miles in Yangon 53 Figure 3.4. Vicious Circle of Residents Losing Access to Destinations Due to Car-Oriented 54 Development Figure 3.5. Pictures of Buses in Yangon 57 Figure 3.6. Public Opinion on the YBS 61 Figure 3.7. Yangon Public Transport Performance and Gross Earnings after the YBS 61 Figure 3.8. Trip Costs from a Sample of Bus Passengers along the Pyay Road Corridor 63 Figure 4.1. YCDC Road Expenditures (MMK, millions) 69 Figure 4.2. MCDC Road Expenditures (MMK, millions) 70 Figure 4.3. Road Expenditures in Yangon Region (%) 75 Figure 4.4. Road Expenditures in Mandalay Region (%) 75 Figure 4.5. Road Projects Approval Process 83 Figure 4.6. Procurement of Infrastructure PPPs in ASEAN Countries 86 Figure 5.1. Use of Financing Instruments for Capital, Operations, and Maintenance Costs 93 by Urban Transport Mode Figure 5.2. Fuel Consumption in Myanmar - unit: 1,000 gallon 99 Figure 5.3. Fuel Taxes in Selected Countries 99 Figure 5.4. Potential Funding from Existing No-Fare Instruments in Yangon 2020–2035 106 (US$, millions) Figure 5.5. Potential Funding from Existing Non-Fare Instruments in Mandalay 2020–2035 106 (US$, millions) iii TABLES Table ES1. Summary of Urban Transport Performance Review: Yangon xi Table ES2. Summary of Urban Transport Performance Review: Mandalay xii Table ES3. Urban Transport Policy and Institutions: Summary of Policy Recommendations xv Table ES4. Urban Transport Expenditures: Summary of Policy Recommendations xviii Table ES5. Urban Transport Funding: Summary of Policy Recommendations xx Table 1.1. Yangon and Mandalay Overview 9 Table 1.2. Yangon Railway Network 12 Table 1.3. Selected Urban Transport Indicators and Description 19 Table 1.4. Summary of Performance Review: Yangon 25 Table 1.5. Summary of Performance Review: Mandalay 25 Table 1.6. Transport Modal Share by Gender in Yangon 29 Table 2.1. Priorities Related to Urban Transport in the MSDP and NTDP 42 Table 2.2. Institutional Roles by Subsectors 43 Table 2.3. Alternative Governance Models for Public Transport Provision 45 Table 3.1. Supply and Demand of YBS System in 2018 50 Table 3.2. Select Bus Companies after the YBS Formation 57 Table 3.3. Select Bus Terminals Leased or Owned by Bus Companies in Yangon 59 Table 3.4. Advantages and Disadvantages of the Current YBS Contract System: 62 Route-based Net-Cost Contract Table 3.5. Estimation of OPEX 64 Table 3.6. Estimation of Farebox Ratio, YBS 64 Table 4.1. YCDC and MCDC Road Network (km) 70 Table 4.2. Road Expenditure in Yangon Region (MMK, millions) 71 Table 4.3. Roads Expenditure in Mandalay Region (MMK, millions) 72 Table 4.4. Road Condition of Sample Surveyed Network (non-urban, 2014) 73 Table 4.5. Balance of Capital and Current Expenditure on Non-Rural Roads in Yangon Region 73 (MMK, millions) Table 4.6. Balance of Capital and Current Expenditure on Non-Rural Roads in Mandalay Region 74 (MMK, millions) Table 4.7. MOC Expenditures in Yangon (MMK, millions) 75 Table 4.8. MOC Expenditures in Mandalay (MMK, millions) 75 Table 4.9. Number of and Average Size of Planned Capital Projects in Union Budget 2018/19 BE 76 Table 4.10. Myanmar Railways Revenues and Costs by Type of Services (2014, MMK billion) 77 Table 4.11. YUTRA Estimated Government Costs by Sectors 79 Table 4.12. Urban Transport-related Projects under Yangon Project Bank 85 Table 4.13. Potential Opportunities for Private Sector Participation in Urban Transport 88 Table 5.1. Funding Instruments Applicable to the Urban Transport Sector in Yangon and Mandalay 94 Table 5.2. Taxes and Charges on Property in Myanmar 101 Table 5.3. Property Tax in Selected Cities 2016/17 102 Table 5.4. LVC Instruments Potential in Yangon 104 Table 5.5. Assumptions on Fiscal Resources from the Existing Instruments 107 Table 5.6. Financial and Transport Sustainability of Funding Instruments 108 iv Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding BOXES Box 1.1. Priorities for Inclusive, Sustainable, and Competitive Urbanization in Myanmar 7 Box 1.2. Social Inclusion Aspects in Strategy-Level Documents 26 Box 1.3. Why Is Gender an Important Factor for Urban Transport Systems? 28 Box 3.1. Proposed Pyay Road BRT Busway Corridor in Yangon 55 Box 3.2. Applicable Legal Framework to Public Bus Transportation 60 Box 4.1. Road Spending in Selected Countries 69 Box 4.2. Multiannual Commitment Appropriations in France 81 Box 4.3. Yangon Elevated Expressway Project 87 Box 5.2. Wheel Taxes in Myanmar 96 v ACKNOWLEDGEMENTS The preparation of this report was co-funded by the Mobility and Logistics Multidonor Trust Fund (MOLO), managed by the World Bank Group and supported by the Governments of Switzerland (SECO), Germany (BMZ), and Austria (BMF). The report was prepared by a World Bank team led by Sadig Aliyev and Leonardo Canon Rubiano, including Hongye Fan, Myint Kaw, and Tin Hninn Yu (World Bank) and Simon Groom, Mia Hyun, Thet Hein Hun, and Kate Hardwick (Consultants), under the guidance of Almud Weitz. Advice by Gerald Ollivier at the time of the conception was extremely useful. The team highly appreciates the guidance and support received from Gevorg Sargsyan and Mark Austin. The team is grateful for the comments provided by peer reviewers Andre Bald, David Ingham, Jen JungEun Oh, and Yang Chen. The preparation of the report also benefited from valuable suggestions from Judy Baker, Zubair Khurshid Bhatti, Degi Young, Natacha Caroline Lemasle, Emilie Bernadette Perge, Clarence Tsimpo Nkengne, Arvind Nair, Ildrim Valley, and Kyaw Soe Lynn. The team is grateful for the support in data collection from Dan Jollans, Ye Khaung Oo, and Mya Thida of the Renaissance Institute. The World Bank team gratefully acknowledges the cooperation with the government counterparts in Yangon and Mandalay as well as the respective ministries and agencies in the transport sector in Myanmar. The government counterparts are not, however, responsible for any of the conclusions in this report. This report is a product of the staff of the International Bank for Reconstruction and Development/the World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.   vi Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding ABBREVIATIONS ADB Asian Development Bank MOTC Ministry of Transport and ASEAN Association of Southeast Asian Communications Nations MSDP Myanmar Sustainable Development AVL Automatic Vehicle Location Plan BCG Boston Consulting Group NGO Nongovernment Organization BRT Bus Rapid Transit NSPAW National Strategic Plan for the Advancement of Women CAPEX Capital Expenditures NTDP National Transport Development Plan CBD Central Business District OECD Organisation for Economic Co- CCBRT Comprehensive Community-Based operation and Development Rehabilitation in Tanzania OPEX Operational Expenditures CIDA Cities Development Initiative for Asia PPP Public-Private Partnership CLS City Life Survey PwDs People with Disabilities CNG Compressed Natural Gas RTAD Road and Transportation CODATU Cooperation for Urban Mobility in the Administration Department Developing World SGT Special Goods Tax DAO Development Affairs Organization SuM4All Sustainable Mobility for All DI Disability Inclusion SUTI Sustainable Urban Transport Index DOH Department of Highways TEC Total Estimated Cost DUHD Department of Urban Housing and Development TIF Tax Increment Financing GDP Gross Domestic Product TOD Transit-Oriented Development GMS Greater Mekong Subregion UNDP United Nations Development Programme GPS Global Positioning System UNESCAP United Nations Economic and Social GTFS General Transit Feed Specification Commission GYCT Golden Yangon City Transportation VIC Vehicle Inspection Certificate ITS Intelligent Transport Systems WHO World Health Organization JICA Japan International Cooperation YBO Yangon Bus Operator Agency YBPC Yangon Bus Public Company KOICA Korea International Cooperation Agency YBS Yangon Bus Services KPI Key Performance Indicator YCDC Yangon City Development Committee LOLF 2001 Organic Budget Law, Loi YCR Yangon Circular Railway Organique Relative Aux Lois De YRG Yangon Regional Government Finances YRTA Yangon Regional Transport Authority MCDC Mandalay City Development YUPT Yangon Urban Public Transportation Committee YUMBo Yangon Urban Mobility Board MHA Ministry of Housing YUMRT Yangon Urban Mass Transit MILI Myanmar Independent Living Initiative YUTRA Yangon Urban Transport Masterplan of MOC Ministry of Construction the Project for Comprehensive Urban MOPF Ministry of Planning and Finance Transport Plan of the Greater Yangon vii viii Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding EXECUTIVE SUMMARY The increased urbanization and economic activity in Yangon and Mandalay in the past decade may be potentially hampered by the negative externalities associated with increased motorization, including long travel times disproportionately affecting public transport users and access to jobs and services, and increasing traffic- related accidents and air pollutants and emissions. A forward-looking, actionable, and financially viable sustainable urban mobility strategy for Yangon and Mandalay is a fundamental component to support sustainable and inclusive urbanization in Myanmar over the next decade. Without such a strategy and corresponding investment program being made available, the quality of life and access to jobs, opportunities, and services in Yangon and Mandalay will become increasingly difficult, particularly for the poor. This report calls for urgent actions for Yangon and Mandalay to seize the window of opportunity brought by a growing economy and put forward financially viable and corresponding funding and financing schemes for sustainable urban mobility programs aiming to provide efficient, equitable, clean, and safe mobility for the urban population in the two major cities in Myanmar. This executive summary presents the principal takeaways from the review of urban mobility context, institutions, and financing and funding of the sector for Yangon and Mandalay. Each subsection introduces a table with the main issues and gaps found by the study and presents with short- and longer-term policy recommendations, followed by a short text which amplifies the information on each subject. Executive Summary ix A. Context: Increasing Urban Mobility Challenges in Yangon and Mandalay Like many other countries in the region, the urban population in Myanmar is expected to increase at a fast pace. Myanmar is still at an early stage of urbanization, with only about 30 percent of the population living in urban areas. The urban population in Myanmar is expected to increase significantly and exceed 45 percent by 2050. High rates of rural poverty, limited access to public services and job opportunities, and stability in urban areas are increasingly affecting the urban population growth in Myanmar. The increasing population in urban areas is adding pressure to the already lagging urban transport infrastructure and services. Comparatively, the Yangon and Mandalay Regions are different in terms of their demographic and transport demand characteristics. Each city faces different issues when planning to meet its future urban transport demands while avoiding congestion, damaging productivity, and welfare. The Mandalay Region is predominantly rural, with Mandalay City and surrounding urban agglomerations representing around 30 percent of the population of the region. The Yangon Region, on the other hand, is mainly urban and dominated by Yangon City, which represents 70 percent of the population of the region. While Yangon is dealing with increasing pressure on how to improve its popular public transport system, Mandalay, unless action is taken, will consolidate as a motorcycle-only city, posing challenges for those without access or capacity to use a motorbike. In both cities, there is an inefficient distribution of road space and urban transport investments: the road supply is preferential toward private modes and does not provide proper space allocation for public transport and nonmotorized modes. For each city, the following summary of current and future outlook and challenges prevails. Yangon • Yangon, the former capital of Myanmar, is the country’s primary city in population and economic terms, contributing to approximately 22 percent of the country’s gross domestic product (GDP). Yangon City has a population of over 5 million people, while the region hosts nearly 7.4 million inhabitants. The annual growth rate of the city population has been about 2 percent. Yangon City’s transport system is diverse and includes roads, public buses, and rail transport as well as river transportation. • Since 2012, conditions for urban transport have rapidly declined in Yangon, the country’s main economic powerhouse. The Yangon Region is mainly urban and dominated by Yangon City, which represents 70 percent of the population of the region. With the economic recovery and relaxation of restrictions on (new and used) vehicular imports and licensing, the number of private vehicles has rapidly increased. Public transport systems have not been able to adjust to these rapid changes and have started to lose ground to private modes. Increasing motorization, traffic congestion, emissions, traffic-related accidents, travel time, and costs are affecting the living conditions in both cities, hampering well-being and competitiveness, and becoming a significant burden on the mobility of the population and their access to jobs, goods, and services. • In Yangon, private car ownership has been steadily increasing, reflecting a macroeconomic trend of rising purchasing power of urban residents and decreasing the costs of imported vehicles. Restrictions on motorcycles and bicycles have severely limited the use of these two-wheeler modes in Yangon City, albeit being increasingly used in nonurban areas of the region. This has particularly helped maintain a healthy demand for public transport in the city, predominantly by bus. At the same time, motorization has increased almost threefold in the Yangon Region over 2010–2017. Traffic congestion has emerged as an urgent challenge undermining productivity and quality of life in Yangon City. x Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding • The review of selected urban transport performance indicators suggests substantial room for improvements in Yangon. Benchmarking, in relation to other cities, indicates that Yangon has some distance to catch up with regional peers when it comes to air quality, road safety, and traffic fatalities. Despite its size and relatively large population, Yangon has public transport fares and average commuting travel times, which compare well to similar cities. However, if left unchecked, travel times and congestion will tend to increase and disproportionately affect public transport users. Table ES1. Summary of Urban Transport Performance Review: Yangon Focus Areas Performance Efficient: Commuting travel time to work Moderate Efficient: Urban accessibility Moderate Equitable: Public transport affordability Good Equitable: Public transport modal share Good Safe: Traffic fatalities Poor Clean: Air quality Poor or moderate Source: World Bank Transport Team, 2019. Mandalay • Mandalay, with an urban population of about 2.1 million, is the second-largest city in Myanmar, contributing to approximately 10 percent of the country’s GDP. Mandalay is located on the Greater Mekong Subregion (GMS) Northern Economic Corridor linking Myanmar with China and India. Mandalay’s strategic geographic location helped it become an important trading center in Myanmar. • In Mandalay, transport is dominated by motorcycles and public transport plays a minimal role. Mandalay, once a city of bicycles, is now host to over a million motorbikes, making it the region with the highest number of total registered motor vehicles. Studies estimate that motorcycles account for 70 percent of trips, and the region has over 30 percent of the country’s motorcycle registrations (RTAD, 2018). The city dwellers solve most of their commuting needs with direct alternatives, favoring motorbike and walking trips. In the absence of a functioning and efficient public transport system, Mandalay is expected to continue registering motorcycles at a high rate, further leading to consolidate the dominance of motorbikes over any other transport mode. Such short-distance, direct commuting patterns favored widespread bicycle use in the past. Increased motorization and lack of well-functioning urban transport systems undermine the future economic growth potential of the city, becoming a major burden on the mobility of the population and their access to jobs and services. • For Mandalay, the analysis of its urban mobility indicators reveals a less positive outlook. The majority of its citizens have turned to motorcycles for their daily travel needs, and public transport plays a minimal role. Mandalay’s public transport modal share is only comparable to Ho Chi Minh City in Vietnam, which is a city dominated by motorcycles, with relatively adequate infrastructure for motorcycles, including bike-only lanes for major roads and junctions. Considering the minimum Executive Summary xi role of public transport, a preliminary accessibility analysis to jobs and opportunities shows less than positive results. Mandalay’s decision makers have also recognized that road safety and traffic fatalities pose an important challenge on the way forward, as more urban dwellers turn to motorbikes as their preferred transport mode. Table ES2. Summary of Urban Transport Performance Review: Mandalay Focus Areas Performance Efficient: Commuting travel time to work Poor Efficient: Urban accessibility Poor Equitable: Public transport affordability Good Equitable: Public transport modal share Poor Safe: Traffic fatalities Moderate or poor Clean: Air quality Moderate or poor Source: World Bank Transport Team, 2019. • Mandalay is at the early stage of urban transport development, and a no-regrets policy action should point at formalizing and expanding urban transport services and increasing incentives (push and pull) toward sustainable mobility. With an institutional vacuum for urban mobility and a virtually nonexisting formal bus service, Mandalay faces growing challenges on the fast determination of its congestion, pollution, and road accident indicators and a lack of adequately funded, technically proficient urban mobility institution. xii Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding B. Policy Options and Recommendations: Improving Financial Sustainability of the Urban Transport Sector Policy recommendations for the Urban Transport Sector in this report are organized into three strategic areas: institutions and policy, current and projected sector public expenditures, and funding and financing strategies for the sector. Each recommendation responds to identified gaps or issues related to each of the strategic areas and provides practical and actionable measures that can be considered by decision makers as no-regrets initiatives supporting broader strategic objectives aimed at improving urban transport systems and the overall quality of life and competitiveness of Yangon and Mandalay. i. Urban Transport Institutions and Policy Incomplete decentralization in Myanmar has so far led to institutional fragmentation, overlapping functions, and disjointed accountabilities in the transport sector. This particularly affects the ability of subnational governments to raise financing and funding for the sector, integrate different transport modes, and advance on high-level policies toward a sustainable urban mobility system. As far as day-to-day management of the transport system is concerned, the various stakeholders may coordinate reasonably well, but problems emerge when it comes to developing a coordinated response to the fast-growing demands on the urban transport system. Poor coordination and fragmented responsibilities undermine the possibilities of advancing toward an integrated, efficient, and sustainable urban mobility system. Yangon • In Yangon, the public transport agenda has taken an important role at the Yangon Regional Government (YRG) with the establishment of the Yangon Regional Transport Authority (YRTA) in 2016. YRTA oversees road and water public transport modes (excludes rail, which is still under control of Myanmar Railways) and could further develop as a modern and integrated urban mobility authority in Yangon. As part of reforms of the bus system, an updated bus network and service scheme branded under the Yangon Bus Services (YBS) began operations under YRTA’s supervision in 2017, effectively improving the quality of public transport services and advancing in the right direction to allow regulated private sector participation in the provision of transport services. The new system, however, faces technical and financial challenges that undermine its sustainability and the city’s capacity to embark on more ambitious urban transport investments. • There are institutional weaknesses and fragmentation which undermines the capacity to complete the ongoing transport reform in Yangon. Despite the efforts made to create YRTA and give it authority over buses, water buses, and taxis, broader institutional capacity to plan, invest, and monitor levels of service undermines Yangon’s plans to advance toward a sustainable transport strategy. Mandalay, with no formally defined urban transport institutional framework, suffers from a systemic lack of coordination and sound distribution of responsibilities between the national, regional, and city governments and authorities, leaving multijurisdictional functions such as urban transport management and planning without real owners. Executive Summary xiii • Further strengthening of the institutional framework in Yangon is needed to support financially viable plans for better urban mobility systems. The Yangon Region could consider supporting YRTA’s higher-level strategic planning activities by establishing a Yangon Urban Mobility Board (YUMBo), composed of delegates from the YRG, Yangon City Development Committee (YCDC), and Myanmar Railways, with chairing or coordination by YRTA. YUMBo would hold public transport fare setting authority and lead higher-level sustainable urban mobility policy making. It could also provide the space for vital nongovernment stakeholders to oversee the planning, implementation, and management of an integrated public transport network that meets the needs of commuters in an efficient, cost-effective, and sustainable manner. Moreover, YRTA’s regulatory roles should be strengthened and complemented with a commercial focus and use a business-like approach to maximize non-farebox revenues and minimize costs within the framework of affordable fare setting led by the regional government or YUMBo. Mandalay • In Mandalay, there is a need to design and implement an integrated transport authority which could lead and coordinate the implementation of urban mobility plans for the city. Mandalay does not have a well-defined urban transport authority at the city level, and transport functions at the regional level focus primarily on roads and inter-city connectivity. A well-defined, technically competent, and adequately funded urban transport agency is the first cornerstone to advance with adequately funded, sustainable urban mobility strategies. For that reason, Mandalay could advance in policy and action that allow establishing the Mandalay Regional Transport Authority, which should gradually build technical capacity that will enable it to coordinate the development and implementation of urban transport strategies and policies as a lead agency. • The Mandalay Regional Transport Authority could effectively advance in developing and implementing strategic urban transport plans around comprehensive ‘push and pull’ strategies. Such strategies—aiming at disincentivizing private vehicle use (for example, reducing implicit subsidies to private transport - push) while boosting the attractiveness of sustainable transport modes (pull) by increasing access, coverage, and quality—have been successfully piloted in efforts to persuade urban dwellers to opt for sustainable transport alternatives over the two-wheelers, which is overwhelmingly the favored mode at present. Both are significant challenges, which other comparable cities in the region have struggled to address but might nevertheless offer some useful lessons. • While the establishment of the Mandalay Regional Transport Authority should occur over the next two years, Mandalay should redouble as early as possible its efforts in preserving and improving road space, including traffic management and traffic engineering measures. These simple, straightforward, and affordable actions should yield results and form a foundation for the implementation of more complex, strategic urban transport investments in the long term. Major infrastructure investments would require an enhanced financial structuring, possibly blending funding from the regional and union governments and financing at the municipal level. This financial structuring should be prioritized and carefully assessed during the preparation of the master plan. • Both Yangon and Mandalay have the potential to make their transport systems more inclusive and use improved transportations systems to support greater inclusion of excluded groups into the economy and into society. Global evidence shows that promoting social inclusion and reducing inequality can make growth more sustainable and resilient. Safety, security, accessibility, convenience, and affordability for all population groups are critical considerations in developing xiv Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding inclusive urban public transport services. These considerations should feature across all levels, including the policy and strategy framework, budget allocation, institutional capacity development, standard operating procedures, and planning and implementation guidelines as well as throughout the entire project cycle: from needs assessment, design, planning, and operations to monitoring and impact evaluation. It requires both policy-level actions through understanding specific mobility needs of excluded/vulnerable groups and integrating this analysis into urban transport policies and plans as well as financing to support the development of inclusive urban transport infrastructure and services. Finally, both Yangon and Mandalay can prioritize digital infrastructure to leapfrog and transform itself into a smart city to overcome the current lack of accurate and reliable transport and urban data. First, an updated and comprehensive urban transport survey would help better understand the citizens’ travel behaviors. Public bus information such as geo-coded routes, frequencies, speeds, and bus fares is neither updated regularly nor available in accessible digital format (such as General Transit Feed Specification [GTFS]). Data must be considered as an infrastructure—such as roads and rails—on which additional urban services can be provided using insights from transport analytics. Such a ‘data-as-infrastructure’ approach, if executed properly, will not only be equitable but can also bring financial growth due to economies of scale. The review has identified policy recommendations and measures to address institutional and policy gaps, as summarized in Table ES3. Table ES3. Urban Transport Policy and Institutions: Summary of Policy Recommendations Issues and Gaps Short Term (1–2 years) Medium Term (2–3 years) Long Term (3–5 years) Mandalay: There • Establish an • Define and implement • Enact policy changes is no formally integrated urban adequate funding and and urban transport established and transport authority staffing mechanisms investments in line with integrated public in Mandalay (at the for the integrated urban the recommendations transport authority. regional level) and transport authority in of the urban mobility begin developing Mandalay. strategy and adopt an urban mobility indicators to track the strategy. impact of actions and investments. Yangon: YRTA • Enhance and • Advance with the • Advance with non-fare has limited explicitly define the implementation of an revenue lines and use a regulatory power regulatory functions integrated, unified business-like approach to and supervisory of YRTA. fare collection system; enforce adequate levels and management • Enable YRTA to centralizing revenue of service, maximize capacities over bus structure and manage collection and payment user satisfaction, and operations and performance-based to operators; defining minimize costs within the control over system public transport performance-based framework of strategic revenues. concessions. contracts, indicators, policy set by the YRG. payments, and penalties; and licensing advertisement business schemes on buses and stations. Executive Summary xv Issues and Gaps Short Term (1–2 years) Medium Term (2–3 years) Long Term (3–5 years) Yangon: Different • Identify higher- • Establish a YUMBo, • Oversee the planning, authorities have level regulatory and composed of delegates implementation, and control over strategic planning from the YRG, YCDC, management of an different public activities that should and Myanmar Railways, integrated public transport schemes. be supported by with chairing or transport network As a result, a metropolitan coordination by the that meets the needs public transport transport regulatory YRTA/YRG. of commuters in an service delivery is agent. • Prioritize digital efficient, cost-effective, fragmented, mainly infrastructure to and sustainable manner. between rail-based leapfrog and transform transport and into smart cities to buses. overcome the current lack of accurate and reliable transport and urban data. Yangon and • Encourage and • Enact policy-level • Integrate inclusiveness Mandalay: support research to actions to improve analysis fully to urban improve the social understand specific safety, such as anti- transport policies and inclusiveness of mobility needs and harassment laws and investments. transport systems issues affecting enforcement of these to more equitably excluded and laws, well-designed serve the needs of vulnerable groups. and easy-to-reach all groups. complaints, support, and grievance systems. • Adopt and implement actions to ensure that all population groups can equally access and benefit from public transport initiatives. Source: World Bank Transport Team, 2019. ii. Urban Transport Expenditures Launched in 2014, Yangon Urban Transport Masterplan of the Project for Comprehensive Urban Transport Plan of the Greater Yangon (YUTRA1) recognizes the level of ambition behind the implementation of costs of the program, which forecasts over US$23.7 billion of public sector commitments between 2017 and 2035. Expenditure at this level is seen as requiring a massive political commitment at the city, regional, and union levels and would need to be backed by significant reforms of urban transport management and regulatory systems. Therefore, interim solutions may be required to prioritize spending for the immediate needs of the city based on available financing and funding space. The review of public expenditures indicates that the actual public spending levels in urban transport is not enough to meet the high demand for transport service delivery. As a broad indication of the relative 1 YUTRA was prepared with support from the Japan International Cooperation Agency (JICA). An update was published in 2018. xvi Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding importance of the road expenditures in Yangon that will need to be achieved in the medium to longer term, the US$370 million annual public investment program for roads proposed in YUTRA would represent around 2.6 percent of Yangon’s 2017/18 GDP. Doubling of expenditure on roads as a share of regional GDP, from the current 0.7 percent to around 1.5 percent, is recommended in the short to medium term. The impact of underspending is particularly damaging in the heavily urbanized and fast-growing Yangon, where road traffic congestion is worsening as citizens with growing incomes turn to private cars. Actual government spending and operational subsidies on bus transport are limited. Private sector bus operators receive no operating subsidies in either Yangon or Mandalay. In fact, they pay a levy for the right to operate services. They appear to make enough money to cover operating costs through fares but not enough to cover financing costs for capital expenditures (CAPEX), including fleet upgrades. The YRG has stepped in and made in-kind investments, involving the purchase of buses, which is then treated as equity injections by the government, leading to an increase in its shareholdings. The financial performance of the majority of the bus operators remains weak. In the rail sector, Myanmar Railways relies on transfers from the union budget to support its operational expenditures and infrastructure investment plans. This is also the case for urban operations like the Yangon Circular Railway (YCR). Myanmar Railways is implementing an investment program to modernize the YCR and a feasibility study for the Mass Rail Transit System is ongoing. Although these investments are expected to be mostly supported by public funding, Myanmar Railways is keen on redeveloping land around stations following Transit-Oriented Development (TOD) best practices, which could increase land use density around stations and raise revenues from real estate transactions with developers (Pulido, Daniel, Georges Darido, Ramon Munoz-Raskin, and Joanna Moody, eds. 2018). These complexities around urban rail- guided upgrading should be accompanied by policy and administrative reforms to improve the technical and financial performance of Myanmar Railways significantly. Alongside increases in expenditure on urban transport, efficiency improvements will be required to budgeting and public investment management. Efficiency improvements alone will not close the significant gap in urban transport infrastructure and services. However, getting more outputs out of a given expenditure will nevertheless play an important part in making expenditure increases go further in delivering better outcomes in terms of more productive cities and improved mobility for the population. The national Project Bank could be a step in the right direction in public investment management but only if it is accompanied by rigorous prescreening and appraisal, along with an objective review process, to ensure that it contains only projects that meet the defined standards in terms of preparation, economic performance, and sustainability. There also needs to be a process and method for smaller projects that would not be part of the Project Bank. This could be a more straightforward approach than for the Project Bank or a similar approach but requiring proportionately less analytical effort. Public-private partnerships (PPPs) designed around value for money criteria may unlock financing for improving and expanding urban transport infrastructure and services in Yangon and Mandalay. PPPs are still public projects, even if the procurement and financing modality is different. For this, they should not be to be tagged as a panacea and must be treated with caution, given the significant specialist skills required to negotiate a deal that is beneficial to taxpayers and broader society. PPPs can also pose a significant fiscal risk, either explicitly or implicitly. A poorly performing project from a societal perspective will remain unviable, whether it is implemented through a traditional or a PPP modality. PPPs, therefore, need to be subject to the same tests as any other public investment project to determine whether they will deliver net welfare benefits to society. PPP-worthy projects should only be included in the Project Bank, along with traditionally procured projects, after a thorough appraisal has determined that they will be ‘socially profitable,’ that is, technically and economically Executive Summary xvii feasible and socially, environmentally, and financially/fiscally sustainable. Once this is confirmed, their suitability as PPPs can be assessed. The review has identified policy recommendations and measures to address gaps in sector expenditures and financing as summarized in Table ES4. Table ES4. Urban Transport Expenditures: Summary of Policy Recommendations Issues and Gaps Short Term (1–2 years) Medium Term (2–3 years) Long Term (3–5 years) Fragmented • Institute more • Adopt a comprehensive • Remove the gaps in responsibilities in systematic data view of urban transport the legislative design sector financing collection on volume expenditures planning of the decentralization and expenditure and quality of - treating it as a unified to achieve a clearer planning outputs from public policy area rather than distribution of fiscal expenditure on devising policies mode responsibilities in the urban transport, as by mode. sector. a starting point for a • Improve the alignment • Strengthen the fiscal stronger efficiency between the urban responsibilities for the orientation. transport sector sector at the subnational expenditure and revenue level and remove the assignments. duplication and dual reporting lines. Constrained fiscal • Prioritize road • Introduce formal • Gradually increase public capacity compared maintenance procedures and rigorous expenditure on urban with high financing expenditures and analysis methods transport by up to 1.5–2.0 needs improve efficiency for appraisal of all percent of regional GDPs. in maintenance major urban transport • Develop appropriate practices. projects, irrespective of institutional • On CAPEX, the source of funds. arrangements and investment in • Improve capacities technical capacities for projects to relieve to apply investment PPPs to enable private or forestall traffic appraisal procedures financing for major PPPs congestion with lower and methods. in the sector. cost should be the • Leverage private sector focus such as traffic financing by piloting engineering and first; risks related to traffic management such transactions solutions. should be carefully considered when deciding on PPP projects. Source: World Bank Transport Team, 2019. xviii Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding iii. Funding and Financing strategies Modernization of urban transport infrastructure and service in Yangon and Mandalay requires dedicated revenue streams for the region and city governments that are relatively stable and predictable over the long term. Long-range capital plans are only useful and practical when revenue and budgets for infrastructure development are relatively stable and reliable and come from dedicated revenues sources such as fuel taxes, property taxes, parking charges, and long-range union or regional infrastructure spending programs. Considering the infrastructure upgrading needs and financing and funding capacity, Yangon and Mandalay could consider the following actions to enhance funding for the improvement of their transport systems. (a) To develop resource mobilization plans for the urban transport system. Such plans can review types of instruments in place to finance and fund different urban transport system components and analyze them from the perspective of revenue level, financial, and transport sustainability as well as the beneficiary type. In addition to existing funding instruments, new instruments such as fuel excise tax or land value capture (LVC) schemes can be potentially considered to expand the urban transport funding space, as potential revenue sources for future significant investment demand. (b) To prioritize new infrastructure projects based on their social and economic benefits and potential to generate revenues to finance capital and operational costs. Long-range capital plans are only useful and effective when revenue and budgets for infrastructure development are relatively stable and reliable and come from dedicated revenues sources. New funding schemes could be considered to support new and large infrastructure projects such as LVC schemes. The prioritization also needs to consider the financial viability of the projects, which contains an assessment of the cost management and revenue generation of the projects. Revenues generated from urban transport projects include tolls on urban roads project, fare revenue collected on public transport projects, and non-fare/ toll revenues generated from advertising, and land leasing. The government authorities should sufficiently develop the potential of revenue generation in urban transport projects by leveraging private resources and efficiency and providing enabling policy and institutional framework. (c) To use the existing funding instruments to enhance funding capacity at subnational levels and support the immediate mobility needs of the cities. Yangon and Mandalay could start with mobilizing funding for urban transport through existing funding instruments and use it for immediate needs related to public transport. High-level estimations indicate that Yangon has potential to generate over US$1.8 billion and Mandalay US$1.3 billion between 2020 and 2035 with the existing funding instruments to fund urban transport systems. With an existing large bus network and high ridership, Yangon faces growing challenges on fast deterioration of public transport assets such as buses, depots, and terminals and lack of integrated and effective bus service management. Mandalay, on the other hand, is at an early stage of urban transport development. To advance toward a sustainable transport strategy, Mandalay could improve and expand urban transport services and increase the incentives of the public to use bus services. For Mandalay, the short-term financial demands derive from the cost of public transport service upgrading, which includes improvements to public transport infrastructure (roads, stops, and terminals), fleet, and contractual mechanisms. Revenues generated from existing funding instruments such as wheel tax, parking charges, property tax, and special goods tax (SGT) could help support the above immediate priorities of two cities. (d) To explore new funding instruments with sufficient assessment of benefits and risks. In addition to the existing funding instruments, Yangon and Mandalay could consider implementing new instruments such as fuel excise tax or land-value capture schemes. This would allow expanding the urban transport funding space as potential revenue sources for future significant investment demand. Cities should assess their fuel excise tax before introducing it, including its economic and social benefits and risks. A thorough feasibility study can be implemented on fuel tax to analyze Executive Summary xix economic and social impacts, tax rates, proper apportionment scheme to the region and city for their consumption of fuel, consideration of the profile of consumers, and minimizing of the negative impact on excluded and vulnerable groups. For LVC, subnational governments could consider establishing a framework with institutional and regulatory coordination that enables operationalizing and piloting such mechanism as part of the investment plans of urban transport development. Operationalizing LVC requires defining the links of the allocation of land development to the urban transport infrastructure and service delivery, including key performance indicators (KPIs) in the competitive tendering documents. Table ES5. Urban Transport Funding: Summary of Policy Recommendations Issues and Gaps Short Term (1–2 years) Medium Term (2–3 years) Long Term (3–5 years) Inadequate • Prioritize new • Use the existing • Explore new funding funding results urban transport non-fare funding instruments for the in deteriorating projects based on instruments (wheel tax, sector such as LVC quality of urban their potential to property tax, special and fuel-based taxes transport services. generate revenues to goods tax on fuel and surcharges with While mobility finance capital and and parking charges) support from the demand is growing, operational costs. to enhance funding national government resources remain • Develop resource capacity for the sector on supportive fiscal insufficient to mobilization plans at the subnational level. policies and institutional maintain and for the urban • Improve collection of coordination. improve the urban transport system and above instruments • When considering new transport system. improve institutional • Consider establishing a potential revenue sources coordination mechanism of allocation such as fuel tax, carry required for resource of revenues from the out a detailed analysis of mobilization . above instruments their economic and social to urban transport impacts. development, with • Define suitable supporting fiscal and implementation budget policies from the mechanisms, national government. including reducing negative impacts on the poor before the implementation of new funding instruments. Source: World Bank Transport Team, 2019. By focusing on wise investments and choosing the appropriate sets of financing instruments, the cities can design a comprehensive financing strategy for urban transport projects. Inadequate funding results in deteriorating quality of services, as resources become insufficient to maintain and operate existing urban transport systems, let alone upgrade them. Demand for urban mobility and transport services is rapidly growing in Yangon and Mandalay, while the fiscal capacity of the governments is constrained. As public budgets must respond to diverse public service needs, the governments should identify various funding sources and instruments for the urban transport sector to advance toward sustainable and inclusive urban transport system to serve the needs of all groups of the population. xx Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Executive Summary xxi xxii Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding INTRODUCTION The World Bank has launched a series of analytical works to support the ongoing policy dialogue with the Government of Myanmar on urban development, transport, and infrastructure. The report on Urban Transport in Yangon and Mandalay was prepared as part of this collaboration in Myanmar. The objectives and scope of this analytical work are aligned with the Myanmar Sustainable Development Plan (MSDP) 2018–2030, particularly with its strategic objective on managing cities and towns efficiently and sustainably. The objective of this report is to provide a broad assessment of urban mobility in Yangon and Mandalay for policy makers working on how to improve sector performance and match an adequate funding and financing options with the bold plans for urban transportation to meet growing mobility demand in Yangon and Mandalay. It aims to support discussions regarding the challenges and priorities of the urban transport sector moving forward, including the need for actions on the financial, technical, and institutional dimensions. Introduction 1 The report is structured on the following lines. Chapter 1, Urban Mobility in Yangon and Mandalay, presents an overview of the urbanization trends and urban mobility challenges in Yangon and Mandalay, the country’s two main urban agglomerations. It leverages data from past studies carried out by the Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), World Bank, and other development partners in the sector. By using the Sustainable Mobility for All (SuM4All) framework and applying selected measurable indicators drawn from the United Nations Economic and Social Commission (UNESCAP) Sustainable Urban Transport Index (SUTI), the chapter benchmarks urban mobility performance in the two cities against international comparators as a means to inform policy makers aiming to set concrete targets and monitor performance and progress (Oo, T., and H. A. Thin. 2016). Furthermore, the chapter analyzes the urban transport system under the lens of inclusive urban mobility. Based on available data, this analysis discusses different aspects of inclusive mobility including social and special inclusion of vulnerable groups such as women, people with disabilities (PwDs), and ethnic groups and highlights key issues and recommendations, which include future research areas geared toward improving the inclusiveness of urban transport systems to serve the needs of all groups in society. Chapter 2, Urban Transport Policy and Institutions, starts with a discussion of the still-evolving decentralization process in Myanmar, as it will continue to impact the financing and provision of urban transport services in Yangon and Mandalay. The chapter reviews the existing urban transport policy and regulatory framework and assigned institutional responsibilities at the union, regional, and city levels and its links to unlock the potential for the two cities to advance toward an integrated, efficient, and sustainable urban mobility system. Chapter 3, Yangon Bus System - Financial and Operational Review, reviews the status and emerging challenges for the bus-dominant, public urban transportation system in Yangon. Yangon, with over 5 million urban population, has managed to maintain a healthy demand for public bus transportation, which accounts for half of total motorized daily trips, but is also facing increasing challenges of rising motorization, vehicle- use intensity, and the associated increasing congestion and road space overcrowding. Reviewing the evolution of Yangon’s bus-dominant transport system over the past years is important to allow setting the agenda for the next generation of actions to support a robust, multimodal public transport system. Yangon’s experience also presents a valuable context for Mandalay and other cities in the region which are facing similar challenges associated with increasing motorization and lagging public transport systems that fall short in offering a viable alternative to private car use. Chapter 4, Urban Transport Expenditures and Financing Potential, reviews public expenditure trends on urban transport in Yangon and Mandalay. It is both a stock-taking exercise and, to the extent possible, an analysis of ways in which the efficiency and effectiveness of public spending could be improved. While recognizing data gaps and limitations, the review focuses primarily on the road sector, which constitutes most of the public expenditure at the subnational level. It further discusses the budget process and the public investment management systems, as relevant to the urban transport sector, and public policy considerations related to private sector participation in financing urban transport infrastructure and services. Chapter 5, Urban Transport Funding Context, discusses funding options to support the urban transport sector by drawing on international practices. Developing urban transport infrastructure and service requires dedicated funding streams that are stable and predictable over the long term and, importantly, are reliable based on political, economic, and social considerations. The review, therefore, focuses on existing non- fare funding instruments, which are already in place and represent a feasible option to increase support to the urban transport sector in Yangon and Mandalay. It further assesses the funding capacity of these instruments and provides recommendations for developing resource mobilization plans and considerations to further prioritize investments based on funding potential. 2 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding The report builds on the recently published studies on urban transport in Yangon and Mandalay and aims to provide an update on recent developments and contribute to update the existing knowledge on specific subtopics, including urban transport performance, expenditures, and funding and financing of public transport, funding context and potential, and social inclusion in urban transportation. The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the World Bank Group, government counterparts in Myanmar, and other parties cited in the report. Any errors are the responsibility of the authors. Introduction 3 4 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding 1 URBAN MOBILITY IN YANGON AND MANDALAY Key points • Myanmar is at an early stage of urbanization, with approximately 30 percent of the population living in urban areas. Like many other countries in the region, Myanmar expects its urban population to increase significantly by 2050. Urban growth, while offering opportunities for economic development and creation of more and better-paid jobs, also increases the pressure on the existing urban mobility systems and access of the population to jobs, services, and their communities. • Yangon and Mandalay have different transport demand characteristics. Yangon has managed to maintain a healthy demand for public bus transportation, which accounts for half of the total trips. However, the number of private vehicles has been increasing rapidly and traffic congestion has emerged as an urgent challenge in Yangon. In Mandalay, public transport is practically nonexistent and motorcycles account for about 70 percent in transport modal share. • The review of the selected performance indicators on efficient, equitable, safe, and clean urban mobility indicates substantial room for improvement of transport systems in Yangon and Mandalay. Two cities also need to improve the social inclusion of their transport systems to equitably and safely serve the needs of all groups in society, including the poor, people with disabilities, women, ethnic groups, religious minorities, and other groups. • Urban mobility challenges in both cities will only become more sophisticated and costlier and addressing these challenges sustainably and efficiently will increasingly require integrated policy solutions, more financial resources, and more robust technical capacity. Urban Mobility in Yangon and Mandalay 5 A. Urbanization in Myanmar Estimates indicate that between 1980 and 2015, the population in East Asia has increased by nearly 50 percent, while gross domestic product (GDP) per capita, measuring average wealth, has grown 1.6 times (BCG 2017). Asia’s growth in population and wealth over the past four decades has increased the demand for transport, as evidenced by several researchers. During the past decades, many governments have invested in transport infrastructure to a point where, on average, infrastructure quality rankings have placed five Asian countries among its top 20. Myanmar is at an early stage of urbanization. Approximately 30 percent of the population in Myanmar is living in urban areas. Nearly 38 percent of the urban population lives in Yangon and Mandalay, the two main economic centers in Myanmar. The annual urban population growth rate has been about 1.7 percent, which is still lower than that of other countries in the region. Like many other countries in the region, demographers estimate that the urban population in Myanmar will keep significantly growing and exceed 45 percent by 2050 (UN DESA 2018). High rates of rural poverty, more job opportunities, and stability in urban areas are increasingly affecting the rural-to-urban migration. Urban agglomerations in Myanmar have received the bulk of recent migration flows. In Yangon, analyses attribute 81 percent of the population growth between 2009 and 2014 to internal migration. Other push factors of rural-to-urban migration include market shocks, rural poverty, landlessness, and natural disasters. Pull factors range from better living and working conditions and broader access to public services and job opportunities to higher salaries and a stabilized political situation (World Bank 2019a). The robust economic growth in Myanmar in recent years has brought a decline in urban poverty from 32.2 percent in 2004 to 14.5 percent in 2015. Inequality in Myanmar has risen, as better-off and predominantly urban households have seen faster progress than average and poorer, mostly rural, households (World Bank 2019b). The economic growth in cities has been fueled by an expansion in construction, services, and manufacturing. Ownership of assets has shown more improvements in urban areas, which is primarily attributed to growth in the service sector and, to some extent, manufacturing. Growth in the construction sector and in manufacturing has been predominately focused in urban and peri-urban areas. Figure 1.1. Share of Urban-Rural Population in Association of Southeast Asian Nations (ASEAN) Countries 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 2014 2050 Singapore Brunie Malaysia Indonesia Thailand Philippines Laos Myanmar Vietnam Cambodia Percent Urban Percent Rural Source: UNEP 2018. 6 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Overall employment levels in urban areas are high, estimated at 78.2 percent for men and 53.5 percent for women. Yangon and Mandalay host about a third of all firms in the country, providing employment to more than half of the number of formal sector workers (60 percent) and concentrating 50 percent of total value added and capital owned (World Bank 2018a). This high concentration is especially prevalent in manufacturing jobs, where Yangon represents 47 percent and Mandalay represents 16 percent of all jobs. The increasing urbanization levels in Myanmar’s two largest cities have begun to put a strain on their urban services and resources. In Yangon, for example, only 40 percent of the city’s population has access to safe drinking water and traffic congestion is on the rise, as is solid waste, flooding, and pollution (World Bank 2019a). There is also a rise in the number of informal settlements as new residents cannot afford the existing supply of housing. If left unaddressed, these infrastructure needs will lead to further congestion, slums, and pollution and limit opportunities for growth. A recent World Bank Myanmar urbanization review highlights the need to focus on inclusive urbanization (World Bank 2019a). The report found that vulnerable groups and minorities in Myanmar face challenges of spatial exclusion related to accessing urban land markets and housing. There are also challenges of exclusion related to access to jobs, education, and services, largely due to a mismatch of living locations and availability of public transport systems, which, despite being comparatively affordable, have limited coverage to these exclusion-prone areas. Policies that promote socially inclusive urbanization can bring shared prosperity, enhance cities’ productivity and competitiveness, and enhance social cohesion and livability (Box 1.1). In this sense, social inclusion relates to fostering inclusive policies and attitudes toward marginalized groups, regardless of differences in gender, ethnicity, or region of origin.2 Safety, security, accessibility, convenience, and affordability for all groups of the population are critical considerations in developing inclusive urban transport services. If cities are not well planned and well managed, urbanization can lead to higher levels of poverty and inequality, which can affect a city’s competitiveness; undermine socioeconomic benefits; threaten sustainable growth; and result in social divisions, violence, and conflicts. Box 1.1.Priorities for Inclusive, Sustainable, and Competitive Urbanization in Myanmar Promoting economic inclusion to foster job creation and resilience. From a broad policy perspective, priorities for promoting economic inclusionz include better access to and quality of education for all and addressing issues in the macroeconomy and labor market to create increased opportunities for employment and income generation. At the urban level, using an economic inclusion lens, two key priorities stand out: addressing the high levels of informality and improving resilience to natural hazards and economic shocks. Improved urban transport services have a role in promoting spatial inclusion to improve access to affordable land, housing, and services for low-income and vulnerable populations. Investing in affordable, safe, and reliable housing, infrastructure, and transportation services, particularly in underserved areas, can reduce spatial inequality, open new employment opportunities, and reduce health and disaster risk. The current needs in Myanmar are significant. Prioritizing investments in sustainable infrastructure and affordable housing, as well as building capacity to carry out integrated planning, are top priorities for fostering spatial inclusion in cities. Ensuring equitable access to sustainable infrastructure is a key facet of pro-poor, inclusive development. Sustainability, in the case 2 In Myanmar, a few subgroups are vulnerable to exclusion in the urban context—internal migrants, the urban poor, PwDs, and some ethnic and religious minoritie. (World Bank 2019a). Urban Mobility in Yangon and Mandalay 7 of Myanmar, particularly includes resilience given the country’s high exposure to natural hazards, but given the lock-in effects of infrastructure, approaches for compact low-carbon urban development are also critically important. Promoting social inclusion to improve conditions for vulnerable groups to participate in society fully. For the subgroups in cities that do not fully benefit from urbanization due to a number of reasons discussed in the study, targeted social programs and policies to allow for the formalization of their identity in the city will help promote social inclusion. While the focus on the poor, women, ethnic and minority groups, and the disabled is critical throughout Myanmar, within cities, there are specific aspects that can improve inclusive urbanization from a social perspective. A focus on migrant populations is important in urban areas, particularly given international evidence showing that policies to remove obstacles are linked to migration status for access to services and addressing various forms of economic, political, and cultural discrimination against migrants is important as are tackling stereotypes and promoting intercultural dialogue and understanding. Fostering good governance and financing to create the basis for inclusive, competitive, and sustainable cities. As Myanmar transitions from a highly centralized system, strong institutions and good governance will be important at the local level to foster an inclusive approach. Key elements of transparency and fair decision making, as well as enough resources, are necessary to foster inclusion. Evidence from other countries shows that engaging communities and citizens in decision- making processes is also a powerful way of promoting inclusion. Key priorities include improving coordination and operational processes for urban planning, management, and local service delivery, ensuring local participation, and developing a more comprehensive approach to improving financing for urban development. Source: World Bank 2019a. Improved transportation services, particularly in underserved areas, can serve as one tool within the social inclusion toolbox to facilitate access to employment, education, and medical care opportunities, reducing risks of exclusion or loss of welfare because of internal migration. A comprehensive urban mobility strategy that embeds broader accessibility considerations is, therefore, a key facet of pro-poor and inclusive development. Urban transport services also have an important role in promoting spatial inclusion to enable better access to jobs, education, health, and other and services. The Yangon and Mandalay Regions are different in terms of their demographic and transport demand characteristics. Both regions are critical to the economy of Myanmar, together accounting for nearly 32 percent of GDP and 26 percent of the population. The Yangon Region is mainly urban and dominated by Yangon City, which represents 70 percent of the population of the region. The Mandalay Region, on the other hand, is predominantly rural, with Mandalay City and surrounding urban agglomerations representing less than 30 percent of the population of the region. These differences have implications for public transport demand and accessibility and mobility patterns, which are strongly influenced by contrasting broader urban mobility policies, as discussed further in the report. Since car import restrictions were eased in Myanmar in 2012, conditions for urban transport have rapidly declined in Yangon and Mandalay. With the economic recovery and relaxation of restrictions on vehicular imports and licensing, the number of private vehicles has increased quickly. Public transport systems have not adjusted to these rapid changes and have started to lose ground to individual modes. Increasing motorization, traffic congestion, emissions, traffic-related accidents, travel time, and costs have started to affect the living conditions, becoming a significant burden on the mobility of the population and their access to jobs, goods, and services. 8 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 1.1. Yangon and Mandalay Overview GDP Total Registered Population Urban Rural (MMK, Registered Motorbikes Region (thousands) (thousands) (thousands) billions) Vehicles (2016) (2015–2016) (2016) Yangon Region 7,355 5,157 2,198 14,408 824,068 295,495 % of national 14 35 6 22 12.9 5.5 Mandalay Region 6,146 2,137 4,008 6,634 1,408,549 1,262,024 % of national 12 14 11 10 22.1 25.6 Myanmar 51,420 14,864 35,349 65,262 6,377,002 5,355,510 Source: National Census (2014); Ministry of Planning and Finance (MOPF) (2015–16); Department of Road Transport (2016); World Bank. B. Yangon Yangon, the former capital of Myanmar, is the country’s primary city in population and economic terms, contributing to approximately 22 percent of the country’s GDP. Yangon City has a population of over 5 million people, while the region hosts nearly 7.4 million inhabitants. The annual growth rate of the city population has been about 2 percent. Yangon City is under the administration of the Yangon City Development Committee (YCDC). Yangon is rather monocentric in its urban spatial structure, although various scales of developments are taking place sporadically along major roads (JICA 2014). The city center has a high construction and population density, while areas along the main roads have medium density, both with mixed land uses. Central areas concentrate around 80 percent of jobs, and density in suburban areas is still low. However, population growth rates are slowing down in the central areas and accelerating in the peripheral, suburban areas. On the demand side, the average number of trips per person per day in Yangon is estimated at 2.042 for all trips generated (1.179 for all trips excluding walking) (JICA 2014). As noted in YUTRA, in most Asian cities, the trip rate ranges from 2.0 to 2.5, suggesting that mobility in Yangon is still on the lower side. Buses, branded under the Yangon Bus Service System Scheme, carry around half of the total trips (excluding walking) by modal share in Yangon (Figure 1.3), which is high by comparison to international and regional standards and is partly attributed to the active ban on motorcycle circulation in the Yangon city center. Urban dwellers use bicycles for short-distance commutes, and licensed trishaws, or bicycle cabs, are available in areas of the historic city center, particularly around Strand Road. Urban Mobility in Yangon and Mandalay 9 Figure 1.2. Transport Network (left) and Land Use in Greater Yangon (right) Source: YUTRA 2019. Figure 1.3. Modal Split in Yangon (excluding walking) Large bus: 28.4% Small and medium bus: 21% Motorcycle: 7.2% Bicycle: 22.5% Water ferry: 2.5% Car: 8.1% Rail: 1.1% Taxi: 7.7% Other: 1.5% Source: YUTRA 2019. 10 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Yangon is the only urban agglomeration in Myanmar with urban railway services. The network comprises nearly 143 km and 59 stations divided into eight lines (Figure 1.4). The data for 2014 indicate that, together, there are around 110,000 daily boardings (weekdays) on the Yangon railway system. Comparing boardings to network length results in nearly 775 passengers per km of rail, which is a low rate considering regional benchmarks: in comparison, modern urban railway systems mobilize values in the range of 16,000 to 30,000 passengers per km, depending on station density and railway commercial speeds. Myanmar Railways manages and operates rail services in Yangon. Figure 1.4 presents a map of the four main lines running in Yangon: the Circular Line (M Hlaw Gone-Mingaladon), the Pyay Line, the Yangon-Mandalay Line, and the Thilawa Line, serving the East University of Yangon. Figure 1.4. Map (Open Street Map) and Description of Yangon Circular Line Source: World Bank study team, based on Open Street Maps. Urban Mobility in Yangon and Mandalay 11 Table 1.2. Yangon Railway Network Daily Boardings Lines (length, Track Description (2014); % of Total stations) Railway Boardings Circular Line Double This line is operated in two sections: the 81,600 (74.2%) (46 km; 38 western section from Yangon Central to stations) Da Nyin Gone via Insein (20.3 km and 21 stations) and the eastern section which runs from Yangon Central to Da Nyin Gone via the western side of the Circular Line, which is 25.8 km and has 17 stations. Pyay Line (19.4 Double (7.6 km); This stretches from north of Da Nyin Gone to 12,200 (11.1%) km; 4 stations) Single (11.8 Hmawbi, a 26.5 km section with six stations km - Hawga- and a 3.0 km spur which serves the Computer Himawbi) University of Yangon. Yangon- Double This is part of the north-south main line 13,100 (11.9%) Mandalay section from Yangon to Mandalay. The section line section in from Yangon Central to Dabein is a 36.0 km Yangon area section with seven stations and a 6.4 km (36.1 km; 6 spur which serves the Dagon University in stations) northeast Yangon. Thilawa Line Single This is a 26.7 km branch line to the industrial 12,200 (11.1%) (26.2 km; 5 area in southeast Yangon and has five stations stations) and a 5.0 km spur which serves the East University of Yangon. Source: World Bank study team, based on ADB 2016a. Three major water transport routes have operated in Yangon since 2017 with operational intermissions.3 These are the routes that connect the Yangon Botahtaung Jetty to Insein, North Dagon, and Thanlyin. In 2016, as part of its broader program to improve transport services, Yangon Regional Transport Authority (YRTA) issued licenses to operate water bus services in the three routes referenced above. YRTA tendered this operation to Tint Tint Myanmar, which has imported three boats from Australia and seven hulls from Thailand and provided improved services, which, for alleged cash shortfalls, have operated intermittently during 2019. The suspension, which occurred due to low passenger numbers and overall low financial returns, could undermine existing plans to expand water bus operations in the Yangon River and the Nga Moe Yeik Creek to provide reliable transport links and reduce travel times and congestion from road services entering Yangon. Figure 1.5 presents a schematic view of the Yangon Water Bus services as they operated during early 2019. 3 Yangon water bus operations is expected to resume after renovation of the jetties is completed. 12 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 1.5. Map of Yangon Water Bus Routes Source: World Bank study team, based on Open Street Maps and Tint Tint Myanmar, 2019. Nonmotorized transport. Walking accounts for nearly 43 percent of the total daily trips in Yangon (YUTRA) and the average travel length of these trips is around a half kilometer, with an average travel time of 14.5 minutes. Analysis suggests that the number will increase as more commuters walk to access public transport services. In Yangon, bicycles are still widely used for short-distance commutes, and licensed trishaws, or bicycle cabs, are available in the city center. The need for significant nonmotorized transport facilities is clear, considering that currently many pedestrians do not have safe and adequate infrastructure to walk, as sidewalks are discontinuous, deteriorated, and inadequately dimensioned in many parts of Yangon, especially when leaving the historic city center. Yangon is already experiencing the negative impacts of increased motorization. With the rapid increase in personal vehicles as well as challenges in public transport, traffic congestion has emerged as an urgent challenge. The number of private cars in Yangon has doubled between 2010 and 2015 (Figure 1.6) and average traffic speed has decreased by nearly a half over the past decade. Between 2015 and 2018, vehicle registration growth has shown a tendency to stabilize. However, in the Yangon Region, the percentage of two-wheelers as a percentage of total vehicle registration has boomed. This particularity reflects that more people outside central Yangon can access low-cost two-wheelers and potentially are shifting from public transport to motorcycle. If this tendency further consolidates, it could put service provision of public transport in the periphery in a downward spiral, where reduced demand affects revenues and, consequently, gives way for service cuts. This phenomenon, known as the ‘vicious circle of public transport’, has happened in many cities in Vietnam, Thailand, and North America and it has proven challenging to revert the trend. Urban Mobility in Yangon and Mandalay 13 Figure 1.6. Growth in Registered Vehicles by Type in Yangon Region 1,000,000 800,000 600,000 400,000 200,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Passenger Car Truck (Light Duty) Truck (Heavy Duty) Bus Other Two Wheeler Three Wheeler Trawlergi Heavy Machine Source: Myanmar Department of Road Transport Administration, 2018. The conditions of urban mobility also remain a critical challenge in exclusion-prone, densely populated informal settlements, which are mostly located in urban peripheries. These settlements, as documented in the World Bank Myanmar Urbanization Review (World Bank 2019a), lack access to basic infrastructure and services, including paved roads or reliable, frequent public transport. In Yangon, 54 percent of the informal settlements have internal road networks provided by the government or built by the community, with most roads being unpaved and only 1.2 percent of the roads having drainage. Many informal settlement areas are flooded during the rainy season due to lack of drainage systems, which significantly constrains the mobility of people residing in these areas and their access to public services. As evidenced in a number of World Bank-supported programs, investment plans focused in improving access to all-weather roads in exclusion-prone areas can reduce travel time to essential services and enable communities experiencing spatial exclusion to access essential services more frequently. In this sense, Yangon should put forward a program to create an inventory of unpaved roads and prioritize improvements by matching with census data that allow targeting exclusion-prone populations. The Yangon Regional Government (YRG) has taken significant steps toward improving urban transport service provision with the establishment of the YRTA, which oversees different transport modes (except for railways). As part of the reforms of the bus system, the Yangon Bus Services (YBS) began operations in January 2017 (under YRTA) and has advanced in the provision of public transport services. Nevertheless, the new system faces technical and financial challenges that undermine its sustainability and the city’s capacity to embark on more ambitious urban transport investments, including rail and bus rapid transit (BRT). 14 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding C. Mandalay Mandalay, with an urban population of about 2.1 million, is the second-largest city in Myanmar. The Mandalay Region’s total population is about 12 percent of the national population and its contribution to GDP is approximately 10 percent. Mandalay is located on the Greater Mekong Subregion (GMS) Northern Economic Corridor linking Myanmar with China and India. Mandalay’s strategic geographic location helped it become an important trading center in Myanmar. Mandalay has a comparatively small urban footprint and limited density. Built-up areas—including residential, commercial, industrial areas, and public and transit areas—cover about 17 percent of land use in Mandalay City (Figure 1.7). The city dwellers solve most of their commuting needs with direct alternatives, favoring motorbike and walking trips. Such short-distance, direct commuting patterns favored widespread bicycle use in the past. Since 2012, the city has experienced an exponential increase in motorization after the union government eased restrictions on car and motorcycle imports. Increased motorization and lack of well-functioning urban transport systems undermine the future economic growth potential of the city, becoming a major burden on the mobility of the population and their access to jobs and services. Figure 1.7. Land Use in Mandalay City Source: JICA 2016. Urban Mobility in Yangon and Mandalay 15 Transport in Mandalay is dominated by motorcycles. Data show that motorcycles account for 70 percent of all trips, excluding walking (Figure 1.8). The Mandalay Region has 30 percent of the country’s motorcycle registrations, with 688,652 registered motorcycles in the city alone (1,182,691 across the region in 2014). This equates to 2.12 motorcycles per household (0.16 for cars and 0.92 for bicycles) and a motorcycle ownership rate of about 400 per 1,000 population. The motorcycle ownership rate might appear high, but international comparisons indicate that it could still grow by 50 percent before the saturation point is reached (ADB 2016b). Figure 1.9 illustrates that motorcycles are not only the largest category in vehicle registration but are also the fastest growing category year-on-year. In other words, Mandalay is expected to continue registering motorcycles at a higher rate than other types of vehicles, further helping consolidate the dominance of motorbikes over any other transport mode. Figure 1.8. Mandalay Trip Modal Split Car Bus 5% 3% Bicycle 22% Motorcycle 70% Source: ADB 2016b. Figure 1.9. Growth in Registered Vehicles by Type in Mandalay Heavy Machine Trawlergi Three Wheeler Two Wheeler Other Bus Truck (Heavy Duty) Truck (Light Duty) Passenger Car 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 30-Apr-2018 28-Feb-2019 Source: Road Transport Administration Department, 2018. 16 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Buses play a minimal role in Mandalay’s urban transport. In Mandalay, a small group of bus users are captives of public transport. Public transport users tend to be citizens who carry voluminous packages to and from the markets and find it too expensive or cumbersome to travel with cargo on motorbikes. Public transport vehicles themselves are extremely uncomfortable, inappropriate in size, difficult to access, poorly maintained, and noisy. Consequently, the only means of public transport is through the 57 bus routes. Buses generally make three trips per day, with an average of 100 passengers per day. Ya ka ka, a legacy nongovernment organization (NGO), permits minibus operations with limited oversight. Ya ka ka deals with the day-to-day relationship with individual bus owners or operators, without evidencing bookkeeping on operational or financial performance. The existing system includes 18 city buses (90,000 passengers per month), 383 Dyna (759,600 passengers per month), 15 Hilux (24,300 passengers per month), and 401 light trucks (686,700 passengers per month). Buses generally make three trips per day, with an average of 100 passengers per day (data from Ya ka ka interviews, 2018). Mandalay, which used to be a city of bicycles, has limited bicycle use now. Easy access to motorbikes has meant that bicycles as commuter vehicles have all but vanished and the limited infrastructure that used to exist for bicycles is now used mainly as parking space for motorbikes. While the city has a train line and a central train station, the train line plays no urban transport function and, due to its slow and uncompetitive run times, has a limited regional function. The Mandalay City Development Committee (MCDC) has recently implemented a traffic control signaling system on around 14 main intersections. The system, however, is not being used at its full potential, given the technical capacity constraints and issues related to enforcement of the traffic control system. The city is also implementing an automated vehicle registration system, and there are plans for the development of information systems for parking and bus stops. There are preliminary plans looking at implementing BRT as a mechanism to advance toward a sustainable urban transport strategy that curbs motorcycle use. D. Urban Transport Indicators and Performance Benchmarking Improvements in transport infrastructure bring tangible benefits to cities’ competitiveness and quality of life. Equally, the state of the transport system varies widely across cities, allowing for a broad three-tier classification. Such classification looks at infrastructure development and public transport adoption. A classification based on data from the World Economic Forum and Boston Consulting Group (BCG) plots Asian cities considering these two criteria and produces a grouping of three tiers of distinguishable cities. • Tier 1: Cities that have consolidated, extensive, formal, organized public, and mass transport networks (bus and rail). In these cities, public transport is the most convenient (cost and travel time) mode for commuters. Tokyo, Beijing, Singapore, Seoul, and Hong Kong SAR, China are placed here. • Tier 2: Cities that have made progress over the past two decades in implementing organized, formal mass transit networks (bus and rail). Kuala Lumpur, Bangkok, and Jakarta fit this category. • Tier 3: Cities with relatively undeveloped mass transit networks and bus systems combining formal and informal services. Cities in this category include Ho Chi Minh City, Hanoi, Surabaya, Manila, Vientiane, Phnom Penh, Yangon, and Mandalay. Urban Mobility in Yangon and Mandalay 17 Cities in each tier face different transport-related challenges, and their sustainable transport programs are configured differently according to challenges, funding, and financing capacity and institutional arrangements. For Tier 2 and 3 cities, the lower adoption of public transport translates into higher chances for congestion increasing over the next decade, disproportionately affecting public transport users, which, in these tier cities tend to be predominantly B40 (typically referred to as bottom 40 population by income level) population by income. Figure 1.10 plotted comparable cities in Tiers 1, 2, and 3, as described earlier. Figure 1.10. Tiers of Cities by Mass Transit Network Supply and Demand Tier 2 Tier 1 Beijing Seoul Tokyo Consolidation of Mass transit network Singapore Hong Kong Kuala Lumpur Bangkok Jarkata Mandalay Hanoi Tier 3 Ho Chi Minh Yangon Surabaya Vientiane Manila Phnom Penh 0% 20% 40% 60% 80% 100% % kms in public transport Source: World Bank study team, based on Moovit Data, BCG, WEF. For Yangon and Mandalay, it is critical to determine what aspects of their urban transport system are in greatest need of improvement and whether reforms and investments are having the desired impact. Performance targets can be used as an accountability mechanism for policy makers and provide a clear message to the public about the plans and expectations for urban transport (World Bank 2019c). Advancing toward more sustainable transport strategies requires that both cities adopt a set of measurable, actionable indicators which can allow setting targets and monitoring system performance and overall progress toward achieving targets. In assessing the system performance and defining indicators, the following four key principles of the Sustainable Mobility for All (SuM4All)4 can provide a framework: • Efficient: Allow people and goods to move from A to B quickly and seamlessly. 4 https://sum4all.org/. 18 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding • Equitable: Ensure everyone has access to good quality transport to reduce economic and social disparities. • Safe: Halve the number of global deaths and injuries from road traffic accidents. • Clean: Lower the environmental footprint of the sector to combat climate change and pollution. This review attempts to consolidate available data based on selected indicators. For Yangon, the study bases its analysis on in situ interviews and 2013 and 2019 surveys conducted as part of the YUTRA study. For Mandalay, data availability is limited and this study draws relevant information mainly from local, non- professional sources. These data constraints warrant attention and considerations in future analytics. The list of indicators applied is drawn from the SuM4All framework and UNESCAP SUTI, as presented in Table 1.3. Table 1.3. Selected Urban Transport Indicators and Description Principle Indicator Description Efficient Commuting travel time Average time to work by public transport Urban accessibility Percentage of jobs within 60 minutes by public transport Equitable Public transport affordability Share of monthly income for the 2nd decile Public transport modal share Share of motorized trips done in public transport Safety Traffic fatalities Road fatalities per 100,000 residents Clean Air quality Average annual reading of PM10 from available locations Commuting travel time. The YUTRA 2019 update provides the best available data for determining the average travel time for transport users in Yangon. The average travel time for commuters in Yangon varies according to income levels. In this sense, public transport users, who are primarily B40 population, take on average 63 minutes in a one-way commute trip. Taxi and private vehicle users, categorized in the two upper quintiles by income level, have nearly 30 percent shorter commute times, clocking around 40 minutes for a one-way trip. A benchmarking exercise for public transport users in comparable cities shows that the average commute time for bus users in Yangon is comparable to that of Bangkok, Jakarta, or Sao Paulo in Brazil. Cities such as Kuala Lumpur, Manila, Hanoi, and Beijing have average travel times in public transport between 52 and 58 minutes, while Singapore averages 44 minutes, which is lower than Athens or Washington, DC (Figure 1.11). Travel times in Yangon are acceptable if compared with other cities, which multiple analyses consider to have some of the worst commutes in the world, such as Bogota, Mexico City, and Istanbul.5 Accelerated motorization rates in Yangon Mandalay will significantly worsen average commercial travel speeds and overall commuting times unless decision makers put in place priority measures for sustainable transport (public transport and nonmotorized) over a five-year horizon. 5 South China Morning Post. http://www.scmp.com/news/china/article/1692839/beijingers-lead-chinas-pack-longest-daily-commute. Urban Mobility in Yangon and Mandalay 19 Figure 1.11. Average Time in Minutes Commuting to Work (one way) 72 67 67 69 63 65 62 63 56 57 58 54 52 50 47 44 k r ir e ns o iro ty DC ng ila i on a ta ul no pu ko or rt ul m nb Ci go he an ng ne iji ka Ha Pa ap Iz m ng n Be ta Bo o to At M Ja Ya Lu Ja ng ic o Ba Is ng Sa ex de a Si hi al M o Ku as Ri W Average commute time per trip (minutes), public transport 2019 Data, Moovit 2017 Data, BCG, WEFORUM (Shangai) Source: World Bank study team, based on Moovit Data, BCG, WEF. Urban accessibility. The World Bank standard analysis considers jobs accessible by public transport over a 60-minute window. An accessibility analysis is important to understand and identify areas of the city that are underserved by transport options. In other words, which residents face long or unsafe walks, long waits for poorly connected or unavailable transport as part of their daily routine to commute to work, school, see healthcare providers, or engage in social activities. The underserved are those who face restricted access to opportunities either because of their poor locations relative to activities and services, as a result of poor transport or both. Figure 1.12 graphs accessibility in two axes: access and transport expenditure. Population located in the lower-left quadrant are typically lower-income residents living in the periphery and at risk of social exclusion and hence should be the focus of urban mobility policies aiming to improve the conditions for B40 populations. As part of the urban accessibility review, the study team carried out an inhouse urban accessibility analysis for public transport users in Yangon. Approximately 21 percent, or 581,000 jobs out of 2.8 million available in the Yangon area, are accessible within a 60-minute commute using public transport, either bus or rail. This number is based on a weighted average based on network calculations recently carried out for the Yangon BRT1 feasibility study (Far East Mobility 2018). A graphic representation of the results is included in Figure 1.13, in which accessibility is displayed in shades of blue, darker meaning more jobs accessible. In this figure, readers should note the highly accessible central business district (CBD) in historic Yangon (limited to the south by the Yangon River), while peripheral areas, particularly in the north and northeastern parts of Yangon, have much more limited accessibility. If compared with census information locating population by income levels, the initial hypothesis would suggest that those peripheral areas in the north and northeast of Yangon also have the highest concentration of lower-income and exclusion-prone populations, highlighting the fact that limited access to jobs, education, and services is particularly challenging to those in risk of exclusion. 20 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 1.12. Access-Mobility Framework to Identify Transport-Underserved Populations MOBILITY EXPENDITURE (time + money) HIGH MOBILE UNDER-SERVED WELL-LOCATED COMMUTERS Currently low access, Currently high access, high mobility expenditures high mobility expenditures ACCESSIBILITY LOW HIGH STRANDED UNDER-SERVED WELL-LOCATED URBANITES Currently low access, Currently high access, low mobility expenditures, due high mobility expenditures to limited transport options LOW Note: Accessibility is the number of opportunities reachable within 60 minutes; mobility expenditure is the actual amount of time and money spent traveling. Source: Venter and Hidalgo 2019. Figure 1.13. Accessibility Analysis for Yangon Source: World Bank study team and Thet Hein Tun, 2019. Urban Mobility in Yangon and Mandalay 21 Public transportation is limited in Mandalay, and city residents commute to work mostly by motorbikes. In similar cities such as Kampala, Uganda, or Hanoi, Vietnam, the results can be much higher, such as 74 percent. There is substantial room for improvement of urban accessibility in Yangon and Mandalay, which would require improvement of public transport based on robust accessibility analysis. Figure 1.14. Accessibility Indicator Results in Latin American Cities Source: World Bank Transport Team, 2019. Affordability of public transport. The ‘affordability’ measure is concerned with the ability of low-income persons to use public transport services. This is a common concern in many cities when setting fare levels and often involves a difficult tradeoff between financial sustainability and social equity. International calculations conducted for UNESCAP SUTI show that that the average monthly cost of public transport use equates to approximately 12.82 percent of monthly income for households in the 2nd decile. In this indicator, Yangon and Mandalay fall closer to the average for the four pilot cities in the UNESCAP study, considering reported figures show that monthly expenditure in transport in these two cities ranges between 6 percent and 8 percent. The results are not surprising as rail fares have been kept low, yet most commuters use the somewhat more expensive bus service, which is also considered affordable by many.6 Public transport modal share. Public transport modal share is related to the availability of public transport services and infrastructure as well as to other push and pull measures aimed at discouraging private vehicle use (that is, parking charges, congestion charging, and circulation restriction schemes). The modal share of public transport in Yangon is high (Figure 1.15) when compared to other cities in the region, and this is, in part, attributed to the motorcycle ban. The high modal share of public transport is a proxy for network coverage and the robustness of the public transport system. If Yangon manages to keep the modal share of public transport up while maintaining affordability and increasing service quality (for example, by expanding the share of users on rail and water bus services), the city could become a regional referent for sustainable transport, considering that trip length and modal distribution will make it comparable to other cities where there are similar trip lengths and lower modal share of public transport (Bangkok, Hanoi, and Jakarta). Mandalay, in turn, has a low modal share of public transport and, given the rate of growth of motorcycle registration, this trend is not expected to reverse in the next five years, unless cities implement robust push and pull measures to encourage shift from private to public modes. 5 Social inclusion section in this chapter includes more discussion on public transport fares and affordability in Yangon. 22 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 1.15. Public Transport Modal Share, Selected Cities Mandalay 3% Yangon 50% Ho Chi Minh 4% Bandung 20% Tokyo 51% Taipei 37% Singapore 66% Shanghai 36% Seoul 66% 0 10 20 30 40 50 60 70 Source: ADB 2016b; Urban Land Institute and Centre for Livable Cities 2017. Traffic fatalities. Increased motorization has affected the deterioration of road safety conditions in Myanmar, particularly in urban areas. Myanmar has one of the highest road crash-related fatalities in the region, estimated at 19.9 fatalities per 100,000 population (WHO 2018) (Figure 1.16). Riders of motorized two- and three-wheelers and pedestrians are more exposed to road fatality risks in Myanmar, together accounting for about 79 percent of road crash-related death (Figure 1.17). Road fatalities in Yangon and Mandalay are significantly higher than the country average, accounting for 39 and 34 fatalities per 100,000 population, respectively. Pedestrians and cyclists account for almost half of road fatalities in urban areas. This compares unfavorably to global road traffic deaths and calls for Yangon and Mandalay. Both cities should take urgent actions to advance toward actionable, affordable, and straightforward Vision Zero strategies, which introduce infrastructure, vehicle, and behavior improvements to minimize road safety risks, particularly for the most vulnerable road users. (pedestrians, cyclists, and PwDs). Figure 1.16. Road Fatalities per 100,000 Figure 1.17. Fatalities by Road-User Category Inhabitants Riders of motorized 2- Myanmar and 3 wheelers: 65% China Passengers of cars and light vehicles: 7% Cambodia Drivers of cars and light Laos vehicles: 3% Drivers and passengers Indonesia of buses: 1% South Korea Drivers and passengers of heavy trucks: 3% Japan Pedestrians: 14% Singapore Cyclists: 3% Other: 3% 0 5 10 15 20 25 Source: WHO 2018. Urban Mobility in Yangon and Mandalay 23 Air quality. A study carried out by ADB (2015) on environmental sustainability in Myanmar indicates that air pollution is becoming a problem in urban areas. Data show that Yangon and Mandalay have one of the highest PM10 concentration levels in the region, which is partly attributed to combustion emissions, suspended particulate matter from dust, and seasonal organic material burning. The coarse PM10 levels in Yangon and Mandalay were measured from 71.75 µg/m3 to 112.49 µg/m3 in commercial areas, 61.7 µg/m3 to 65.3 µg/m3 in residential areas, and 131.54 µg/m3 to 136.92 µg/m3 in industrial areas. While the World Health Organization (WHO) recommended level is 20 µg/m3, it is also higher than the WHO interim target of 70 µg/m3 but in the range of average 89.5 µg/m3 of 230 cities in the same year. Considering the time that has passed since the collection of the data and high motorization rates (almost tripled) as well as industrial growth over the past decades, data suggest that the air quality in two major metropolitan areas of Myanmar may enter the critical zone. There is potential for improvement; 44 percent of cities in high-income countries have managed to achieve air quality levels within the WHO standards for PM10 (WHO 2018). Yangon and Mandalay should introduce actionable, affordable, and straightforward Avoid, Shift Improve strategies as part of their efforts to encourage nonmotorized trips, improve the quality of fuel and public transport vehicles (that is, compressed natural gas [CNG]), and improve air quality and reduce pollution-related health risks. Figure 1.18. Urban Air Pollution in Selected Cities in Southeast Asia (PM10 concentration) 100 90 (microgram per cubic meter) 80 Annual mean PM10 70 60 50 40 30 20 10 0 Jakarta Kuala Mandalay Yangon Metro Singapore Bangkok Lumpur Manila Source: ADB 2015, WHO 2016. A review of selected urban transport performance indicators provides unbiased, comparable information on positive aspects of public transport in Yangon and Mandalay as well as other aspects where regional peers show that there is substantial room for improvement. Yangon and Mandalay rank positively in aspects of affordability of public transport, which has direct links to social inclusion aspects, further discussed in Section E of this chapter. Other indicators—including commuting times, road safety, and air quality— show differences between Yangon and Mandalay and its regional peers. This analysis is consistent with the diagnosis outlined earlier, where the study introduces Yangon and Mandalay as cities that have an important need for improvement in terms of strengthening and improving the quality of their public transport systems. The analysis of urban transport indicators in Yangon and the international benchmarking shows that Yangon compares well to similar cities’ public transport modal share, average commuting travel times, and affordability of fares. However, if left unchecked, travel times and congestion will tend to increase and 24 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding disproportionately affect public transport users, considering that Yangon has not advanced with priority measures for its bus system. Yangon’s YBS bus network coverage and the city’s road hierarchy and its orthogonal, accessible downtown provide an adequate metric for accessibility to jobs and services which, however, has substantial room for improvement considering the potential for improving travel times for bus users with priority measures and enhancing the coverage, frequency, and reliability of the legacy rail network. Yangon has some distance to cover to catch up with regional peers when it comes to road safety and traffic fatalities. Aspects with the management of road space, speed limits enforcement, pedestrian infrastructure, and training and enforcement of drivers could help improve this metric. Table 1.4 summarizes the result of this benchmarking for Yangon. Table 1.4. Summary of Performance Review: Yangon Focus Areas Performance Efficient: Commuting travel time to work Moderate Efficient: Urban accessibility Moderate Equitable: Public transport affordability Good Equitable: Public transport modal share Good Safe: Traffic fatalities Poor Clean: Air quality Poor or moderate For Mandalay, the benchmarking of urban mobility indicators reveals a less positive outlook. The majority of its citizens have turned to motorcycles for their daily travel needs and public transport plays a minimal role. Mandalay’s public transport modal share is only comparable to Ho Chi Minh City in Vietnam, which is a city dominated by motorcycles, with relatively adequate infrastructure for motorcycles, including bike- only lanes for major roads and junctions. Considering the minimum role of public transport, a preliminary accessibility analysis to jobs and opportunities shows less than favorable results. Mandalay’s decision makers have also recognized that road safety and traffic fatalities pose a significant challenge on the way forward, as more urban dwellers turn to motorbikes as their preferred transport mode. Table 1.5 summarizes the result of this benchmarking for Mandalay. Table 1.5. Summary of Performance Review: Mandalay Focus Areas Performance Efficient: Commuting travel time to work Poor Efficient: Urban accessibility Poor Equitable: Public transport affordability Good Equitable: Public transport modal share Poor Safe: Traffic fatalities Moderate or poor Clean: Air quality Moderate or poor Urban Mobility in Yangon and Mandalay 25 E. Social Inclusion in Urban Transport Mobility is a key enabler of social and economic development in cities, helping people gain access to education, employment, and services. Mobility is linked to factors such as spatial accessibility, frequency, reliability, safety, and affordability of the transport system. Besides the configuration of the transport network, mobility also depends on social norms and the status of different groups, safety considerations, time availability, and urban development patterns, among others.7 Global evidence shows that promoting social inclusion and reducing inequality can make growth more resilient. Social stratification and exclusion from basic services, infrastructure, and economic opportunities can constrain productivity and trap marginalized groups in poverty (World Bank 2018b). The benefits of social inclusion in transport include enhanced mobility and increased access to education and health services and facilities for excluded groups (such as the poor, women, ethnic/religious minorities, migrants, and PwDs) which can improve school enrollment and educational attainment and health outcomes. Supporting more inclusive transportation also necessitates addressing crime and violence, including transport-related instances of gender-based violence and sexual harassment. Inclusive transportation that facilitates access to markets and business centers to all groups of the population supports improved social inclusion, providing inclusive access opportunities to income-generating opportunities, including employment, trade, markets, and access to social and capital networks (UNW/UNOPS 2019). In Myanmar, higher-level strategies (Box 1.2) provide a useful framework on the inclusiveness of urban transport, while there is substantial room to improve inclusive mobility conditions in the provision of urban transport infrastructure and services. Box 1.2. Social Inclusion Aspects in Strategy-Level Documents The Myanmar Strategic Development Plan (MSDP) states that issues pertaining to youth, gender empowerment, equity, and inclusion shall be considered cross-cutting and to be mainstreamed into all aspects of MSDP implementation and that the government will apply gender-responsive budgeting at all levels to ensure that sector and program budgets are adequately structured to address gender inequality. YUTRA aims to ensure mobility and access to services, by developing a safe, equitable, and comprehensive transport system. The National Strategic Plan for the Advancement of Women (NSPAW) provides an opportunity to promote a gender equality agenda through inter-ministerial collaboration and gender mainstreaming into sectoral policies, plans, and programs. The ASEAN Sustainable Urbanization Strategy recognizes the need to consider gender and social inclusion issues in relation to public urban transport. The ASEAN Smart Cities Framework serves as a nonbinding guide to facilitate smart city development, promote inclusive communities, and address barriers to equitable access to opportunities for all ASEAN people. 7 The working definition of social inclusion for this section encompasses the ability of different demographic groups to benefit from urban public transport, with a particular focus on gender and disability. Other aspects of inclusion such as affordability and accessibility of public transport are discussed in the previous sections of the chapter. 26 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding The World Bank’s flagship Inclusion Matters report defines social inclusion as “the process of improving the ability, opportunity, and dignity of people, disadvantaged on the basis of their identity, to take part in society.”8 Social exclusion, under this definition, consists of being disadvantaged by one’s identity in how one takes part in society. People take part in society through engaging in three main domains: markets (land, housing, labor, and credit); services (health, education, water, transport, electricity, information, social protection); and political, physical, cultural, and social spaces. Social inclusion is the process of improving the ability, opportunity, and dignity of people in taking part in these domains.9 In the case of urban areas in Myanmar, groups that have been identified as excluded include the urban poor, migrants, non-Bamar ethnic groups, religious minorities, women, and PwDs(World Bank 2019a). These groups may often face exclusion from jobs, housing, and infrastructure and social services for various reasons. Beyond the precarious living conditions facing low-income populations, challenges related to legal documentation, tenure security, and crime leave many at high risk. Inclusion aspects of urban transport in Yangon and Mandalay have not been researched in detail yet, and available data are limited. This section aims to review the key issues related to inclusive urban mobility in Yangon and Mandalay and to define areas of focus that can support advancing the transport systems in these two cities toward more inclusive and sustainable urban mobility. The review focuses on three dimensions of inclusive mobility to review major constraints for the inclusive urban mobility: • Socially inclusive urban transport: Women, PwDs, and other socially vulnerable or excluded groups may face more constraints in accessing or using transportation. • Spatially inclusive urban transport: Different groups such as the urban poor, ethnic groups and religious minorities, and migrants may be affected by their concentration in underserved city areas and may face challenges to benefit from transport provision fully. • Affordable urban transport: Transportation costs of the poor and lower-income groups may become a deterrent for their access to jobs, services, and economic opportunities. The above three aspects of inclusive mobility are interrelated. For example, ethnic groups and migrants may have mobility constraints affected by social exclusion, while they are also likely to be affected by spatial exclusion from their concentration in specific city locations and urban peripheries with limited access to infrastructure and services. Similarly, while women in many countries are more affected by safety and harassment risks in public transport, they may also have economic constraints to access affordable transportation services. Therefore, any approach to understand the complexity of issues or develop robust solutions must consider all three as interrelated. Socially inclusive urban transport10 Women’s access to and use of transport infrastructure and services is among the most critical aspects of social inclusion in urban transport. Experience from many cities around the world indicates that women face more mobility challenges and their travel patterns differ from those of men (Box 1.3). In Myanmar, a combination of time constraints, cultural norms, and gender-based violence (both actual and perceived risk) disproportionately affects women’s mobility. 8 See World Bank 2013 report for a more in-depth discussion of the approach and of the literature. 9 World Bank. 2018. Social Inclusion in Myanmar, World Bank, Washington DC, internal document. 10 The working definition of socially inclusive mobility in this report encompasses the ability of different demographic groups to benefit from urban public transport, with a particular focus on gender and disability. Other aspects of inclusion such as affordability and spatial inclusion are discussed separately. Urban Mobility in Yangon and Mandalay 27 Women, as primary caregivers (World Bank 2020), tend to make more non-work-related trips, traveling to more dispersed locations. Women are also much more likely to travel with children or elderly dependents and during off-peak times. Data for Yangon (ADB 2016b; YUTRA 2014) indicate a similar pattern: women walk more often (51.6 percent of trips) than men (33 percent) and mainly rely on public transport (60 percent of trips excluding walking) as described in Table 1.6. Men have greater access to cars, bicycles, motorcycles, and taxis (33 percent of trips) than women (18 percent). Improving the quality, accessibility, and safety of pedestrian facilities around public transport, therefore, has significant impacts on women’s mobility. In Yangon, women use public transport and walk more than men, with preliminary screen count suggesting less than 5 percent of private vehicle drivers are women. The number of female bus or taxi drivers is also negligible, with data indicating that there were only five women taxi drivers formally recorded among over 26,000 taxis in Yangon (Irrawaddy, 2014). Overall, men tend to dominate in transport sector jobs with 97 percent share in total sector employment (Ministry of Labor, Immigration and Population 2014). When comparing the total number of daily trips undertaken by men and women in Yangon, women are slightly less mobile (1.9 trips, 0.9 trips excluding walking) than men (2.2 trips, 1.5 trips excluding walking). This difference is likely affected by the high rate of domestic work of women—23 percent of women of age 15 and above report domestic work as their main activity over the last seven days, compared to 0.9 percent of men (CSO, UNDP, and World Bank 2018). This is also confirmed by a qualitative and ethnographic study where the overwhelming majority of women respondents confirmed they were the primary responsible person for housework, children, and elderly care in their respective households (World Bank 2020). As the shift in global labor market participation shows, increasingly, women are commuting more for work, particularly in manufacturing and service sector jobs. With the high growth rates in Yangon and Mandalay, more and better-paid jobs are expected to be created and transport accessibility will be an important factor shaping the participation of women in the urban labor force. Women may turn down employment opportunities further away from home if the transport system does not enable them to travel to and from work in time to meet their domestic family care obligations or provide ample space and flexibility for women to travel with dependents and household goods (ICED 2018). Box 1.3. Why Is Gender an Important Factor for Urban Transport Systems? Mobility is the precondition to accessing goods and services: health, work, education, and leisure. Women face more restrictions to mobility and their travel patterns differ from those of men due to their different needs and tasks because they generally have less available time and access to resources and because they are at higher risk of crime and violence. Therefore, women have different requirements of transport systems and space. Women are more likely to be poor. According to the United Nations Development Programme (UNDP) Human Development Report, 70 percent of the 1.2 billion people living in poverty worldwide are women, this being more pronounced in urban areas. Also, globally there is a growing number of women heads of households and women working outside the home, which means that women must juggle earning an income with caring for a family. Affordability of transport is especially relevant for women: they are the first in a family to forgo a trip if it means allowing the male income earners to get to work or the children to go to school. Women have different travel patterns. Generally, compared to men, women in urban areas tend to make more and shorter trips at more varied times. They use public transport and walk more than men and tend to make more off-peak and non-work-related trips, traveling to more dispersed locations. They are also more likely to trip chain, meaning that when they travel, they tend to have multiple 28 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding purposes and multiple destinations within one trip. This can be considered in the fare structure and the layout of new transportation routes. Women mainly use public transport and depend on its accessibility. If there is only one vehicle available in the household, generally, the man will use it. Besides walking, women mainly rely on public transport. Because they often travel with children and packages, they find physical barriers, such as high curbs and steep steps, more of a problem than able men. Additionally, women are more affected by issues of quality or capacity. For example, overcrowding becomes a security issue for women as it facilitates groping and inappropriate behavior and a convenience issue if they are traveling with large packages and small children. Women are more affected by safety and security issues. Women and girls are more commonly affected by gender-based violence due to their subordinate status in many societies, discrimination against them, and their higher vulnerabilities to violence. Violence and harassment in public places and in transport reduces their freedom of movement and their ability to attend school or work and participate fully in public life. Source: Implementing the New Urban Agenda: Gender and Urban Transport. SUTP Factsheet in the Series, 2017. Table 1.6. Transport Modal Share by Gender in Yangon Modal Share Including Walk Modal Share Excluding Walk Transport Modes Male Female Average Male Female Average Walk 33.0 51.6 42.2 Bicycle 16.6 9.4 13.0 24.8 19.3 22.5 Motorcycle 5.8 2.6 4.2 8.6 5.3 7.2 Car/Van 6.2 3.1 4.7 9.3 6.5 8.1 Taxi 5.6 3.2 4.4 8.4 6.7 7.7 Bus 29.0 28.0 28.5 43.4 57.9 49.4 Truck 1.1 0.4 0.8 1.7 0.9 1.3 Railway 0.7 0.6 0.6 1.0 1.2 1.1 Ferry 1.8 1.1 1.4 2.7 2.2 2.5 Others 0.2 0.1 0.1 0.3 0.1 0.2 Source: YUTRA 2014. Urban Mobility in Yangon and Mandalay 29 Violence in public places, particularly in public transport systems, reduces the freedom of movement of women and girls. Women in many cities and countries are often subjected to sexual and other forms of harassment when using transport services. Women forgo better jobs or educational opportunities if they feel that the transport connections are not safe for them (GIZ 2018). While there are no data on the incidence of gender-based violence and sexual harassment on public transport in Myanmar, 15 percent of women have experienced physical violence since the age of 15, although this figure is likely to be lower than actual incidence due to underreporting.11 Action Aid Myanmar’s Safe Cities for Women Programme facilitated a series of Women’s Urban Forums (2016), which found that women are afraid to travel alone at night and were particularly concerned with poor lighting, bushes and trees, and beer shops near bus stops and recommended increasing security, police check posts, and lighting and banning beer shops near bus stops (Action Aid 2016). The Myanmar City Life Survey (CLS) Report12 released by the Asia Foundation (2018) provides valuable information about the experiences and opinions of urban residents to inform urban planning decisions by municipal authorities. Yangon (19 percent strongly agree) and Mandalay (28 percent strongly agree) score the lowest on safety13 compared to the other cities (ranging from 32 percent to 58 percent). Likewise, on convenience, in Yangon, 38 percent strongly agree and in Mandalay, 33 percent strongly agree, compared to the other cities, where 42 percent to 70 percent strongly agree. Improving safety in public transport requires continuous and comprehensive measures. Some measures to address this include greater security personnel presence on buses and at stations, a gender-mixed staff presence from transport officials, and a concerted effort to reduce overcrowding in cars and buses. The segregation of men and women is seen by some to be an option; however, it does not address the underlying issue that both men and women should be able to access the same transport choices and services and that taking the bus or metro is only one part of the journey. There are significant and possibly greater security concerns related to walking to and waiting at stops and stations. Such security concerns refer particularly to greater concerns of walking or waiting at night, where terrain/sidewalk conditions, street lighting, and fewer people on the road increase the perception of security risk. Less than half of respondents in the CLS survey feel safe walking alone in their neighborhood after dark; men and older respondents were more likely to say that they felt safe walking alone after dark. Yangon has the lowest in this specific safety ranking at 48 percent, in Mandalay it was 59 percent.14 Regional and municipal governments can encourage certain practices, which include anti-harassment laws and enforcement of these laws, well-designed and easy-to-reach complaints, support, and grievance systems. Additional measures should consider providing training and hiring women drivers and demanding a gender mix of personnel at stations, on buses, and even in management. Other complementary solutions include options for women-only transit cars and/or sections stops/stations with convenient and safe pick-up and drop-off points; improved public lighting; public latrines that are gender segregated, private, clean, and secure; and security officers, including female officers, on transport platforms and at stops. An inclusive transport system plays a strong role in the integration of PwDs into society. The Myanmar CLS 2017 reports a disability rate of 2.8 percent and the disability rate increases with age: two-thirds of PwDs are over 50. PwDs are less likely to be in education, in employment, or married (CSO, UNDP, and World Bank 2018). While the national average for school enrollment in 2010 was 84 percent, a government survey conducted that year found that approximately half of the PwDs in Myanmar had never attended school, and only 2.2 percent of those with disabilities had a university degree. A 2015 study found that accessibility 11 Government of Myanmar. 2016. “Demographic and Health Survey.” 12 The Asia Foundation. 2018. “Myanmar City Life Survey.” 13 Perception of a journey to have low risk of traffic-related accidents; injuries due to unforeseen obstacles or surface conditions; and risk of violence, harassment, or theft with violence. 14 The Asia Foundation. 2018. “Myanmar City Life Survey.” 30 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding issues, such as difficulties with transport and long school commutes, were among the reasons why children with disabilities were ‘pushed’ out of school (World Bank 2019a). PwDs face significant difficulties in accessing transport services. They find physical barriers such as poor, inconsistent quality of sidewalks. and high curbs and steps which challenge disabled and non-disabled people. PwDs have a harder time boarding and alighting, whether it is because they are visually impaired or traveling with mobility support (Myanmar Times, 2019b). Many services are designed on median dedicated lanes (that is, the BRT bus lanes run in the center of the road), where there may be a large number of stairs to access the services and a lack of functioning escalators (World Bank 2019a). The Myanmar Independent Living Initiative (MILI) is active in organizing events to raise awareness and lobby for more accessible urban infrastructure such as pedestrian overpasses as well as public transportation (bus, train, and train station designs) and pedestrians’ platforms. They recommend lifts, escalators, or even just graded concrete ramps that users can wheel through. Such a design would allow not only wheelchair users but also the elderly, mothers with perambulators, bicycle users, and travelers with packages and luggage (Myanmar Times 2019b). Complementary measures are necessary to ensure that all population groups can equally access and benefit from inclusive public transport initiatives, such as accessible and safe pedestrian facilities for bus riders to get to and from bus stops and destinations to ensure door-to-door accessibility and security. In budget-stretched ministries, with weak capacity and competing priorities, integrating disability inclusion (DI) may seem expensive, unrealistic, and overcomplicated. However, the evidence shows that ignoring DI is a missed opportunity for economic growth. Investments in PwDs enhance national economic growth through increased productivity and well-being, reduced stigma and discrimination in the workplace, and reduced welfare burden. Including PwDs in the labor market can boost a country’s GDP by 3–7 percent (ICED 2018). There are many examples and practical solutions to improve the inclusion of the transport system for women and PwDs. Examples of recommended standard practices include promoting gender and social inclusion awareness with clients, partners, suppliers, and project staff to implement the project work/ construction in an inclusive manner; specifying gender and inclusion targets and physical design features in bidding documents for contractors; creating procurement policy mandates that all procured products (hardware and software), goods, and services must conform to accessibility requirements; and including social inclusion and gender-disaggregated indicators that precisely measure achievement of gender and inclusion criteria and provide a norm of reference to compare to set standards. At a practical level, well-lit bus stations, women-only carriages, ticketing systems for multiple short trips, lower off-peak fares, and gender-, elderly-, and PwDs friendly physical design contribute to promoting greater utilization of public transport systems. Spatially inclusive urban transport Urban mobility is essential to spatially inclusive urban development as it allows people to access jobs, services, and city resources. If segments of the population have challenges in moving around due to access and where they live because of cost, safety, or discriminatory practices, this can affect their inclusion in urban life. Spatial and transport planning, therefore, need to be well integrated to help foster equitable access to urban opportunities and amenities. Good planning allows for a spatial match between jobs, markets, public transportation, health, and education services for different population groups, including economically and socially vulnerable groups. Spatial inclusion remains a challenge in urban areas of Myanmar, particularly in Yangon and Mandalay, given high land and housing costs and the overall poor quality of basic infrastructure. The majority of the population still live in semi-temporary or temporary housing structures: 75 percent of households live in semi-pucca or temporary structures. Approximately 77 percent of the informal settlements identified by mapping Yangon are in these peri-urban resettlement areas (UN-Habitat and Cities Alliance, 2017). Urban Mobility in Yangon and Mandalay 31 Without enough options for affordable housing, higher rents have pushed the urban poor from central areas to fringes of cities where inexpensive accommodation options are available; however, the provision of basic services is limited, thus making mobility and transportation an urgent issue. As noted earlier in this chapter, the north and northeastern parts of Yangon have much more limited accessibility. If compared with census information locating population by income levels, the initial hypothesis would suggest that those peripheral areas in the north and northeast of Yangon also have the highest concentration of lower-income and exclusion-prone populations, highlighting the fact that limited access to jobs, education, and services is particularly challenging to those in risk of exclusion. The conditions of urban mobility remain a critical challenge in densely populated informal settlements and resettlement areas in Myanmar, which lack access to basic infrastructure and services, including paved roads and are often located in city peripheries. In Yangon, 54 percent of the informal settlements have internal road networks provided by the government or built by the community, but most roads are unpaved, and only 1.2 percent of the roads have drainage. Many informal settlement areas are flooded during the rainy season due to a lack of drainage systems. These limitations have adverse outcomes on health indicators, the ability to increase income generation from home-based microenterprises, and for those in periphery areas, exclude them from access to job markets due to the limited availability of roads or access to public transport. Ethnicity, cultural norms, and spatial exclusion disproportionately affect the mobility of marginalized groups. In Yangon, these populations are likely to do less frequent or shorter trips on average and to solve their commuting needs by walking or biking, particularly in the city periphery areas. These groups may often face exclusion from jobs, housing, and infrastructure and social services for various reasons. Beyond the precarious living conditions facing low-income populations, challenges related to legal documentation, tenure security, and crime leave many at high risk. Migrants, and in particular those who have migrated from rural areas to urban agglomerations, face more mobility challenges. The 2014 census suggests that internal migration is mostly toward urban areas. From 2009 to 2014, 43 percent of migrants (about 800,000) ended up in Yangon and 12.5 percent in Mandalay. According to a 2015 UNDP report, the majority of migrants are ethnic Bamars, followed by ethnic Rakhine and ethnic Karen from the Ayeyarwady delta (UNDP 2015). The majority of informal migrants live in the fringes of the city, in the peri-urban areas bordering farmland areas, around the outer limits of the city of Yangon. Preliminary research suggests that Hlaing Thayar township has the largest concentration of informal settlements in Yangon, consisting mostly of internal migrants (Kyed 2019). A focus on migrant population is important in urban areas, particularly given international evidence showing that policies to remove obstacles are linked to migration status for access to services and addressing various forms of economic, political, and cultural discrimination against migrants is important as are tackling stereotypes and promoting intercultural dialogue. It is also critical to understand who is benefiting from the bus system and whether the system is serving the citizens who need it the most. One analytical approach is to evaluate the proportion of income spent by poorer households on transport and mapping commuting patterns in relation to a residential location, location of jobs and services, and their associated travel distances and travel times if using the existing public transport network. Such analysis, commonly known as an accessibility analysis, allows focusing on access to opportunities (jobs, education centers, markets, parks) by public transport for low-income populations. Accessibility analysis can reveal citizen’s access (or the lack thereof) to urban amenities as a result of factors such as urban agglomerations and its consequences on the levels of motorization, congestion, local air pollution, physical activity, and the expansion of urban poverty as well as the impact of real estate prices on the urban core of Yangon (for example, often forcing low-income residents to live farther out in the periphery or to live in dilapidated informal settlements to reduce travel cost). Further research analyzing the spatial distribution, exclusion, and access to opportunities for different population groups should aim to perform accessibility analysis with differentiated results for socially vulnerable and excluded groups. 32 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Affordability of transport for vulnerable groups Affordable transport systems refer to the financial cost that travel puts on an individual or household and the extent to which persons can afford to travel when and where they want (World Bank 2018c). Considering that expenditure on transport is one of the main components of a personal budget of lower- income households, analyzing public transport fare setting policy relative to affordability metrics is a vital component in any social policy oriented at providing affordable transport services for the lower-income populations or B40 population. While the top quintiles on the income scale spend more on transport in absolute terms than the bottom 40 percent on the income scale, the burden or share of transport costs is highest for the bottom two quintiles, especially for persons unable to walk to their destination (World Bank 2018c). Cities worldwide struggle to provide financially sustainable public transport services with fares that are affordable to the low-income population. Given that the public transport is considered as public goods, many cities in high-income countries (for example, Kansas City in the United States, Luxembourg, or Tallinn, Estonia) are experimenting with eliminating the fare charges altogether. This could also be a financially sound decision when fare technologies in these cities are expensive and a large portion of the revenue goes to fare collection efforts. For other cities, monitoring, through surveys and census data, the share of household income spent on public transport, particularly for lower-income groups, is an important metric to keep track of an affordability metric that serves as input for the fare setting policy. The average transport expenditures of households in Myanmar are about 4–5 percent of their annual expenditures.15 The share of transport expenditures in total household expenditures varies between 3.7 percent and 5.5 percent for different welfare quintiles (Figure 1.19).16 The poor spend, on average, around 3.9 percent of their total household expenditures on transport compared with 5 percent for non-poor households. As indicated in Figure 1.20, the share of transport expenditures of households is slightly higher in urban areas, up to 5.5 percent. Transport expenditures of households in the Yangon Region (6 percent) are almost two times higher than for households in the Mandalay Region (3.7 percent), which is not surprising as Mandalay Region has a more rural population (about 70 percent) compared to Yangon (30 percent). Figure 1.19. Transport as a Share of Figure 1.20. Transport as a Share of Household Expenditures (%) Household Expenditures (%) Yangon Region 6 5.5 Mandalay 5 4.8 Region 4.4 4.3 Poor 4 3.7 Percent Non-poor 3 Rural 2 Urban 1 Union 0 Q1 Q2 Q3 Q4 Q5 0 2 4 6 8 Welfare quintiles Source: World Bank staff estimations based on Myanmar Living Conditions Survey 2017. 15 Myanmar Living Conditions Survey 2017. 16 The welfare quintiles are defined using per adult equivalent consumption. Q1 represents the poorest quintile and Q5 the richest one. Urban Mobility in Yangon and Mandalay 33 The relatively affordable prices of transport in Yangon are reflected in comparatively lower shares of expenditures in transport from total household expenditures; however, there are important data gaps that do not allow comparing how more mobile (trips per day) are inhabitants from the Q4 and Q5 quintiles compared to those on Q1 and Q2. Over 52 percent of households in the Yangon Region and 65 percent in the Mandalay Region spend less than 4 percent of their total consumption on transport (Figure 1.21). Overall transport expenditures of households seem to be at the lower side. This can be explained by a combination of affordable fares, low trip per capita indexes in urban population, and for Mandalay in particular, a higher share of rural population, which does not have the same mobility needs than urban, more mobile populations. Figure 1.21. Distribution of Transport Expenditures among Households using Transport Services (% of households) 100% 1.5 4.1 6.6 90% 14.9 80% 26.8 70% 3.7 33 60% 10.7 50% 18.5 9.6 40% 9.8 30% 20% 11.8 32.1 10% 16.8 0 Mandalay Region Yangon Region <1% 1-2% 2-3% 3-4% 4-10% 10-20% >20% Source: World Bank staff estimations based on Myanmar Living Conditions Survey 2017. Public transport fares are relatively affordable. The flat MMK 200 per trip fare in the YBS system with an average of two trips per day compared with minimum monthly wage indicates that an average low- income person spends less than 10 percent of his/her monthly income on public transport. This benchmark is low if compared to other cities with higher public transport fares, where public transport expenditures of households with income in the bottom quintile are between 17 percent and 30 percent (Figure 1.22). 34 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 1.22. Share of Household Income Spent on Public Transport CITY % FOR AVERAGE % FOR HOUSEHOLDS WITH INCOME IN THE BOTTOM HOUSEHOLD QUINTILE Buenos Aires, 4 26 Argentina Chennai, India 8 19 Lima, Peru 10 20 Manila, Philippines 5 17 Mexico City, Mexico 3 19 Mumbai, India 9 23 Rio de Janeiro, Brazil 6 30 Source: World Bank 2018c. For many low-income countries, financial sustainability and affordability of public transport tend to tip the balance in opposite directions. Transport systems typically prioritizing affordability rely on high levels of subsidies, while others, prioritizing financial sustainability, set up a fare scheme that might price out for the poor populations. While Yangon might not consider, in the short to medium term, making public transport free for everyone because of financial constraints, the city could still consider specific discounts and/or free passes for certain demographics. However, without appropriate district-level household survey data on accessibility and mobility patterns (mode split, average number of trips per person, and average spending in transport), a proper detailed assessment on the affordability of public transport to revise fare structure is not recommendable. Accordingly, further analytical activities with the support of household surveys could add a module on mobility questions to better understand how people move and who most need the transport service. Both Yangon and Mandalay have the potential to make their transport systems more inclusive and use improved transportations systems to support greater inclusion of excluded groups into the economy and society. Safety, security, accessibility, convenience, and affordability for all population groups are critical considerations in developing inclusive urban public transport services. These considerations should feature across all levels, including the policy and strategy framework, budget allocation, institutional capacity development, standard operating procedures, and planning and implementation guidelines as well as throughout the entire project cycle: from needs assessment, design, planning, and operations to monitoring and impact evaluation. It requires both policy-level actions through understanding specific mobility needs of excluded/vulnerable groups and integrating this analysis into urban transport policies and plans as well as financing to support the development of inclusive urban transport infrastructure and services. Globally inclusive transport is an increasing area of focus for governments and development partners, with the rapid development of urbanization and infrastructure. There are several examples of good practice and success stories that Myanmar can learn from; some of these are included in Box 1.4. The fact that this trend in promoting inclusive transport is increasing suggests that the perceived cost of these measures is outweighed by the actual benefits. Urban Mobility in Yangon and Mandalay 35 Box 1.4. International Examples of Inclusive Transport Projects Dar Es Salaam’s BRT System. The government worked with the Comprehensive Community-Based Rehabilitation in Tanzania (CCBRT) Advocacy Unit to understand the needs of PwDs. This translated into a design with smooth access to stations, platforms with easy access to buses without a ramp, and a feedback mechanism for all passengers, including PwDs, to report problems to the appropriate government department. These measures ensured sufficient revenue for the government to provide a sustainable budget for maintenance, quickly fixing problems that may prevent PwDs’ access, such as uneven pavements. The Greater Dhaka Sustainable Urban Transport Project supports a BRT system specifically planned to support women’s employment by selecting an alignment along a transport corridor that services a garment factory hub and the residential areas of female garment workers. The physical design of this project tackles issues of safety, harassment, and bullying often experienced by women using public transport in Dhaka by providing for separate male/female queues and reserved seats for women, even on a female-dominated transit route. In Ulaanbaatar, public transportation provides an affordable transit option for most city residents, given the flat fare of MMK 500 (US$0.27) charged to adults and MMK 200 (US$0.11) for children. Full- fare subsidies are provided for students, PwDs, and the elderly, who collectively constitute 40 percent of the passengers. The Project for Developing Transport Service for Women in Pakistan ensures that buses serve women and all children under 12. Each bus has a combination of seated and standing spots, with at least one wheelchair spot, internal and external speakers for announcements, and one internal surveillance camera. In addition to the buses themselves, the project constructed 31 specialized bus stops, which were designed and planned in consultation with female commuters to ensure demand- driven features. Each bus stop has shade, adequate seating, and consistent solar-powered lights. In addition to a women-friendly infrastructure design, the project developed a mobile app for women commuters using the bus service to monitor safety. The project also conducted context-specific training in project management skills and tools on mainstreaming gender concerns into regional urban planning, development, and operation of the women bus service. In Cairo, the Harass Map Project has been using modern technology to map the incidence of sexual harassment on urban public transport. Global positioning system (GPS) mapping, mobile phones, cameras, and Internet technology can be used for the identification and reporting of traffic or public transport performance hot spots. This mobile phone and Internet-based initiative allow women to report anonymously through free mobile texting and has identified hot spots for sexual harassment around public transport stations. Further research is needed to assess the specific mobility needs of different groups in Yangon and Mandalay to inform the design and operation of future transport initiatives. Research should identify spending decisions that result from the lack of transport alternatives. Analysis based on income-expenditure surveys tends to ignore the fact that households may be spending too much or too little on transport due to restricted options. Peripheral areas often concentrate high proportions of lower-income residents, who have the fewest, most costly, and least-efficient transport services available; this leads to significant underestimates of the transport-related burdens in many urban areas. In particular, origin destination surveys in many cities are not conducted often enough and tend to be limited spatially to core cities instead of metropolitan areas. Surveys should be designed with indicators for functional urban areas and to compare regions within 36 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding them (for example, core city versus peripheries or areas that are clearly divided in terms of socioeconomic conditions and income levels). Social inclusion audits are one way to incorporate accessibility, affordability, safety, and security issues into the project design by allowing local transport users to provide accurate and useful information to planners, designers, and service providers through consultations, surveys, time-use diaries, and focus groups. Urban Mobility in Yangon and Mandalay 37 38 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding 2 URBAN TRANSPORT POLICY AND INSTITUTIONS Key points • Incomplete decentralization has so far led to institutional fragmentation, with disjointed responsibilities and accountabilities in the urban transport sector with multiple stakeholders at the city, regional, and union levels. This undermines the possibilities of advancing toward an integrated, efficient, and sustainable urban mobility system. • Yangon has advanced on improving institutional and policy frameworks with the establishment of YRTA and has an urban transport development master plan. YRTA’s further regulatory roles should be strengthened to allow better coordination between all modes of public transport and prioritization and planning of investments. The Yangon Region could consider supporting YRTA’s higher-level strategic planning activities by establishing a Yangon Urban Mobility Board (YUMBo), composed of delegates from the YRG, YCDC, and Myanmar Railways, with chairing or leadership by YRTA. • Mandalay lacks a dedicated transport authority, and there is no overarching strategic direction for urban transport development. Mandalay needs to advance in policy and action that allow establishing the Mandalay Regional Transport Authority, which should build technical capacity that allows it to coordinate the development and implementation of urban transport strategies and policies. Urban Transport Policy and Institutions 39 A. Decentralization and Service Provision at the Subnational Level Myanmar’s constitutional reforms of 2008 began a decentralization process that is still evolving. The new Constitution put in place the broad framework for decentralization, creating 14 state and regional governments, including Yangon and Mandalay Regions, with local legislative bodies and defined responsibilities. However, the ultimate extent of decentralization and its operationalization are not yet settled and require more work. Notably, political, fiscal, and administrative decentralization has not progressed to the same extent, with the latter lagging, to the detriment of actual service delivery capacities in the new governments (International Growth Centre and Renaissance Institute 2018). While the 2008 Constitution and subsequent reforms have delegated functions to the state/regional governments and established new mechanisms of local governance, Myanmar remains a relatively centralized state (The Asia Foundation, 2019). The Constitution sets out the responsibilities of the upper and lower levels of government. Schedule One of the Constitution establishes the union’s areas of responsibility in the transport, communication, and construction sectors, including land transport, major highways and bridges, railways, and inland waterways, which have relevance to urban transport. Schedule Two of the Constitution designates the areas where states and regions can enact laws. It is notable that the Constitution makes no explicit reference to public transport services when assigning responsibilities to the different levels of government. State and regional governments can perform management, guidance, supervision, and inspection functions in relation to these responsibilities (Article 256). As far as the transport, communication, and construction sectors are concerned, these responsibilities cover (a) ports, jetties, and pontoons having the right to be managed by the region or state; (b) roads and bridges having the right to be managed by the region or state,17 which includes urban roads (although not mentioned explicitly); and (c) systematic running of private vehicles within the region or state. The Constitution gives the financial means to states and regions for fulfilling their responsibilities through revenue-raising and spending powers. Article 254 lists the taxes and revenues that belong to this level (Schedule Five). The Constitution also makes provision for supplementary finance to be granted to states and regions by the union. Initially, such finance was provided in an ad hoc and unpredictable way to close deficits, but since 2015, unconditional transfers have been provided on a more systematic basis using a stable formula, which attempts to account for relative needs and fiscal capacities.18 For most states and regions, other than Yangon and Mandalay, such transfers remain their main source of funding. Notionally at least, the Constitution also allows for administrative decentralization, but limited progress has been made. Article 257 gives state and regional governments the opportunity, in consultation with the union, to establish and staff organizations required to perform their functions. This is the area where the least progress has been made, and the implementation capacities of states and regions remain constrained, making them largely reliant on deconcentrated units of union ministries to carry out their designated responsibilities. Regional and state governments, therefore, find themselves with limited capacities to formulate and implement policies, thus partially undermining accountability for the planning and delivering services, one of the main motivations for decentralization. Administrative arrangements in the urban areas of regions and states are more straightforward than for the regions and states. Municipal affairs stand alone as an area where subnational governments have 17 Also referred to as subnational or state/region roads. 18 Formula-based funding is administered by the Intergovernmental Fiscal Relations Department under the union-level MOPF. 40 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding wholly devolved responsibilities. Yangon, Mandalay, and Nay Pyi Taw have special arrangements whereby city development committees are empowered and capacitated to perform management functions in their areas of responsibility. The city development committees predate the decentralization reforms.19 In other townships, Development Affairs Organizations (DAOs) fulfill a similar role. These arrangements have positive implications for urban transport, although there are still some difficulties in terms of fragmentation of responsibilities. The YCDC and MCDC are the administrative bodies of their respective cities. Together with the DAOs serving townships outside the main cities, they are, effectively, the only government agencies under the full and direct control of their regional governments. Having their own dedicated revenue streams,20 they are self-financing and not reliant on transfers from the union. The YCDC and MCDC are responsible for city planning, land administration, tax collection, and urban development, including roads within their city boundaries.21 Decentralization is not yet complete in Myanmar, and the lack of clarity about the end destination presents difficulties for urban transport development. The evolving status of decentralization, at least as far as transport is concerned, is illustrated in the MSDP, which includes an action “Explore administrative decentralization in the transport sector, such as for the management of state, regional and rural road networks…” This strongly suggests that it is recognized at the highest levels that there is more work to be done before the final form of decentralization arrangements is reached. Given the lack of clarity about the detailed design and implementation of decentralization, in practice, there is room for different approaches to operationalization. Naturally, decentralization has had important implications for the provision of services and financing of urban transport infrastructure and services, where there are also issues to be resolved, as explored in the following discussion of the policy framework and main actors in the sector. B. Urban Transport Policy Framework While there are important gaps in the policy and planning frameworks for urban transport, there are also several elements already in place. At the national level, the MSDP has a number of ‘action plans’ under its various pillars, demonstrating a commitment to making improvements in the urban transport sector (Table 2.1). The MSDP recognizes the importance of decentralized decision-making transport service delivery and notes further administrative decentralization of the transport sector to provide adequate public service delivery to the population at the subnational level. At the sectoral level, the National Transport Development Plan22 (NTDP) sets out broad priorities for Myanmar’s transport sector, together with specific proposals for addressing these priorities. While the NTDP states relatively little on urban transport, it does provide some broader policy directions of relevance. The NTDP also identifies strategic objectives for the different modes, some of which touch on aspects of urban transport (Table 2.1). At the city level, Yangon has YUTRA,23 which covers Yangon City and the urbanizing areas of the Yangon Region. YUTRA is a long-term master plan. It recognizes the level of ambition behind the implementation 19 The YCDC was created in 1990 and the MCDC in 1992. 20 From dedicated taxes, fees, licenses, and property development. DAOs are also largely self-financing, relying on sales of business licenses and some revenues from property and wheel taxes. However, there is some cross-subsidization between richer and poorer DAOs in a region and some DAOs make requests for funding from the state or regional budgets. 21 In townships outside the cities of Yangon and Mandalay, DAOs perform similar functions, as they do in all urban areas of states and regions without city development committees. 22 The Survey Program for the NTDP in the Republic of the Union of Myanmar, Ministry of Transport of the Republic of the Union of Myanmar, prepared with the support of JICA in 2014. 23 YUTRA was prepared in 2014 and updated in 2019 with support of JICA. Urban Transport Policy and Institutions 41 proposals, in which the report forecasts to cost over US$23 billion to the public sector. Expenditure at this level is seen as requiring a massive political commitment, at the regional and union levels, and would need to be backed by major reforms of urban transport management and regulatory systems and substantially increase the funding space. There is no urban transport strategy developed for Mandalay at the time of publishing this report. In Mandalay, there is no formally established public transport authority and service provision is mainly informal and limited. Before prioritization and implementation of major investments on the urban transport sector, Mandalay requires development of an urban transport development plan that is aligned with its growth and land use patterns and mobility needs of its population. As a starting point, Mandalay needs to advance in policy and actions that allow establishing the Mandalay Regional Transport Authority, which should gradually build technical capacity that allows it to coordinate the development and implementation of urban transport strategies and policies as a lead agency at the regional level. Table 2.1. Priorities Related to Urban Transport in the MSDP and NTDP MSDP NTDP • Further administrative decentralization of the • Improve coordination among transport sector transport sector to provide effective public ministries and agencies. service delivery to the population at the • Improve coordination among transport subnational level. sector and spatial planning and development • Revise and enhance key transport-related laws, ministries and agencies. polices, programs, and strategies. • Enhance mechanisms for integrated planning • Develop sustainable public transport systems, of transport and other sector development including school transportation systems, that programs, projects, and proposals. are safe, convenient, and accessible to all. • Enable integration of multimodal transport • Increase resilience of urban infrastructure networks and services in strategic corridors. and services to protect from climate change, • Ensure efficient use, upgrading, and disasters, shocks, and other natural hazards. maintenance of existing transport assets before • Promote public-private partnership (PPP) major new investments are committed. mechanisms which facilitate the development • Enhance opportunities for private sector of commercially viable infrastructure projects involvement in the provision of transport through greater public-private sector infrastructure and services. collaboration. • Prioritize safety and security of transport and • Adapt infrastructure systems, including transport services in all states and regions. transport systems, to mitigate against • Emphasize the importance of environmental heightened risks of natural disasters and considerations in transport planning new climatic conditions while facilitating processes to improve potential for successful a transition to more efficient, low-carbon implementation. technologies. • Adapt appropriate technologies relative to the • Implement measures to improve road-user fees stage of development of the country to provide framework, including heavy vehicle license future sustainable transport solutions and help fees, fuel levies, and road tolls. reduce carbon emissions. • Institute long-term training programs in transport sector planning, management, and operations to improve human resource capabilities. 42 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding C. Institutions Both Yangon and Mandalay require integrated and improved functions over planning, funding and financing, and developing urban transport services. The operationalization of the Constitution’s decentralization provisions through lower-level legal and regulatory instruments is incomplete. Although they are expected in the country’s highest legal instrument, the details of the management, guidance, supervision, and inspection functions are not given. The drawback is that these details are not provided in lower-level legal instruments either, leaving them open to interpretation. This section discusses institutional roles and currently assigned responsibilities for different subsectors at the union, regional, and city levels. Table 2.2. Institutional Roles by Subsectors Fixed Rolling Stock Policy Making Planning Regulation Infrastructure Providers Providers Bus Regional government YRTA (Yangon) Mixed capital Bus Supervisory Committee (Mandalay) and private bus operators Railways Ministry of Transport Myanmar Railways and Communications (MOTC)/Myanmar Railways Roads and Ministry of Department of Highways (DOH), n.a. Expressways Construction (MOC) Department of Bridges (MOC), YCDC, and MCDC (urban roads) Nonmotorized Regional governments, YCDC, MCDC n.a. (walking, bicycle) Traffic MOTC, Ministry of Traffic police; regional and city n.a. Management Home Affairs (MHA) governments Union level. At the union level, the MOC has the primary responsibilities related to urban development and roads. Operating through deconcentrated units at the regional and state levels, the DOH under the MOC is responsible for national highways and trunk roads. There is a dual reporting structure at the regional level: the DOH regional units in Yangon and Mandalay also come under regional ministries, namely the Ministry of Electricity, Industry, Transport and Communications in the YRG and the Ministry of Electricity, Energy, and Construction in the Mandalay Regional Government. In the same way, the Department of Rural Roads Development, also under the MOC, has responsibility for rural roads in two regions. In addition, the MHA oversees the traffic police, which plays a critical role in road safety enforcement agenda. Spatial planning, land administration, housing, and urban development come under the purview of the MOC. Within the MOC, the Department of Urban Housing and Development (DUHD) takes the lead at the union level in urban development policy making, spatial planning, and urban infrastructure development. While the DUHD has local offices in all 14 states and regions, as well as a handful at the district level, the department is not seen as having a significant presence outside the capital. Urban Transport Policy and Institutions 43 The only formal actor in urban rail is at the union level. Rail does not feature in urban transport in Mandalay, but it does have a role in Yangon. Rail transportation and associated infrastructure are union-level functions managed through the union MOTC, which oversees the state-owned railway operating company, Myanmar Railways, which operates the Yangon Circular Line. The Yangon Circular Line is a good example of a valuable asset that is exploited at a fraction of its potential. Frequency, quality of service, condition of stations, tracks, and signaling and condition of rolling stock are examples of the poor state of repair of many rail lines, particularly regarding the problems affecting the Yangon Circular Line. Regional level. Public transport service provision is under regional governments. The YRG transformed Ma Hta Tha into YRTA in 2016 as a dedicated transport authority with a mandate to manage and regulate public transport in Yangon (except for rail). This is perceived as a positive step forward, albeit additional challenges remain. YRTA is nearly 4 years old, and the need to further develop its capacity toward full-fledged transport authority is evident. Its institutional setup is still precarious, and capacity and staffing are constrained, particularly on planning and operations management. River transport comes under the regional government and plays a role in Yangon; it is currently managed by YRTA. As Schedule Two of the Constitution states, besides roads, state/regional governments manage ports, jetties, and pontoons falling within their responsibility. In Yangon, river ferries represent a small share of urban transport trips but are still more important than rail. Most passenger movements are on ferries across rivers, notably between Dalla and Yangon. River transport has been in decline, particularly since the near-collapse of the public service provider Inland Water Transport. Although private operators have stepped in to fill gaps in freight services, this has not happened to the same extent as passenger services. Despite the difficulties, water transport offers opportunities for future expansion, particularly in passenger transportation, to the benefit of both users and non-users (through congestion relief). The absence of proper landing facilities for passengers and cargo and draught limitations for vessels, especially during the dry season, currently hamper the expansion of services. Relatively low-cost investments could fix these problems, though, bringing a high return compared to other investments. In Yangon, public transport service delivery is fragmented, mainly between rail-based transport (overseen by Myanmar Railways) and road and water buses (overseen by YRTA). The design of complex transport solutions, such as BRT, requires both infrastructure improvements and service restructuring, which are difficult to achieve in the current environment. Fragmented institutions also impede the implementation of organized traffic management, which will be an essential part of dealing with the inevitable increase in road congestion that will occur. Mandalay lacks a dedicated transport authority, while the regulation of the existing bus system is under the mandate of the regional government. Buses in Mandalay are owned and operated by private entities, but there is a body for regulating services. The Bus Supervisory Committee controls and manages bus operations in the city. It is constituted of elected representatives of bus associations, which in turn represent individual bus operators. The Bus Supervisory Committee is headed by the regional minister. There is a need to design and implement an integrated transport authority which could lead and coordinate the implementation of urban mobility plans for the city. This could be addressed by reviewing the practical operationalization of the decentralization in Mandalay to achieve a clearer distribution of responsibilities and remove the potential for duplication and dual reporting lines between the Mandalay Regional Government and the MCDC. City level. The YCDC and MCDC are responsible for urban roads in city jurisdictions. The YCDC and MCDC are responsible for city planning, roads, land administration, tax collection, and urban development within their city boundaries. In other townships of the region, the DAOs fulfill a similar role. The existence of the YCDC and MCDC should theoretically make it easier to execute decentralized responsibilities in urban roads, but there are still complications. First, the DAOs are responsible for roads in townships outside the city boundaries and their expenditures and the resulting road infrastructure services also need to be considered 44 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding when evaluating urban mobility and accessibility in the city in relation to urban peripheries and its region. Second, while the Constitution designates management responsibilities for transport infrastructure, sources of funding may not, in practice, always align with these responsibilities. So, while administrative responsibilities for highways and trunk roads are situated at the union level and carried out through the DOH, funding may be blended, with states/regions co-financing the cost of works. While such shared financing arrangements are standard in other countries, they are usually formalized and rules based, whereas in Myanmar, they are ad hoc, which blurs responsibilities and lines of accountability. Table 2.3. Alternative Governance Models for Public Transport Provision Policy Fixed Infrastructure Rolling Stock Planning Regulation Making Providers Providers Strategic Private Government Government Government Government Planning operators Tactical Private Government Government Public planning agency Private Planning operators operators Operational Private Government Private Public or private Private Planning operators operators operators operators Government None ‘Turnkey’ Planner and Planner and contractee Regulator Role provider contractee Operating None In-house Fee-for- Fee-for-service/ ‘Gross Franchise/ Contract provision service/ ‘Gross cost’ ‘Net cost’ Type cost’ Governing None Government Government Statutory corporation Government Institution department department department Type or statutory corporation Oversight Private Commissioners Department Independent board Department shareholders or Department Head Head/Private Head shareholders Examples Early Sydney, Melbourne Zurich, Hamburg, U.K. regions, Bangkok Adelaide, many buses Vancouver, Toronto, Melbourne U.S. cities Gothenburg, London, trains/trams Perth, Brisbane (2008) Source: Public Transport Users Association, State of Victoria, Australia, https://www.ptua.org.au/campaigns/govern/models-table/. There is no unique best practice governance model for urban transport, and different cities around the world approach the issue in different ways, depending on their political, administrative, and economic contexts (Table 2.3). While most practitioners agree on schemes where urban transport planning, monitoring, and regulation are within the responsibility of the public sector and operations can combine public and private sector stakeholders, the approach toward service provision comes in different forms. For example, many cities in North America have regional governments running public transport services, while many European cities have metropolitan governments running public transport. Other models (London, Madrid, Urban Transport Policy and Institutions 45 Paris, Singapore) operate rail, bus, and road under a single, robust agency—but this is more a rarity where institutional capacity is high rather than a footprint to recommend. The loosely controlled, fully free-market model is generally seen as an experience that is not to be replicated, considering the role of the public sector to address market failures in the provision of transportation services for broader population groups. The existing institutional fragmentation effectively undermines the possibilities of advancing toward an integrated, efficient, and sustainable urban mobility system. As far as day-to-day management of the transport system is concerned, the different stakeholders may coordinate reasonably well, but the problems emerge when it comes to developing a coordinated response to the fast-growing demands on the urban transport system. Urban mobility challenges in both cities will only become more sophisticated and costlier, and addressing these challenges in a sustainable and efficient manner will increasingly require stronger technical capacity and larger amounts to be funded and financed. Yangon has the potential to further capitalize on important steps achieved with the establishment of YRTA and the YBS, advance on its urban transport institutional framework, and strengthen capacity to be able to manage and implement more complex projects. The Yangon Region could consider supporting YRTA’s higher-level strategic planning activities by establishing YUMBo, composed of delegates from the YRG, YCDC, and Myanmar Railways, with chairing or leadership by YRTA. YUMBo could also provide a space for the key nongovernment stakeholders to oversee the planning, implementation, and management of an integrated public transport network that meets the needs of commuters in an efficient, cost-effective, and sustainable manner. Moreover, YRTA’s regulatory roles should be strengthened and complemented with a commercial focus and a business-like approach should be used to maximize revenue and to minimize costs within the framework of strategic policy set by the YRG. In Mandalay, there is a need to design and implement an integrated transport authority which could lead and coordinate the implementation of urban mobility plans for the city. Mandalay needs to advance in policy and action that allow establishing the Mandalay Regional Transport Authority which should gradually build technical capacity that allows it to coordinate the development and implementation of urban transport strategies and policies as a lead agency at the regional level.   46 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Urban Transport Policy and Institutions 47 3 YANGON BUS SYSTEM - FINANCIAL AND OPERATIONAL REVIEW 48 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Key points • Public transport constitutes one of the main pillars for a long-term sustainable mobility strategy aimed at the development of sustainable, inclusive, and livable cities. In Yangon, bus transport contributes to nearly half of the motorized trips, and it is the dominant mode across different socioeconomic groups. Having such a high modal share of bus transportation is an important advantage for Yangon to build on and consider in the modernization of the urban transport system. • The YRG has implemented important actions toward improving its bus transportation system. The most important step forward took place in 2016 with the establishment of YRTA, which redesigned the bus network, introduced more robust bus operators, and relaunched the city’s bus system under the brand Yangon Bus Services (YBS) in early 2017. Although YRTA’s institutional setup and capacity is improving, it is still precarious, and capacity and staffing are constrained, particularly on planning and operations management. Coordination between different, institutionally fragmented agencies at the regional and city level limits the room for maneuver of YRTA and leaves the city with fragmented authorities overseeing and planning transport and land use. • Overall, major YBS operators have decent operational performance and passenger revenues and appear to make enough money to cover operating costs through fares, but not all operators appear to have a financial structure allowing for capital expenditure (CAPEX) and financial cost repayment or provisioning for additional fleet upgrades or investment in additional capacity. Public transport fares are relatively affordable and affordability remains at the core of YRTA’s fare review. • While Yangon might not be able to afford to keep transit fares at a minimum for everyone, policy makers should consider targeted subsidies to specific vulnerable and marginalized user groups. Without appropriate district-level household survey data on accessibility and mobility patterns (socioeconomic profile of users, the average number of trips per person, average spending in transport), a detailed discussion on subsidy targeting and delivery mechanisms is not recommended yet. • In addition to physical infrastructure, Yangon can prioritize digital infrastructure to leapfrog and position itself into a smart city to overcome current lack of accurate and reliable transport and urban data. Public bus information such as publicly available digital service plans (General Transit Feed Specification [GTFS]), scheduling, time tables, and service indicators is nonexistent and could, relatively easily, be published regularly in accessible digital format. Data must be considered as an infrastructure—such as roads and rails—on which additional urban services can be provided using insights from transport analytics. Such ‘data-as-infrastructure’ approach, if executed properly, will not only be equitable but can also bring financial growth due to economies of scale. Yangon Bus System - Financial and Operational Review 49 A. Public Transport Demand and Supply in Yangon Public transport constitutes one of the main pillars for a mobility strategy aimed at the development of sustainable cities. The agenda that cities in developing countries adopt generally promotes the organization of transportation systems compatible with a livable and sustainable urban environment, ensuring mobility and minimizing negative externalities. It typically includes the enhancement of public transportation to avoid individual trips (fueled by the growing motorization) and informal services (characterized by their poor service and significant negative impacts). Although there are other components in the agenda, the improvement of public transportation is a key one. This report argues, in line with well-accepted policy recommendations, that the lack of action on this agenda may have many high future costs for cities. Bus transport contributes to nearly half of the trips in Yangon and it is the dominant mode across different socioeconomic groups. According to data from YRTA (2019), there are about 1.9 million daily passengers traveling using the YBS (Table 3.1). YRTA caps YBS fares at MMK 200 (about US$0.13) with a marginal number of operators having variation between MMK 100 and MMK 500. Figure 3.1 presents Yangon’s mode share in terms of vehicle ownership and monthly household income. Residents who do not own private cars have the largest mode share of buses across all income levels. For the car owner group, the mode share of car/van is the highest in almost all income levels, although the modal share for buses is still high (ranging from 18.2 percent to 24.1 percent across different income groups). Having such a high modal share of bus transportation is an important advantage for Yangon to build on and consider in the modernization of the urban transport system. Table 3.1. Supply and Demand of YBS System in 2018 Small Vehicles and City Bus Minibus Microbuses Registered vehicles 4,758 1,253 539 Monthly operating vehicles 106,214 21,995 7,581 Daily operating vehicles 3,542 733 252 Average number of trips per month 385,579 81,704 27,848 Average ridership per month 54,166,651 11,073,108 156,920 Average ridership per day 1,505,555 369,103 5,230 Source: YRTA 2019. 50 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 3.1. Mode Share by Vehicle Ownership and Monthly Household Income Level . Group 1 Group 2 Group 3 Group 4 Group 1 Group 2 Group 3 Group 4 $275- 18.9 5.5 0.5 46.9 8.7 18.2 0.9 Car owner -$275 25 6.4 1.2 33.8 8.4 23.5 0.5 Household income level -$200 29.1 8.4 3.2 21.9 11.8 24.1 0.7 -$125 31.2 8.7 1.1 29.6 6.5 20.8 0.8 $275- 33.9 9.6 6.2 2.9 10.3 35 0.6 Non-car owner -$275 35.6 10.8 3.4 2 7.9 37.5 1.1 -$200 42.2 13.9 4.3 1.5 3.9 31.3 0.9 -$125 50.1 14.5 4.8 0.72.1 24.4 0.6 0 10 20 30 40 50 60 70 80 90 100 Modal share(%) Walk Bicycle Motorcycle Car/Van Taxi Bus Truck Railway Water Ferry Others Source: YUTRA 2014. For the morning peaks, 13 percent of 2.4 million daily boards take place in the CBD.24 Many other high boarding bus stops are on peripheral townships—including Htauk Kyant Lan Sone, Waryar Let, Chauk Kwae, and Myauk Okkalar Awin stops. The alighting map further reveals that most passengers get off in the downtown CBD area (Figure 3.2). However, further origin-destination analysis is needed to confirm that these passengers are reaching their destinations—and that they are not just transferring. During the early phase of bus reform in 2017, YRTA redesigned the YBS network in such a way that most routes run in the north-south direction, with their final stops ending in downtown or near the downtown area. The redesign resulted in affecting passengers who live in the eastern part of Yangon (for example, in East Dagon, Dagon Myo Thit townships), who now transfer once or twice—often via CBD bus stops—if they want to commute to the western part of the city or vice versa. The YRG has been improving the situation and adding new routes based on passenger demand. Figure 3.2. Peak-hour AM Boarding (left); Peak-hour AM Alighting (right) Source: Far East Mobility2019. 24 To better understand transport demand, Far East Mobility, as part of the feasibility study for a Cities Development Initiative for Asia (CIDA) project in Yangon, examined peak bus boarding and alighting in the city in 2018. Yangon Bus System - Financial and Operational Review 51 Beyond buses, the Yangon Circular Railway (YCR) provides small but vital services, especially for low- income residents, although the quality of service can be significantly improved. With a relatively cheap ticket price of MMK 100–200, Yangon’s 50 km circular rail line and wide radial routes, which consists of 38 urban stations and 17 suburban stations, serve approximately 80,000 passengers per day (2018). Unfortunately, the colonial legacy infrastructure is slow, unreliable, and deteriorating so travelers often need to factor inefficiencies and delays in their schedules. Two specific demographics primarily use the Circular Line: the first group is the ‘captive’ riders who are the poorest of Yangon citizens and cannot afford bus fares or they live in far satellite towns where there are no bus services, or both (Dean 2017). The second demographic who uses the YCR is foreign visitors who are keen on experiencing everyday Yangon life through a three- hour train ride with locals. The YCR is now being updated by, for example, installing signaling equipment and automatic level crossings. When the upgrade is completed, the average speed is expected to increase from the current speed of 15 km/h to 26 km/h. YRTA announced in early 2019 that circular buses would soon operate along the route similar to that of the YCR to further improve the city’s connectivity (Grafilo 2019). This can be a positive measure since it will increase usage and access over the circular railway. Reallocating buses once the upgrade is complete should be straightforward, and demand will transfer from bus to rail, perceiving an improvement in travel times and service quality. Another public transport, Yangon Water Bus service, was first launched in October 2017 as part of the regional government’s plan to help mitigate urban congestion. Currently, there are 10 vessels under operation—seven locally manufactured over Thai hulls, with a capacity of up to 120 passengers and three purchased from Australia with a capacity between 120 and 220 passengers. The daily service runs between Botataung (Nan Thidar) Terminal and Insein Terminal (under Aung Zay Ya bridge)—a total of 12 miles and fares are priced at a fixed rate of MMK 300 per journey. During peak hours, there are about 100–120 commuters per ship (Win 2018). In 2018, around 1,360,000 passengers were served (YRTA 2019). Commuting by water is not common in Yangon beyond a fixed number of regular Yangon Water Bus customers, and Yangon dwellers reported using the service for recreation during weekends and holidays. Although bus transport in Yangon contributes to nearly half of all trips, its high modal share must be maintained by reallocating road space to public modes over private modes, which are slowly increasing at par with additional vehicle registrations. Bus ridership has been declining at around 10 percent (2007– 2015) although there is an increase in ridership in recent years (Figure 3.3). The sharp rise in ridership in 2016, as evidenced by Figure 3.3, is attributed to the introduction of the YBS, which revamped routes and introduced new fleet and better frequencies, registering a demonstrative effect that accounted for a temporary increase in ridership. Restrictions on motorcycles and bicycles have severely limited the importance of these two modes, creating demand for public transport, predominantly by bus. On the other hand, car ownership has surged, doubling over 2012–2015. In addition, there are about 67,000 taxis (not accounting for unlicensed taxis) in the Yangon Region, to which the Road Transport Administration Department claims only half of them are needed (Win 2017; YRTA 2019). With the drastic increase of Internet penetration in Myanmar, there have been appearances of ride-hailing services such as Grab, Oway, and Hello (Shadrach 2018). 52 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 3.3. Number of Bus Passengers and Passenger-Miles in Yangon 1,000,000 6,000,000 900,000 5,000,000 800,000 700,000 4,000,000 600,000 500,000 3,000,000 400,000 2,000,000 300,000 200,000 1,000,000 100,000 0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Passenger Passenger-mile Source: CSO 2019. A hierarchically integrated transport system will play an integral role in Yangon’s productive, competitive, sustainable vision for the future. Yangon is ripe for taking measures to reallocate road space to public modes and advancing with an adequate on-street parking management strategy to prevent potential gridlocks and rapid deterioration in the urban mobility landscape. At its core, the goals of public transport systems are to be ‘pro-poor’ and to improve accessibility for all citizens. First, the majority of Myanmar citizens, albeit their aspiration, currently cannot afford to own a car. Second, although having a private vehicle—be it a car or a motorcycle—increases individuals’ accessibility, this is only true to a point. Eventually, congestion— accompanied by unsafe road practices, accidents, and air pollution—will inhibit everyone’s mobility. The perils of private vehicle-oriented development on the citizens’ accessibility are charted in Figure 3.4. Yangon can service its residents to reach their destinations safely, affordably, and efficiently by moving away from car-oriented development and prioritizing public transport systems. The YRG has implemented important actions toward improving YBS. The most important step forward took place in 2016 with the transformation of the Yangon Motor Vehicles Supervisory Committee (Ma Hta Tha), a legacy institution, into YRTA. YRTA is designated as a dedicated transport authority in Yangon that has the mandate to regulate various modes—bus, school bus, coach, water bus, and taxi-based transport—excluding rail-based transport, which is overseen by Myanmar Railways. Steering Committee of YRTA is composed of members from the YRG, YCDC, MOTC, Public Transport Company, Myanmar Engineering Society, and Yangon Technological Institute (JICA 2018). There is potential for YRTA to further evolve as a modern and fully integrated urban transport authority. Although the YRTA’s institutional setup is improving, it is still precarious and capacity and staffing are constrained, particularly on planning and operations management. Coordination between different agencies also becomes cumbersome, especially when the institutional setting is highly fragmented. Without a clear and effective organization structure, the multitrack improvement works described earlier are bound to be difficult to implement and can be extremely costly both in terms of labor and financial resources. Yangon Bus System - Financial and Operational Review 53 Figure 3.4. Vicious Circle of Residents Losing Access to Destinations Due to Car-Oriented Development Growth of car ownership in society Dispersion of services and work locations Accessibility becomes car dominated Accessibility problems for non-car households More households purchase cars Use of public transport decreases Difficulty in maintaining PT service levels Worsening accessibility conditions for non-car households (involuntary transport disadvantage) Source: Jeekel 2019. Before the current YBS system, the YRG and YRTA’s predecessor Ma Hta Tha attempted smaller-scale bus reform. In 2014, YUTRA proposed a preliminary feasibility study of two BRT corridors: the BRT 1 route along the Sule Pagoda Road, Zoological Garden Road, and Bahan Road and the BRT 2 route along Phone Gyi Street and Pyay Road. However, due to limited capacity at that time, a modest implementation of a ‘BRT Lite’ system through a PPP scheme took place instead. BRT Lite commenced operations in February 2016 and runs along Yangon’s two main commuter routes, Pyay Road and Kabar Aye Pagoda Road (Win 2016), and the system was generally considered as a success. BRT Lite charges a flat rate of MMK 300 per ride (around US$0.20). The cost of the system, estimated at US$19.2 million, was fully financed by the newly created PPP entity called Yangon Bus Public Company (YBPC)—40 percent funded by the government and 60 percent funded by private companies and public shareholders. Currently, these YBPC buses operate under the administration of the YBS system. The YRG is dedicating important resources to devise mechanisms that address issues of urban transport as part of the redevelopment of four districts and in tandem with the development of New Yangon City. International development organizations are supporting this dialogue to improve urban transport including (a) a feasibility study for the proposed 19.8 km Pyay Road BRT (Box 3.1) with support from ADB; (b) an investment program to modernize the YCR, led by Myanmar Railways with support from JICA; and (c) a feasibility study for the Mass Rail Transit System, also with support from JICA. In addition to mass transit systems, there are ongoing discussions at the policy level to improve traffic management and traffic signaling systems (for example, the Bottleneck Removal Pilot Project to address congestion at San Pya Market Bus Stop and Sule Bus Stop), parking policy and management (also included as a component of the BRT feasibility study), road safety, and taxi regulations and governance. 54 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Box 3.1. Proposed Pyay Road BRT Busway Corridor in Yangon The proposed 19.8 km median-aligned corridor consists of 28 stations: 8 ‘full BRT’ stations at the highest demand locations, 14 ‘busway’ stations that are expandable into full BRT stations should the demand increase in the future, and 6 non-expandable ‘busway’ stations with smaller area footprint. The corridor is likely to use 400 existing buses and 400 new busway buses that have doors on both sides to accommodate effective passenger boarding and alighting. According to Far East Mobility*, a consulting firm, the total infrastructure cost including pedestrian facility and parking improvements, is estimated to be U$183 million and the system will not be operational at least until 2022 (Far East Mobility 2019). Pilot study by Ramboll, Swedfund, and YRTA projects that the busway will achieve a relatively high cost recovery with 60–80 percent costs covered by the revenue, although government support is likely to be required (Ramboll 2019). If implemented, the busway, along with other infrastructure improvements, is estimated to benefit more than 840,000 daily passengers while improving the bus speed by half and reducing travel time by about 25 minutes (CDIA 2019). The map shows proposed BRT with 28 stations on Pyay Road Source: Far East Mobility 2019. Note: *The World Bank understands Far East is a consultant working for ADB on the Pyay Road BRT Project preparation. Yangon Bus System - Financial and Operational Review 55 B. Structure and Characteristics of the Yangon Bus Service The YBS was launched under YRTA’s supervision on January 16, 2017. It has advanced in the right direction in the provision of public transport services. The goal of the YBS was to reduce traffic congestion and commute time of about 2 million passengers while at the same time improving the quality of bus service. Before the YBS’s launch, bus services were marred with overcrowding, unpredictable schedules, and unsafe driving practices. In its early days, the new bus system reduced the number of bus lines from around 300 to 60 (JICA 2018) to address the issue of multiple operators competing in the same major routes along arterial roads. YRTA also replaced about 60 percent of the old and polluting buses with new ones (2017). With the YBS, YRTA advanced with a broader citywide bus reform, which has supported the partial professionalization, consolidation, and modernization of incumbent operators. The corporate structure of these improved bus operating companies varies from cooperatives—composed of former small bus owners, who run a combination of ‘yellow buses’ along aging legacy buses—to formal and financially capable modern companies owned by large economic conglomerates that have purchased modern CNG bus fleet with financing from local commercial banks. With over 60 percent of the buses now being owned by companies, the trend of public transport in Yangon seems to be toward consolidation (Nyein 2019). One of the biggest challenges of the YBS system is supporting the transition of small bus-owning families into the YBS bus operating companies. These small bus owners have either transferred the ownership of their buses to operating companies in exchange for company shares (becoming shareholders) or operate their buses under the structure of a larger operating company, paying a fee to operate under the company’s name. This condition poses an important challenge to small bus owners who have faced difficulties transitioning from informality toward investing, managing, and running large-scale formal bus operations businesses. The following paragraphs summarize the most salient features of the YBS. Operators. As of 2018, the YRG has issued permits to operate 100 bus lines to a total of 28 bus operating companies and individual operators, who collectively operate 6,550 buses (YRTA 2019). The corporate structure of these bus operating companies varies from cooperatives, composed of former small bus owners, to formal and financially capable modern companies owned by large economic conglomerates. Cooperative operators lack managerial capacities and are perceived to be running the business on a day-to-day basis. This translates into poorly managed bus operations, maintenance, and human resource management and limited financial capacity to reinvest in the future. Deepening the corporatization scheme of these cooperatives will be crucial for the sustainability of these operating companies. Fleet. Cooperatives operate a blend of owned and leased buses with CNG motorization. Owned legacy buses were part of a fleet of used imports provided by Hyundai in 2012. The newer, yellow fleet belongs to and is leased by YRTA. The stronger operating companies have purchased their own fleet with loans from local commercial banks. New buses, either private or YRTA owned, are of Chinese origin. The split between public and privately owned buses is 60:40. Table 3.2 provides further information on select bus companies. 56 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 3.2. Select Bus Companies after the YBS Formation Fleet Share, Operational Bus Company from Total Method of Driver Payment Control Center YBS Fleet (%) Functioning Bandoola 100 Flat rate per round trip Yes Omni Focus 100 Salary, varies based on performance, Yes plus food Yangon Urban Public 58 Base salary plus round trips Yes Transportation (YUPT) YBPC 100 Base salary plus revenue share Pending Ludu (People’s) Partner 100 Base salary plus revenue share Pending Golden Yangon City 28 Revenue share after flat bus rental fee Yes Transportation (GYCT) Power Eleven 40 Revenue share after operating, plus No housing Khit Tit Bayintnaung 2 Revenue share after flat bus rental fee Pending Source: Hook 2018. Figure 3.5. Pictures of Buses in Yangon Buses from private operator serviced in depot A YRTA-leased bus A legacy bus in Yangon A newly installed YBS bus stop Source: Leonardo Canon Rubiano, 2019. Yangon Bus System - Financial and Operational Review 57 Fleet management and user information. As of March 2018, YRTA has equipped 4,253 buses with GPS— Automatic Vehicle Location (AVL)—and CCTV to be able to supervise drivers using the telematics system (YRTA 2019). This AVL system, known as Yangon Bus Operator (YBO), is provided and operated by a Singaporean firm. Despite the AVL’s potential, its functionality is restricted to monitoring accidents, speeding drivers, prolonged dwelling at bus stops, and other traffic infractions due to limited capacity (YRTA 2019). The newly built control center building, where the Yangon Traffic Control Center also operates, is active from 9 to 5 exclusively due to the building running on a diesel electricity generator since a connection to the city electric grid is still pending. Despite YRTA having an oversight control center linked to the Yangon Traffic Control Center, operators still run their individual control centers. The recommended international best practice is to have all bus operators regulated under a separate operational controller using one system. When the YBO further evolves, it would be able to play this role well, making it more efficient to monitor the buses’ quality of service compliance and provide a fasterpolicing response if needed. Bus depots. Besides a few cases, operators do not have access to depots and maintenance facilities. As a result, most of the publicly owned buses leased to operators are serviced on the side of the road and the condition of the buses is deteriorating rapidly. According to the 2018 YRTA Annual Report, the bus companies listed in Table 3.3 own bus depots often constructed on land leased from YRTA. Traffic management. Despite having installed modern traffic signaling systems and a control center for the YBS, Yangon’s perceived traffic management capacities are weak. The institutional vacuum in which traffic management operates is made evident: congestion is increasing, traffic signals are poorly timed (evidenced by extremely long cycles and low levels of service on intersections), street and road signage is limited, parking management is nonexistent, and traffic police is almost nonexistent. Bus stops replacement. YRTA is in the process of installing smart facilities that feature advertisement displays and city information panels in 500 out of 4,000 existing bus stops. After the Memorandum of Understanding between the YCDC and FM Decaux, the latter replaced around 200 old bus stops with ‘smart’ or hi-tech bus stops as of May 2019. FM Decaux will install 500 new bus stops by 2020 (Aung 2018). This is perceived as a step in the right direction, as better bus stops with better information have incidence in quality of service for users. Regarding the contractual mechanism, having an international company that handles the installation and maintenance costs in exchange for advertisement rights is a standard, well-known practice in many cities. Yangon has successfully made its bus stop system attractive to private investors and can increase quality at low cost owing to this internationally proven scheme. 58 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 3.3. Select Bus Terminals Leased or Owned by Bus Companies in Yangon Bus Area Land Location of Bus Terminal Usage Company (acres) Ownership YBPC No. 7, Myo Shaung Street, Bwak Gyi 3.2 Owned by Will be used for Village, Hmawbi Township the YBPC administrative office, bus depot (for 150 buses), and maintenance facility as well as a storage unit Min Ye Kyaw Swar Main Road, 20 Leased from Used as bus depot for (East) New Dagon Township the YRG 150 buses as well as office buildings and maintenance facility No. 1.D, Ayar Won Road, 10/South 1.5 Leased from Used as bus depot for the Ward, Thaketa Township YRTA YBS Line 72 Ayar Won Road, Ward 8, (near Shwe 0.72 Leased from Used as bus depot for the Oak Gu Pagoda) Thaketa Township YRTA YBS Line 79 Omni Focus West Yangon Cargo/Truck Station, 15 Leased from Under construction; it will Hlaingtharyar Township the YCDC be used as Omni Focus through Headquarter as well as YRTA bus depot for 500 buses YUPT No. 10, Pin Lone Street, Ward 10, 0.91 Leased from Used as bus depot as (North) New Dagon Township YRTA well as bus equipment garage No. 391-B, Bagan Street, Ward 1.86 Leased from Used as bus depot as 14, Shwe Pauk Kan Town, North YRTA well as Maintenance Okkala Township Department No. 1 No. 1318, Shu Khin Thar Road, Ward 0.453 Leased from Used as bus terminal 6, Thaketa Township YRTA for the YBS Line 84 minibuses GYCT No. 883, Bagan Street, Ward 53, 1.658 Leased from Used as bus depot for (South) New Dagon Township YRTA GYCT buses Power No. 2/4/5 Taw Win Road, Ward 8, 0.906 Leased from Used as bus depot for Eleven Shwe Pyi Tar Township YRTA Power Eleven buses Source: YRTA 2019. Yangon Bus System - Financial and Operational Review 59 Box 3.2. Applicable Legal Framework to Public Bus Transportation The 2016 Road Transport Law establishes a 14-member national committee that stipulates, enacts, and governs countrywide and cross-border road regulations on passenger and freight transportation to facilitate safe, reliable, convenient, and effective service. It also includes provisions around the administration of operating business licenses for different transport purposes. The law abolishes and replaces the 1963 Road Transport and Inland Water Transport Law (Myanmar Union Parliament 2016). The 2015 Motor Vehicles Law encompasses motor vehicle registration; provision of driving licenses for specific types of vehicles; import, manufacturing, repair, and inspection of motor vehicles; regulation of traffic and safety rules (for example, speed control, seat belts/helmets requirements); and penalties for infractions. The 2015 Motor Vehicles Law updates and replaces the 1964 Motor Vehicle Law (Myanmar Union Parliament 2015a). Another important legal framework, 1989 Motor Vehicles Rules, was enacted under section 33 of the 1964 Motor Vehicles Law and it details the required terms and conditions of vehicle registration, maintenance, driving license, and training school as well as road safety and traffic rules of motorists, pedestrians, and cyclists (MOTC 1989). Many of the specifications are outdated (for example, new driver license types have emerged since 1989) and it is unclear to what extent the 1989 Motor Vehicles Rules framework is still enforced nor is internally consistent with recent transport laws. At the same time, the most updated version of certain motor vehicle requirements is published on Road and Transportation Administration Department (RTAD) website (see below), though as of June 2019 there still lacks a unified statutory framework that supersedes the 1989 Motor Vehicles Rules. None of these laws or rules provides a clear definition of a ‘bus’ in Myanmar, although the 1989 Motor Vehicles Rules does define a taxi as “a passenger motor vehicle registered as a hired vehicle and carrying not more than 5 passengers other than a driver.” The 2015 Motor Vehicles Law defines a ‘commercially used motor vehicle’ as a wheeled vehicle that transports either passengers or goods for a fee and is required to register as a hired vehicle (a-ngar-yin). According to the 1989 Motor Vehicles Rules, an urban bus is considered a category of a hired motor vehicle, the regulations of which are prescribed in Chapter 6. Under the automobile import tax regulation, a bus is classified as a vehicle with 10 or more seating, including the driver. In another documentation regarding issuing Vehicle Inspection Certificate (VIC) by the RTAD, buses have 25 seats and above. In the appendix of Vehicle Registration for International Travel, also from the RTAD, buses are classified as vehicles with more than eight passengers, excluding the driver (RTAD n.d., c). Source: Myanmar Union Parliament 2015a, 2015b. 60 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding C. Bus System Fare Box Remuneration With no unified fare collection system in place, cash flows are managed by each bus operating company independently, undermining YRTA’s ability to centrally and efficiently run the financial management of the YBS. With many setbacks and delays, Yangon is tentatively beginning to implement a YBS-wide smart card-based centralized fare collection system (current to December 2019; Myanmar Times, 2019a; Zue, Z. 2019.). YRTA expects to install the necessary equipment on 2,000 to 4,000 buses in the latter part of 2020. Figure 3.6 reveals public experience about using the YBS system, and Figure 3.7 shows the monthly ridership and gross revenue before and after YBS implementation. Note that gross earnings are consistently higher in the aftermath of YBS reform. Figure 3.6. Public Opinion on the YBS Figure 3.7. Yangon Public Transport Performance and Gross Earnings after the YBS How often do you use YBS? Monthly Passenger and Passenger-miles: Before (Dec 2016) and After YBS Passenger-miles (Thousand) Everyday Sometimes Once a week Once a month 60,000 300,000 Passengers (Thousands) 50,000 250,000 40,000 200,000 63.6 20.2 12 3 30,000 150,000 20,000 100,000 10,000 50,000 How long do you have to wait for the bus? 0 0 Dec 2016 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 <10 min 10-20 min 20-30 min 30-60 min >1 hour Don’t know Months 42.8 40.6 11.2 4 Passenger (Thousand) Passenger-miles (Thousand) How long does it take to get to your destination? Average Daily Trips and Gross Earnings: Before (Dec 2016) and After YBS 12,000 25,000 Gross Earnings (K Million) 15-30 min 30-60 min 1-2 hours >5 hours Don’t know Number of Trips Per Day 10,000 20,000 29 36.2 24.4 4 8,000 15,000 6,000 10,000 4,000 2,000 5,000 Is your bus safe and comfortable? 0 0 Dec 2016 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec 2017 Jan 2018 Feb 2018 Mar 2018 Apr 2018 May 2018 Jun 2018 Yes So-so No Months 48 34.2 16 Gross Earnings (K Million) Number of trips per day Source: YSPS 2018. Source: CSO 2019. Yangon Bus System - Financial and Operational Review 61 The two main contract types that are most relatable to the YBS are net-cost and gross-cost contracts.25 With the exceptions of the YUPT and YBPC operating companies, the operating structure of the YBS resembles a ‘net-cost’ model, where the operators collect passenger fares, cover their costs with them, and pay a small fee to YRTA for the right to operate a route. Since the operators must cover all the operating costs of the service, the private sector—as opposed to the government—assumes the risk of the system. Without adequate contracting and enforcement, which is the case for the YBS, net cost schemes foster risky competition for customers on bus corridors with many routes. To mitigate this, YRTA should advance with a unified, centrally controlled fare collection scheme operated by a third party independent from bus operators. Such an arrangement could constitute the foundational element to transitioning toward per-km, performance-based contracting. The two contract types can be often further classified based on geographical coverage—either route licensing as practiced by YRTA, where the contract covers per route or area licensing, where the contract is based on specific areas of the regions. The pros and cons of the contract type used in the current YBS system are provided in Table 3.4. Table 3.4. Advantages and Disadvantages of the Current YBS Contract System: Route-based Net-Cost Contract Advantages Disadvantages • Minimize risk of open-ended subsidies by • Difficult to modify the network shifting the demand risk to operators • Cannot cross-subsidize loss-making routes with • Incentivize bus operators to collect revenue those that are making profits and run their respective routes efficiently • Fewer returns of scale • Provide city municipality some control over bus • Difficult to achieve system-wide unified fare services collection • Create a dangerous competition for customers along corridors with numerous bus routes Source: ITDP 2017a. Besides a subsidized CNG supply, YBS operators are highly dependent on farebox revenues, through which companies fund the investment and operational expenditures (OPEX) for urban bus operations. Yangon bus fares can cost MMK 100, MMK 200, MMK 300, and MMK 500 for different services (Figure 3.8). The most common fare is MMK 200 (about US$0.13), while shorter routes within downtown CBD (for example, circular routes such as YBS 56, 57, and 58) charge MMK 100, and longer routes cost MMK 300 per trip for the whole journey. Routes 78 and 94, operated by Lu Htu Partner, and some Omni Focus routes charge MMK 300 since these services use new, air-conditioned buses. Figure 3.8 reveals that nearly 70 percent of surveyed passengers (n = 4,131) along the Pyay Road Corridor pay MMK 200 for the entire trip. Regardless, because many passengers need to transfer buses and the YBS still lacks fare integration system among different bus operators, commuters can end up paying more than MMK 200. Monks can ride buses free of charge on all routes and students can also travel for free depending on the bus operators. Currently, there are no other types of bus discounts (Far East Mobility 2018). 25 These terms are based on ownership of the bus fare revenue and in net-cost contract, fare revenue ownership is assigned to bus operators whereas in gross-cost contracts, bus operators are paid by the city government based on some operating features (for example, per bus kilometer, per bus hour, per passenger kilometer) (ITDP 2017a). 62 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 3.8. Trip Costs from a Sample of Bus Passengers along the Pyay Road Corridor 80% 70% 60% Passengers (%) 50% 40% 30% 20% 10% 0% 100 200 300 400 500 600+ Trip cost Source: Far East Mobility 2018. There are several approaches by which the current flat fare structure of YBS routes can be modified to have a more cost-efficient system that considers both the passenger demand and purchasing capacity. One common approach would be to combine reasonably high minimum base (flat) fares with distance- based fares for additional kilometers traveled. Such an approach was recommended by Daw Khin Than Hla, Auditor General of Yangon Region, to YBPC and YUPT services to increase farebox revenue. A simpler version of distance-based fares is zonal fares for which passengers are charged based on the number of zones crossed. While zonal fares require less sophisticated fare technology and can save customers from potential confusion, they can cost more for travelers who are taking short trips within a zone. Alternatively, fares can also be varied by time—by having peak period fares and off-peak period fares. All these different combinations of fare structures will have widely varying impacts on bus ridership as well as revenue and thus should be implemented only after a thorough understanding of passenger behaviors through origin- destination matrix of transport trips in Yangon. Moreover, because different bus companies and operators set fares in the YBS system, passengers can become confused about the mix-and-match fare structure, especially when there is no integrated fare system for all bus routes. Expenditures. As operators pay themselves through net schemes and YRTA has not put forward legally binding contracts requiring the periodic submission of operational or financial KPIs, there are limited official data on capital and operational expenditures of bus operators (CAPEX,26 OPEX27). The publicly available CAPEX is US$56 million for the procurement of 1,000 new buses for the YUPT and YBPC. For OPEX, Table 3.5 uses anonymized, average data collected from in-person interviews with bus operators in Yangon. The data from the interviews indicate a typical distribution of OPEX for bus services, with a slightly higher percentage of OPEX devoted to wages and stipends (around 42 percent, with international comparators sitting approximately at 35 percent). Fuel cost and maintenance cost add up to close to 50 percent, which is similar to other systems benchmarked. 26 CAPEX is one-time infrastructure or equipment investments that will yield benefits in the future. For corridor-based bus systems, CAPEX typically includes bus infrastructure investments (stations, terminals, depots, control centers, roads), vehicle procurements, fare collection, and IT equipment. 27 OPEX considers ongoing expenditures as a result of the system operation. They include personnel costs (labor, staff, and so on), fuel costs, and maintenance costs. Yangon Bus System - Financial and Operational Review 63 Table 3.5. Estimation of OPEX Cost Type MMK Per Bus Per Day % of Total Per Bus Per Day Fuel 15,000 24 Wages and stipend 26,000 42 YRTA fees 4,000 6 Company fees 2,000 3 Maintenance 15,000 24 Total operating cost 62,000 100 Source: World Bank staff based on interviews with bus operators. Bus passenger levels in Yangon are still high by international standards, which translates into considerable revenue streams, particularly for big operators. The interviewed operator, who manages a fleet of about 340 commercially active buses, reported daily average ridership levels of around 450 passengers per bus per day, which total about 250,000 daily passenger trips for the company. Extrapolating to the 4,800 bus fleet, this demand roughly translates into monthly revenues of nearly US$5.3 million for the YBS. Farebox recovery ratio—calculated as the ratio of farebox revenue to operating cost or the percentage of operating expenses of the system covered by fare—is likely to be above 1.23. This, in other words, means that from each US$1 collected from fare revenues, US$0.81 is spent in OPEX, leaving roughly 20 percent of revenues for debt servicing, financial costs, and depreciation. Table 3.6 presents a summary of such estimations considering field-based operational costs and reported ridership per bus (all data collected during surveys with operators). Table 3.6. Estimation of Farebox Ratio, YBS Operating Costs Per Bus Per Day MMK, Day (a) As % of Total Per Bus Total OPEX cost, per bus (from Table 3.5) 62,000 100 Revenues per day MKT, day Average passengers per bus per day 450 Average fare 170 Total revenue, per day 76,500 Active fleet, 2019 (buses) 6,550 Total Costs and Revenue, Company MMK, Day MMKb, Monthly US$c, Monthly Total cost (total OPEX × number of active fleet) 406,100,000 9,340,300,000 5,878,099 Total revenue, day (total revenue × number of 501,075,000 11,524,725,000 7,252,816 active fleet) Estimated farebox ratiod 1.23 Source: World Bank staff estimations 2019. Note. a. All prices in MMK except otherwise noted. b. Day to month expansion factor = 23. c. US$/MMK exchange rate December 2018 = 1,589. d. Excludes fleet depreciation. 64 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding The estimation includes preliminary data for operational costs (excluding fleet depreciation) and daily ridership per bus and is close to YRTA’s approximation (Irrawaddy 2017). This estimation provided here is exploratory in nature and further data collection effort—for example, gathering the total number of new and old buses, bus models, and specific capital costs for each bus model as well as the daily operating nature of all the different bus companies and bus owners—is warranted to be able to reveal a clearer picture of the YBS system. Running a financially sustainable or even profitable urban transport system can reap certain benefits, including being able to provide high-quality service (both in terms of technology and infrastructure), being less prone to political swing in transport sector (ITDP 2017b), potentially shifting modal share from unsustainable transport options (for example, use of private vehicles) to sustainable mobility options, and being able to further invest for excluded and vulnerable populations (for example, providing infrastructure such as sidewalk or bicycle lanes that can be helpful for the most transport-disadvantaged demographics or providing targeted subsidies). Overall, one or two financially solid YBS bus operators use fare revenues to cover operating costs and the repayment of commercial loans for fleet acquisition, but the majority of the less-capable operators are not able to cover capital costs or save for subsequent fleet upgrades. According to the Yangon Region Auditor General’s report, both the YBPC and YUPT have not yet met the breakeven point on CAPEX for their 1,000 YBS buses, as of FY2017/18 (Ko 2018). This situation is also likely to happen in Yangon where as much as 75 percent of bus revenue goes into covering the operating costs, as reported in public media (Irrawaddy 2017), which tend to go up over time due to increase in maintenance and labor costs, thereby making it difficult to finance additional capital investments needed for transport improvement (Soe, H. K. 2018). The current focus area of YRTA is on improving Yangon’s bus network—YBS—as the main arterial public transport mode in the city. These improvements consider work on multiple tracks, including enhanced contracting mechanisms (from limited responsibility perennial permits to time-bound, performance-based contracts); consolidation and professionalization of low-capacity bus operators into modern operating companies; renewal of bus fleet; and technology projects, including the introduction of fleet management, user information, and fare collection systems. These multi-track improvements are the foundation work to allow the implementation and integration with higher capacity systems, including BRT, urban rail, or other fully segregated technologies. In addition to physical infrastructure, Yangon can prioritize digital infrastructure to leapfrog and transform itself into a smart city to overcome the current lack of accurate and reliable transport and urban data. First, Yangon needs an updated, comprehensive urban transport survey to better understand the citizens’ travel behaviors, trip patterns, origins-destinations, and mode shares. Such literature is scarce and the most up-to-date citywide survey was conducted under the YUTRA study in 2014, three years before the formation of the current YBS system. Second, public bus information such as geo-coded routes, frequencies, speeds, and bus fares is neither updated regularly nor available in accessible digital format (such as GTFS28). Data must be considered as an infrastructure—such as roads and rails—on which additional urban services can be provided using insights from transport analytics. As the provider of public goods, YRTA has the responsibility to monitor and curate transit data—for example, by setting up a dedicated agency—and make it transparent and available for all citizens. Such a ‘data-as-infrastructure’ approach, if executed properly, will not only be equitable but can also bring financial growth due to economies of scale. 28 GTFS is the global standard for fixed-route public transport data sharing. Yangon Bus System - Financial and Operational Review 65 66 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding 4 URBAN TRANSPORT EXPENDITURES AND FINANCING POTENTIAL Key points • The current expenditure on urban transport is not enough to meet the high demand for transport service delivery in Yangon and Mandalay. The impact of underspending is particularly damaging in the heavily urbanized and fast growing Yangon Region, where road traffic congestion is worsening as citizens with growing incomes turn to private cars. A limited system for road asset management and limited funding (and access to financing) for maintenance is affecting the condition of assets and their level of service. • Alongside increases in expenditure on urban transport, efficiency improvements will be required. Efficiency improvements alone will not close the significant gap in urban transport infrastructure and services but getting more outputs out of a given expenditure will nevertheless play an important part in making expenditure increases go further in delivering better outcomes in terms of more productive cities and improved mobility for the population. • Increased private sector participation in the sector can be one way of financing urban transport infrastructure and services in Yangon and Mandalay. However, experience in urban transport PPPs is limited in Myanmar and in countries at a similar level of GDP per capita. Given the importance of management of fiscal risks, the role of the union government is important to support Yangon and Mandalay in the identification and preparation of potential PPPs or municipal debt operations. PPPs must be treated with caution because significant specialist skills are required to negotiate a good deal on behalf of the public good. There are various types and mechanisms for private sector financing in the urban sector, which can be considered and decided based on value for money for the public sector and taking account of differences in fiscal risk. Urban Transport Expenditures and Financing Potential 67 A. Scope of Expenditure Review This chapter reviews public expenditure on urban transport in Yangon and Mandalay and the potential to increase financing for the sector. It is both a stock-taking exercise and, to the extent possible, an analysis of ways in which the efficiency and effectiveness of public spending could be improved. The review of expenditures covers urban transport-related spending at the union, regional, and city levels. On public transportation, bus operators do not receive operating subsidies from either subnational or union budgets. Urban rail currently has a limited role in public transport and only in Yangon with less than 2 percent modal share. Therefore, the review primarily focuses on the analysis of road spending, which constitutes most of the public expenditure in the sector. It also discusses the budget process and the public investment management systems, as relevant to the urban transport sector, and describes the main shortcomings identified. The review of public expenditure covers a period when better financial information is being prepared; however, there are limitations related to unavoidable gaps in recent historical data and issues with the quality of the current data. Data presented on road expenditure were collected from the YCDC, MCDC, regional governments, and MOPF as part preparation of the Subnational Public Expenditure Review, which includes an urban transport chapter too. While data on road expenditures of different actors are available in various categories, including budget estimates, actuals, and proposals, the review attempts to consolidate all available data to develop a broader picture on public spending covering the city, regional, and union levels. Analysis of this expenditure, therefore, warrants the most attention. Spending on roads by the YCDC and MCDC is exclusively on urban roads and is the most reliable information. In addition, the DOH, funded from both the union budget and regional budgets, also spends on roads, mostly on major projects, but it is not possible to separate this from the rest of its spending. The DAOs, serving urban areas outside the jurisdictions of the city development committees, also spend on roads but this expenditure cannot be separated from their expenditure on other urban services. Since roads are likely to be the most significant item, their total expenditures are considered in the comprehensive analysis. B. Road Sector The share of regional GDP spending on roads in the two regions is much lower than is required to preserve and improve a network capable of supporting sustained economic growth.29 The current share of expenditure on roads in the two regions is around 0.7 percent of regional GDP which is low by international benchmarks (Box 4.1). As a broad indication of the relative importance of the road expenditures in Yangon that will need to be achieved in the medium to longer term, the US$370 million annual public investment program for roads proposed in YUTRA would represent around 2.6 percent of Yangon’s 2017/18 GDP. At least a doubling of expenditure on roads as a share of the current regional GDP, to around 1.5 percent, is required in the medium to long term to avoid choking off economic growth considering the role of the road transportation in two regions. Increases in expenditure should be oriented toward investment, but maintenance expenditures should also rise to ensure sustainable assets. This will be particularly important for Yangon, where the network is already under stress from growing congestion. In the longer term, further increases should be planned consistent with institutional capacities to plan, implement, and manage the transport infrastructure assets that would be created. 29 The international statistics for road expenditure quoted in this paragraph are derived from the Organisation for Economic Co-operation and Development (OECD) database on transport infrastructure expenditure and include expenditure on both maintenance and investment, unless otherwise stated. The figures are for 2015. GDP figures are taken from the World Bank World Development Indicators database. 68 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Box 4.1. Road Spending in Selected Countries Larger and higher-income countries, such as Argentina, Brazil, and Mexico, spent around 1 percent of GDP on urban transport over 2008–2013, while others such as Bolivia, Nicaragua, Panama, and Peru invested two to three times higher shares of their GDP (IDB 2018). Although not strictly comparable because the figures are for expenditure on the transport sector as a whole, Beijing spent around 1.4 percent of GDP in 2016.30 At the country level this sort of share is comparable with advanced countries with mature networks.31 Spending as a share of GDP for upper-middle-income countries varies considerably—from 1.2 percent for the Republic of Korea and Turkey to 4.2 percent for China.32 CDC-level spending on roads Roads make up an important share of the YCDC’s total expenditure and an even more important share of capital spending. Figure 4.1 shows the YCDC’s spending on urban roads together with total spending. It shows that in 2015/16 and 2016/17, urban roads made up 24 percent and 33 percent, respectively, of total expenditure. The importance of urban roads appears to be declining, though, representing only 21 percent and 18 percent in 2017/18 and 2018/19, respectively. Looking at aggregate spending could mask the significantly greater importance of capital spending on urban roads. It made up 41 percent of total capital spending by the YCDC in 2015/16, declining to a proposed 21 percent in 2018/19. Maintenance spending on urban roads has a much lower share of the total but held steady at around 11–12 percent between 2015/16 and 2017/18, even showing signs of increasing importance in 2018/19. Over 2015/16 to 2018/19, road maintenance spending increased by 68 percent compared to a 33 percent decline in capital spending. Figure 4.1. YCDC Road Expenditures (MMK, millions) 2018/19 2017/18 2016/17 2015/16 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 YCDC total expenditures Roads capital Roads maintenance Source: YCDC.33 30 Beijing Statistical Yearbook of 2017 (http://www.bjstats.gov.cn/nj/main/2017-tjnj/zk/indexch.htm). 31 France spends around 0.6 percent of GDP and the United States spends around 0.7 percent. 32 Excluding maintenance. 33 Data presented on road expenditure in this chapter were collected from the YCDC, MCDC, regional governments, and MOPF by Renaissance Institute team as part of preparation of the Myanmar Subnational Public Expenditure Review (World Bank, 2019d). Urban Transport Expenditures and Financing Potential 69 Urban roads constitute an important part of the MCDC’s total expenditure, too, while it is current spending that dominates. Figure 4.2 shows that the MCDC’s spending on urban roads makes up 26 percent and 31 percent of total expenditure in 2016/17 and 2017/18, respectively, which is not different from Yangon. However, urban roads make up a more significant share of current expenditure than in Yangon—37 percent in 2016/17 and 28 percent in 2017/18—indicating greater relative importance given to road maintenance. Capital spending on roads represents 34 percent and 13 percent of total capital spending for 2017/18 and 2016/17, respectively. Figure 4.2. MCDC Road Expenditures (MMK, millions) 2017/18 2016/17 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 MCDC total expenditures Roads capital Roads maintenance Source: MCDC. In absolute terms, the YCDC’s expenditure on roads is more than double that of the MCDC, whereas its network is almost thrice the size. For the year for which there are matching data, 2016/17, Yangon spent a total of MMK 42,964 million compared to Mandalay’s MMK 18,749 million. However, Yangon’s urban road network is larger than that of Mandalay (Table 4.1), indicating that the YCDC is underspending on a per kilometer basis (in 2016/17 estimated at about US$6,400 in Yangon and US$7,100 in Mandalay). Table 4.1. YCDC and MCDC Road Network (km) Concrete Bituminous Macadam Gravel Earth Total YCDC 1,108 1,766 0 551 1,032 4,457 MCDC 55 1,034 172 0 491 1,752 Source: ADB. 2019. 70 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Regional-level spending on roads There are several sources of expenditure on roads at the regional level, but the information is difficult to separate from other expenditure data and to assemble into a complete time series for trend analysis. There is relatively better data on the YCDC and the MCDC. While the DAOs spend on roads outside the city jurisdictions in two regions, it is not possible to separate this expenditure from other activities. The DOH regional offices also spend on national highways and trunk roads that serve urban areas, using a mixture of funding from the union and regional budgets, but again it is not possible to separate this spending from non-urban roads. The YCDC dominates regional spending on non-rural roads in the Yangon Region. Best available data on total expenditure from regional budgets on non-rural roads in 2017/1834 indicate that its spending is 65 percent of the total, followed by the DOH (24 percent), and by the DAOs (11 percent), although the importance of the DAOs does seem to have been growing. In spite of only having partial data for 2016/17, a broadly upward trend in spending, with some yearly variations, is evident: total road expenditure in 2017/18 is 11 percent higher than in 2014/15 and the proposal for 2018/19 is 37 percent higher. However, once inflation is considered,35 real expenditure fell by 9.4 percent in 2017 and only rose by 5.9 percent in 2018.36 This should be of considerable concern given the rapidly increasing demands of the region’s road network from increasing traffic, notably private cars. To the extent that there have been efficiency improvements, the picture may not be as bad as the numbers indicate. Expenditure on roads does not seem to be keeping pace with rapidly growing needs. The relative importance of regional expenditure on non-rural urban roads has remained broadly static at around a quarter of total regional expenditure. The figures for the YCDC, which represent spending on urban roads exclusively, indicate that roads expenditure has declined as a proportion of total regional expenditure, from 18 percent in 2014/15 to 13 percent in 2017/18 (Table 4.2). This may be an indication that expenditure on urban roads in Yangon is being given a lower priority in allocation decisions, whatever strategic policy statements may say to the contrary. This might make sense if other areas of urban transport were being given higher priority and all or most road assets have recent update, but this does not seem to be the case. Table 4.2. Road Expenditure in Yangon Region (MMK, millions) 2014/15 2015/16 2016/17 2017/18 Category PA or A PA or A PA or Aa PA or REb DOHs (not just urban) 24,256 23,235 2,536c 34,547 YCDC 66,974 93,874 35,505 56,980 DAOs (not just roads) 4,609 8,680 2,880 15,298 Total roads expenditure 95,839 125,790 40,922 106,825 Total regional expenditure 366,241 471,209 505,692 424,281 Share of roads in regional expenditure (%) 26 27 8 25 Share of YCDC roads in regional expenditure (%) 18 20 7 13 Note: a. Total regional expenditure is revised estimate (RE); CAPEX missing from DOH and DOAs. b. DOH is REs; YCDC and DOA are preliminary actuals (PA). c. Figures for capital spending by DOH and DAOs are missing. 34 The term ‘non-rural’ roads is used to acknowledge that some of the expenditure captured is non-urban. The figures may only be a proxy for regional expenditure on urban roads. 35 Between 2014 and 2018, the general price level rose by 29 percent. Between 2014 and 2017, it rose by 23 percent (World Bank Database). 36 The 2018/19 figure is a budget estimate, not actual. The proposed increase is therefore not confirmed. Urban Transport Expenditures and Financing Potential 71 Similar to Yangon, road expenditure might not be keeping pace with needs in Mandalay. Over the short period, there was an increase of some 6 percent in total roads expenditure in nominal terms between 2016/17 and 2017/18,37 which would have been reduced to close to 0 in real terms once inflation is considered.38 Efficiency improvements may have meant that static real funding has gone further though. As with Yangon, there is, therefore, a reason to believe that spending on urban roads may not be keeping up with needs because of financing constraints, although the demand pressures are lower on Mandalay’s, so far, less congested network. Table 4.3. Roads Expenditure in Mandalay Region (MMK, millions) 2016/17 2017/18 2018/19 Category PA or REa PA, BE, or REb BE or Proposal DOHs (not just urban) 32,614 32,845 35,285 MCDC 18,749 21,770 8,223 DAOs (not just roads) 15,167 16,178 18,316 Total roads expenditure 66,531 70,793 61,824 Total regional expenditure 225,647 224,321 322,820 Share of roads in regional expenditure (%) 29 32 19 Share of MCDC roads in regional expenditure (%) (c) 8 10 3 Note: a.MCDC is revised estimate (RE); DOA and DOH are preliminary actuals/actuals (PA/A). b. DOH is PA, MCDC is budget estimate (BE), and DOA is RE. c. MCDC is maintenance only. This review recommends a no-regrets policy action to highlight the importance of preserving roads rights of ways. Myanmar is well positioned to do so (given the public sector controls on urban expansion) and additional enforcement is desirable to prevent construction directly adjacent to the roads. These actions will allow for reduced costs and implementation times when road expansion projects consolidate, avoiding unnecessary resettlement costs. Yangon and Mandalay would need to establish a road asset management system to support evidence- based decision making for preserving and improving existing road assets and prioritizing their maintenance and capital works. The technical assistance carried out in 2014/15 with the support of the ADB on developing road asset management program for Myanmar could provide a foundation for Yangon and Mandalay to develop a road asset management system at the regional level. While data available from this work cover a sample of a surveyed non-urban network, they indicate that there is significant maintenance and rehabilitation backlog on the road network of the two regions (Table 4.4), requiring robust prioritization of road spending from the regional budget for the short, medium, and long terms. 37 It is not possible to make a valid comparison with 2018/19 because proposed capital spending for the MCDC is not included. 38 Inflation was 7.0 percent in 2016 and 4.6 percent in 2017. 72 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 4.4. Road Condition of Sample Surveyed Network (non-urban, 2014) Myanmar Mandalay Region and Nay Pyi Taw Yangon Region Road Surveyed Road Surveyed Road Surveyed % % % Condition (km) Condition (km) Condition (km) Good 9,505 35 Good 660 27 Good 245 27 Fair 6,519 24 Fair 908 37 Fair 134 15 Poor 2,940 11 Poor 494 20 Poor 48 5 Bad 1,699 6 Bad 204 8 Bad 30 3 Very bad 6,301 23 Very bad 211 9 Very bad 459 50 Total 26,963 100 Total 2,476 100 Total 916 100 Source: ADB 2014. Preservation of existing road assets through well-resourced and timely maintenance is critical to delivering sustainable road infrastructure services. Tables 4.5 and 4.6 dig deeper into the economic nature of expenditure, showing capital and current spending on non-rural roads separately to draw the balance between the two and identify any trends. While maintenance spending is usually an important part of current expenditure on roads, non-maintenance spending will also be captured in this economic category; where the information is available, in the case of the YCDC and MCDC, maintenance spending itself is recorded as discussed earlier39 rather than the broader category. Table 4.5. Balance of Capital and Current Expenditure on Non-Rural Roads in Yangon Region (MMK, millions) 2015/16 2017/18 2018/19 Category PA or A PA or RE BE or Proposal DOHs (not just urban) Capital 19,452 28,930 28,891 Current 3,783 5,617 4,249 YCDC Capital 84,266 45,946 56,597 Current 9,609 11,034 16,132 DAOs (not just roads) Capital 6,254 11,892 21,574 Current 2,427 3,406 3,463 Total roads expenditure Capital 109,971 86,768 107,062 Current 15,818 20,058 23,843 Current as % of total 13 19 18 Note: A = Actuals; BE = Budget estimate; PA = Preliminary actuals; RE = Revised estimate. 39 The information for the city development committees has already been presented in Figures 4.1 and 4.2. Urban Transport Expenditures and Financing Potential 73 Table 4.6. Balance of Capital and Current Expenditure on Non-Rural Roads in Mandalay Region (MMK, millions) 2016/17 2017/18 2018/19 Category PA or A or BE PA, RE, or BE BE or Proposal DOHs (not just urban) Capital 9,718 3,260 17,963 Current 22,896 29,585 17,322 MCDC Capital 4,420 12,122 n.a. Current 14,329 9,648 8,223 DAOs (not just roads) Capital 9,181 7,738 9,865 Current 5,987 8,440 8,450 Total roads expenditure Capital 23,319 23,120 27,828 Current 43,212 47,673 33,995 Current as % of total 65 67 55 Note: A = Actuals; BE = Budget estimate; PA = Preliminary actuals; RE = Revised estimate. There seems to have been a general shift toward maintenance spending in Yangon. In effect, therefore the real value of capital spending has fallen when considering the 36 percent rise in prices over the same period. There has, however, been a significant real increase in current/maintenance spending. Ignoring the aberration in 2016/17 caused by lack of data on capital spending, the broad trend in Yangon seems to be toward a general increase in the importance of current/maintenance spending relative to capital spending, which has risen from 13 percent of total expenditure in 2015/1640 to a proposed 18 percent in 2018/19. This trend is more pronounced for the YCDC (where, surely, the spending figures relate exclusively to maintenance of urban roads) with spending rising from 10 percent of the total road expenditure to 22 percent over the same period.41 If this trend represents greater attention to preservation of urban road assets, it should be interpreted as a positive development because investment bias and underspending on road maintenance are chronic problems across the region. Maintenance spending appears to be afforded much higher priority in Mandalay than Yangon. Table 4.6 shows a different picture of the economic nature of spending on roads in Mandalay, compared to Yangon: current/maintenance spending is afforded a higher priority in Mandalay relative to capital investment than it is in Yangon. Figures for 2016/17 and 2017/18 show current spending at around two-thirds of total spending, which is much higher than the one-fifth, or so, of expenditure in Yangon. 40 2014/15 is not used as a baseline, because there is no information on maintenance spending by the MCDC. 41 The significant increase in maintenance spending between 2015/16 and 2018/19 and the decline in capital spending, which explain this change in relative importance have already been discussed in relation to Figure 5.4. 74 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Union level At the union level, Departments of Highways and Bridges under the MOC have significant expenditure on roads in Yangon and Mandalay, some of which relates to urban roads. The figures in Tables 4.7 and 4.8, which are budget estimates not actuals, indicate significant expenditure in Yangon, but less so in Mandalay, where budgeted expenditure was less than a tenth of Yangon’s in 2017/18. The difference is even greater in 2018/19 when a near tripling of expenditure is planned for Yangon, with the largest increase reserved for bridges. No figures for actual expenditures are available for 2017/18; it remains to be seen whether such an increase can be implemented as planned. Overall, union-level funding is much more important for Yangon than it is for Mandalay. Figures 4.3 and 4.4 show the combined financing for non-rural roads for Yangon and Mandalay, respectively. Table 4.7. MOC Expenditures in Yangon Table 4.8. MOC Expenditures in Mandalay (MMK, millions) (MMK, millions) Yangon 2017/18 2018/19 Mandalay 2017/18 2018/19 DOHs 25,895 44,990 DOHs 2,287 2,754 Department of Bridges 31,834 111,191 Department of Bridges 2,735 3,459 Total 57,729 156,181 Total 5,022 6,213 Source: World Bank staff estimates. Figure 4.3. Road Expenditures in Yangon Figure 4.4. Road Expenditures in Mandalay Region (%) Region (%) DOH - Union government DOH - Regional government DOH - Union government DOH - Regional government YCDC (urban roads only) DAOs (not just roads) MCDC (urban roads only) DAOs (not just roads) Source: World Bank staff estimates. Urban Transport Expenditures and Financing Potential 75 Project-level data indicate that the MOC, which primarily spends on highways and trunk roads through the DOH, plans to spread its budget across a large number of projects—72 projects in Yangon with average value of MMK 5.8 million and 36 projects in Mandalay with average value of MMK 3.5 million (Table 4.9). The investment focus of the transport is consistent with buttressing urban growth. However, the average value of projects and the proliferation in the number of projects could also reflect issues in project selection and appraisal as well as weaknesses in prioritization in capital spending as indicated in other studies (World Bank 2017). Table 4.9. Number of and Average Size of Planned Capital Projects in Union Budget 2018/19 BE Yangon Mandalay Shan Ministry Average value Average value Average value Projects Projects Projects (million Kyat) (million Kyat) (million Kyat) Transport 72 5,775 36 3.517 - - Electr./Energy 86 2,381 46 1,072 22 7,271 Construction 36 4,320 - - 104 571 Education 397 212 618 88 554 70 Industry - - 14 5,679 - - Source: World Bank 2019d C. Urban Bus Transport Government spending and operational subsidies on bus transport is limited. Private sector bus operators receive no operating subsidies in either Yangon or Mandalay. In fact, they pay a levy for the right to operate services. In Yangon, the financial performance of the majority bus operator is weak. It appears to make enough money to cover operating costs through fares but not enough to cover financing costs for fleet upgrades, causing the YRG to step in. The YRG has made in-kind investments, involving the purchase of buses, which is then treated as equity injections by the government, leading to an increase in its shareholdings. In the case of the largest operator, the regional government is understood now to own around 80 percent of the shares and appoints four out of nine members of the board of directors. There are also larger private operators which have obtained commercial loans from local banks backed by assets from the parent companies to which the operating companies belong to. There is no evidence of public sector guarantees backstopping such loans, which allows concluding that the budget has not taken on any explicit contingent liabilities. However, in the area of public services, there may be implicit contingent liabilities, whereby the government is expected to step in if there is a default of key operators, to keep services running. This is not a contractual obligation, but political realities can sometimes be just as binding. Government purchases of vehicles and acquiring shareholdings in public transport operators is one way of supporting the provision of public transport services. There is, however, no single best practice governance model and different cities approach the issue in different ways, depending on their political, administrative, and economic contexts. Decisions to be taken should consider local market conditions and ensure limited public resources are used efficiently for provision of public transport services. Bus transport operation and financing in Yangon is discussed in more detail in Chapter 3. 76 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding D. Urban Rail Transport Myanmar Railways, under the MOTC, consistently relies on injections from the union budget. As it is unable to cover operating costs and investment needs for largely deteriorated assets, Myanmar Railways is not financially viable without union budget funding. This is also the case for individual parts of its operations such as the YCR serving suburban areas in Yangon (Table 4.10). Subsidies flow from the union budget through the MOTC, the parent ministry, to Myanmar Railways. Available data (ADB 2016c) indicate that the farebox ratio of the Yangon rail system (revenues/cost)—which adds up data from express, mail, local, and YCR—is around 0.36 or for each US$1 of revenue, there are US$2.7 in expenses, indicating a structural deficit as has also been confirmed by other studies (JICA 2013, 2015). The figures, as shown in Table 4.10, suggest that revenues only cover around half of the OPEX and track CAPEX. In other words, operational expenditures (excluding track maintenance) and track maintenance and investment (CAPEX and OPEX, respectively), resulting in farebox ratio (revenues/costs) is nearly 0.51. Myanmar Railways is implementing an investment program to modernize the YCR and a feasibility study for the Mass Rail Transit System is ongoing. These investments are expected to be mostly supported by public financing (including government borrowing) and therefore should be accompanied by policy and administrative reforms to significantly improve the operational and financial performance of Myanmar Railways. Myanmar Railways has also reported work around the redevelopment of YCR stations and their surroundings, ideally applying Transit-Oriented Development (TOD) and Land Value Capture (LVC) principles. Compact, vibrant, and high-quality development of public spaces around key mass transit stations with better integration with bus routes can help increase YCR’s ridership base, enhancing the economic and financial viability with less reliance on fiscal subsidy. This approach can also help maximize the local accessibility benefits of a mass transit system by shaping the urban form and the location of activities and opportunities in the city. Table 4.10. Myanmar Railways Revenues and Costs by Type of Services (2014, MMK billion) Passengers Infra- Cost and Revenues Freight Total Express Mail Local YCR Total structure Costs OPEX excluding track 23.4 12.0 9.7 7.1 52.1 14.8 66.9 Rolling stock CAPEX 7.2 3.5 3.3 2.4 16.4 6.2 22.6 Track OPEX 6.7 3.7 3.3 1.9 15.6 4.0 19.6 Track CAPEX 4.7 2.3 1.7 0.8 9.6 2.6 12.2 Total costs 42.0 21.5 18.0 12.2 93.8 27.6 121.3 Revenues 20.4 6.0 5.7 2.6 34.7 18.0 9.1 61.8 Source: ADB 2016c. Urban Transport Expenditures and Financing Potential 77 E. Water (river) Transport in Yangon River passenger transport services (river bus) in Yangon is overseen by YRTA, with only one active operator as of 2019. River ferries were tendered to and are operated by Tint Tint Myanmar. This operator has an active fleet of 10 vessels, with capacities between 120 and 220 passengers. Fares are priced at a fixed rate of MMK 300 per journey and there is no CAPEX or OPEX subsidies involved. A preliminary analysis indicates that the farebox ratio of water services is around 0.7 or, for each US$1 of revenue, there are US$1.3 spent in operation and maintenance, excluding depreciation and financial costs. At the time of writing this report, demand levels are not stable, and revenues are likely not enough to cover for operation and maintenance. There were intermittent service stops during 2018 and 2019, which are likely related to financial considerations. River bus services are assessed as a valuable mode within a hierarchically integrated public transport system in Yangon, for which the report encourages Yangon to increase its efforts to popularize river bus services given the perceived benefits in travel times and low emissions it can potentially bring. To popularize and consolidate river bus services, an analysis of operational, financial, and infrastructure barriers could allow identifying a series of actionable, simple ,and straightforward actions that support this objective. F. Public Expenditure Needs The rationale for public sector intervention in public transport has a sound basis in economic theory. Private car users do not consider the costs they impose on other road users and non-road users in terms of increased congestion and pollution. There is a role for governments in correcting these negative externalities, through increasing the price of road use (as Singapore and London have done through congestion charging) and through subsidies to public transport, which is more efficient in its use of road space and less polluting on a per passenger basis. Public sector intervention can also be motivated by dynamic considerations— improving economic productivity through less congested urban roads—and distributional considerations— public transport users will tend to have below-average incomes. As far as Yangon is concerned, YUTRA recognizes the level of ambition behind the implementation proposals, which are forecast to costs over US$23.7 billion to the public sector during 2017–2035 (Table 4.11). Over the first half of the strategy period, the annual public expenditure of more than US$1.4 billion would be required, which is a multiple of current levels of investment. Expenditure at this level is seen as requiring a massive political commitment, at the city, regional, and union levels and would need to be backed by major reforms of urban transport management and regulatory systems. It is worth noting that around half the proposed investment under YUTRA is for rail and public transportation to support improved mass transit. Prioritization of investment in public transport infrastructure over infrastructure for private vehicles has to be the best way forward for achieving a sustainable urban transport system in the long term. However, the proposed US$12.3 billion rail investments are nearly 40 times greater than US$0.3 billion public bus transport (non-rail). With the current financing gap and constraints, it is recommended that this distribution be reviewed, considering that a hierarchically integrated transport network places as much importance to high-capacity, trunk lines as to high-density, high-coverage, and high-quality bus services. YUTRA is a long-term strategy and interim solutions may be required. The current financing and funding capacity is constrained, and there are significant institutional and capacity weaknesses on project appraisal and preparation. Therefore, robust prioritization of investment is important. The government may consider prioritization of investments on public bus transport, traffic management, and institutions, which could serve the immediate needs of the sector with high benefit potential. Priority should also be given to preserving current assets and improving the maintenance of roads by putting in place a functioning asset management system. Major investments in infrastructure upgrading should be carefully considered from the rationale for public spending and matched with realistic and financing and funding capacity and instruments. 78 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 4.11. YUTRA Estimated Government Costs by Sectors Cost to the Government (US$, millions) Sector Short Term Medium Term Long Term Total (2017–2020) (2021–2025) (2025–2035) Roads 1,328 3,879 1,772 6,979 Expressway 0 2,124 1,403 3,527 Public transportation 149 123 0 272 Traffic management 178 0 0 178 Rail 382 5,512 6,396 12,290 Inland waterway 26 2 0 27 Logistic 14 217 153 384 ICT 30 0 0 30 TOD n/a. n/a n/a n/a Institutions 10 9 0 19 Total 2,117 11,865 9,725 23,707 Source: YUTRA 2019. There is no financing plan for urban transport in Mandalay. Discussions are ongoing to develop an urban transport master plan for Mandalay with the support of the Korea International Cooperation Agency (KOICA). While preparation and approval of such a plan is likely to take time, Mandalay would also need to implement interim actions including establishment of an integrated urban transport authority, preservation and improvement of existing road, traffic management and traffic engineering measures, which require limited financing but could yield results and form a foundation for implementation of larger investments. Major infrastructure investments would require substantial financing from the regional and union government, which should be prioritized and assessed during preparation of the master plan. Similar to the road sector, the share of regional GDP spending on roads in the two regions is much lower than is required to preserve and improve a network capable of supporting sustained economic growth.42 The current share of expenditure on roads in the two regions is around 0.7 percent of regional GDP which is low by international benchmarks. As a broad indication of the relative importance of the road expenditures in Yangon that will need to be achieved in the medium to longer term, the US$370 million annual public investment program for roads proposed in YUTRA would represent around 2.6 percent of Yangon’s 2017/18 GDP. At least a doubling of expenditure on roads as a share of the current regional GDP, to around 1.5 percent, is required in the medium to long term to avoid choking off economic growth considering the role of the road transportation in two regions. Increases in expenditure should be oriented both toward investment and maintenance to ensure sustainable assets. This will be particularly important for Yangon, where the network is already under stress from growing congestion. In the longer term, further increases should be planned consistent with institutional capacities to plan, implement, and manage the transport infrastructure assets that would be created (Oxford Business Group, 2019). 42 The international statistics for road expenditure quoted in this paragraph are derived from the OECD database on transport infrastructure expenditure and include expenditure on both maintenance and investment, unless otherwise stated. The figures are for 2015. GDP figures are taken from the World Bank World Development Indicators database. Urban Transport Expenditures and Financing Potential 79 G. Overview of the Budget Process Fiscal decentralization is incomplete in Myanmar, diluting the potential benefits of decentralized decision making in urban transport. This is a common feature of countries where central planning has historically been practiced and made its mark on the administrative and political culture, but it has the potential to undermine advantages of decentralization and the benefits of applying the subsidiarity principle. Depending on the degree to which the center interferes in the expenditure decisions of subnational governments, this practice can be expected to lower the benefits of urban transport projects to the extent that the center overrides decisions made by the decentralized entities. This being said, it should be recognized that transport, particularly roads, is the most fiscally decentralized sector in Myanmar, in that road expenditure represents the largest share of decentralized spending. The annual focus of the budget is a problem for major transport projects implemented over a number of years. While multiyear contracting is feasible, surety of funding through the budget is not. The result is that projects may be cut into one-year slices and implemented on a piecemeal basis, or open-ended contracts are entered into, whereby the contractor implements annual tranches of the project in line with the budget allocation. Both approaches lead to implementation inefficiencies and higher total costs. Most countries operate an annual budget process, but the better performers get around the problem of efficiently funding multiyear projects using a variety of means. In countries with strong contract law and strong public sector governance, the government enters into firm contracts for completion of a project within a given budget and timescale and then honors these contracts through budget provisions. This involves a rigid application of the two-stage budgeting process described earlier, involving earmarking of funding for existing commitments before taking on new commitments. Penalties built into the contract for postponement and payment delays combined with an independent judiciary ensure that there is a strong incentive for governments to meet their commitments. The whole system is assisted by a multiyear perspective to budgeting which, while not involving multiyear budgetary appropriations, does involve indicative allocations to spending agencies within which they can plan to meet their commitments with some confidence. Additionally, a good monitoring system is required to keep track of financial progress and outstanding multiyear commitments.43 None of these factors supporting efficient funding for multiple years can be acquired overnight if they do not exist already. In some systems, the total cost of a multiyear project is approved for funding. In Botswana, for example, the total estimated cost (TEC) of a project is approved for funding (but not appropriated). Annual appropriations against the approved TEC are then automatic, provided these are within a spending agency’s ceiling for investment expenditure. In the French system, a distinction is made between annual payment appropriations and multiyear commitment appropriations (Box 4.2). To make this approach work requires a good system for monitoring individual and aggregate commitment appropriations and the payment appropriations (and their execution) against them. It also requires processes for making accurate forward estimates of payment appropriations. 43 This will often involve more than monitoring the outstanding balance on contracts. Some multiyear projects will involve multiple contracts, which may not be all signed at the beginning. In this case, the total commitment, rather than the individual contracts, needs to be monitored. 80 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Box 4.2. Multiannual Commitment Appropriations in France France is an example of a country using commitment authorizations (appropriations) voted by Parliament to enhance control over multiannual contractual commitments (engagements juridiques) and to ensure the sustainability of the budget. The 2001 Organic Budget Law (the Loi Organique Relative Aux Lois De Finances, ‘LOLF’) established annually approved commitment authorizations (autorisations d’engagements), which extend over several years for investment projects. This means that there is an upper limit to the total value of new commitments, not just their value for the budget year in question, that can legally be contracted by a spending authority in a budget year. Payments against these contractual commitments can only be made if there is an accompanying annual payment appropriation: a crédit de paiement or annual limit on the issuing of payment orders, voted by Parliament. The ‘autorisations d’engagements’ for spending other than investment lapse at the end of the budget year, so do payment authorizations for all spending. Since a commitment appropriation does not represent authority to pay, payment appropriations for the years beyond the budget year in question must be voted by Parliament in subsequent budgets. Parliament thus exercises a double control, first over contractual commitments entered into and then over payments against these commitments. The intention is to ensure that there can be no unchecked buildup of multiyear commitments that might potentially undermine medium- to long- term fiscal sustainability or the efficient implementation of the portfolio of ongoing projects. The approach increases transparency and strengthens the hand of the legislature over the executive (a key motivation behind France’s LOLF). Notably, the introduction of multiannual commitment appropriations was not judged by France’s Constitutional Council to be in contradiction to the constitutional requirement for annuity of the budget. Source: World Bank (forthcoming). The budget preparation process for the regional budget uses the bottom-up planning process. The bottom-up budgeting process begins at the township level where lists of spending proposals are aggregated and prioritized according to three levels of priority. The lists rise up through district levels and eventually to the state/region level. At each level, the project lists may be expanded or reprioritized. Finally, a final list will have arrived at that may bear limited resemblance to initially expressed needs in terms of content and priorities and that is likely to exceed the available fiscal space. In this case, it falls upon the highest level in the system to reconcile the contradictions by defining priorities and cutting the budget proposal down to size. Paradoxically, therefore, an overemphasis on bottom-up planning without accompanying top-down guidance and constraints can lead to a more centralized budget process and dislocation between priority needs and expenditure decisions. An optimal system would combine much-needed bottom-up inputs with top-down guidance and constraints that are specified early enough in the process to force decisions on expenditure trade-offs. Figure 4.5 shows how the regional budgeting process currently works for roads. In the end, a budget is set at by the regional government and the city development committees must work within its confines. However, it is difficult for the regional government to reconcile the competing needs- based requests and the extent to which these requests influence the final budget decision is therefore not clear. What seems clear is that real prioritization by the city development committees only starts once the budgets are allocated. A process that fosters earlier priority setting would be more efficient. For centrally funded projects through the MOC, alignment between requests and the budget allocation can be expected to be even weaker. Depending on funding source, the point at which the contradictions between ‘needs’ and ‘availability’ of funding is reconciled varies: for MOC projects reconciliation is at the union level, whereas for City Development Commission projects it is at the level of the regional government. Urban Transport Expenditures and Financing Potential 81 The current budget process is missing some important components of a functional priority setting process. Generally, budgeting will work better if prioritization is done within predefined financial constraints and using a transparent set of prioritization criteria. Bottom-up requests are generated without reference to available fiscal space and their affordability and without applying strategically oriented prioritization and selection criteria. In this context, the tendency will be to classify all project proposals as the highest priority, irrespective of their actual priority. Early prioritization is essential to ensure that bottom-up requests are contained and remain manageable. This should be taking place when project concepts are first identified and before they go further. The project’s cause-effect rationale, its strategic relevance, and its deliverability should be the main criteria. Prioritizing by strategic relevance should become easier when strategic urban transport development plans have been developed and formally approved. Additionally, a two-step budgeting process is preferable, whereby spending needs for projects that have already started and received some funding are established and locked down, before new spending proposals are considered. The expenditure required to implement existing expenditure policies, including continued implementation of those projects that have already commenced, is often referred to as baseline expenditure. As far as urban transport is concerned, such an approach would assist in guarding against the frequent problem of stop-go project implementation and stalled projects,44 an issue for both regions, and in ensuring timely delivery of benefits from multiyear projects. The process, as it occurs in Mandalay, is described in Figure 4.5. Central monitoring of projects is presently on an annual basis with limited attention paid to the TEC of multiyear projects, although many projects funded by the regional government can be accomplished within one year. Weaknesses in implementation monitoring impede timely responses to problems and undermine efficiency. This risks serious cost escalation, delays going unnoticed, and failure to implement remedial measures.45 An improved monitoring system would flag significant deviations from the total project budget and implementation schedule. In this regard, setting up a database of large projects to track disbursement and implementation progress can help improve implementation efficiency. This will also allow for reprogramming of funds from projects that have slow disbursement and slow progress over time. Ultimately, the system should foresee the triggering of a formal process for cancellation or substantive redesign of failing projects to avert further waste of public financial resources and set up a database of large projects to track disbursement and implementation progress Budget process reforms are beyond the mandate of Yangon and Mandalay Regional Governments, but there are expenditure management improvements that could be made in the absence of fundamental changes. The approaches just described will require wider public financial management reforms at the union level, which go well beyond improving urban transport expenditure management. At the heart of any system for managing multiyear projects is a good system for managing financial progress during implementation and a process for making accurate forward estimates of expenditures for individual projects and in aggregate for the sector. These elements are the starting point for better management of multiyear projects and could be the focus of attention for expenditure management reforms at the regional level. 44 The widespread issue of stalled projects was also raised in the Public Expenditure Review 2017. 45 The Public Expenditure Review 2017 highlighted the issue of delays in project implementation. Some completed (hydropower) projects were identified as experiencing delays of over two and half years and ongoing projects were delayed by an average of two years. Similar delays are experienced in other sectors as a result of weaknesses in project preparation and inefficiencies during implementation. 82 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 4.5. Road Projects Approval Process Regional government The regional government budget process assigns budget to all regional departments and MCDC, The final proposal is approved by the Hluttaw. submitted to the regional government asking for $xxx in funding A funding decision is passed back to MCDC, saying that they have $xxx MCDC Committee meeting to spend for the The committee meets with senior At this stage current year. engineers to discuss which projects more detailed to pursue this year. costs are attached to the proposals. Roads and Bridges Dept Reads the townships’ proposals and compiles a prioritised list of road projects For their overall budget for the whole city. A proposal for the envelope, MCDC current year (the top X number of projects allocates a final amount on the list) is then submitted to the for road building and Proposal sent committee. sends this to the R&B in form of departments who then short memo start building as much as they can from their Township-level meeting priority list. MPs and engineers meet do discuss which roads need to be build/ repaired/upgraded this year. Source: MCDC. H. Public Investment Management The existing public investment management systems have some weaknesses that are likely to affect investment expenditure. There is some strategic guidance to steer the initial choice of urban transport project concepts, but it generally does not have an official status and is not comprehensive, particularly for Mandalay. This means that it is difficult to use the guidance to drive project identification and to frame projects in terms of their strategic relevance. As far as can be ascertained, there is no requirement for a summary of the project concept to be prepared according to standard template. There is also no formal decision to proceed to more in-depth investigation based on such a summary. This means that the strategic relevance and underlying rationale for urban transport projects are not confirmed before further investigation (if any) is pursued. Taking the example of Mandalay, projects are submitted annually by township engineers to the Roads and Bridges Department of the MCDC, where they are categorized according to priority level. Urban Transport Expenditures and Financing Potential 83 There is no rigorous appraisal process based on the preparation of a comprehensive feasibility study. Project ideas of the kind that are identified in the bottom-up part of the budget preparation process (as described earlier) are not subjected to a rigorous appraisal. This means that there are risks that projects can enter the regional budget without detailed checks on whether they represent a good use of public financial resources, that is, they deliver economic benefits in excess of their economic costs on a sustainable basis. Many projects at the level of the regional government are small scale. Therefore, a complex feasibility study and in-depth appraisal may be overkill when systems and capacities are suboptimal. The problem is that due diligence for major projects is also weak, whether these are funded by the regional government or, more likely, by the union government. Investment needs to be distinguished clearly from periodic maintenance, which should fall outside the scope of a public investment management system. Ideally, periodic maintenance (as well as routine maintenance) should be treated as an obligation of owning an asset and, if assets are properly maintained, there should be no choice concerning its timing, which should be triggered by the condition of an asset and its lifetime maintenance plan. This is unlike an investment decision, the timing of which is a choice. Some of what the MCDC and the YCDC seem to be classifying as investment projects fall within the usual definition of periodic road maintenance and do not need to be subject to the more stringent procedures that should be applied to investment. Periodic maintenance needs to be properly funded before funding is directed toward investment. Rehabilitation of an asset because of neglected maintenance is usually classified as an investment; many of the projects undertaken by the MCDC and the YCDC seem to fall into this category. The government has issued a notification in 2018 on establishment of the Project Bank and PPP center.46 The Project Bank will receive project submissions from various government agencies and then will screen, score, and prioritize these projects. In May 2019, Yangon Project Bank was initiated by the Yangon Regional Government with 80 major infrastructure projects—15 of which are related to urban transport and are either in progress or under planning stage (Table 4.12). Such ambition can be achieved only if project procurements are accompanied by rigorous prescreening and appraisal, along with an objective review process to ensure that it contains only projects that have met the defined standards in terms of preparation, economic performance, and sustainability. This is how Project Banks operate in Latin American countries, such as Chile and Colombia, where the approach has been practiced for many years. A perfect system will not be achievable immediately and improvements should be phased in, focusing first on the largest and riskiest projects and widening the scope as analytical capacities develop. Before sophisticated techniques are introduced—which will require a significant capacity-building effort—a lot can be achieved by focusing on verifying the strategic relevance of projects, the underlying rationale for the investment, and the demand for the services that will be provided. Introducing a requirement for a simple results framework can help in this respect. Even in the end state, there will also need to be a process and method for smaller projects that would not necessarily be part of the Project Bank. These could be a simpler approach than for the Project Bank or a similar approach but requiring proportionately less analytical effort. Improvements to upstream public investment management processes and methods cannot be achieved in a hurry and represent a significant reform effort. Careful sequencing and design, together with long- term capacity building would be required. Focusing on a more rigorous prescreening of project ideas, before their entering the budget process, could be a good starting point as it offers the opportunity to vet the underlying project rationale, make sure subsequent analysis is properly planned, and ensure that alternative approaches have been considered. More robust appraisal procedures and methods could then follow, supported by efforts to build up the required capacities to apply them, focusing first on the largest projects. The weaknesses of the selection and budgeting process have been discussed in the previous section; it suffices to say that improvements are required to ensure that new projects better reflect priorities and that continuity of funding for ongoing projects is assured before funding is allocated to new projects, no matter what their perceived priority. 46 Project Bank Notification No. 2/2018. 84 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 4.12. Urban Transport-related Projects under Yangon Project Bank Transport Mode Projects Mass transit • Yangon Pyay Road BRT (to be confirmed in the Project Bank) • Yangon Urban Mass Transit (YUMRT): East-West Line - Phase 1 • YUMRT: North-South Line Railway • Mingaladon Railway Station, Intercity Terminal Railway Station (bidding, 2019) • Yangon Central Railway Station Comprehensive Development • Yegu Railway Station, Interchange Railway Station • Insein Railway Station, Interchange Railway Station • Kyee Myin Daing Railway Station Others • Ma Hlwa Gone Railway Station Redevelopment • Yegu Railway Station Redevelopment • Danyingone Railway Station, Intercity Terminal Railway Station • Ma Hlwa Gone Railway Station, Intercity Terminal Railway Station Logistics/bus • San Gyu Wa Transportation Hub Elevated expressway • Yangon Inner Ring Road-Yangon Elevated Expressway Project - Phase 1 (East Wing and East-West Wing) • Yangon Inner Ring Road-Yangon Elevated Expressway Project - Phase 2 (West Wing) • Yangon Outer Ring Road (Eastern section) Source: Lwin 2019; PwC 2019. I. Mobilizing Private Sector Finance The Myanmar Government is keen to leverage private sector financing for infrastructure projects. For the right kind of project and in the right institutional setting, PPPs can offer advantages over traditionally financed and procured infrastructure projects. Use of PPPs may therefore be one way of improving and expanding urban transport infrastructure and services in Yangon and Mandalay. PPP approach can help in addressing typical infrastructure problems by mobilization of financial resources, better and timely managed construction due to the enhanced incentive environment, and better operation and maintenance of assets, offering an improved level of service due to long-duration contracts and performance requirements. Myanmar scores lower than its ASEAN regional neighbors on procuring infrastructure PPPs (Figure 4.6). In countries with limited experience in PPPs, governments are often uncertain about which deals are ‘good deals’ and get done; the private sector is uncertain about the level of government commitment and the viability of the investment and hence its ability to raise finance. A first step is to ensure that initial identification of potential PPPs is firmly based in development policy priorities and demonstrated public value rather than being driven in an ad hoc fashion by unsolicited proposals. Addressing the existing institutional and regulatory weaknesses, therefore, represents a significant agenda, which suggests a cautious approach to PPP, involving capacity building, piloting, lesson learning, and evolutionary steps. Urban Transport Expenditures and Financing Potential 85 Figure 4.6. Procurement of Infrastructure PPPs in ASEAN Countries 100 90 80 70 60 50 40 30 20 10 0 Myanmar Cambodia Laos Thailand Malaysia Indonesia Vietnam Philippines Preparation of PPPs Procurement of PPPs PPP Contract Management Unsolicited Proposals Source: Procuring Infrastructure Public-Private Partnerships in the World Bank 2018. The government is in the process of designing an optimal institutional model for PPP development and management. The government issued a notification in 2018 on the establishment of the Project Bank and PPP center.47 The Project Bank will receive project submissions from various government agencies and will then screen, score, and prioritize these projects. To complement the Project Bank and help facilitate and implement PPP projects, the notification also announced the establishment of a PPP center to strengthen capacity within government departments to identify, develop, procure, implement, and monitor PPP projects. The Project Bank notification also regulates the subnational guarantees related to the PPP projects. While subnational borrowing is permitted by law,48 the subnational government’s direct borrowing is currently not feasible in Myanmar, given the limited debt management capacity and lack of creditworthiness of subnational borrowing entities. As highlighted in the Myanmar Public Expenditure Review 2017, debt management capacity is at an early stage in Myanmar; a modern debt management office with front, middle, and back-office functions was only established in 2015. Such functionality is absent at the subnational level, which raises the risk of unsustainable borrowing and inefficient management of cost- risk trade-offs for borrowing (World Bank 2019d). The experience in PPPs in urban transport is limited in Myanmar. In fact, Yangon Elevated Expressway Project, under procurement at the time of publishing this report,49 can be the first urban transport PPP in Myanmar prepared in line with international practices (Box 4.3). The experience in the preparation and procurement of this transaction would be crucial for the government for other potential PPP projects in urban transport infrastructure. PPPs are often used as an instrument of project financing in transport 47 Project Bank Notification No. 2/2018. 48 Provisions on subnational borrowing is specified under Chapter 6 of the 2016 Public Debt Management Law. It indicates that states and regions can borrow from both Myanmar and international lenders, subject to approval from the union government and the Union Hluttaw. Region and state governments are also required to report on their outstanding debt and new loans no later than one month after the end of each quarter. 49 International Finance Corporation (IFC) is providing PPP Advisory support to the MOC for the tendering of the Yangon Expressway. 86 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding projects with revenue generation potential. It enables a ringfenced special purpose vehicle (SPV) to access to finance based on its cash flows and, to some extent, separate the project risk from the risk of project owners. When a city government has limited access to financing due to lack of credit record of capital market, a project financing approach can be useful to mobilize financing to urban transport development. In addition, PPPs also transfer part of the risks to the private sector that has better capacity and experience of risk management. The risk transfer also helps lower the life cycle cost of a project. Box 4.3. Yangon Elevated Expressway Project Since 2018, the government has been looking for suitable investors to develop the Yangon Elevated Expressway, which is required to connect businesses and residential communities and reduce traffic congestion in the country’s commercial hub to help pave the way for more economic growth and development. The MOC released a final request for proposal for the development of Phase 1 under PPP scheme to 10 prequalified bidders with the bid submission deadline set at April 30, 2010. Based on the MOC’s estimates, the cost to develop the first phase of the Yangon Elevated Expressway is between US$80 million and US$100 million. Construction is expected to take about 3.5 years to complete. The tendering of the second phase of the project is expected to commence later in 2020. The Yangon Elevated Expressway is a priority project for the government and will be the first transport project to be developed under a PPP scheme. The project will consist of a four-lane elevated road of 47.5 km that will link the south of Yangon, which includes Yangon Port and Thilawa Special Economic Zone, to the north side of the city, where the Yangon International Airport, Mingaladon Industrial Park, and the Yangon-Mandalay Expressway are located. Phase 1 of the project will involve a 27.5 km four- lane ring road connecting east and west of Yangon as well as the Yangon International Airport. Source: Myanmar Times 2010. There are different types of private sector participation and the associated mechanisms, which are illustrated in Table 4.13. The main constraints for a greater mobilization of private financing in urban transport sector include (a) inadequate revenue to cover capital cost and operational cost, (b) challenges of international investors in managing demand risks and currency risk, (c) lack of effective coordination and integration with incumbent operators, (e) limited creditworthiness and access to finance for local operators to invest the mass transit projects, and (f) lack of standardization and enforcement of PPP contracts. To enhance mobilization of private sector financing and the financial sustainability of the urban transport system, it is essential to set up an effective funding mechanism for urban transport, with stable and reliable revenue streams from various instruments to the urban transport sector. In addition, PPPs are not the only way to raise private finance. By using the new revenue streams mentioned earlier and improving their financial management, local authorities—including urban transport state-owned enterprises and national or subnational governments—could become more attractive to private investors and issue commercial municipal debt. Urban Transport Expenditures and Financing Potential 87 Table 4.13. Potential Opportunities for Private Sector Participation in Urban Transport Mode Type Mechanisms Comment Selected Case Studies Bus Fleet Bundled PPP (fleet Requires advancing Singapore bus service provision, provision, operation toward structured bus operation concessions; operation and maintenance) service concessions/ London Routemaster and Unbundled performance-based buses (public maintenance operation and contracting provision); maintenance (fleet Likely to require non-fare TransMilenio BRT provision under the revenues to cover levels system in Bogota, government or third of service and fleet Colombia (bundled and party) investments (subsidy) unbundled PPP) Terminals Joint development Requires bus Yogyakarta bus and depots (terminal + real modernization program terminal, Indonesia estate) Bus shelters Shared depots Existing concessions with subsidiary of JCDecaux (Yangon) Intelligent Concession with Improve/centralize ITS project at Mysore Transport advertising operating control center; City, India System introduce performance (ITS)/fare metrics in bus operators collection (per km-based remuneration) Rail50: Public Stations Joint development Review existing, delayed Italy packaged station investments (terminal + real initiatives in Yangon redevelopment currently estate) (Yangon Central Station) in place to Ancillary Concession in upgrade services stations and improve track and signaling. Parking On street Zonal concession Requires revised parking Parking lot lease policy; enforcement project, City of Miami, mechanisms Florida Off street Self-private sector On-street parking policy Parking infrastructure Source: YUTRA 2019. investment + planning and management system at Thimphu, Bhutan Bike Dockless Self-financed Public bike infrastructure bike share 50 Myanmar Railways is implementing public investments to upgrade and improve track and signaling system along YCR. 88 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Mode Type Mechanisms Comment Selected Case Studies Expressway Concession Fully funded from Economic feasibility/ NAIA Expressway, for revenue contingent liability Philippines construction Availability and/or Payment/annuity operation Viability gap funding BRT Concession Availability payment Economic feasibility/ Mexico BRT program for for CAPEX and/or contingent liability construction OPEX and/or Land development operation Viability gap funding for OPEX Source: World Bank 2019c. While PPPs have the potential to help in improving urban transport infrastructure, they also have major pitfalls. PPPs should not be a panacea and must be treated with caution because significant specialist skills are required to negotiate a good deal on behalf of the public sector. PPPs can also pose a significant fiscal risk, either explicitly or implicitly. PPPs are still public projects, even if the procurement and financing modality is different. A bad project from a societal perspective will remain a bad project, whether it is implemented through a traditional or a PPP modality; PPPs therefore need to be subject to the same tests as any other public investment project to determine whether they will deliver net welfare benefits to society. They should only be included in the Project Bank, along with traditionally procured projects, after a thorough appraisal has determined that they will be economically, socially51 and technically viable. Once this is confirmed, their suitability as PPPs can be assessed. Using PPPs is not the same as privatization: the public sector retains ultimate responsibility for the provision of the public service involved. The private sector is involved in service delivery, to a greater or lesser extent depending on the PPP model, and in securing financing. Through a long-term contract, the private sector partner may provide some components of public service, for example, providing the infrastructure necessary for service delivery, or the whole public service, including any infrastructure required. The public sector must monitor whether service provision is in line with performance standards defined in the contract. Depending on the contract and the nature of the infrastructure or service, the private partner may receive regular availability payments from the budget or may be allowed to collect user charges, which may also be subsidized from the budget. Various criteria must be fulfilled for a project to qualify as a good PPP candidate. The potential for achieving a proper allocation of risk between public and private partners is critical. It must also be possible to formulate a long-duration contract of enough size to outweigh the large fixed costs involved in negotiating a PPP deal. Complex projects for which the private sector can provide innovative design and management solutions are good candidates, but it must be possible to define and monitor outputs and quality in a clear way and user needs must be stable over long time periods. Projects should also not be in areas where the policy environment is unstable or where fast technological change is expected (because of the rigidities of long-term contracts). With consideration of these factors, urban transport should be fertile ground for PPPs.  51 Economically and socially viable, in this context, is to be understood as a project for which a socioeconomic analysis, weighing social benefits (that is, reductions in travel times, GHG emissions, accidents, vehicle operating costs), and investment costs (CAPEX and OPEX over analysis period) produce a cost-benefit ratio greater than 1. Such analysis uses a social discount rate following guidelines for cost-benefit analysis, including that of the World Bank. Urban Transport Expenditures and Financing Potential 89 90 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding 5 URBAN TRANSPORT FUNDING Key points • Demand for urban mobility and transport services is rapidly growing in Yangon and Mandalay, while the fiscal capacity and commitment earmarked to urban transport of the government, both at union and subnational levels, are extremely constrained. • Developing urban transport infrastructure and service in Yangon and Mandalay requires dedicated revenue streams that are stable and predictable over the long term. There are existing funding resources in Myanmar that are linked to the benefit generated by urban transport development such as wheel tax, proper tax, special goods tax (SGT) on fuel, and parking charges. Despite not being currently dedicated to urban transport development, these instruments can be used as direct financial support from the public sector to address the immediate urban mobility priorities of Yangon and Mandalay. • Existing funding instruments will not be enough for the long-range capital plans and large infrastructure developments. New funding instruments, such as LVC schemes and fuel tax, could be considered to support large infrastructure projects. When considering new revenue sources, detailed analysis of their economic and social impacts and suitable implementation mechanisms would need to be warranted before implementation. Urban Transport Funding 91 A. Urban Transport Funding Instruments As public budgets must respond to diverse public service needs, the governments should identify various funding sources for the urban transport sector. Demand for urban mobility and transport services is rapidly growing in Yangon and Mandalay, while the fiscal capacity of the government, both at the union and subnational levels, is constrained. There is a need to enhance the funding52 level in the sector, particularly at the subnational level, which could provide authorities with resources to meet increasing mobility needs of the population. Inadequate funding results in deteriorating quality of services, as resources become insufficient to maintain and operate existing urban transport systems, let alone upgrade them (World Bank 2019c). Such shortages are the results of often intended policies to keep the system affordable for all. Other factors are inefficient pricing of externalities such as pollution or congestion, imbalance between fiscal resources and investment responsibility of cities, combined with reluctance of policy and decision makers to proceed with unpopular tariff increases in public transport or with new charges on car ownership and usage. By focusing on wise investments and choosing the appropriate sets of financing instruments, the cities can design comprehensive financing for all types of urban transport projects, using multilevel innovative revenue sources that promote efficient pricing schemes; increase revenue; strengthen sustainable transport; and cover capital investments, operation, and maintenance for all parts of a public transport system. The World Bank’s analytical framework under the ‘who benefits pays’ principle provides comprehensive guidance on funding and financing for urban transport by considering different instruments (Ardila- Gomez and Ortegon-Sanchez 2016). The funding instruments can be grouped into three categories based on their funding sources and consideration of ‘who benefits pays’ principle. Three broad categories group the majority of the available instruments: • General benefit funding instruments. General benefit funding instruments are financial instruments for which the beneficiary and funder is the general public. Instruments include public transport subsidies, property taxes, and national and international grants. • Direct beneficiaries funding instruments. Direct benefit instruments are those funding instruments that directly charge specific groups for certain benefits received. The instruments include parking charges, road pricing, congestion charges, fuel taxes and surcharges, vehicle taxation, and farebox revenue. • Indirect beneficiaries funding instruments. Indirect benefit instruments charge actors for indirect benefits stemming from the transport investment. The main instruments include advertising, added value capture mechanism, transportation utility fees, and development impact fees. 52 For infrastructure projects, ‘financing’ provides the money required upfront to meet the CAPEX costs of constructing or developing the project, while ‘funding’ is the money used to pay back the financing and cover payment obligations, through operating revenues or publicly funded debt service (ADB 2016; World Bank 2019c). 92 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 5.1. Use of Financing Instruments for Capital, Operations, and Maintenance Costs by Urban Transport Mode or t n tio n sp o ibu ran t i re e ac rg ts ptu ntr ct es ex ha ran t bli e rg s co ca nt nc nd k g ax dg ha pu r g cin e ta x rs’ a lue fu s t io sin m yt es nm c ta x e n ye for pri lop t ax ng va at e sa es idi ert le rti plo rbo les hic res ng Ps rki bs ad ve ve nd an op im el Em Ad PP Su Co Ca De Sa Ro Ve Pa Fu Fa Lo La Pr Cl Urban transport system General benefit financing Direct benefit financing Indirect benefit Cost component instruments instruments financing instr. C Integrated and hierarchical M public transport network O C Rail network (subway, light rail, M tram, commuter rail) O C Bus network (BRT, buses in M O Nonmotorized transport C bicycles (bikepaths and bicycle M rental schemes) O Nonmotorized transport C pedestrians (sidewalks and M walkpaths) O C Arterial roads for cars and M trucks O C Neighborhood roads and M streets O Source: Ardila-Gomez and Ortegon-Sanchez 2016 An inventory of a wide array of available funding and financing instruments under the ‘who benefits pays’ principle is presented in Figure 5.1. The columns in the figure refer to the variety of instruments available in three broad categories: general benefit; direct benefit; and indirect benefit, as described earlier. The rows categorize the potential uses of the funds collected by each instrument, including rail and bus networks, nonmotorized transport, and roads. The cost section defines if funding instruments are able to support CAPEX (C), maintenance (M), or operations (O). The color intensity of each shaded cell defines the level of funding made available by a specific instrument for the specific matching destination. In Myanmar there is no dedicated funding to urban transport, although some instruments currently exist. Existing funding instruments include property tax, bus management fee, parking charges, wheel tax, bus fares, SGTon fuel, and advertising (only for Yangon), although none are dedicated to urban transport or broader transport (except for bus fares and bus management fee). Table 5.1 summarizes an overview of funding instruments by type of funding source and their potential application in Yangon and Mandalay. Urban Transport Funding 93 Table 5.1. Funding Instruments Applicable to the Urban Transport Sector in Yangon and Mandalay Yangon Mandalay Type of Funding Source Earmarked Collected Potentiala Earmarked Collected Potential General Public transport No No Yes No No Yes benefit subsidies funding Property taxes No Yes Yes No Yes Yes instruments Bus service Yes Yes Yes Yes management fee Direct Parking charges No Yes Yes Yes No Yes benefit Congestion No No Yes No No Yes funding charges instruments Fuel taxes and No Partiallyb Yes No Partiallyb Yes surcharges Vehicle taxation No Yes Yes No Yes Yes (wheel tax) Vehicle/ No Yes Yes No Yes Yes motorcycle licensing fee Car imported tax No Yes Yes No Yes Yes Farebox revenue Yes Yes Yes Yes Yes Yes National grants No No Yes No No Yes Indirect Advertising Yes Yes Yes No No Yes benefit Employer No No Yes No No Yes funding contributions instruments Betterment levies No No Yes No No Yes Note: a. ‘Potential’ refers to broader potential for increasing revenues for the sector, including from new collection (if not collected), increasing existing collection rates or earmarking (fully or partially) existing funds to urban transport services. b. Under the SGT for goods that are imported Thean-ngarm, Y., and N. Oo. 2018). Globally, several countries have set up programs to define sustainable funding mechanisms for urban transport in metropolitan areas, relevant for Yangon and Mandalay. The national governments often allocate the fund to the subnational government through a transfer or a subsidy to local government financing. A typical national urban transport program sets up a funding pool from revenue sources at national level such as fuel tax, oil sale revenue, and international development loans/grants. The national fund is dedicated to support urban transport projects that meet selection criteria and strategic priorities of development. The criteria may include targets of urban transport network coverage and public transport service level, enabling institutional and legal environment for urban transport development, and mobilizing private sector participation. Apart from the financial support, the program also is combined with capacity building and technical assistance to local government on urban transport development. Box 5.1 presents a summary of relevant international experiences with such programs. 94 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Box 5.1. International Experiences on National Support to Fund Urban Transport Development China. The sources of the national funding program on urban transit include fuel tax, oil sale revenue, international development bank grant or loans, and similar instruments. Co-funding from the city government is also always required to cover 15–70 percent of project cost depending on how fiscally capable the cities are. Through the funding program, the national government also sets up project selection criteria to select the projects with the highest priority and best social and economic benefit. This also helps improve cities’ capacity of project appraisal and provide right incentive to identify feasible projects. Colombia is an example of a country where the national government stepped in with a program to cover a significant funding gap due to weak revenue raising and potentially weak institutional capacity of some municipal governments. Cities have the ability to raise fuel taxes to fund public transport projects, which gave them reliable revenue streams, for their significant contribution. Since 2000, Colombia has had reliable funding from the national government and from cities. However, Colombia is rated as mixed reliability for funding because it remains to be seen if the national government will continue its grant program for rapid transit—a significant part of transit funding in Colombia. In Mexico, the funding is not highly reliable, especially outside of Mexico City. Since Mexico City is a federal district with a constitutional figure equivalent to a subnational state, and since the country’s economic activity is concentrated there, the state value added tax receipts are sufficient to pay for a significant share of the city’s infrastructure needs. Outside of Mexico City, cities and states struggle to fund infrastructure needs. Mexico’s municipalities and states are dependent on national government transfer by laws that discourage and restrict state and municipal revenue raising capacity. Outside of Mexico City, states depend heavily on the formula-based distribution of national government funds, many of which come from the sale of oil by Pemex, the former state oil company. In addition, many of the rapid transit projects were funded by the federal government, the revenues for which come from tolls on intercity highways controlled by the national government. In South Africa, the national government collects fuel taxes; though the revenue is not earmarked for urban transit or urban transport, it is roughly similar to annual spending on urban transportation, with nearly one-third being spent to subsidize the national highway program’s deficits and the remaining two-thirds on urban transit. Other sources of municipal revenue must be developed to increase the capacity of the municipal government to fund urban transit infrastructure as it gradually assumes its legal authority to manage urban transportation. Urban Transport Funding 95 B. Funding Sources for Urban Transport in Yangon and Mandalay Both Yangon and Mandalay have non-fare funding resources that are linked to the benefit generated by urban transport development. This section will focus on the four non-fare funding instruments, which are already in place and represent feasible options to support urban transport in Yangon and Mandalay.53 Despite not being currently dedicated to urban transport development, these instruments, as discussed further in this section, can be used as direct financial support from the public sector to address the immediate urban mobility priorities of Yangon and Mandalay. Wheel tax Generally paid annually, a wheel tax represents stable funding source. Wheel tax has a redistributive effect because it is paid by vehicle owners, who generally, in developing cities, have higher incomes than public transport users. If allowed by the legislation framework, the nationally collected tax should be allocated to a local level so that the revenue can be invested in road maintenance and sustainable transport provision. Criteria for determining wheel tax levels can vary depending on desired effects of the measure. Wheel tax could focus on engine size or be based on actual impact on road infrastructure, in which case heavy goods vehicles would be charged according to their weight. Setting wheel tax based on engine size will encourage a shift to more efficient vehicles, subjecting environmental unfriendly vehicles to a larger tax burden than eco-friendly ones. This type of vehicle taxation would not only incentivize users to buy low-emission vehicles but also encourage the industry to produce vehicles with better environmental performance. In Myanmar, the wheel tax is an own-source revenue for municipal authorities, including the YCDC and the MCDC. Although wheel tax is applied at the location where a vehicle is registered, it is also collected in the form of road tolls. As a result, wheel taxes on vehicles can be levied twice, once when a vehicle is initially registered and again if the vehicle crosses a toll booth outside the state or region in which the vehicle is registered. In 2018, wheel tax was moved to calculation based on the engine size, from that based on the type of car/weight. Box 5.2. Wheel Taxes in Myanmar Yangon Mandalay Wheel tax rates vary between MMK 36,500 for Tax rates range from MMK 18,250 for cars with cars with 660 cc engines and MMK 109,500 for 660 cc engines to MMK 54,750 for 4,301 cc and 4,301 cc and above engines. Wheel tax revenue above engines. Collection was US$7.2 million in has been steadily increasing from US$9.1 million 2018. in 2016 to US$13.5 million in 2018. 53 Bus farebox revenue and bus management fee are already used in Yangon and Mandalay, as explained in Chapter 4. This section will mainly focus on the five non-fare funding instruments, estimating the level of revenue generated by them and how to apply them in the urban transport context of Yangon and Mandalay. 54 These changes were made as part of the Regional Tax Law. 96 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding With the fast growth of vehicles in Yangon and Mandalay, wheel tax could generate own-source revenue for the cities to fund urban transport. As a direct benefit funding instrument, wheel tax can be earmarked for transport development. For example, in London, about 90 percent of wheel tax was used for the road network in 2018 (Maklver Institute 2014). In Wisconsin, the United States, wheel tax can only be spent on transportation projects by regulation (Department of Transportation of the State of Wisconsin 2019). Yangon and Mandalay could consider establishing mechanism of allocation of wheel tax revenues for urban transport development. It will also require analyzing current tax rates and improve efficiencies in its collection and administration and design indicators to monitor the performance of using wheel tax on urban transport. The possibility of earmarking the resources to a specific transport component depends mainly on the financial legislation rules. If there is no effective allocation scheme, vehicle taxation revenues will go to the central budget and it is difficult to guarantee that the same amount of revenue would be allocated to the transport sector (Ministry of Commerce, n.d.; Ardila-Gomez and Ortegon-Sanchez 2016). Parking fees Parking policy has long been recognized as a core component in congestion management given its direct impact on car use. Better parking pricing and enforcement can contribute to reducing the growing level of congestion. High pricing of on-street parking fees during peak hours can discourage on-street parking or idling on those corridors and encourage off-street parking instead. Such corridor-based approach can be supplemented by area-based parking to discourage long-time use of on-street parking while encouraging pricing levels for off-street parking that enables private development of parking facilities. Since street space is heavily constrained in parts of Yangon and Mandalay, on-street parking fees can be set dynamically to ensure a target level of parking occupancy rate. In Yangon, the YCDC started to exercise parking charges in downtown Yangon, in an effort to curb unmanaged, uncontrolled on-street parking. According to the YCDC, from October 2018, the Roads and Bridges Engineering Department began collecting parking fees on main roads and side streets in the six townships—Pazundaung, Botahtaung, Kyauktada, Pabedan, Latha, and Lanmandaw—in congested downtown Yangon. The parking fee is about MMK 200 per hour between 8 a.m. and 6 p.m. daily (Myanmar Times 2018). As of January 2019, the YCDC released an invitation statement for private companies to submit expressions of interest in developing a modern smart parking system in the six downtown townships (Irrawaddy 2019). In Mandalay, parking of both motorcycles and cars on the roadside and on wide sidewalks is prevalent. At key trip attractors, such as shopping malls, parking is organized by security staff. In the city center, parking charges are collected by MCDC staff or agents on their behalf. The road network in Mandalay has a relatively wide width. However, the outer lane is often occupied by parked vehicles. The MCDC established a guideline for commercial buildings on the necessity to install parking space. But it is not actually materializing since there is no legal binding force. The development of controlled on-road and off-road parking will be required. While parking charges are not high revenue generators and are potentially contentious, they rank highly in terms of efficiency and equity. For parking charges, the share of total revenue varies widely among cities (Box 5.3). Private outsourcing of parking management and enforcement leveraging technology can facilitate the ease of administration. When associated with on-street parking (on spaces perceived as public spaces), acceptability of the measure is low. Similarly, when related to private parking spaces on commercial properties, opposition from the businesses can make implementation difficult, even though it can be imposed through legislation. Acceptability can be increased by investing revenues locally (such as for local roads and public spaces). Measures can also be tailored to each company’s situation. Urban Transport Funding 97 Box 5.3.International Experience of Parking Charges In San Francisco, parking charges are managed by the San Francisco Municipal Agency and represent a third of its total revenue (CODATU 2009). In Tanzania, parking charges are managed by a private firm and represent almost 25 percent of total revenue (Wright and Hook 2007). In Barcelona, parking charges are managed by the city’s transport authority and used as the main source of funding for the city’s bicycle sharing scheme. In London, parking charges and fines on local roads are managed by the councils. Councils can directly collect this revenue and invest it in public transport and environmental projects (CODATU 2009). It should be also noted that effective implementation of the instrument without adequate provision of substitutes for private car use (such as good quality public transport, car sharing, teleworking, and other arrangements) might reduce overall trips to an area and threaten economic productivity. For users, the cost is directly linked to the benefit of entering a certain area by car. To encourage more sustainable behavior, parking fees should be set based on the relationship between off-street and on-street parking fees and fees for hourly parking compared to a single public transport fare. Fee structure should also discourage travel during peak hours while encouraging off-peak hour travel (for example, by customers). Fuel-related taxes and surcharges Many countries use petroleum product excise and fuel charges and taxes extensively to generate fiscal revenues. They provide a stable, administratively straightforward solution to collect large revenues. Their direct link to vehicle use produces efficient, equitable, and environmentally beneficial outcomes by lowering their use although with a lesser deterrent effect than parking fees or congestion pricing. In Myanmar, the central government has applied SGT on importing fuel, gasoline, and diesel since 2016, with a tax rate of 5 percent on the basis of landed value of imported fuel and diesel.55 As a shared tax, SGT is allocated to Yangon and Mandalay with 15 percent of the SGT value collected in each region. Compared to other countries such as Singapore and Thailand where the SGT rate is around 20 percent, the rate of SGT in Myanmar is low. There is no fuel tax applied in Myanmar. Fuel consumption has increased dramatically in Myanmar during the past five years because of high motorization (Figure 5.2). The volume of fuel consumption in 2017 was more than three times of consumption volume in 2013. It is estimated that fuel tax rate at US$0.04 per liter56 can help generate over US$200 million annual revenues which could be earmarked to large funding needs of the transport sector. To encourage a shift to more efficient vehicles, fuel tax rate can be set as a function of engine size or average carbon emissions, subjecting environmental unfriendly vehicles (including motorcycles) to a larger tax burden than eco-friendly ones. This type of vehicle taxation would not only incentivize users to buy low-emission vehicles but also encourage the market to shift toward better environmental performance (Ardila-Gomez and Ortegon-Sanchez 2016). Some countries established earmarking systems with a special fund such as road fund in Lao PDR or a program such as national urban transport program in Mexico and Colombia. Fuel tax could also be used to leverage private financing (Box 5.4). 55 Myanmar tax booklet. 2018. 56 As a conservative scenario, the average of three countries with available data and lowest fuel tax rates was applied in estimations. 98 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Figure 5.2. Fuel Consumption in Myanmar - unit: 1,000 gallon 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: World Bank staff based on publicly available data 2019. As a direct funding instrument for the transport sector, the fuel tax and surcharges have several advantages including high stability of revenue flow and ease in administration. The cost of fuel taxes is borne directly by users proportionally to the amount of fuel consumed, which is a good indicator of their road usage and distance traveled. In Bogota, Colombia, fuel taxes are earmarked: 50 percent of total fuel taxes revenue goes to capital investments of BRT lines, 40 percent to capital and maintenance of the road network, and 10 percent to local councils for maintenance of local roads. In Germany, fuel taxes are managed at the federal level; in the state of Bavaria, they are used to subsidize 40 percent of operating costs of suburban rails (CODATU 2009). Figure 5.3 presents the fuel tax level by selected countries. Figure 5.3. Fuel Taxes in Selected Countries 3.0 2.5 Dollars per Gallon 2.0 1.5 1.0 0.5 0 Korea Czech Japan South India China Mexico United Brazil Indonesia Republic Africa States Gasoline (road use) $/gal Diesel (road use) $/gal Source: Taxing Energy Use 2018 - OECD 2018 Database. Urban Transport Funding 99 Fuel tax is a stable funding instrument and can reach a high level of revenue with the fast growth of vehicles in Yangon and Mandalay. It is considered as a progressive tax instrument. The key advantages, apart from additional revenues, include internalizing the congestion and environmental externalities associated with higher fuel use. But these changes will be politically costly and are likely to face a lot of opposition, including from small businesses. Fuel is a major component of operating costs and, in the past, there was a correlation of increased fuel prices with inflation (and inflationary expectations). Yangon and Mandalay could consider and analyze potential use of SGT and fuel taxes as a funding source to support their urban transport modernization. The experience of other countries indicates that when introducing fuel excise tax, it is important to assess the equity impact and tax burden to the public, particularly to the poor. In addition, the governments should take a step-by-step approach with a solid communication plan which could help understand and manage inflationary expectations and demonstrate to the public benefits from the increased revenues. Box 5.4. Using Fuel Tax to Leverage Private Sector Financing in Bogota, Colombia Between 1999 and 2016, the TransMilenio BRT deployed 112 km dedicated bus lanes and 684 km feeder routes, with stations every 500 m on average, and replaced (including scrapping) old buses with efficient 18 m and 24 m units. The total project cost for Phases I and II, which add up to 84 km, is US$842 million. CAPEX was financed with a combination of a World Bank Group loan, local budget (including fuel tax), municipal bond securitized by World Bank loan, and private investment (for fare collection and fleet). The private party recoups its investment and operating costs through fare charges. A legislation for a surcharge on gasoline was passed to enable the project funding through fuel tax. In 2002, a 25 percent surcharge was added to the fuel price at the gas station. About 50 percent of the fuel charge was used to invest into mass public transit. To make the project financially sustainable, the system was designed with the highest efficiencies and redefined system components. Occasionally, resources from the system’s contingency fund and contributions from the district budget were used to make up shortfalls. Despite higher-than-average traditional bus fares, the BRT remains popular and user satisfaction is high due to much faster commutes and high-quality service. Property tax and LVC Property tax can be an important instrument as it is a cost-effective way to raise critical revenue to cover the capital, maintenance, and operation costs for urban transport system. Property tax is levied on estimated value of land or land and buildings combined. Revenues usually go into budgets for general purposes. As a general benefit instrument, it underscores that sustainable transport projects bring major economic, social, and environmental benefits and thus national and local governments can legitimately support such projects on behalf of society (World Bank 2019c). Since land is a scarce resource, its value and the value of property tax collected tend to rise over time. It is a stable revenue resource as it is based on the value of the property and has a wide tax base that is relatively constant in the medium term. Rates can be adjusted annually for inflation, supporting long-term planning. Property taxes can therefore yield important revenues and are frequently one of the main sources of funding for cities. Local government capacity for collecting the tax depends on the quality and accuracy of its cadaster to provide an updated and detailed database on properties (Ardila-Gomez and Ortegon-Sanchez 2016). Although it can cost considerable time and resources to construct such a database, once established, the collection and management costs are low, given that all properties in the city are charged. It is important that compliance rates are high, so that collected revenue does not have to be used to enforce payment. 100 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding The current practices of using the property tax to fund urban transport in Myanmar are limited as of 2019. In practice, the revenues are pooled with other municipal revenue (business license fees, wheel tax, and so on) and are used to finance operations by municipal offices: staff salaries and pensions, purchase of equipment, municipal services such as garbage collection, and urban road construction. Table 5.2. Taxes and Charges on Property in Myanmar Type When Paid Paid To Property tax Regularly Municipalities Capital gains tax Once: on sale of transfer of property Union Stamp duty Once: on sale of transfer of property Uniona Source: World Bank 2019d. Note: a. With 2 percent shared with the state/region of collection. In Myanmar, property tax is the ongoing tax on possessing property paid to the local municipality. They are distinct from other taxes and charges levied on property and/or paid once and triggered by property transactions (Table 5.2). The Yangon municipality enjoys a high degree of authority to collect property tax revenues and has a clear mandate to plan and deliver a range of urban services (McDonald and Hein 2017). This creates the right environment for a robust tax collection system, but despite this, tax receipts are low; in Yangon the median property tax payment is MMK 203. The authors of the report note that this is less than the equivalent of one cup of tea per property every six months. As a revenue stream for the YCDC, it delivered only MMK 13.2 billion (US$8.7 million) in 2016/17 or 6 percent of YCDC’s annual tax receipts (McDonald and Hein 2017, 8). This is low by regional standards and barely covers the cost of the urban services it is intended to fund (McDonald and Hein 2017, 23). There are a number of contributing factors to this low revenue stream: • The practice of undervaluing properties • Incomplete or fragmented property records, with a heavy reliance on the legacy paper-based system • Lack of clarity if owners or occupiers are liable for payment • A non-market-based valuation approach that is frequently and (seemingly) arbitrarily varied by individual assessors • Weak enforcement powers Small improvements are being made by the YCDC, which is working in digitalizing and improving the quality of property records. Recent (yet to be enacted as of September 2019) streamlining of YCDC’s departments may avoid some fragmentation of records across the municipal government. Further work is required to move to a market-based valuation approach and strengthen enforcement powers if property tax can be a viable and reliable LVC mechanism. Urban Transport Funding 101 Table 5.3. Property Tax in Selected Cities 2016/17 Compared with Collections in Selected Asian Cities and Other Ordinary Household Purchases Per Capita Collected Annually Median Tax Payment Cups of Tea City/Municipality (US$ in parentheses,2016 values)a (each 6 months) Equivalentb Yangon (2016) MMK 2,535 (1.86) MMK 203 Less than 1 Ulaanbaatar (2013)c (3.08) Bangalore (2009) (21.45) Manila Metro (2009) (22.05) Delhi (2009) (29.09) Kuala Lumpur (2009) (25.01) Source: McDonald and Hein 2017. Note: a. Using the prevailing period average U.S. dollar exchange rate and adjusted for domestic inflation. b. Presumes the price of a cup of tea is approximately MMK 350 (US$0.26). c. Property tax in Ulaanbaatar is levied only on businesses. In total, the YCDC accounted for around half of all property tax collected nationwide in 2016/17. In Yangon, the revenue level of property tax has been increasing dramatically from US$2.4 million in 2011 to US$8.7 million in 2016, with an average growth rate of 29 percent. In Mandalay, the revenue level of property tax increased from US$3.5 million in 2016 to US$4 million in 2018. Despite increasing trend, the amount of property tax collected is small compared with other cities in Asia (Table 5.3). Largely, this reflects small collections from ordinary residential households, which accounts for only 3.2 percent of total tax collected by the YCDC, despite accounting for almost 95 percent of all registered properties. Both Yangon and Mandalay could consider the use of property tax revenues or part of it to support urban transport development. To use property tax to support urban transport development, Yangon and Mandalay should do the following: • Enhance tax collection capacity and improve the quality and accuracy of its cadaster and database • Integrate urban transport planning with land use planning • Sufficiently assess the premium of land value generated by urban transport development • Strengthen coordination between CDC, DAO, and transport authorities on tax allocation • Establish monitoring and supervision system of using property tax for urban transport • Prioritize using the property tax to support urban transport CAPEX LVC is part of a funding mechanism aiming specifically to target partnerships with the private sector. It can be an effective strategy to fund infrastructure while lessening the burden on the fiscal budget and creating more sustainable funding approaches (Murakami, J., 2012). Beyond the societal benefits created by investment in public transit (higher productivity, cleaner environment, better access, and social equity, and 102 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding so on), private benefits are also created as a result of new infrastructure. This can include higher property values, increased commercial opportunities, and better business efficiency as a result of lower congestion. These forms of value are not evenly distributed across the population and a value capture approach seeks to retain some of the private windfall gain to reinvest back in public projects. LVC is optimized when combined with the application of TOD planning principles at the metropolitan level. Interim proposals on TOD and LVC are being considered by Myanmar Railways, YCDC, and YRTA on several sites in Yangon. They have the potential for demonstrable improvements in key locations. LVC revenue may not be significant but would ideally be designed to provide these proposals as cost-neutral improvements. Given the demonstrable increase in land value after the announcement of new transit infrastructure, property tax has excellent potential as an LVC mechanism and should be adopted as a no-regrets, short- to medium- term policy action to increase funding made available for urban transport. In Yangon, capturing value from property owners and land developers can be instrumentalized considering a blend of property taxes, development right sales, and in-kind infrastructure contributions. In addition, mechanism to ensure value is captured from transit operators benefiting from improved public transport is an additional instrument to consider. Table 5.4 summarizes a range of opportunities for these instruments, particularly for the context of Yangon. Best practices recommend coordinated transport and land use planning efforts at regularly scheduled intervals (approximately five years) involving a wide range of stakeholders. Such reviews draw on shared databases and analyze in particular job-housing balance in each administrative division, concentration of jobs and housing compared to transport network capacity, and percentage of new development taking place in areas of high connectivity. Existing physical and structural plans, when coordinated with transport planning exercises, help ensure the best use of resources. Such reviews also serve as a communication tool to guide the public, local officials, partner agencies, and developers about regional needs, challenges, choices, and priorities (World Bank 2019c). Urban Transport Funding 103 Table 5.4. LVC Instruments Potential in Yangon How and When Examples of Value Capture Opportunities for Level of Effort to Realize the Benefit Is Beneficiaries Mechanisms Yangon the Opportunity Realized Property • Increased utility • Property tax • The YCDC property • Moderate: Considerable owners leading to • Rates and tax system effort ongoing to increased land charges overhauled and overhaul property tax values - sharp improved to increase collection year 1 increase tax receipts • High: New levy would that diminishes • Increased stamp duty require new policy and over time receipts legislation • Potential to create special area assessment levy and infrastructure contribution levy (likely new legislation would be required) Developers • Highly attractive, • In-kind • Favorable site/ • Moderate: Current accessible land - infrastructure precinct-specific planning reform will one off contribution zone controls to include flow area ratio • Increased • Cash-in-lieu increase the value of zones around TOD. development contribution project area land Should be expanded yield and • Development • Development bonus to include BRT. Policy land use bonus scheme implemented framework should opportunities scheme through planning be developed for a - sharp year 1 • Land/air controls development bonus increase that rights sale • Development scheme through the diminishes over contribution scheme planning system or time cash contribution per dwelling approved Transit • Improved • Service • Higher agreed • Low: Could be operators infrastructure contracts performance negotiated through new assisting service and standards contracts reliability - agreements • Co-contributions to ongoing • Station transit infrastructure • Greater naming or acceleration of certainty for rights/ fleet improvements route planning advertising and revenue • In station projections – retail/leases ongoing -see note a) 104 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding How and When Examples of Value Capture Opportunities for Level of Effort to Realize the Benefit Is Beneficiaries Mechanisms Yangon the Opportunity Realized Govern- • Increased • Tax • Earmark expected • High: (TIF) Innovative ments investment increment increases in financing approach and economic financing tax revenues as that has been used activity - (TIF) security to finance with varying success. ongoing infrastructure Significant analysis • Increased tax projects and stakeholder receipts - varies • Sell land around, consultation required to • Consolidated or the space above, determine suitability urban area transit interchanges • Moderate: Market leading to more analysis and efficient service stakeholder provision - consultation required, ongoing legal advice to confirm acquisition powers can be used for infrastructure Wider • Reduced • Broad-based • Increase to income or • High: Policy and community congestion mobility payroll tax legislation in place and improved improvement challenging political environmental levy decision, tax system in outcomes - Yangon currently relies ongoing heavily on business • Better access making payroll tax even to employment, more sensitive services and amenities - ongoing Note: a. Assumes ongoing government program of network and service improvement. Use of existing funding instruments is a more feasible approach to support immediate urban transport needs in Yangon and Mandalay. High-level estimations and consideration of shared tax mechanism indicate that Yangon has potential to generate over US$1.8 billion and Mandalay US$1.3 billion between 2020 and 2035 with the existing funding instruments to fund urban transport systems (Figures 5.4 and 5.5, and Table 5.5). Parking fees have the highest resource potential among existing instruments accounting for about 62 percent of total estimated resources in Yangon and 71 percent in Mandalay. Urban Transport Funding 105 Figure 5.4. Potential Funding from Existing No-Fare Instruments in Yangon 2020–2035 (US$, millions) 140 120 100 80 60 40 20 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Wheel Tax Parking fees SGT Property tax Source: World Bank study team estimates. Figure 5.5. Potential Funding from Existing Non-Fare Instruments in Mandalay 2020–2035 (US$, millions) 140 120 100 80 60 40 20 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Wheel Tax Parking fees SGT Property tax Source: World Bank study team estimates. 106 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Table 5.5. Assumptions on Fiscal Resources from the Existing Instruments57 Instruments Assumption Impact 2020–2035 Wheel tax Existing tax collected by the YCDC and MCDC grows at Yangon: US$290 million 3 percent annually from 2020 to 2035, base year as an Mandalay: US$155 million actual value collected in 2018. Parking fees Parking fees at MMK 300 for cars and MMK 150 for Yangon: US$1,087 million motorcycles per hour are applied for city areas, assuming Mandalay: US$916 million affecting 30 percent of the car fleet in Yangon and 15 percent in Mandalay and 10 percent of motorcycles58 in Mandalay considering urban/rural context in two regions, for eight hours a day over 317 days per year. It grows at 3 percent annually from 2019 to 2035. SGT Existing tax applied on importing fuel, gasoline, and diesel Yangon: US$292 million is the basis of landed value of imported fuel and diesel, Mandalay: US$188 million allocated to Yangon and Mandalay with 15 percent of the SGT value collected in each region and 3 percent annual growth rate assumed in estimations. Property tax Existing property tax collected by the YCDC and the Yangon: US$90 million MCDC grows at 6.5859 annually from 2020 to 2035, base Mandalay: US$37 million year for Yangon as an actual value collected in 2016 and for Mandalay as an actual value collected in 2018 with 30 percent of total collection allocated to urban transport. Source: World Bank 2019d. Note: a. With 2 percent shared with the state/region of collection. C. Considerations for Funding Mobilization When considering the application of different funding sources, the government agencies need to assess the financial sustainability and transport sustainability of the funding instruments. Table 5.6 provides an overview of the financial sustainability and transport sustainability on the funding sources by eight indicators in total, based on the international experience. The indicators for financial sustainability include stability, public acceptability, level of easiness of administration, and revenue level. The transport sustainability is assessed by efficiency, equity, environmental impact, and coverage of cost. Among the existing funding instruments, fuel tax and surcharges have the highest financial sustainability and transport sustainability. However, the public acceptability is rated as low. Property tax, bus service management fee, farebox revenue, and advertising have relatively high financial sustainability with two indicators ranked as high, while the parking charges despite not being as financially sustainable as other instruments have more contribution to transport sustainability. 57 The MM Statistical Information Service suggests that vehicle registration growth during the last three years has been on average about 3 percent. As wheel tax, parking fees, and SGT on fuel are closely associated with the number of vehicles, the growth rate for a conservative estimate is set as 3 percent. http://mmsis.gov.mm/statHtml/statHtml.do?orgId=195&tblId=DT_YAM_0024&conn_path=I2 58 Yangon has banned motorcycles in the city since 2003. https://www.indiatimes.com/news/world/motorcycles-are-banned-in-this-myanmar-city-and-nobody-knows-why-361627.html 59 This is based on the average of Myanmar consumer price index from 2014 to 2018. https://data.worldbank.org/. Urban Transport Funding 107 Table 5.6. Financial and Transport Sustainability of Funding Instruments Financial Sustainability Transport Sustainability Funding Instrument Public Admin Revenue Environmen- Beneficiary Government Stability Efficiency Equity Cost Acceptability Ease Level tal Impact General Public transport L H L L M H M OPEX Society National and benefit subsidies subnational funding government instruments Property taxes H M H H L M L CAPEX Society Subnational OPEX government International H M H H H H H CAPEX Society National grants OPEX government Direct Bus service H M H M H L L OPEX Users Subnational benefit management fee Drivers government funding Parking charges M L L L H H M CAPEX Users Subnational instruments OPEX Drivers government Congestion M L H H H H H CAPEX Users Subnational charges OPEX Drivers Fuel taxes and H L H H H H H CAPEX Users National and surcharges OPEX Drivers subnational government Vehicle taxation M L M M M H H CAPEX Users National and (wheel tax) OPEX Drivers subnational government Farebox revenue M M H H M M M OPEX Users Drivers Direct Advertising H H L L L L M OPEX Firms Subnational benefit government funding Employer H M L L M M M OPEX Firms Subnational instruments contributions government Betterment M L H H M M M CAPEX Land/property Subnational levies OPEX owner government Source: CODATU 2009; Sakamoto and Belka 2010. Note: H - high, M - medium, L – low. While existing funding instruments could provide important revenue source to fund urban transport system, they are not enough to cover large and ambitious infrastructure development and upgrade projects. For example, as discussed in the expenditure chapter, investment plan proposed in YUTRA for Yangon includes major investments on roads upgrade, expressway, and mass rail transit. Funding such magnitude of investments will not be possible unless selected projects have economic and financial feasibility to generate revenues (for example, tolls for expressways) to support CAPEX and OPEX or new funding instruments are established (for example, fuel tax) to support funding of projects, which might not be easy from political and social considerations. The union government support is important to expand funding base through financial, policy, and technical support. In the context where regional and city governments in Yangon and Mandalay face severe fiscal constraints and cannot develop urban transport system by its own-source revenue, the Myanmar Union Government is recommended to support the subnational government to expand funding sources for urban transport development. These options include the following: • Financial support. The direct financial support from the government can be provided as (a) an inter-government transfer earmarked to urban transport projects and (b) a dedicated sector fund to support urban transport systems such as road fund with clear eligibility criteria of project selection. The indirect financial support can be also provided as (a) as interest subsidy of loans or government bonds and guarantee with close monitoring on the proceeds of financing and (b) increased percentage of shared tax retained by the subnational government on funding instruments related to beneficiaries of urban transport • Policy support. The national government can provide policy support to enable the multiyear budgeting for projects with large capital investment as well as to facilitate mobilization of private sector investment though national regulations/instructions on competitive procurement, assessment on project economic and financial viability and value for money, and risk allocation. • Technical and capacity support. The national government can provide training programs to the subnational government on planning, preparing, and managing urban transport projects, in particular on the project cost control and revenue generation. Modernization of urban transport infrastructure and service in Yangon and Mandalay requires dedicated revenue streams for the region and city governments that are relatively stable and predictable over the long term. Long-range capital plans are only useful and practical when revenue and budgets for infrastructure development are relatively stable and reliable and come from dedicated revenues sources such as fuel taxes, property taxes, parking charges, and long-range union or regional infrastructure spending programs. Considering the infrastructure upgrading needs and financing and funding capacity, Yangon and Mandalay could consider the following actions to enhance funding for the improvement of their transport systems. (a) To develop resource mobilization plans for the urban transport system. Such plans can review types of instruments in place to finance and fund different urban transport system components and analyze them from the perspective of revenue level, financial, and transport sustainability as well as beneficiary type. In addition to existing funding instruments, new instruments such as fuel excise tax or LVC schemes can be potentially considered to expand the urban transport funding space, as potential revenue sources for future significant investment demand. (b) To prioritize new infrastructure projects based on their social and economic benefits and potential to generate revenues to finance capital and operational costs. New funding schemes could be considered to support new and large infrastructure projects such as LVC schemes. The prioritization needs to consider the financial viability of the projects, which contains assessment on Urban Transport Funding 109 the cost management and revenue generation. Revenues generated from urban transport projects include tolls on urban roads project, fare revenue collected on public transport projects, and non- fare/toll revenues generated from advertising, and land leasing. The government authorities should sufficiently develop the potential of revenue generation in urban transport projects by leveraging private resources and efficiency and providing enabling policy and institutional framework. (c) To use the existing funding instruments to enhance funding capacity at subnational levels and support the immediate mobility needs of the cities. Yangon and Mandalay could start with mobilizing funding for urban transport through existing funding instruments, as discussed in this chapter, and use it for immediate needs related to public transport. High-level estimations indicate that Yangon has potential to generate over US$1.8 billion and Mandalay US$1.3 billion between 2020 and 2035 with the existing funding instruments to fund urban transport systems. With an existing large bus network and high ridership, Yangon faces growing challenges on fast deterioration of public transport assets such as buses, depots, and terminals and lack of integrated and effective bus service management. Mandalay, on the other hand, is at an early stage of urban transport development. The emerging development demand is to formalize and expand urban transport service and increase incentives of the public to use bus services. For Mandalay, the short- term financial demand derives from systematic cost of bus service formalization and investment on better public transport infrastructure including roads, buses, and terminals. Revenues generated from existing funding instruments such as wheel tax, parking charges, and property tax could help support the above immediate priorities of two cities. (d) To explore new funding instruments with sufficient assessment of benefits and risks. In addition to existing funding instruments, new instruments such as fuel excise tax or LVC schemes can be potentially considered to expand the urban transport funding space, as potential revenue sources for future significant investment demand. Regarding fuel excise tax, it should be sufficiently assessed including its economic and social benefits and risks before introducing it. A thorough feasibility study can be implemented on fuel tax to analyze economic and social impacts, tax rates, proper apportionment scheme to the region and city for their consumption of fuel, consideration of the profile of consumers, and minimizing of the negative impact on the poor including. Regarding LVC, the government should consider establishing a framework with institutional and regulatory coordination to enable the operationalization of such mechanism and test on pilot basis as part of the investment plans of urban transport development. It is also important to design a mechanism to ensure the land value captured is used on the urban transport development. The way to do so often requires linking of the allocation of land development return to the transport infrastructure and services and certain KPIs to be included in the competitive tendering process. By focusing on wise investments and choosing the appropriate sets of financing instruments, the cities can design comprehensive financing strategy for urban transport projects. Inadequate funding results in deteriorating quality of services as resources become insufficient to maintain and operate existing urban transport systems, let alone upgrade them. Demand for urban mobility and transport services is rapidly growing in Yangon and Mandalay, while the fiscal capacity of the government is constrained. As public budgets must respond to diverse public service needs, the governments should identify various funding sources and instruments for the urban transport sector, as discussed in this chapter, which can help the governments advance toward sustainable and inclusive urban transport system to serve the needs of all groups of the population. 110 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Urban Transport Funding 111 112 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding 6 SUMMARY OF POLICY RECOMMENDATIONS Urban Transport Funding 113 Urban Transport Institutions and Policy Short Term Medium Term Longer Term Issues and Gaps (1–2 years) (2–3 years) (3–5 years) Mandalay: There • Establish an • Define and implement • Enact policy changes is no formally integrated adequate funding and staffing and urban transport established and urban transport mechanisms for the integrated investments in integrated public authority in urban transport authority in line with the transport authority. Mandalay (at the Mandalay. recommendations of regional level) and the urban mobility begin developing strategy and adopt an urban mobility indicators to track strategy. the impact of actions and investments. Yangon: YRTA • Enhance and • Advance with the • Advance with non- has limited explicitly define implementation of an fare revenue lines regulatory power the regulatory integrated, unified fare and use a business- and supervisory functions of YRTA. collection system; centralizing like approach to and management • Enable YRTA revenue collection and enforce adequate to structure payment to operators; defining levels of service, capacities over bus and manage performance-based contracts, maximize user operations and no performance- indicators, payments, and satisfaction, and control over system based public penalties; and licensing minimize costs within revenues. transport advertisement business the framework of concessions. schemes on buses and stations. strategic policy set by the YRG. Yangon: Different • Identify higher- • Establish YUMBo, composed • Oversee the planning, authorities have level regulatory of delegates from the YRG, implementation, and control over and strategic YCDC, and Myanmar Railways, management of an different public planning activities with chairing or coordination by integrated public transport schemes. that should be YRTA/YRG. transport network supported by • Prioritize digital infrastructure that meets the As a result, a metropolitan to leapfrog and transform into needs of commuters public transport transport smart cities to overcome the in an efficient, service delivery is regulatory agent. current lack of accurate and cost-effective, and fragmented, mainly reliable transport and urban sustainable manner. between rail-based data. transport and buses. Yangon and • Encourage and • Enact policy-level actions • Integrate Mandalay: support research to improve safety, such as inclusiveness improve the social to understand anti-harassment laws and analysis fully to inclusiveness of specific mobility enforcement of these laws, urban transport transport systems needs and well-designed and easy-to- policies and issues affecting reach complaints, support, and investments. to more equitably excluded and grievance systems. serve the needs of vulnerable • Adopt and implement actions all groups. groups. to ensure that all population groups can equally access and benefit from public transport initiatives. 114 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding Current and Projected Urban Transport Expenditures Short Term Medium Term Longer Term Issues and Gaps (1–2 years) (2–3 years) (3–5 years) Fragmented • Institute more • Adopt a comprehensive view of • Remove the gaps responsibilities in systematic urban transport expenditures in the legislative sector financing data collection planning - treating it as a design of the and expenditure on volume and unified policy area rather than decentralization to planning quality of outputs devising policies mode by mode. achieve a clearer from public • Improve the alignment between distribution of fiscal expenditure on the urban transport sector responsibilities in the urban transport, expenditure and revenue sector. as a starting point assignments. • Strengthen the fiscal for a stronger responsibilities for efficiency the sector at the orientation. subnational level and remove the duplication and dual reporting lines. Constrained fiscal • Prioritize road • Introduce formal procedures • Gradually increase capacity compared maintenance and rigorous analysis methods public expenditure on with high financing expenditures and for appraisal of all major urban urban transport by needs improve efficiency transport projects, irrespective up to 1.5–2.0 percent in maintenance of the source of funds. of regional GDPs. practices. • Improve capacities to • Develop appropriate • On CAPEX, apply investment appraisal institutional investment in procedures and methods. arrangements and projects to relieve • Leverage private sector technical capacities or forestall traffic financing by piloting first; risks for PPPs to enable congestion with related to such transactions private financing for lower cost should should be carefully considered major PPPs in the be the focus when deciding on PPP projects. sector. such as traffic engineering and traffic management solutions. Urban Transport Funding 115 Urban Transport Funding and Financing Strategies Short Term Medium Term Longer Term Issues and Gaps (1–2 years) (2–3 years) (3–5 years) Inadequate • Prioritize new • Use the existing non-fare • Explore new funding funding results in urban transport funding instruments (wheel tax, instruments for the deteriorating quality projects based property tax, special goods tax sector such as LVC of urban transport on their potential on fuel and parking charges) to and fuel-based taxes services. While to generate enhance funding capacity for and surcharges with revenues to the sector at the subnational support from the mobility demand is finance capital level. national government growing, resources and operational • Improve collection of above on supportive remain insufficient costs. instruments fiscal policies to maintain and • Develop resource • Consider establishing a and institutional improve the urban mobilization plans mechanism of allocation coordination. transport system. for the urban of revenues from the above • When considering transport system instruments to urban transport new potential and improve development, with supporting revenue sources such institutional fiscal and budget policies from as fuel tax, carry out coordination the national government. a detailed analysis of required for their economic and resource social impacts. mobilization . • Define suitable implementation mechanisms, including reducing negative impacts on the poor before the implementation of new funding instruments. 116 Urban Transport in Yangon and Mandalay: Review of Sector Institutions, Expenditures, and Funding REFERENCES References 117 Action Aid 2016. 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