In o­ne of the first visits to Naypyidaw by a foreign journalist, The Irrawaddy’s Clive Parker discovers that building Burma’s new capital is proving far from straightforward

Naypyidaw’s new city hall stands at the end of a road so long and wide it could almost serve as an airport runway. The imposing building—a colonnaded structure with an interior courtyard—will look better, though, when it is completed.

Civil servants have worked for months in the o­nly finished section—two furnished offices at the front of the building—while around them hundreds of sandal-clad workers carry bricks and lay cement. The din of sawing, banging and heavy machinery is constant.

After more than two years of construction, Asia World Company, the private Burmese contractor responsible for the building, says it will be a further 12 months before the project is completed, locals say, despite pressure from the authorities to finish by the end of 2006. Each week that passes costs the state millions of kyat in labor costs that it cannot afford.

Asia World is the country’s biggest construction enterprise, run by Tun Myint Naing, also known as Steven Law, barred from entering the US because of suspected links with drugs trafficking.

Nearly a year since the ruling State Peace and Development Council first began moving civil servants to its new administrative center, Burma is learning the hard way that relocating a capital city is a difficult and expensive undertaking.

However, since early 2004, when a European diplomat who happened to be traveling in Pyinmana noticed heavy machinery “bulldozing the ground,” there has been remarkable progress. Workers are putting the finishing touches o­n ministry buildings. Many still look rough around the edges, but outside others shrubs and flowers are being planted.

Homes for middle-ranking officials are also ready, although pathways and roads are still o­nly half finished. A 300-bed hospital was opened six months ago. Telephone lines and an electricity supply—said to be the best in the country—are in service.

Snr-Gen Than Shwe, the head of the SPDC, reportedly moved into his 4,000 square-meter residence to the east of the Rangoon-Mandalay highway in February suggesting that too is finished—workers said they are no longer permitted into the compound, which is built into a hillside, without written permission from a senior defense official. The restricted military zone, including a high school for the children of high-ranking officials, also appeared to be nearing completion.

Nevertheless, after two and a half years of construction, Naypyidaw still lacks the infrastructure required to support a community.

High-ranking officials have fared much better than the government rank-and-file, whose living accommodations consist at the moment of makeshift huts o­n the outskirts of the city, the son of o­ne government employee complained. The construction of permanent housing for low-level civil servants forms part of the second phase of development and could take years to complete.

There are few places to buy anything in Naypyidaw—in fact, few places to do anything as a visitor. The o­nly shops lie o­n the edge of the new city o­n the road east to old Pyinmana. Many roads are o­nly partially complete. The convoys of construction vehicles that circulate day and night throw up thick clouds of dust that sting the eyes and throat.

Burma’s new capital is still very much a work in progress, and the civil servants transferred there since last November—at least those prepared to talk—are unanimous in their dissatisfaction. o­ne could be forgiven for thinking otherwise, from the highly embellished reports in Burma’s state-run press.

One article in The New Light of Myanmar in August provided this rosy depiction of the dusty capital: “A long row of new departmental buildings…in Naypyidaw has become a majestic scene for anyone visiting the place,” the article declared. “It will not be wrong to say that service personnel have entered a new age.”

In light of other capital relocations, the limited progress in Naypyidaw after more than two years of effort is unsurprising. Brazil took 41 months to relocate its capital inland from Rio de Janeiro to Brasilia in 1960, and even then, despite years of planning, the new city was hardly able to accommodate its new residents—the city’s first shopping mall arrived 11 years later. Similarly, when Pakistan moved its capital from Karachi to Islamabad in 1967, the last civil servants were not relocated until well into the 1980s.

Asia World Company has been contracted by the government for another six years, which means that Naypyidaw will remain under construction until at least 2012. And for the 80,000 workers enlisted to build the new city, conditions have reportedly been poor from the start.

The International Labour Organization received reports that at least 2,800 people from the surrounding area were forced to build camps for three army battalions and an air force battalion to secure Pyinmana ahead of construction. “In addition to labor, each village had to provide roofing and construction materials and transport for the project,” an ILO report from March 2005 said. The government has denied the allegations.

The ILO has not received any verifiable evidence of forced labor since then, and says  it is reluctant to draw attention to labor complaints from Naypyidaw for fear that the government might punish complainants for “spreading false information,” as it has in numerous other cases. The government agreed to a moratorium o­n such prosecutions in July.

The lowest-paid laborers in Naypyidaw make 1,500 kyat (US $1.10) a day. Some have travelled from distant parts of Burma to participate in what o­ne worker called his “duty.” Men, women and children work in the numerous brick factories that span Naypyidaw, scooping wet clay from the ground with their bare hands and shaping the building blocks of their new capital.

Many of these laborers are required to work seven days a week, from dawn until nightfall. o­n the main roads leading into Naypyidaw, they can be seen at all hours pressing partly-set tarmac into potholes by hand.

Reporting o­n such developments in Naypyidaw can be dangerous, as two Burmese photojournalists discovered in March. Each was sentenced to three years in jail for taking photographs—strictly forbidden since the relocation was announced.

The burden of a capital relocation o­n a country’s human resources is predictably heavy—perhaps more so under a military dictatorship—but the financial burden can also be staggering, says Ed Schatz, a political scientist from the University of Toronto who specializes in the subject of capital relocation.

“First, tremendous financial resources must be available for the move. The costs are not simply those of construction—which are always considerable and rarely under-budget,” he says, adding that relocating civil servants, citizens, foreign embassies and companies makes a capital move all the more expensive.

Although the lack of transparency over the building of Naypyidaw makes any realistic cost estimate impossible, a look at other recent capital city moves offers some idea of the financial scope of such an undertaking. When Kazakhstan shifted its administration northwest from Almaty to Astana in 1997, initial estimates put the price tag at $400 million. The actual cost was much higher.

Even if all 80,000 construction workers in Naypyidaw were paid the minimum 1,500 kyat a day (and they are not), the total annual labor cost for the project would come to 43.8 billion kyat ($32.32 million).

Over eight years, the wage bill, considered a much smaller outlay than material costs, would balloon into the hundreds of millions of dollars—money that economists say Burma simply does not have. “There is little likelihood that the junta has been able to finance the project without borrowing heavily from the Central Bank, and even then the junta may still not have raised sufficient funds,” says Danny Richards, a Bangkok-based researcher o­n Burma’s economy for the Economist Intelligence Unit.

EIU data shows that by the end of the 2005-2006 fiscal year last March, the Central Bank’s claims o­n the government had escalated to more than 2.3 trillion kyat ($1.7 billion), up from 1.3 trillion kyat ($960 million) at the end of 2003. Burma has nearly doubled its domestic borrowing since the construction of Naypyidaw began.

As early as 1998, Burma was looking for funding from overseas to develop the new capital site. It secured a loan of $160 million from the China Exim Bank to fund the Paung Laung hydropower project in Pyinmana, with repayments made at 2.75 percent interest over 10 years. The Yunnan Machinery and Equipment Import and Export Company built the hydro plant, which is thought to provide Naypyidaw’s reliable electricity supply.

In June 2004, shortly after construction began o­n Naypyidaw, the Export-Import bank of Thailand lent Burma 4 billion baht ($106.45 million). Although it is not clear whether any of this money has been used to build the city—Thailand’s Exim Bank told The Irrawaddy that the arrangement is “very confidential”—it is worth noting what the money has paid for.

In a statement in August designed to allay fears that Burma was failing to repay the loan, the bank said that 1.75 billion baht ($46.6 million) had been paid to nine Thai “exporters of machinery and equipment,” and 980 million baht ($26.1 million) went to three “construction contractors.” An additional 600 million baht ($16 million) was paid to two “telecommunications companies” and 500 million baht ($13.3 million) to two “petrochemical enterprises.” It remains unclear what infrastructure has been developed with these funds—and where.

The CIA estimates that by the end of 2005, Burma already owed $6.99 billion overseas, and $4.5 billion is due for repayment by next year, the EIU says. By comparison, the International Monetary Fund, CIA and Bank of China estimate that Burma’s reserves of foreign currency and gold are o­nly worth about $800 million.

Despite strong statistical evidence that the move to Naypyidaw is pushing Burma into a financial abyss, a regional representative of the World Trade Organization, Raymond Krommenacker, praised the project and the government in July. “The capital is absolutely amazing, in terms of size and the level of construction. Everything is booming in every respect,” he is quoted as saying in the Rangoon-based English language weekly The Myanmar Times.

The relocation project has had some positive economic impact. Local companies have benefited from the influx of new business, notwithstanding their allegations of the government’s confiscation of land. New shops that offer mostly construction materials and furniture have sprung up in old Pyinmana, which is not subject to the strict building and trading regulations applied in Naypyidaw.

Big construction companies—Asia World Company, Htoo Trading, Eden Group, Max Myanmar and Shwe Thanlwin—have also seen significant revenues, but the government’s reported inability to pay for services has required companies to generate income from numerous concessions offered in the place of cash.

These companies were all given the opportunity to build hotels in Naypyidaw, while the government simultaneously prohibited smaller operations in old Pyinmana from accepting foreign guests, thereby denying them the ability to earn foreign currency.

Max Myanmar has made the most of government concessions. It’s Royal Kumudra hotel, located in Naypyidaw’s new guest accommodation zone along an unfinished stretch of two-lane highway, is the busiest of the city’s new hotels—and o­ne of the most expensive, charging $144 per night for its top-tier executive villas.

The hotel often runs at full capacity—this was the case in August, as it hosted teams of smartly dressed Asian businesspeople in town for high-level meetings with ministry officials. In the absence of cash payments from the government for its building contracts, Max Myanmar earns handsome revenues from such market restrictions.

At the beginning of 2005, Max Myanmar was also awarded joint development of a 5,000-acre rubber plantation with the army in Karen State, as reported in The New Light of Myanmar. The project immediately sparked controversy after the Karen Human Rights Group alleged that the site in Thaton township was taken by force from local villagers who have reportedly not been paid any compensation and have subsequently been denied access to the land.

Air Bagan, owned by Htoo Trading chief Tay Za, became the first private airline to offer service to Pyinmana’s Ela Airport o­n March 1. Other companies not involved in construction in Naypyidaw—including Air Mandalay—were permitted to fly to the new capital two weeks later. The big contractors have also been awarded lucrative vehicle import licenses, a Rangoon-based businessman said, which can bring profits of up to $100,000 per license for second-hand imports.

Whether Burma can sustain its current policy of borrowing to fund the building of Naypyidaw until it is finished remains an open question, according to the EIU’s Richards. “There may be a short-term boost to economic growth from this construction activity, but over the long term the impact will be negative,” he says, citing the scale of Burma’s domestic and overseas debt.

History is not o­n Burma’s side, in this respect. Capital relocations have proven disastrous for some economies. In Brazil’s case, shifting its administrative center led to such acute budget and inflationary problems that the country’s military seized power four years after the new capital Brasilia was inaugurated.

In Naypyidaw, there may not be talk of a coup, but residents’ discontent is as evident as their confusion about why the move was necessary in the first place. The civil servants and laborers who toil each day in the dust and despair that shrouds the new capital give little or no importance to the government’s construction timetables or cost projections. Being uprooted from their families and homes by force is all that concerns them.

 “The question of timing… is less important than the question of whether or not it [the shift to a new capital] is necessary at all,” political scientist Schatz points out. “The first question should be: Should Naypyidaw exist?”