YANGON, May 9 (Reuters) - Manufacturers in Myanmar's two biggest cities are facing steep increases in costs and possible job losses after the government shut down their electricity supply, the latest sign that the ageing power grid is holding back economic development.
The country's Electricity Supply Board said it had halted power supplies to industrial zones outside Yangon and Mandalay from Monday due to drought.
"If this situation lasts a long time, some factories won't be able to sustain operations," Myat Thin Aung, chairman of the Hlaing Tharyar Industrial Zone, which lies on the outskirts of the former capital, Yangon, told Reuters.
Under President Thein Sein, a former junta general who has headed a quasi-civlian government since March 2011, Myanmar has set about rimplementing economic and social forms, released political prisoners and improved fundamental rights.
In recognition of those reforms, Western governments have dropped or eased sanctions.
But modernising the once-pariah state and reviving sectors neglected under military rule remain uphill tasks.
Myint Soe, a chairman of the Myanmar Garment Manufacturers Association, said operating costs had nearly quadrupled since factories had to turn to diesel-run generators to replace lost power supplies.
"The authority has not told us when exactly we can expect a regular supply of power," said Myint Soe. A prolonged outage, he said, could force factories to lay off workers to cut costs.
A senior official from Yangon Electricity Supply Board told Reuters that the board decided to direct its dwindling electricity supply to residential areas.
He said power would be restored once the monsoon season arrived this month, filling reservoirs at hydroelectric dams, which provide 70 percent of Myanmar's electricity.
"We are doing our best to increase generation, but demand is soaring all the time," said the official, who declined to be identified as he was not authorised to speak to the media.
In a report released in November, the Asian Development Bank (ADB) urged international donors to help Myanmar rehabilitate and upgrade its power system, predicting that demand for electricity would double by 2018. It described electrification as an "urgent requirement".
According to the ADB, around 67 percent of households in Yangon, Myanmar's biggest city, have access to electricity compared to 16 percent of households in rural areas. (Additional reporting by Jared Ferrie; Editing by Amy Sawitta Lefevre and Ron Popeski)