Thai rice businesses urged to invest in Myanmar
Thai rice businesses may see an opportunity for investment in Myanmar as its government looks to make the emerging country a major world rice exporter.
Myanmar’s rice sector is being eyed by foreigners due to a range of positive factors, the most important being the government’s plan to end its five-decade absence from the global market.
Myanmar’s GDP is projected to grow by about five percent annually over the next few years. The agricultural sector currently accounts for about 43% of the economy is and the country has a harvested rice area of about 7 million hectares or nearly 44 million rai.
According to an Asian Development Bank (ADB) report, Myanmar’s total milled rice production in 2011 was 10.60 million tonnes, an increase of 1.8% from the previous year, with 20.48 million tonnes (1% growth) in Thailand.
Myanmar’s rice exports are expected to grow steadily from 651,000 tonnes in 2011 to 1.64 million tonnes in 2021. Although Myanmar has a small share when compared with the combined rice exports of Asean countries at 15.5 million tonnes in 2011, the country has good potential to expand its rice exports due to availability of land and water resources, according to ADB.
To achieve the goal of becoming a key global exporter, Myanmar will have to shift its rice sector from one based on subsistence farming to commercial production. Export growth in the coming years will be subject to the country’s ability to develop infrastructure and relevant institutions to support farmers, processors, marketers and exporters.
Myanmar will need improvements and investments in production, while the transport system must be developed in order to handle the larger volumes of production and exports, said the ADB report.
Kasikorn Research Center says Myanmar’s rice sector is becoming more attractive to foreign investors for a number of reasons, including the strength and size of the sector, quality of local rice varieties, abundant natural resources, cheap labour and the government’s attempt to liberalise the economy.
More importantly, the government is determined to develop the rice sector. It has issued a national rice policy that focuses on developing high-yield hybrid rice, expanding irrigation and harvested areas, enabling transport routes such as ports along the Irrawaddy River, and establishing two new agricultural banks that will issue loans for rice farmers.
Various foreign investors are taking advantage of the situation. The research centre said Japanese businesses have established three large rice milling and processing plants in Myanmar, while Singaporeans have joined with local businessmen to invest in farming. US businesses are researching rice varieties and their Chinese counterparts are selling seeds to Myanmar.
K-Research suggests that Thai rice business executives should seize the opportunity to invest in Myanmar, likely by employing a “backward integration” strategy, such as setting up and operating rice mills with local partners in order to use Myanmar as an export base.
Thai investors can bring their knowledge and technology to Myanmar, where more than 80% of rice mills are small and low-tech.
Thai businesses may also invest in rice trading as well as other relevant sectors such as fertiliser and agricultural machinery.
The centre said that in the short term, Thai investors would face many challenges including complicated procedures to gain a milling permit, unclear local laws, lack of good irrigation, poorly maintained transport systems and insufficient electricity supply that leads to frequent blackouts.
However, Thai entrepreneurs should attempt to tap into Myanmar’s rice sector, as the country is developing the relevant infrastructure and opening up its economy for foreign investment. As well, the Thai rice export sector is losing competitiveness because of exchange-rate volatility and the high prices paid by the government’s rice pledging programme, which make Thai rice hard to sell.