Myanmar: Will Asia’s Breadbasket Rise Again?

Via The Financial Times, a report on Myanmar’s agribusiness potential:

To the lengthening list of foreign companies beating a path to Myanmar, add at least two more: Wilmar, one of Asia’s largest agribusinesses, and Cargill, the commodities’ trader.

Wilmar, a Singapore-listed group and the world’s largest processor of palm oil by volume, told beyondbrics it planned to make “significant investments” focusing on rice, fertilisers, sugar and vegetable oil. Cargill told beyondbrics it was “exploring opportunities” in the southeast Asian country for importing and exporting food and livestock feed.

Known as the region’s breadbasket before its decades of international isolation, economists say Myanmar could use improvement of its agricultural sector – damaged by decades of economic mismanagement – to revive its overall economy.

Agriculture accounts for as much as 36 per cent of economic output, according to the Asian Development Bank, as well as most of the country’s employment and 25-30 per cent of exports by value.

Yet only about 18 per cent of the country’s total land area of 68m hectares is used for crop production and only 18.5 per cent of this is irrigated.

By those numbers, the need, not to mention the opportunity, for foreign capital looks obvious.

Attracting that capital has just been made easier by passage of a new foreign investment law which, to the relief of the agriculture crowd, was stripped of an earlier draft provision that would have capped foreign ownership to as low as 35 per cent of ventures in sectors including fisheries and agriculture.

Cargill, said a Singapore-based spokeswoman for the group, has begun “exploring opportunities in terms of both exporting and importing food and feed crops [for livestock]“.

A spokesperson for Wilmar declined to say how much exactly the company plans to invest as “the plans are still being worked out at the moment,” but what is certain is that Myanmar’s opening up comes as the company is looking to expand into new markets, partly to offset squeezed margins at its big Chinese oilseeds crushing business.

Kuok Khoon Hong, Wilmar’s chief executive, told an earnings briefing in November that sugar would be “a major business for us in the future”. Its investment plans for Myanmar could be a an early sign of how the company’s ambitions for its sugar operations will develop.

In rice the ADB – not usually known for hyperbole – thinks the potential is “enormous”.

While the area planted with rice has almost doubled and production almost tripled in the decade up to 2010, the addition of irrigation and other inputs could boost yield to at least five tonnes per hectare, from about four tones now, it says, citing analysis done by the Food and Agriculture Organisation, an agency of the UN. That would place Myanmar just behind Vietnam’s yield of 5.3 tonnes per hectare.

“With its good weather, abundant water resources, and large rural population, Myanmar could harvest this near term and further develop a vibrant export sector in farm products,” the ADB says.

Another Singapore-listed agribusiness, Olam, may follow Wilmar’s suit.

The company already sources rice from Myanmar and says it is monitoring how the country’s agricultural sector is opening up to foreign investment and “might explore avenues” in sesame, beans and wood products.

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