HONG KONG — Singapore-listed Yoma Strategic Holdings will receive a $100 million loan from the Asian Development Bank (ADB) to build up Myanmar’s transport and logistics infrastructure urgently needed to create sustainable economic growth.
“Investment in connectivity infrastructure is a key factor in creating better access to economic opportunities, reducing costs, promoting trade, and attracting private investment into diverse geographic areas and sectors,” said Christopher Thieme, director of ADB’s private sector operations department.
Myanmar is one of the least-connected countries in the world in terms of telecommunication, transportation, and logistics. In 2012, the fixed line penetration rate stood at less than 1 percent of the population, with just 7 percent for mobile phones. Years of isolation and underinvestment have left the road density at less than one fifth of the average in ASEAN countries. Myanmar’s inland waterways network, which is important for freight traffic, is also underutilized by an ageing fleet of vessels and neglected ports facilities.
The Southeast Asian nation has been experiencing an influx of investors in recent years as trade barriers have fallen. While investments have been concentrated in the oil, gas, and other mineral sectors, and in light manufacturing, private sector financing for much-needed infrastructure projects to boost connectivity remains a challenge. An underdeveloped banking sector and capital market, and a lack of alternative funding sources, is holding back projects, the ADB said in a statement.
Yoma Strategic’s $100 million ADB loan is intended to help address this gap for long-term commercial debt needed to finance infrastructure projects. It will be disbursed in two tranches, with Yoma engaging partner companies to work with it on individual infrastructure sub-projects. The first tranche will be used to build telecommunication towers, develop cold storage logistics, and modernize vehicle fleet leasing, and the second will fund sub-projects in transportation, distribution, logistics and other sectors.
“ADB’s loan will help support our goal of improving the country’s connectivity, which in turn will strengthen local markets, boost productivity and create jobs,” said Serge Pun, executive chairman of Yoma Strategic.
For transportation and logistics companies, the potential rewards of establishing early bridgeheads are huge. Myanmar boasts rich natural resources, and its low-wage economy and population of 60 million already is attracting textile firms. In terms of consumption and development, large parts of the economy are untapped, and rapid GDP growth is predicted over the next decade.
New port and trading zones are being established at Kyaukpyu, Sittwe and Dawei, and new road links to Thailand, India and China are promoting further growth.
The large infrastructure projects are creating their own logistics requirements, and FPS Logistics Thailand (FPST), a subsidiary of Leo Global Logistics, has expanded its operation in Myanmar. Leo Myanmar Logistics Company hung out its shingle on Dec. 1 and in the next two years, the new company’s main focus will be major project and heavylift cargoes employed in the development of infrastructure and manufacturing, as well as handling inbound consumer goods. It will provide a complete logistics solution spanning international multi-modal transport, customs formalities, warehousing and inland transport.
A Leo Myanmar statement said the company expected to see significant growth in exports by air and ocean once new industrial developments had begun operations. The company anticipates growing interest in Myanmar from multi-nationals, creating significant demand for international-standard 3PL services.
“FPST has a vast global network of connections with overseas agents through its FPS membership, and these companies will be eager to support the new venture in Myanmar and so share in the massive opportunities in this exciting new market,” said FPST-Leo Global Logistics president and CEO Kettivit Sittisoontornwong.
The opportunities are not confined to Myanmar. Cross-border trade between Southeast Asian neighbors Thailand and Myanmar is expected to hit $6 billion in 2014, a growth of 10 percent year-over-year.
According to Isara Vongkusolkit, chairman of the Thai Chamber of Commerce, trade between the two countries is slated to continue expanding in the coming years, thanks partly to the development of a special economic zone in the Mae Sot, a district in western Thailand bordering Myanmar.
Cross-border trade in the district jumped 30 percent this year to nearly $1.4 billion compared to last year.
Isara said cross-border trade could grow even faster if a second Thai-Myanmar Friendship bridge was built and roads were improved on the Myanmar side. The new SEZ is aimed at attracting small and midsize shippers to the region.
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