International Finance Corporation (IFC), the World Bank Group’s private sector investment arm is looking to invest more in the agricultural space, to help private companies be part of the supply chain development process.
Myanmar’s agriculture sector contributing 38% of GDP, employing more than 60% of the workforce, IFC finds themselves playing a major role in helping develop the entire supply chain by mainly working with the government.
“We want to grow our business more in agriculture and food processing and we are seeking local and international companies that we can work with,” said Vikram Kumar, country manager of IFC in Myanmar.
In doing so, IFC is willing to work with anyone that are keen to follow best practices in terms of governance, environment, social performance and financial control.
One significant investment around the agriculture space is the financing of $10 million Myanma Awba Group Company Ltd for its agricultural input complex and formulation plant for crop protection products and for other works to boost production. It also recently financed $1.5 million for a stake Maha Agriculture Public Company, a subsidiary of Myanma Awba Group.
“We believe that agriculture is an area that Myanmar has a significant comparative advantage because there is enough land, water and sunlight to grow a lot of crops and get the right price for the crops. The country can really benefit going back to its original glory of the rice bowl of Asia, located between the two markets which are very hungry for food products. Myanmar really has that potential. Much more than manufacturing,” said Kumar.
Simplifying procedures and educating the farmers on good farming practices are some of the few works handled together with respective government.
“Most of the advisory work on agriculture is currently with the government and we hope to sign an advisory agreement with the Ministry of Agriculture and Irrigation in the near future which will basically include providing support for regulatory reform in the areas like agricultural inputs such as seeds, fertilizers and chemicals and also food safety,” he said.
Potential of agriculture sector has not yet been realized with Myanmar having the lowest profits from rice production compared to its neighbors. World Bank figures show that in 2013-2014, the net profit from producing monsoon paddy is averaged $114/hectare, which is ten times smaller than those in China.
Agriculture reform work is again connected with support given through microfinance.
IFC has made an accumulative investment of $566 million from its own account by June 30 and the accumulative investment including mobilization reached $1.13 billion.
Investments have been made to about 18 private companies for Myanmar to date, covering major sectors being telecom with about 35 percent coverage, tourism with 23 percent and energy with 29 percent.
Outside agriculture, education is another space IFC is keen to look as further opportunities.
“We want to grow our agribusiness portfolio and want to do more in education, an area that Myanmar needs a lot of support. Education is an area that we are very interested in particularly vocational skills and higher education,” said Kumar.
Among their latest investments closed, Mingyan project, a 225 MW combine cycle gas turbine power plant developed by Sembcorp Utilities Pte Ltd and MMID Utilities Pte Ltd is what IFC handled the transaction advisory to set a private public partnership (PPP) model which IFC thinks is the best source for infrastructure financing.
“Hopefully the government will be using these examples to employ more PPPs. Without PPPs, Myanmar will struggle to create quality infrastructure. It doesn’t have the financial capacity or expertise to create quality infrastructure within the short period of time that it is needed,” he said.
Some of IFC’s key investments closed in the financial year 2017 include $2 million in Oway Group, an online travel booking and on-demand ride-hailing service in Myanmar, $8.5 million in Amata Hotel Group, $10 million Myanma Awba Group and the $13.5 million package in three microfinance firms.
“We have also closed our investment in Irrawaddy Green Towers of $95 million (including a parallel loan of $42.5 million) in June 2017,” said Kumar.
With many of the businesses IFC has partnered with in Myanmar are startups or greenfield, they are looking to close a few more investments in agriculture and logistics in the first quarter of next year.