Infrastructure, agriculture sectors at risk of slower investments

Infrastructure, agriculture sectors at risk of slower investments The infrastructure and agriculture sectors could take a hit as a result of the current state of emergency in Myanmar, which could slow economic growth and investment flows into the country, Fitch Solutions said in a report.

The research firm on February 1 downgraded its economic growth forecasts for Myanmar to 2 percent over the next two years from 5.6pc and 6pc before, saying that a pipeline of infrastructure projects and foreign direct investment (FDI) could be “delayed or cancelled if sanctions are implemented and if foreign entities decide to pull out of Myanmar.”

“The Myanmar government was initially in the process of implementing several economic and sector reforms to improve its investment environment, but we now expect this to be stalled over the near term,” it added. In the short to medium term, FDI momentum could slow as investors are likely to adopt a wait-and-see approach before committing capital and progressing with planned projects.

Several power projects might be halted should international sanctions against Myanmar be re-imposed or financing become an issue, for example. Myanmar’s power sector is a key driver of the infrastructure sector and one of the largest beneficiaries of FDI, with more than US$ 21.2 billion permitted in fiscal 2019-20, representing around 27pc of FDI.

With protests breaking out, there are also risks of renewed lockdowns should Myanmar lose control of the domestic COVID-19 outbreak, as this will result in labour, equipment and material shortages and other supply chain disruptions. “As such, we expect significant headwinds to both the power and infrastructure sectors over the near to medium term,” Fitch Solutions said.

Lower or delayed FDI could slow down the modernisation of the agribusiness sector, too. A number of global agri-firms have already invested in the sector, with most investments focused in the aqua and livestock feed and livestock sector. Singapore’s Wilmar International and Olam International, Thailand’s CP Food and Indonesia’s Japfa Comfeed all have local production capacities.

Other agribusiness players had also expressed interest to invest in Myanmar in recent quarters, and may now reconsider their options. For example, Cargill had identified Myanmar as a key engine to its 2025 growth strategy for South East Asia in the aqua nutrition segment. Bounty Fresh Food, a livestock player headquartered in The Philippines, also announced in 2019 it was looking to expand in new markets in Asia, including in Vietnam, Cambodia and Myanmar

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Source: Myanmar Times

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