Tuesday, 18 February 2014

Agribusiness needs govt aid, say experts

Official development assistance (ODA) might be a more reliable source of funding for Myanmar’s “risky” agribusiness than foreign direct investment as the sector has failed to attract significant interest from overseas since economic sanctions were lifted three years ago, experts said.

Hideaki Matsuo, an economic counsellor with the Japanese Embassy, said agricultural investment was widely regarded as too risky with short term production prospects in short supply.

“Productivity and profit are directly linked and are affected by climate change,” he said, cautioning against expectations of possible Japanese investment.

Infrastructural and logistical problems also represented a hindrance for investors, he added.

“If you want investment, local development is needed to prepare in advance. But it is unlikely that people will invest in basic needs. That’s why ODA plays a bigger part in agriculture, as in health and education,” he said.

With little profit to be earned, some experts blame the government for not allocating enough resources to develop the necessary infrastructure to move business forward.

“It is too risky and even less profitable,” said U Soe Tun, joint secretary general of the Myanmar Rice Federation. “The government has failed to upgrade infrastructure and logistics, so both local and international investors are looking at higher costs and less profit.”

He also said while costs are an issue, there has been little transparency in agriculture policy as well as a general lack of supporting services that include different types of related insurance.

Myanmar’s national budget for the agriculture sector came to K310,217 million (US$310 million) or nearly 5 pc of the total national budget in the 2011-2012 financial year, while making up just 6 pc of the budget in the following year.

Similarly, agriculture comprised just 29 pc of the country’s roughly $60 billion gross domestic product last year.

“Myanmar’s agricultural sector should be a world better [as it was in the past]. Few countries are so blessed in terms of their natural endowment, or proximity to major and growing markets [especially China and India],” said Sean Turnell, a Myanmar economy expert at Australia’s Macquarie University.

But other challenges also remain as foreign investors sit on the sidelines due to insufficient provisions in the Foreign Direct Investment (FDI) law pertaining to regulations for the agriculture sector.

“The law doesn’t allow FDI investment in the rice sector and there is a dispute over this matter between local businessmen as some are afraid foreign firms may monopolise the entire sector,” said Ko Nay Lin Zin, central executive committee member of the Myanmar Rice Federation .

Despite the issues, agriculture exports this year have already outpaced those of last year, reaching $2.16 billion in the first 10 months of the 2013-2014 fiscal year, up from $2.07 billion for all of 2012-2013, according to the figures released by the Ministry of Commerce.

Ko Nay Lin Zin said that figure is expected to grow another 30 pc over five years as the market will adapt to new demand in Europe and possibly the US stemming from duty-free access in those countries.

source: The Myanmar Times
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