Infra Capital Myanmar (ICM) announced it plans to develop two agricultural projects – a rice processing plant and a waste-to-feed facility – that will be ready for sale to private investors by the end of this year.
As part of InfraCo Asia Development (IAD), ICM, which is a joint venture between ReEx Capital Asia and ADL Capital Developments Pte Ltd., is tasked with launching and developing projects designed to attract private sector investment to Myanmar. Suitable projects generally must be in areas where private sector investors are either unable or reticent to assume the upfront development costs and risks, must be environmentally sustainable and use best practices while benefiting the poor, and must be commercially viable and scalable according to the company’s website.
In June of last year, InfraCo Asia and ICM entered into a five-year developer service agreement under which ICM will have $15 million to develop up to 25 projects in Myanmar, of which the ICM had allocated $1 million to each of the two ag projects currently being developed for sale.
The rice processing plant will be located in Mandalay and will produce vermicelli and noodles from broken rice sourced from the Sagaing Region. All products will be sold and distributed on Myanmar’s domestic market and be sold for export.
The second project will source agricultural waste from the Ayeyarwaddy Region which will be transported to a new facility being built in Hlaing Tharyar Township where it will be processed into animal feed for use by livestock producers.
The initial steps of securing a local developer, project development, and all legal, land, and technical due diligence have been completed, while commercial structuring of the two projects is currently being handled by ICM.
“One of the reasons we chose that particular deal to work on is because of its impact on its livelihood and its impact socially as well as commercially,” Christa Avery, project director of ICM and Myanmar country director for ReEx Capital Asia told Deal Street Asia.
In order to satisfy the ICM’s requirements that its projects mitigate risk for investors, the projects are structured in Singapore as a Singapore Special Purpose Vehicle (SPV).
“It’s structured in Singapore. It is super easy for them (investors) to invest at that level in the order that the subsidiary is governed at the level of the Singapore Special Purpose Vehicle (SPV). So it is very clean for the private sector to invest,” said Avery.
Although marketing of the two projects is not set to begin until next week, the ICM states that it has received interest from investors in Singapore looking to gain a presence in the Myanmar market.
Answering the Call
Although agriculture employs 70 percent of Myanmar’s workforce and accounts for 45 percent of the country’s gross domestic product (GDP), and the country is home to a substantial bank of fertile land and water resources, returns to farmers are the lowest in Asia at $200 per year, according to a report issued by the Organization for economic Co-operation and Development (OECD).
Despite there being great latent potential for expansion, the OECD states that Myanmar will not be in a position to capitalize on its advantages without reforms, stating, “Myanmar will need to upgrade its agricultural sector and develop a modern agri-food eco-system in order to meet the changing demand and market opportunities for high-value and quality agri-food products over the coming years.”
In order to achieve these goals, the organization is particularly calling for the maturation of the country’s agricultural processing and value-added ventures and the increasing of the availability of credit to the agricultural sector.
The developmental work being done by ICM geared to the mitigation of risk for agricultural investors interested in gaining a foothold in Myanmar with the goal of early positioning in expectation of growth in the sector, is one answer to these needs.
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Lynda Kiernan