Coca-Cola to Suzuki Myanmar Factory Rush Spurs Shipping
Coca-Cola Co. (KO) and Suzuki Motor Corp. (7269) are among companies pushing demand for transportation of machinery to Myanmar to bottle drinks and make trucks, after the country’s five decades of isolation during military rule.
Coca-Cola, which opened a bottling plant in Myanmar last year, plans to invest $200 million over five years while Suzuki restarted production of trucks last year after leaving the market in 2010. Asahi Group Holdings Ltd. (2502), Japan’s biggest beermaker, said this month it’s forming a venture to start operations there this year.
Because much of the machinery is too big to fit in regular containers, Japan’s Mitsui O.S.K. Lines Ltd. and other shippers are increasingly using vessels that can handle oversized cargo. The Southeast Asian nation, formerly known as Burma, is importing basic materials to improve infrastructure after the U.S., Europe and Japan eased sanctions following elections in 2012 in which the country’s leading dissident, Aung San Suu Kyi, a political prisoner for 15 years, was elected to parliament.
“It will take time for Myanmar to be a big manufacturing country,” said Masayuki Kubota, chief strategist at Rakuten Securities Economic Research Institute. “They’re buying machinery now as part of the process to become a big manufacturing country. It needs a huge amount of investment.”
Companies are building manufacturing facilities in Myanmar, about the size of Texas, to take advantage of cheaper labor than in China. The country exports gas, rice and wood and is now importing steel, building materials, machinery and other parts to build factories and infrastructure.
Myanmar is also planning to more than double rice shipments as the country that used to be the world’s largest exporter of the grain embraces trade and opens its economy, challenging Thailand, Vietnam and Cambodia.
Shipments may increase to 2.5 million metric tons in 2014-2015 from an estimated 1.8 million tons in the year that started April 1, according to Toe Aung Myint, director general of the department of trade promotion at the Ministry of Commerce. Exports are targeted to increase to 4.8 million tons in 2019-2020, he said.
The country, the leading rice exporter from 1961 to 1963, saw exports tumble to as low as 15,000 tons in 1997, before bouncing back to be the world’s ninth-largest shipper with 690,000 tons in 2012.
Economic growth in Myanmar is expected to accelerate to 9.1 percent in 2014-2015, said President Thein Sein said in speech in Naypyidaw in January.
That will depend on a rapid build-out. About $320 billion needs to be invested in infrastructure by 2030 if the economy is to expand 8 percent a year, according to a McKinsey Global Institute report.
Mitsui O.S.K. (9104), operator of the world’s biggest fleet, predicts transportation of oversized equipment, which it calls Liner Dry Special, will double this year, after tripling in 2013. The shipping line uses equipment called flat racks, similar to the bottom part of a container, to transport equipment too big to fit inside regular boxes.
“LDS shipment volume for Myanmar is growing rapidly,” the shipping line said in an e-mailed statement. The company predicts more demand for infrastructure and building materials and said the “outcome is pretty good so far.”
The Tokyo-based company is also boosting its cargo service between Myanmar and Singapore this month to a regular weekly service to improve connections in Singapore, it said on March 13.
Myanmar is planning to improve ports and roads to help movement of goods after the Asian Development Bank said transport networks are insufficient to support growing activity.
Shipments by container in Myanmar are still a fraction of neighboring countries. The nation shipped 329 containers to the U.S. last year, compared with 244,283 from Malaysia to the U.S. and 340,170 boxes from Thailand, according to figures from the Japan Maritime Center.
Japan is helping develop a port and industrial estate at Thilawa, 25 kilometers (16 miles) south of Yangon, while Thailand plans to help build an $8.6 billion deep sea port and industrial zone in Dawei, Myanmar.
The country is ranked 129th out of 155 countries for logistics in a 2012 study by the Washington-based World Bank, which assessed factors such as quality of infrastructure. Neighboring Thailand placed 38th and Vietnam 53rd.
While Myanmar, with a population similar to Thailand, has seen its gross domestic product more than triple to $45 billion in 2010 from 1998, it is still smaller than Thailand’s $319 billion, according to figures from the International Monetary Fund. The fund doesn’t have figures for Myanmar before 1998.
Coca-Cola returned to Myanmar last year after a 60-year hiatus. Japanese beverage maker Asahi plans to invest 2.3 billion yen ($22 million) in a soft-drink venture expected to start operations by June. Suzuki returned to the country in May, after a previous contract with the government ended in 2010.
Meanwhile ANA Holdings Inc., Japan’s largest airline, restarted flights to Myanmar in 2012 amid demand from executives to fly to the country.
“Myanmar is set to become an important manufacturing base due to low cost of labor compared with China,” said Mitsushige Akino, who oversees the equivalent of about $500 million in assets in Tokyo at Ichiyoshi Investment Management Co. “It needs to focus on building infrastructure, to ensure smooth operations at factories.”
To contact the editors responsible for this story: Anand Krishnamoorthy at email@example.com Philip Revzin, Frank Longid