Since few years ago, changes in Myanmar’s inefficient and under-developed logistics industry have been driven by influx of imported goods, increased consumer consumptions and opening of the economy to big international players. Majority of the trade is by sea trade handling approximately 70 percent of the total trade, 20 percent air border trade and 10 percent land trade. Regarding sea trade, Thilawa port is a one of the main ports of the Myanmar handling approximately 80 % the export and import of the country. The Yangon Port is accessible for vessels up to 167 meters, handling ships of up to 9 m and lifting capacity of 15 000 tons (DWT). According to the studies, the mobilizations of goods of construction, automotive, industrial and garment sectors account for majority of the logistics spending in Myanmar in the recent years. Usages of logistics services by these businesses are expected to growth along with the growth of the respective industries. Moreover, heavy lift equipment and project cargo are long term potential. At the moment, approximately 75% of the local logistics service providers are providing in freight forwarding, custom clearance and trucking services while the rest provides air freight, distribution, project logistics and total logistics services.
Opportunities wise, approximately 85% of the logistic services providers provide classic services such as unloading, loading, custom clearance and forwarding services while the rest do value added services such as labelling, shipment tracking and cold storage. With the growing international trade flow, there will be an increase of demand for companies providing value added services. The high technology involved in lifting and transportation as well as strict safety requirements are limiting the current local players from increasing the capacities. Myanmar will witness the improvement of intra-ASEAN trade including borderless market and free trade agreements. Due to its cheaper labor cost, Myanmar is also expecting foreign companies moving their production facilities to Myanmar due to cheap labor cost. As a significant effort of the government to promote border trade, it is implementing Individual Trade Certificates, establishing additional border trade centers, facilitating legal trading with major trade partners, China, Thailand, India and Bangladesh. The efforts are expected to pave ways for the overall growth of the logistics industry.
The government’s major plan to drive the growth of the economy by developing special economic zones in strategic locations would create plenty of offshore supply basses and spaces to accommodate up to 300,000 DWT (deadweight ton) vessel. Nevertheless, the air and railroad cargo growth could still be delayed by the limitation in infrastructure development despite the development plan of new airport. The progress is likely to be seen in the sea and road trade due to recent developments of deep-sea ports. Transportation infrastructure is still under-developed compared to the peers in the ASEAN regions.
Recently drafted foreign investment law paves way for FDI coming to logistics industry by allowing cargo transportation businesses. In the recent years, there have been entrances of large international players as well as the increasing influence of big local players. International development and financial institutions such as IFC has invested in local logistics businesses recently, which also created attentions from investment firms targeting this specific industry to reap the returns from its growth and infrastructures. The upcoming Comprehensive Transportation Law and motor vehicle law aiming to regulate motor vehicle related issues will also help pave ways for more accessible and efficient routes for logistics services.
Dry port businesses to be operated in connection with training operations, cargo transportation by flight, building container yard and warehouse on bankside and jetty side, and deep-sea port and international multi-purpose port are the investments that can be permitted by the recommendation of Ministry of Transportation and Communications.
TVP Group (the ‘Group’) is a local firm that provides highest standard financial advisory services to both Myanmar companies and MNCs. With our diverse corporate network, we support our clients on group structuring, valuation, M&A, Joint Venture structuring and research, while offering a fair pricing.
2018 Trust Venture Partners Co., Ltd. All Rights Reserved.