Myanmar subsidiary of German retail group, Metro AG secured USD $ 20 million loan from the International Finance Corporation (IFC)

5 Mar 2019

The Myanmar subsidiary of German retail group Metro AG has raised a US$20m loan from the International Finance Corporation, the private-sector arm of the World Bank.

The subsidiary Metro Wholesale Myanmar is a 85pc-15pc joint venture between Frankfurt-listed Metro AG and Singapore-listed Yoma Strategic Holdings, offering one-stop wholesale food service distribution for hotels, restaurants, retailers, and offices.

The IFC said the financing aims to drive up agricultural incomes as well as improve the quality and availability of local produce, benefiting buyers and end consumers. The terms of the loan were not disclosed.

It also said the investment will help Metro source the majority of its produce from local farmers and companies, raising food safety standards and creating employment opportunities in food processing and logistic services.

Since 2013, the Washington-based lender has invested over $1.3 billion in the country.

Vikram Kumar, IFC’s country manager for Myanmar and Thailand, said the move is to “ensure the availability of safe, high-quality foods from the farm to fork, increasing the agribusiness sector’s export potential.”

He added the loan will eventually benefit small businesses and service providers along the value chain.

According to Jens Michel, CEO of the JV, the company operates a warehouse and distribution centre in Thilawa Special Economic Zone for fast-moving consumer goods and food products and provides “doorstep deliveries” for customers.

Logistics players see rising market demand from retailers and wholesalers just as the infrastructure has gradually developed.

“With the expansion of the retail/ wholesale sector thanks to partial liberalisation, we are definitely seeing more market interest in the logistics,” commented Tomoaki Yabe, managing director of Thilawa-based logistics company Daizen Myanmar.

“While infrastructure and transport remain challenging in many rural areas, warehouse facilities in Yangon and Thilawa in particular have modernised.” Some warehouses, including Metro’s, can now cater for food products and have cold chain systems in place. An improvement in the reliability of power supply in the SEZ is also a boon, Mr Yabe said.

The IFC investment comes at a time when Myanmar is opening up its retail and wholesale market to  foreign players. Under regulations issued by the commerce ministry, 100pc foreign-owned firms must make initial investments between US$3 million and $5 million to operate a retail or wholesale business, respectively, in Myanmar. For joint ventures with foreign entities where the local investor has at least a 20pc equity ratio, the initial investments necessary for retail and wholesale are $700,000 and $2 million.

Japanese Mycare, Aeon and local City Mart have set up joint ventures, which were approved by the ministry late last year. Lottemart and E-Mart, South Korea’s two biggest retailers, are also mulling plans to set up stores.

Commentators said the IFC investment was likely to encourage other regional retailers who were hesitant about investing in Myanmar.

“With the support of an international institution, the Yoma-Metro joint venture will be setting the bar for the industry in Myanmar. This lends investor confidence to the sector,” Pietro Borsano, an academic based in Bangkok and Mandalay, told The Myanmar Times.

“This will also boost foreign investment in local retailers and wholesalers, as well as the market entry of regional players. For example, Thai businesses are generally reluctant to take the first-mover risk. CP Group’s Siam Makro, Central Group, The Mall Group, Siam Piwat and others will be more confident to expand their operations or invest in the Myanmar market."

 

(The Myanmar Times: https://www.mmtimes.com/news/metros-myanmar-subsidiary-secures-us20m-ifc-loan.html )