DJ Myanmar's Military Coup Could Hurt Supply Chains. Why the Disruption Might Be Short-Lived. -- Barrons.com
The military coup in Myanmar is bad news in the near term for investors, as supply-chain interruptions threaten everything from luggage manufacturing to energy projects.
As recently as last year, Myanmar -- situated between regional heavyweights India and China, with a coast on the Indian Ocean -- was seen as a growth story among frontier markets in Asia. The nation of 54 million people is on a path to 5.7% economic growth this year, after cooling to 4.2% last year because of the pandemic, according to the International Monetary Fund, which sent it $350 million in relief funds days before the coup.
Panjiva, S&P Global Market Intelligence's supply-chain research unit, reports that U.S. imports from Myanmar reached $1.06 billion in the year through Nov. 30, up from $245 million in 2016. Apparel and footwear accounted for 41.4% of that, while luggage was 29.9%. Fish was third, at 4.4%.
Supply chains could be disrupted for brands like Samsonite International (ticker: SMSEY), the largest importer to the U.S. from Myanmar, according to Pinjiva data. Unrest could also affect supply chains for apparel makers, such as privately owned LL Bean, retailer H&M (HM-B.Sweden), Adidas (ADS.Germany), and Vera Bradley (VRA), the S&P research says.
Myanmar's military overthrew the fledgling democratic administration on Monday, Feb. 1, arresting elected civilian leaders, including Aung San Suu Kyi, whose party won 83% of the available seats in Parliament in November.
Myanmar's fragile emergence among the world's democracies comes after decades of military rule. The economy is so young there isn't much direct foreign investment -- just $4.2 billion in 2019, according to the Asia Development Bank. But that is up from $2.7 billion in 2017.
Myanmar's geography makes it the perfect location for the competing economic and political ambitions of India and China, says Marko Papic, chief strategist of the Clocktower Group.
The country is among those in China's 70-nation infrastructure-spending project called Belt and Road. And manufacturing is moving from higher-cost factories in China to Myanmar, Vietnam, and other locations. China and India are spending a collective $2 billion to build deepwater ports, within 40 miles of each other, on Myanmar's coast.
China's port will give its shipping interests easier access to the Indian Ocean than sailing through the busy South China Sea and Malacca Straits, Papic says. India's port will connect it more closely to its far-flung provinces that are landlocked between Myanmar and Bangladesh.
Thailand is a close trading partner -- and has seen military coups of its own in recent years. Japan, the U.S., Australia, and Singapore have increased energy and infrastructure investments in the area, according to S&P Global Platts. A Japanese consortium, including Marubeni (8002.Japan), Sumitomo (8053.Japan), and Mitsui (8031.Japan) is working on a liquefied natural gas-to-power project in Myanmar. And Chevron (CVX) is joining with France's Total (TOT) in Myanmar's Yadana offshore natural-gas field.
U.S. President Joe Biden might put sanctions on Myanmar, which also has been criticized for human-rights abuses, particularly the alleged ethnic cleansing of Muslim Rohingya.
Sanctions might burden companies manufacturing goods in the country, but the longer-term investment trends, especially those supported by China and India, are unlikely to change course. If the U.S. backs away, these other countries would be only too happy to step up, says Clocktower's Papic.
Write to Liz Moyer at Liz.Moyer@barrons.com
(END) Dow Jones Newswires
February 05, 2021 07:29 ET (12:29 GMT)
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