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New policies needed to unleash growth in steel industry

International steel manufacturing companies in the Thilawa Special Economic Zone near Yangon have been looking for opportunities to ramp up their capacity to produce in anticipation of greater demand.

“Compared with neighbouring countries, steel production in Myanmar is just 50,000 tonnes. But there is a lot of potential as the country needs a lot of infrastructural development, which requires steel,” said Adib Kouteili, co-founder and director of PEB Steel Myanmar. “The prospects for foreign direct investments (FDI) in this sector are promising.”

Myanmar is expected to grow at a rate of around 7 percent, backed by higher fiscal spending on vital infrastructure and manufacturing activities according to the government and other third party institutions like the World Bank.

PEB Steel, which also has factories in Vietnam and India, first opened its factory in Thilawa last year. During a recent interview with The Myanmar Times, Mr Kouteili shared his views on the challenges and opportunities in the domestic steel industry and how his company is positioning to capture a slice of the market:

What is the current state of the Myanmar steel market?

Currently, most investments are being channeled into the garment and food industries but there is a lack of support for the steel industry from the government. We need good policies to support the steel sector so that factories are able to run well. This will encourage more foreign steel investors to the country. The market will develop if steel production is encouraged. Now, steel is mostly imported from foreign countries, which hinders growth in the local industry.

Demand is around 2 million to 2.5 million tonnes per year. More than 90 percent of that demand is met by imported steel. In the coming years, the country’s appetite for steel will increase and people will start questioning why we have to import so much steel when it can easily be produced here.

Foreign steel producers with facilities in the country are now operating only at a third of their full capacity. But if there is more support for local production, this can easily be expanded to replace imported steel.

What does the government need to improve to draw more FDI?

Local steel producers have to pay taxes in Myanmar. That is not a problem for us but the issue is imported steel is tax exempt, which makes it hard for us to compete. There has to be a fair playing field for local producers and importers.

Most of Myanmar’s steel imports are from Vietnam, where steel producers are protected with strong policies and regulations. If similar policies are implemented in Myanmar, the local steel production rate will easily jump by five times the current level of 50, 000 tonnes within ten years.

Why is it important to increase local steel production?

If local steel production grows, we can stem the foreign reserve outflow and can even expand to a point where we become a net exporter of steel. This is the best time for Myanmar to start channeling support to this industry so that there will be more opportunities for investments, employment and economic growth. – Translated

Source : Myanmar Times

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