Myanmar: Myanmar trade deficit ‘still too high’

ALTHOUGH MYANMAR IS aiming high to improve its trade volume this year, the government needs to reduce the long-standing trade deficit by boosting exports, local businesses say.

Zaw Min Win, president of the Union of Myanmar Federation of Chamber of Commerce and Industry, said that the unstable exchange rate, illegal trade and limited productivity may deter Myanmar from achieving its target of tripling its trade volume during the government’s term. 

Myanmar’s trade volume reached US$27.7 billion (Bt988 billion) in the 2015-16 fiscal year, but the country could export only $11.1 billion. In FY2016-17, as of November 25, the nation’s trade volume reached $16.7 billion and it could export $7.3 billion, according to the Commerce Ministry.

Over the past three months, the kyat continued to depreciate against the US dollar. According to Zaw Min Win, kyat depreciation depends on such factors as a rise in the trade deficit, decreasing foreign direct investment (FDI) inflows, greenback appreciation against many currencies after the US Presidential elections continuity of a budget deficit, strengthening of illegal players in the exchange market, US dollar speculation, and halting Myanmar’s key border trade through Muse. 

He said that the quick wins for exchange rate stability should extend to efforts to attract more FDI, encourage Myanmar nationals who work abroad and send their money in a legal way, weaken illegal players in the exchange market, monitor if foreign investors really bring in capital to the country as they committed to doing, find ways to increase productivity to boost exports, and encourage import-substitution industries. 

“We really need to increase productivity. Many local businesses have limited access to finance, markets, and modern technology. And they cannot invest enough in research and development. So, the government needs to encourage local businesses to come up with new export items and value-added products. Some rules for taxation should be reviewed,” he said.

According to the chamber’s head, the government also needs to encourage agribusiness and put more emphasis on agricultural exports rather than depending too much on resource-generated exports. Farmers should be encouraged with the government’s support and there should be attractive incentives. Agriculture-product export zones should be established across the country. Meanwhile, the private sector should prepare for innovative business models, he said. 

Illegal trade

Zaw Min Win said that the government needs to investigate any acts of illegal trade and its effects. Doing research on Myanmar’s illegal trade should be an urgent task. In an effort to help the government combat illegal trade, the chamber recently conducted a research study. 

Wai Phyo, vice president of UMFCCI and managing director of Yathar Cho Industry Ltd, said that the research team has learnt there are four major types of illegal trade – smuggling, counterfeit, parallel trade, and under value. He added that Myanmar must prioritise its trade with neighbouring countries. 

“Our top trading partners are China and Thailand, as the trade with these two countries accounted for 57.3 per cent of the total trade volume. Ninety-seven per cent of our imports are from China and Thailand, while they buy 52 per cent of our exports,” he said.

Wai Phyo said that illegal trade would impact on the competitiveness of local businesses, as they did not pay taxes and could sell products at cheaper prices. He added that illegal trade affected Myanmar’s economy (due to a decrease in productivity), national income (the state did not get proper taxes), and the public (it might lead to safety issues). 

“Illegal trade occurs because the government cannot urgently issue licences when merchants need them. Proper arrests and punishments are also weak. The government should observe the merchants’ difficulties and solve them. As border checkpoints need more staff, the government needs to appoint more [people] to fight against corruption,” he said. 

Wai Phyo urged the government to make use of modern technology, such as container tracking systems and electronic seals, at border checkpoints. He demanded importer registration and the urgent enactment of the Consumer Prevention Law. He also called for severe punishment to illegal traders. 

Aung Soe, director-general of Myanmar Trade Promotion Department, said that the government would combat illegal trade as a matter of urgency. 

“We have been facing a trade deficit for many years, as our imports volume is much higher than that of exports. As we are at the very early stage, we need to import a lot from other countries. It is usual. So, we need to boost our exports to reduce the trade deficit. There is no other way,” he said. 

According to the official, Myanmar will prioritise exports of rice, beans and pulses, fishery products, wooden products, garments, rubber, as well as promote tourism as a core service sector. 

He encouraged manufacturing value-added products and strengthening cross-sectors. 

As part of trade facilitation, the Commerce Ministry encourages national branding through international expos.