doing business in myanmar – what you need to know as a singaporean
Myanmar recently launched its updated National Export Strategy for the next five years. The Ministry of Commerce will be adding fruits and vegetables, gems and jewellery, handicrafts, processed food products and digital businesses as potential export sectors.
But the government must first address leakages occurring at the border that result in lower than optimal export volumes.
Muse-China border trade, which is one of the biggest overland trading routes in Myanmar, has declined this year. Chinese imports decreased about US$ 600 million to just over $3 billion, according to the Ministry of Commerce.
Exports to China via Muse were just under US $2 billion, whilst imports represent half that volume at US$ 1.04 billion. Both of these figures are down from last year, with the export number sitting at US$ 2.6 billion and imports at US$ 0.98 billion.
“In the 2018-19 fiscal year there was a special scheme to prohibit these imports from Myanmar, and so trade volume declined,” said U Chan Thar Oo, vice chair of the Rice Merchant’s Association (Muse).
Sugar exports were also included in the import bans imposed by China. After taxes were paid on rice, maize and sugar exports Chinese traders look for ways to avoid the ban by buying illegally along the border, resulting in increased arrests. Traders can no longer go to China and sell legally, so the trade volume has decreased, he said. With restrictions on trade at the official border points, Myanmar exports and revenue suffer even as its reliance on Chinese imports rises.
Efforts to resolve the one-sided trade situation have been underway. Last month, the Ministry of Commerce and the government of Yunnan Province signed a memorandum of understanding to allow border trade using a barter system.
According to this agreement, Myanmar will export agricultural goods such as rice, maize and fisheries products and China will export agricultural machinery, chemical fertilizer, iron and steel products to Myanmar.
If the system receives the go-ahead the Yunnan government in China and the Agricultural, Livestock Breeding and Fisheries Development Committee in Myanmar (under the Myanmar Federation of Chambers of Commerce and Industry) will decide which companies are eligible to participate.
This is just the first step towards alleviating the trade ban. Although the barter system gives a guarantee that Myanmar exports will reach the Chinese market, there’s no guarantee that all goods will be sold. China will only import an amount equal to their exports, meaning that any surplus of goods on the Myanmar side will remain unsold. How either side deals with temporary spikes and lulls in demand is also yet to be seen
Other questions remain about how the barter system will be implemented. “How will the system account for the trading of illegal products? How will it deal with illegal trading, outside of the system?” U Chan Thar Oo said.
The government-to-government memorandum doesn’t provide any details about these issues, leaving some exporters unsure as to how particular agreements will work. In some instances, import trade routes will change. “Currently Myanmar imports iron plates from China, and under the barter system these goods may enter the country via the Muse-China border crossing rather than over sea,” he continued.
Although a framework agreement is in place, companies will have to discuss particular goods, their volume and quality in more detail. Only insecticides approved by the government are guaranteed for import at this stage, U Khin Maung Lwin said.
For now, Yunnan province has offered to buy Myanmar rice for US$15 million and is waiting for Myanmar to make a counter-offer to close the deal. What products Myanmar will receive in return, and who will import them, is yet to be discussed, said U Chan Thar Oo.
The barter system is scheduled to commence after the Agriculture, Livestock and Aquaculture Development Committee signs business-to-business agreements with Yunnan companies this month.
Myanmar’s agricultural and livestock products, such as sugar, rice and fisheries exports, can be exported via the Muse border trade route again if the barter system is implemented successfully, the Myanmar Rice Federation’s GMU Ye Min Aung confirmed.
For business-to-business agreements, the Federation will make a trip to Yunnan Province in China later this month.
Source: Myanmar Times
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