- By Dr. Maung Aung
Myanmar is facing reverberations from global economic changes as our country has been practicing market-oriented economy and forward-looking policies. At the moment, the United States is waging a trade war, causing a world trade decline and limiting the flow of the US dollars; many countries are facing higher exchange rates and wild fluctuations in their interest rates. As the high-value US dollars make prices of imports higher, transportation charges have been raised and prices of merchandise have gone higher. If the economic status is referred, trade deficit is lower than previous years. But the amount of imports is higher than that of exports, putting our country’s trade balance in deficit. The situation of our country needs to be solved immediately.
Generally, essential and non-essential imports must be differentiated, limiting the latter ones for the time being. As we are practicing a market-oriented economy, it is suitable to encourage more production rather than banning imports. As our currency continues to depreciate, ways and means of raising exports should be found to evade from current economic crises and to be in good standing for long-term economic progress.
During Donald Trump Administration, the US is practicing protectionism against global productions and free trade systems by taxing 10-25% on foreign goods; trading countries with US retaliated by imposing higher tariffs on imports from the US. However, the United States won’t be stopping the trade war immediately, and its currency will keep on rising against other currencies.
An opportune moment to develop exports
After the Second World War, four Asian tigers of Singapore, South Korea, Hong Kong and Taiwan emerged after Japan; the People’s Republic of China too developed its economy by means of its major exports.
These countries have practiced export-led growth model by focusing on exports. The development of exports means quantities as well as qualities.
Upgrading basic commodities is essential for exports as higher prices could be demanded. In addition, international investments are invited to get engaged with export-oriented industries for considerable higher prices on export-quality products and creating a lot of job opportunities and getting new technology and management. Development of exports or implementation of export-led development is required to play an important role in reducing the inflation of local currency. In this way, lower prices of exports will increase purchasing power of local goods. In order to carry out export-led growth model, the stability of country’s economy, budget deficits within reasonable ranges, financial aids to export-related production and improvement of industrial businesses must be encouraged legally. Foreign investments and export-related industries are basically essential and to be encouraged from all sides.
Export-oriented Foreign Direct Investment
To carry out export-oriented growth, export-oriented foreign direct investments are required to come and get engaged with local industrial businesses. Now Myanmar Investment Commission has taken action by relaxing some business rules and regulations. To solve difficulties concerning with land areas is a major stumbling block; by solvingthese problems, Foreign Direct Investments can be protected and this would earn the trust from domestic and foreign investors. Investments are usually made in a suitable area to export products to the world market by means of global supply chain and its related domestic industrial businesses. The suitable areas should be next to seaports. At the same time, production and labor costs are reasonably lower and water and electricity supplies and transportation have to be convenient to the seaports. In addition, location of theseindustrial businesses must be convenient for investors to contact with their counterparts globally and at an exact time. Foreign direct investments will come to the locations equipped with above-mentioned conditions, forming industrial agglomerates in the designated areas. For instance, in China industrial businesses are mostly located in Shanghai, Chang Jiang and Beijing which are easily accessible to the sea; in the same way, in Thailand, industrial businesses are situated near the capital of Bangkok. For Myanmar, the commercial city of Yangon is a suitable location; if requirements are met for foreign direct investments, Yangon will become a main growth pole.
Laws for higher export quality products
Laws as main legal force must be enacted in order to improve the basic export products. Even with prior discussions on higher price exports, these talks failed to bring success for investors who were not encouraged by laws and there was no considerable success in the end. In accordance with international experience, employers should be lured with financial assistance, lower interest rates and exemption of taxes.
Bank for exports and imports
As trading is the driving force for economic progress, the Bank is required to serve the financial problems of a businessperson’s relationship with exports and imports. Nowadays, every sector has its bank, but no bank is designated for trading. Export enterprises should borrow money from the Bank; money insurance should be borrowed for short-term period as well as insurance cover for the products of high quality.
Upgrading of Myantrade
Myanmar Trade Promotion Organization was formed to potentially promote trading which is higher than in the past, but the development of export sector still needs upgrading. Myantrade is required to make Yangon a commercial city where trading and investments go together and the city should be regarded to fulfill all in one. It means that domestic and international products should be displayed in these exhibition halls where quality and prices of domestic goods, foreign products in accordance with category and standard of marketing situations, information centres, international investors whose needs to be fulfilled with our market information, and business matching between our businessmen and international investors should be arranged by the authorities concerned.
If an organization like Malaysian Matrade could be established, upgrading of domestic products as well as foreign investments would be increased.In addition, implementation of six kinds of merchandise and service of tourism which are included in the National Export Strategy could be carried out to produce good end results.
The quality development of exports is required to meet the standard norms, guarantee for quality of farming products, formation of selling and buying markets and emergence of transparent e-trading. Emergence of International Commodity Center should be simultaneously implemented. For development of exports, important factors in trading and international investments are greatly in need. They have to understand our market deeply in orderto contact new international firms. At the same time, new entrepreneurs should be trained to meetthe demands from foreign countries.
A good situation and an opportune moment
As the global trade war is going on, appreciation in the US dollar hurts every country in the world, hitting weak Myanmar economy the hardest. Quick withdrawal from economic crisis means that development of exports must be implemented hurriedly and consistently. As the US dollar is on an upward trend during the world economic crises, quick development of exports must be made during depreciation of Myanmar currency. In this time Chinese Foreign Direct Investments find it difficult to enter US market.Because of higher labor wages and environmental hazards,they will have to find suitable countries. At the same time, newly prescribed Myanmar Company Law will pave the way for foreign investors and local investments to find a suitable place to make profits in our country.
In conclusion, the real situations and an opportune moment will turn Yangon and its environments to a vital role for export-oriented industries and implementation of high-price products in order to withdraw from present economic crisis and the improvement of long-termeconomic development.
Translated by Arakan Sein