Exports to remain low despite weakening local currency

Export volumes will remain low throughout this fiscal year and for the coming few years, according to a Ministry of Commerce official.

U Win Myint, director of the Trade Promotion Department, said that export volumes are unlikely to rise significantly this year. “People say that when the domestic currency weakens it’s a good time to promote exports, but the reality is not so easy,” he said.

“A trade deficit is not a problem, it’s normal for a developing country.”

The Central Bank reference rate was K1205 to the US dollar yesterday, the highest recorded value since the currency was floated in 2012, while the rate for exporters was as high as K1250 in the informal market.

Promoting exports and developing ties with new markets will take time, said U Win Myint. Several European countries have made proposals after Myanmar was given duty free access to the European Union (EU) he said, but exporters need to take many steps to meet the criteria, including meeting targets for the quality and quantity of goods.

Myanmar was reinstated into the EU’s Generalised Scheme of Preferences (GSP) tariff scheme in 2013, which gives least developed countries duty free access to the EU for the export of all products except arms and ammunition.

The trade deficit is likely to continue in the medium term, said U Win Myint, as Myanmar has lost some of its overseas rice buyers due to a crackdown on informal border trade with China several months ago. Myanmar exports around one million tons of rice per year.

“We are facing difficulties in the overseas rice export market, so the volume of exports is likely to fall,” he said, adding that export volumes are increasing for other agricultural export items such as rubber, beans and pulses.

The Ministry of Commerce expects around US$30 billion in bilateral trade throughout fiscal year 2016, which ends on March 31. Total trade this fiscal year was around $6.2 billion, as of July 3, with $2.5 billion worth of exports. Last fiscal year the trade deficit was $5 billion – the total value of exports was $28 billion.

This year so far, imports are worth $3.7 billion, which is $260 million less than in the same period last year. Imports of electronic, pharmaceutical and other consumer goods have fallen.

Importers say that volumes have slowed over the past couple of months due to the unstable exchange rate – businesspeople did not want to pay with expensive US dollars.

Deputy chair of the Myanmar Rice Federation, U Soe Tun, said that currency instability has a greater impact on the market than the trade deficit does. “The deficit will have an impact on the consumer, rather than the traders,” he said.

However, the target for import volumes has been updated to $17 billion from $13 billion previously, as the government expects the import of more construction materials and machinery through foreign investment projects, U Win Myint said.

Source: Myanmar Times

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