The problems of a beans and pulses export company last month lay bare the challenges potential exporters must overcome to gain significant international market share.
Merchants in Yangon’s Bayinnaung bean market were accused of selling large amounts of beans and pulses to Indian buyers without actually having the product. When bean prices unexpectedly shot up, the merchants were caught short, unable to afford the beans they had already, in effect, sold.
While the Ministry of Commerce moved to quickly to resolve the case, it revealed an essential question about Myanmar exporters: Do firms have the business practices in place to ramp up exports, given the chance?
Myanmar has a large trade deficit, reaching US$2.65 billion in the 2013-14 fiscal year, on total trade volumes of $25 billion. It has also agreed to lower trade barriers in the coming years as part of the ASEAN Economic Community, making efforts to reverse the trade imbalance potentially even more difficult.
Although increased petroleum exports may chip away at the number, it will not reverse the fundamental problem of making Myanmar exports more competitive.
The world has opened so many previously closed doors to Myanmar business since 2010, and it would be a shame if businesses miss this chance.
Poor business practices of a minority too often give good Myanmar businesses a bad name. And while ethics and accountability may often be lacking, there are also other important constraints worthy of attention.
Commerce Ministry trade promotion director U Win Myint said many smaller factories and farmers are not able to sell products to other countries, as they have no quality inspections or basic knowledge of chemical use or proper warehousing.
“Local exporters have trouble getting strong prices and long-term buyers,” he said.
Strict government regulation is one path that can be taken, and according to U Win Myint it had improved business practices in the rice sector, but at the cost of slowing progress and creating weaker rice exports than competitors like Vietnam and Thailand.
Heavy-handed regulation is not the way to solve Myanmar’s exporting problem. Government regulation should be designed to allow businesses to seize opportunities, and build on them.
U Win Myint said one recent opportunity is selling rice to China, as tension caused by the South China Sea leaves the world’s second largest economy looking to source rice from countries other than Vietnam. See related article “Maritime spat to aid rice exporters”
“Sometimes we can’t maintain our market share even though we have chances to improve,” he said.
The government has also moved to give a helping hand. Although Myanmar has far fewer financial resources at its disposal than other regional countries, it has formulated a National Export Strategy program for the next five years. The program is designed to target profitable exports in agricultural and fishery products, garments and forestry products.
The government has also played its part in lowering internal barriers to exports. Of course more government action in this direction is required, but businesses also need to put quality control and best practices at the forefront to take advantage of these changes.
U Win Myint said that exporters often are poor at translating short-term windfalls into long-term gains.
“We discovered exporters don’t control their quality because they previously didn’t have a large market. When they get the chance for bigger export volumes, they go for it, rather than promote quality control,” he said.
Private sector groups point to the need to professionalise their industries if exports are to be strengthened.
After years of being shut out of many world markets – whether rightly or wrongly is another question – it is clear that Myanmar has attracted considerable world attention. Let’s hope that Myanmar firms can seize these opportunities, and overcome problems of quality control and business best practices.
Source: Myanmar Times