Commerce Minister U Win Myint has pledged to smooth the complicated system for importing foreign vehicles by allowing new payment methods.
Currently most vehicles are imported to Myanmar using consignment, meaning foreign exporters own the car but send it to a Myanmar broker, who then sells it for a commission usually between five and 10 percent.
However, most other countries use an array of different financing methods, including direct payments for imported vehicles and letters of credit, where the transaction is essentially guaranteed by banks, allowing the seller to ship the cars before receiving payment.
U Win Myint said the current system of consignment imports had been intended to help car traders, but the reality is different. “Traders have to pay twice as much and cars are taking a long time to arrive,” he said.
The ministry is also planning to shorten the turn-around time to approve showrooms from one week to three days, he added.
Importers can apply for licences in Yangon, but showrooms need approval in Nay Pyi Taw.
Myanmar is one of the only countries relying solely on a consignment system for vehicle imports, which is cumbersome for foreign exporters, said U Soe Tun, president of the Myanmar Automobile Manufacturers and Distributors Association.
Myanmar’s 67 auto import companies face a number of delays, making their products late-to-market, he said.
“The government says they are thinking about local businesspeople, but this system is used nowhere else,” he said. “It’s probably because government officials don’t have first-hand knowledge of buying,” he said.
U Soe Tun said that direct transfers are currently easier than letters of credit, which take seven to 10 days to be approved.
However, a Myanmar Economic Bank official in Nay Pyi Taw said both letter of credit and direct transfers have their advantages. Letters of credit are safer for both sides with the documentation, but direct transfers are easier to follow up on later if there is a problem.
Auto importers say they are uncertain which system – consignment, letter of credit or direct transfer – is the best choice.
U Khant Win from ASE Auto said that after the minister’s remarks he is not sure which system is best.
Yet while consignment ostensibly calls for no payment until the cars are sold, industry insiders say at least 90 percent of sales centres informally pay for the cars before they arrive.
Local sales centres use hundi unofficial remittance to send money to foreign firms, then send the money again officially through the banks when the cars arrive, and the foreign company repays one time using hundi.
Another official at a sales centre who requested anonymity said most company owners open another company abroad and use to sell the cars, in a bid to get around the 3.5pc tax on consignment imports.
Some businesspeople with Yangon showrooms have opened a company in Singapore and ordered cars from Japan, then export a commodity the other way, making the books balance out in an attempt to avoid taxes.
Source: MYANMAR TIMES