Burma's Exports See Positive Growth

Recent figures show that Burma's exports are recovering after a period of stagnation, but the country's imports were also up largely due to rise in the price of refined fuels.

The Economist Intelligence Unit (EIU) noted that exports in April-September were up by eight percent, whilst the September year-on-year figure increased by 51 percent after months of decline, perhaps owing to the high value of the kyat.

“The improvement has been driven by a recovery in exports of natural gas ... while exports of pulses have also performed well ... Exports have benefited from stronger global commodity prices and recovering demand in neighboring markets,” the EIU reported.

However, the positive news was tempered by a sharp increase in imports, “being up by 64.6 percent year-on-year in April-September 2011 to 24.4 billion kyat. They have been driven by an 81 percent year-on-year increase in imports of mineral oil in the six-month period to 5.5 billion kyat, reflecting high global energy prices,” claims the EIU.

Earlier in the year, prices of domestically refined petrol increased from 2,500 to 3,000 kyat per gallon. With the energy minister explaining to Parliament that, “the previous system in practice brought benefits only to entrepreneurs, not the general public."

However, Professor Sean Turnell from Australia's Macquarie University says, “Comments on entrepreneurs are both illogical—some of the entrepreneurs are the retail sellers of petroleum!—and it betrays a lack of understanding about market economics. Why would anything that disadvantaged entrepreneurs not be passed through to the consumer in the form of higher prices?”

Burma currently imports the majority of its refined fuel due to serious shortages in its own refining capabilities. The current daily consumption of the country equates to some 60,000 barrels of oil per day (bpd), whilst the country can only refine 20,000. Hence the growth in the value of imports.

However, notes Turnell, the high value of the kyat should also mean that, just as this has had a negative impact on exports, fuel imports should be cheaper.

This situation may be set to change, however, as Chinese partially state-owned company Guangdong Zhenrong Energy Co. Ltd, has looked into building a refinery in Burma, which would increase the nation's capacity to somewhere in the region of 100,000 bpd. The $2.5 billion facility could potentially be built at Dawei (Tavoy), although details of this and on what basis it would operate have yet to be finalized.

The plant could look to open in 2015, with Reuters reporting that the project would partner with Htoo Trading—run by US sanctions-listed regime crony Tay Za—and an unnamed military-linked company. The latter is rumored to be the Union of Myanmar Economic Holdings Limited—owned by the military and run by its quarter master general—which is believed to be the largest recipient of privatized assets since the new quasi-civilian government took power.

Paddy exports were projected to rise with Bloomberg reporting that, “shipments may increase to as much as two million tons next year and reach three million tons by 2015, according to the Myanmar Rice Industry Association. Sales totaled 700,000 tons in 2011.”

However, such positive news was tempered by Burma's Commerce Minister Win Myint who was quoted by state-run newspaper The New Light of Myanmar as saying, “the majority of farmers were subject to loss due to the decline in the prices of paddy. And steps are therefore being taken for the purchase of reserve paddy at reasonable prices while striving for consumers to have access to quality commodities at fair prices.”

This was despite “a government policy of buying rough rice at about 10 percent above the market rate, according to the [Myanmar Rice Industry Association]. [It said] the program started in about the middle of January,” reported Bloomberg.

Exports of agricultural commodities were hit last year by the high value of the kyat which soared due to a 600 percent year-on-year increase in direct foreign investment largely in the mining and energy sectors—also accounting for an increase in imports of machinery. This caused exports to become uncompetitive and commodities to be dumped on the domestic market, which in turn reduced local prices and caused farmers to make a loss.