Is it too distant a dream to walk down the aisles of a fashionable store in the west and find “Made in Myanmar” tags on clothes, footwear, food products and more? Perhaps not. This should come true in the next few years, as Myanmar goes about reformulating strategies, redefining policies and procedures, incorporating more products and sectors for exports, and the government works towards improvement of infrastructure, capability and mechanization to deliver world class goods and services in the global market.
Last month, the National Export Strategy added five new sectors to NES 2020-25. This is the result of the growing awareness to expand exports, given that the last five years have seen only a USD 2 billion increase in export revenue, which stands at USD 14.8 billion in the last fiscal ending March 2018. Value added products when exported will yield more revenue from a wider range of sectors. A push to export will also lead to quality improvement and competitive pricing.
At present the main exports include oil and gas, textiles and footwear, raw commodities like pulses, rice, oilseeds, wood and wood products, rubber, and marine products. The NES has now included value added product sectors to this list, including gems and jewelry, fruit and vegetables, agri-based food products, industrial art products and information and communication technology products.
The relevance of exports
While self sufficiency in economies would be considered ideal, interdependence, exchange of goods and services, cooperation and collaboration are healthy and bring out the best. Countries produce goods in which they have a comparative advantage due to rich natural resources, sufficient availability of raw materials, lower labor costs, and a host of other factors. Economies grow and expand as they initiate their export and import trade, benefitting from access to products and equipment they are deficient in, and gainfully utilizing their surpluses by exporting them to countries displaying an interest in them, thereby improving their balance of payments.
A strong correlation exists between economic growth and international trade. Empirical evidence reveals that all East Asian nations saw rapid economic growth mainly after they moved towards integration with the global economy. Their strengthened export sector led to spurts in economic growth, even though the initial stages of their industrialization necessitated imports of machinery and equipment.
The significance of increasing exports cannot be highlighted enough. Exports lead to increased demand, capacity utilization, increase in employment opportunities, and hence improvement in standard of living.
Sales and profits increase, and this helps to increase investments and expand the production base. As foreign exchange reserves build up, the balance of payments become favorable, and it is possible to spend on import of the latest technological equipment and make production cost effective and top quality.
The range of goods and services expands, and ancillary industries also mushroom. Inevitably, less developed countries begin with exports of primary goods – raw materials, agricultural produce, and industrially valuable minerals that the country is endowed with.
Exports also help other countries that find producing specific goods uneconomical due to numerous factors, like, high cost of raw material or its unavailability, expensive labor, lack of expertise in production and high tax rates. For such countries, imports are a more viable option.
As the level and range of exports increases, domestic competitiveness goes up, product diversification and specialization begins, and local products gain a global market share. The life cycle of the product extends and seasonal local demand is no longer a concern, since the supply can be sold in other countries.
On the flip side, exports often take place at the expense of the local market, and domestic consumption suffers, with lower supply and higher prices.
Challenges on the path of increasing exports
At present, oil and gas are the biggest exports out of Myanmar, forming 28% of all exports, followed by textiles, agricultural products – beans, pulses, oilseeds, rice, rubber, aquaculture, wood and wood products. With industrialization progressing gradually, numerous challenges stand in the path of rapid export growth.
The absence of a well developed infrastructure is the first impediment. Lack of a good road and rail network that connects villages, towns and cities, ports where international ships can enter for higher volumes of sea trade, make movement of goods difficult. Power supply being deficient implies industries cannot be set up close to the source of raw materials, though the setting up of industrial zones and special economic zones should help.
Building a capable workforce not just through improvement in education, but providing vocational training of international standards, will help improve the quality and quantity of goods produced and use imported machinery and equipment which yield high quality output in other countries.
Tapping global demand for products available in abundance in Myanmar is another avenue where lots needs to be done. The world is moving towards organic agricultural produce and Myanmar grows some of the latest fresh produce in vogue, like avocado, mangosteen, exotic varieties of mangoes, specialty coffee beans, which are now finding their way into exclusive cafes in France and US, and green tea being exported to China and Germany.
Standardized quality and production volumes need to be maintained before vale added products can be exported and export levels maintained. Producing good quality products is still a challenge though the textile industry has improved phenomenally in this respect.
Lower prices attract exports and help create a niche in the global market. In a highly competitive world, lowest cost producers will attract more demand. Myanmar with its large work force offers low cost labor which needs training but will help reduce production costs. If land prices can be regulated, expenses can be curtailed further, since prices of land especially near big cities like Yangon and Mandalay are unreasonably high.
Government initiatives
International trade grows according the policies laid down by the government, protecting the domestic market and their resources, and trade licenses are issued accordingly.
The Myanmar government is well aware of the impediments in the path of increasing exports, and the National Export Strategy is steering the regulatory framework to push exports higher. The initial list of seven sectors has been extended to include five more, for the period from 2020 – 2025. In a recent interview, U Aung Soe, director general of the Myanmar Trade Promotion Organization delineated the steps being taken by the government, the challenges faced and the need for private sector participation in building capability and capacity, training the local people to make them fit for the workplace. A big push and support will be given to small and medium enterprises as well as micro organizations to export their produce, at competitive rates.
Myanmar has a locational advantage as it lies between two of Asia’s biggest countries with a huge customer base, India and China. Its rich natural resources, need to be tapped and utilized for value addition and then exported, to increase the earnings they yield, besides providing employment. Abundance of water and rain on fertile land can increase agricultural production to high levels, especially by mechanizing processes. It has lessons to learn from neighboring Asian countries like Thailand and Vietnam. As an emerging market, it shows promise of growing at rapid rates, and growing exports will only facilitate the process, and Myanmar will be able to inch closer to its Asian neighbors.
