MYANMAR'S FOREIGN TRADE UNDER MILITARY RULE: Patterns and Recent Trends

Article excerpt

After gaining independence from the British in 1948, Myanmar's economy was heavily dependent upon foreign trade with exports constituting on average some 45 per cent of its gross domestic product (GDP) during the early 1950s. This proportion fell to around 33 per cent in 1961, the year before the March 1962 military coup that led to 26 years of socialist command economy. During this period, foreign trade became marginalized, despite the fact that it was the major source of acquiring foreign goods and services in the absence of foreign direct investment (FDI) and limited official development assistance (ODA). For example, during fiscal year 1985-86, external trade reached a total volume of US$900 million, accounting for only around 11.3 per cent of the GDP. During the socialist era, Myanmar posted persistent deficits in its trade balance.1

When the military took over control in September 1988 in the aftermath of a widespread popular uprising against the one-party socialist government, market-oriented reforms were quickly introduced after abolishing the socialist economic system. In 1989, foreign trade, which was formerly the sole prerogative of the state, was liberalized to allow private participation and an "open door" policy towards FDI and foreign trading firms. This led to a revival of foreign trade as a significant driver of economic growth, a major source of fungible hard currency, and of revenue for the state. The private sector quickly realized its potential for quick returns and rapid expansion. Trading enterprises blossomed in the early 1990s with the number of registered export-import companies increasing from none in 1988 to 2,813 in April 2001 and to 19,494 in June 2005.2 Since the Myanmar currency is not convertible, exports became the private sector's sole vehicle in obtaining the scarce foreign exchange needed not only to import consumer goods but also to obtain materials and equipment for the services and manufacturing sectors. By the fiscal year 2005-2006 the value of foreign trade reached US$5.5 billion - six times the volume achieved 20 years ago.3

Institutions and Regulatory Measures

When the socialist economy, premised upon centralized state control, was formally abandoned in March 1989 in favour of a market-oriented system, state agencies controlling foreign trade were reorganized in the process of revamping the Ministry of Trade. State monopoly on both domestic and foreign trade was abolished (except for selected commodities deemed important for national security and economic development), making way for private trading. New laws were also enacted to allow the establishment of private companies (including export and import agencies) and facilitate foreign and domestic private investment and trading. Meanwhile, the dormant chambers of commerce and industry were revived under government sponsorship.

Presently, foreign trade comes under the purview of the Ministry of Commerce (formerly the Ministry of Trade up until 1996), the motto of which is "Advance Forward through Commerce", while the highest policy-making body for trade issues is the Trade Council chaired by the Vice-Chairman of the ruling State Peace and Development Council (SPDC), Vice-Senior General Maung Aye. The number of state trading agencies under the Ministry was reduced from 11 to six by the mid-1990s, and then to three by the turn of the century.4

The "Main Objectives" of the Ministry of Commerce were stated as follows:5

1. To support internal and external trade activities for the economic development of the country.

2. To upgrade the commercial efficiency of the private and public trading houses.

3. To increase the foreign exchange earnings of the country by export promotion.

4. To encourage the trading activities of co-operatives and private entrepreneurs.

Three "Basic Principles" are also espoused as guidelines for trade policies:6

1. Trade activities should be aimed at the interest of the State and the people. …