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Myanmar manufacturing sector continues downturn in March

Myanmar’s manufacturing sector recorded an accelerated downturn in February 2021 as political changes led to factory closures. The IHS Markit Myanmar Manufacturing Purchasing Managers’ Index measures the seven-month low in output, new orders, purchasing and stocks of both inputs and finished goods, stated the IHS Markit on 1 April 20201. The layoff is extended, and the workers are asked to return to their hometowns amid the political changes. The HIS Markit stated that higher material costs and unfavourable exchange rate movements contributed to a sharp increase in cost burdens. Exports of finished industrial goods drastically plummeted to US$3.209 billion between 1 October and 19 March in the current financial year 2020-2021, a severe drop of $1.7 billion compared with the corresponding period of the previous FY, according to the Ministry of Commerce. As per the ministry figures, the exports of finished industrial goods totalled $4.9 billion during the same period in the 2019-2020FY.

Myanmar’s manufacturing sector is primarily concentrated in garment and textiles produced on the Cutting, Making, and Packing basis, contributing to its GDP to a certain extent. Myanmar’s garment export dropped by over 25 per cent as of the first quarter of the current FY compared with a year-ago period on the back of a slump in demand by the European Union market, according to the Ministry of Commerce. At present, the CMP garment factories temporarily shut down and left thousands of workers unemployed. Myanmar mainly exports CMP garments to markets in Japan and Europe, along with the Republic of Korea, China, and the US. The garment sector is among the prioritized sectors driving up exports. The CMP garment industry has emerged as a promising one, with preferential trade from Western countries. Myanmar’s garment factories operate under the CMP system. Those engaged in this industry are striving to transform CMP into the free-onboard (FoB) system. As the factories cannot enter into a contract for FoB, Own Design Manufacturing (ODM) and Own Business Manufacturing (OBM), the income is limited, according to the MGMA.

According to data from the Ministry of Commerce, exports of garments manufactured under the cut-make-pack (CMP) system were valued US$4.798 billion in the last financial year 2019-2020. Although the sector is struggling due to the cancellation of order from the European countries and suspension of Western nations’ trade during the pandemic, export values rose in the previous FY (1 October 2019-30 September 2020). The export value of CMP garments was only $850 million in the 2015-2016FY, but it has tripled over the past two FYs. In the 2016 2017FY, about $2 billion was earned from exports of CMP garments. The figure increased to an estimated $2.5 billion in the 2017-2018FY and $2.2 billion in the 2018 mini-budget period (from April to September). It tremendously grew to $4.6 billion in the 2018-2019FY, according to the Commerce Ministry. Since an outbreak like COVID-19 might happen in the future, it is necessary to prepare for a sufficient raw materials supply. That is why the public and private sectors will cooperate in setting up the supply chain on our own sources, including weaving, knitting, dyeing, and sewing factories. The MGMA has more than 500 members and garment factories in Myanmar, employing more than 400,000 workers. Investors prefer to invest in countries with inexpensive labour, such as Myanmar.

Source: The Global New Light of Myanmar

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Rice prices remain low due to lack of money in circulation

The rice and paddy price extends its drop at March-end due to the brokers’ lack of money in circulation and lower pricing. The rice is regularly traded in Yangon as urban people keep supply to ensure food security in need. The rice price was pegged at around K21,000-22,000 per bag in March-end, with a small decrease of K2,500 as against the previous months. Meanwhile, the paddy prices move in the range of K506,000 to 626,000 per 100 baskets, depending on the rice crops’ quality. The paddy prices indicated a decrease of K6,000-46,000 per 100-baskets upon different qualities and varieties, as per the domestic rice market. Only a small number of rice export companies are buying the rice at present owing to the disruption in banking, said U Than Oo, secretary of Bayintnaung Rice Wholesale Centre.

Since early February, the local private banks have been closed down, causing transaction Rice prices remain low due to lack of money in circulation problems. Consequently, the export companies are buying less in the domestic market. The rice exports are currently conducted for the previous contract only. Additionally, the US dollar is appreciating against the Kyat. However, the farmers are paid lower than the actual market price and suffering losses, he added. Next, the informal money transfer system Hundi is available in border trade only. In contrast, it cannot be done in maritime trade. In Sino-Myanmar border, exchanging Yuan is quite easy through hundi agent. Similarly, the traders use hundi for exchanging Baht on the Myawady border with Thailand.

Nevertheless, overseas trade with European and African countries is carried out with a letter of credit through banks. The disruption in banking poses difficulties to the maritime trade. Bayintnaung rice wholesale centre, a primary market for rice exports via maritime trade, has been closed down since 11 February. Additionally, Myanmar traders are shipping rice to China under new permits for 2021. Myanmar shipped more than 720,000 tonnes of rice and broken rice to foreign countries between 1 October and 15 January of the current financial year 2020-2021, earning over US$275 million, Myanmar Rice Federation stated. Weather changes affected irrigation water resource availability in agriculture. As a result of this, Myanmar set the rice export target at only 2 million tonnes in the current FY as summer paddy growing acreage drops, said the chairman of the Myanmar Rice Federation (MRF). Myanmar generated over $800 million from rice exports in the previous FY2019-2020 ended 30 September, with an estimated volume of over 2.5 million tonnes.

Source: The Global New Light of Myanmar

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Muse border trade nearly comes to suspension due to COVID-19

Muse border trade comes to the verge of standstill following the detection of the coronavirus case in the border market, said the vice-chair of Muse Rice Wholesale Centre. On 29 March, one Myanmar citizen tested positive for COVID-19 was found in Kyalgaung precious stone market, prompting China to restrict border access at the Man Wein checkpoint, which is a major border crossing between Muse and Kyalgaung areas. Man Wein post has been closed down since 12:30 pm of 30 March. Man Wein is the important cross-border point between Myanmar and Ruili, China.

Following the detection of coronavirus case in Kyalgaung border, the Ruili Kyalgaung river crossing is also closed. The coronavirus tests and vaccination are now offered in Kyalgaung. Furthermore, China imposed the lockdowns on Kyalgaung and Ruili cities between 1 and 7 April, Muse Rice Wholesale Centre stated. Consequently, there is no trade flowing in and out of the country via the Muse border, and the Muse border nearly comes to a halt. However, Kyinsankyawt and Wan Ding posts give the green light to over 400 watermelon trucks.

Around 400 trucks of watermelon and muskmelon daily enter China via Kyinsankyawt and Wan Ding posts. They do not need to pass the Man Wein checkpoint for Ruili. The watermelon trucks are the exception. To summarize, rice, broken rice, sugar, corn, fishery products, and other consumer goods cannot be traded for now. Since early March, Muse border trade has returned to normal, with a thousand trucks daily plying to and from Muse border. Myanmar is daily shipping rice, broken rice, green grams, peanuts, various pulses and beans, onion, chilli, fishery products, consumer goods, watermelon and muskmelon to China with over 700 trucks through the land border. Meanwhile, building materials, electric appliances, medical devices, consumer goods, and fertilizer are imported daily with 200 trucks.

Source: The Global New Light of Myanmar

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Myanmar export value exceeds $1,600 mln in Jan this FY

Myanmar average export value for January in the 2020- 2021 financial year reached US$824.38 million, and border export value reached $811.15 million, with total export value coming at $1,635.53 million as a result. Meanwhile, standard import value for the same period reached $1,581.94 million, and border import reached $399.68 million, reaching a total of $1,981.62 million.

As a result, Myanmar total trade value for January 2020-2021FY reached $3,617.15 million, creating a trade deficit of $346.09 million. From October to January of the current 2020-2021FY, Myanmar normal export value generated $2,978.58 million, and border export reached $2,681.65 million, totalling $5,660.23 million.

The average import value for the same period reached $4,721.97 million, and border import reached $1,167.60 million, totally bringing $5,889.57 million. Consequently, the total trade value of Myanmar for October to January of 2020- 2021FY reached $11,549.80 million, generating a trade deficit of $229.34 million, according to the monthly trade report by the Central Statistical Organization.

Source: The Global New Light of Myanmar

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The giant French energy company “Total” says it will not suspend gas production in Myanmar

The giant French energy company “Total” will not suspend gas production in Myanmar, a company official said on April 4. In the wake of the escalating crackdown on protests in Burma, there have been widespread calls for international companies to suspend operations in the interests of the military. Total Company’s gas production supplies millions of people in Rangoon, Myanmar, as well as western Thailand, so the company has a responsibility to continue operating in Myanmar, said Patrick Puyan, chief executive officer of the company.

Should a company like Total make a decision that would cut off power to millions of people and affect hospitals and operation, said in an interview with a French newspaper. The chief executive officer said he was outraged by the repression in Burma, but refused to do anything that would further harm local staff and the people of Burma, who are currently suffering. Italy’s Benetton and Sweden’s H&M have suspended all new orders from Myanmar, while French energy giant EDF has suspended operations, including a $ 1.5 billion hydropower project.

The Burmese oil and gas industry, which is controlled by the military, is owned by Total. It has a joint venture with US energy company Chevron, which generates around $ 1 billion a year from gas sales, according to AFP. Total paid around $ 230 million in taxes and production rights to the Myanmar government in fiscal 2019, and $ 176 million in 2020, according to the company’s financial statements. According to Puyan, Total has not been able to pay around $ 4 million a month in taxes since the military shut down after the military took power in Burma, and will donate the equivalent amount of revenue owed to the Burmese government to human rights groups in Burma, according to the company’s chief executive.

Source: Daily Eleven