Posts in category: ECONOMY

The Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) and US Information and Communication Technology (US ICT) Council for Myanmar will continue working together to develop Myanmar’s digital economy. The UMFCCI said the cooperation will ensure Myanmar does not fall behind when it comes to the digital economy sector.

The UMFCCI vice chair said that the development of their digital economy is important. They will feel the effects if they are left behind by other countries. This is why they will cooperate (with the US ICT Council for Myanmar) last year and this is the second singing following the expiration of their initial one-year term.

The UMFCCI and the US ICT Council for Myanmar signed a new memorandum of understanding (MoU) on January 5. They will also cooperate in all sectors related to IT. The US ICT will provide technical and financial assistance though it is still not known how much funding the US ICT will provide. They will implement digital economy for the industrial and education sectors as well. The current Myanmar digital economy landscape has improved a lot of compared to the past.

Source: Myanmar Times

The Myanmar government is expecting a 6 percent rate of growth in fiscal 20-21, according to the budget statement released by the Ministry of Planning, Finance and Industry. The ministry has set growth targets of 2.6 pc in the farming sector, 6.5 pc in the industrial sector and 7.4 pc in the services sector for the year. The government stated that profitable crops which conform to the country’s climate, new farming methods, plans to reduce crop wastage during the monsoon floods, exploration of oil and gas and other work plans are expected to offset losses made in manufacturing and by micro, small and medium enterprises in the country.

Economists said focusing on sectors like agriculture to generate growth is a good strategy. Myanmar’s garment sector has been hit hard by the prolonged outbreak of COVID-19, which has left thousands of workers unemployed. So, the government should consider prioritising the agricultural sector. According to the current economic index, it can be said that the country saw some growth in its economy last year, but this was then affected by the outbreak of COVID-19.

So, the government should prioritise the resumption of businesses in the country. The Union of Myanmar Federation of Chamber of Commerce and Industries said that profitable crops should be grown and their costs kept low. They will create markets for the sellers and need to produce value-added products. The more focus should also be channeled to sectors like fisheries. Currently, the marine industry has begun to enjoy growth. So, they need to expand into new export markets. The government should cooperate with other organisations in that move.

Source: Myanmar Times

According to the inflation report released by the Central Statistical Organization under the Ministry of Planning, Finance and Industry, the annual rate of inflation in Myanmar, based on the Consumer Price Index, continued dropping to 4.6 per cent in November 2020 as consumer price fell amid the COVID-19 impacts. The US dollar against Kyat is relatively weak in November, with a fall of about K203 against a year-ago period. The imported oil price also dropped against October’s rate, causing the transport group’s price index to slump, the inflation report showed. The consumer price fell in food, non-food, transportation and telecommunication groups. Simultaneously, the CPI spiked in household goods and maintenance, other commodities, tobacco and beverages, clothing, recreation, culture and non-food. The price index of education and rent is stable amid the COVID-19, the report stated.

The annual rate of core inflation, which strips out volatile food and energy prices, was 9.67 per cent in November 2020. The year on year inflation rate stood at 3.65 per cent in November, the inflation data indicated.
During the one-year period from December 2019 to November 2020, the inflation rate stood at 8.81 per cent in December 2019. Despite the drop in fuel oil price and gain in the local currency, the power tariff hike led to a higher inflation rate of 9.2 per cent in February 2020. Then, it gradually declined during the coronavirus outbreak in March due to consumers’ weak demand. Then, the rate fell to 4.60 per cent in November 2020. In November, Ayeyawady Region recorded the highest inflation rate at 9.11 per cent, followed by Mandalay Region at 7.55 per cent, and Nay Pyi Taw at 6.68 per cent.

The rate fluctuated with a maximum rate of 4.19 per cent in Ayeyawady and a minimum rate of -2.67 per cent in Kayah State. Earlier, the inflation rate was calculated based on a 2006 survey. The base year was later changed to 2012. The Central Statistical Organization conducted a Household Income and Expenditure Survey in 82 townships in November 2012. The authorities concerned have been making efforts to reduce the inflation rate based on policies, finance, currency, trade, and foreign currency control, keeping with the second five-year National Development plan (2016-2017FY-2020-2021FY).

Source: The Global New Light of Myanmar

The year 2020 has not been a great one for the Myanmar economy, with GDP growth slowing and unemployment on the rise. Due to the slowdown in economic growth, poverty rates are forecast to increase from 22.4pc in fiscal 2018-19 to 27pc in fiscal 2020-21, according to the World Bank. With limited savings, many poor households are being forced to reduce their food and non-food consumption in order to cope with income and job losses. Still, the pandemic spurred developments on several fronts, ten of which are listed below:

1.Economy goes online

From food deliveries to the sale of plants and jewelry, COVID-19 forced both businesses and consumers to move online this year. So the number of businesses that have moved online has doubled since the pandemic. This year, Statistica is also projecting a 7.1 percent increase in digital transactions and a 19.7pc rise in the number of users adopting digital modes of payment and transfers in Myanmar. The Myanmar government has also moved key administrative functions such as company registrations, tax filing and trade licensing online.

Renewals and fee payments for some permits as well as marketing and promotions for local trade and tourism are now being conducted online. Payments to vulnerable households under the government’s COVID-19 Economic Relief Plan were also distributed through mobile platforms, while social security payments, loans for farmers, emergency funds for garment workers and financial relief for street vendors were disbursed digitally.

2. Central Bank lowers interest rates

The Central Bank of Myanmar (CBM) slashed interest rates by another 1.5pc in April, making it the third time it has done so since COVID-19 was declared as a global pandemic. The decision to cut rates was announced under Directive No. (8/2020), issued on April 27 and effective May 1. The CBM first cut rates by 0.5pc on March 12. A second 1pc cut was announced on March 24. The April 27 cut brings total rate cuts to 3pc within two months.

Starting from May 1, bank deposit rates in Myanmar were reduced to a minimum of 5pc and lending rates will not exceed 10pc for collateralised loans, according to the CBM’s new directive. However, rates for unsecured loans will remain at 14.5pc. The reduction of interest rates is expected to provide some relief for borrowers and help support economy.

3. Dollar exchange rate hits two-year low

The exchange rate in Myanmar reached its lowest level this year, with the kyat trading for less than K1280 per US dollar in the local market at the trough. The dollar weakened against the Myanmar kyat due to a fall in local demand for the currency to trade goods amid COVID-19.

The Central Bank purchased US$318.3 million in fiscal 2019-20, which is the year it bought the most dollars in the money market. Local currency watchers said the Central Bank has to purchase more dollars to stabilise the exchange rate. The US dollar also weakened after the Federal Reserve on September 2 announced a new strategy to boost employment and let inflation rise higher for longer than in the past.

4. Interbank transactions permitted

The Central Bank of Myanmar launched its Financial Network System 2 (CBM- NET2), which is the upgraded version of the original CBM-NET, on November 16. CBM-NET is a secure and efficient payment and settlement infrastructure, set up to facilitate and digitalise banking and finance in Myanmar.

The launch of CBM-NET2 will enable 24/7 domestic local currency remittance between different banks and make formal remittance services more accessible to those who have previously relied on cash payments and high-risk informal remittances. It will also help facilitate bulk payments such as payroll transfer and automatic withdrawal of taxes and utilities bills.

Supported by the Japan International Cooperation Agency, CBM-NET2 was developed in response to the surge in online transactions via mobile banking in Myanmar. The system enables interbank transactions between all Myanmar banks, including commercial, state-owned as well as foreign banks which are licensed to do business in the country. Additional features will be added to the system over the first half of 2021.

5. Yangon ports receive biggest ships in history

The Yangon River was able to accommodate the largest vessels in its history as a result of improved waterways in the river this year. Ships with drafts of 10 meters will be allowed to dock at Yangon’s ports from this year onwards. This year, a 10.5-meter-draft vessel was able to call at Yangon for the first time in Myanmar port history. From July to November, a total of 15 ships with drafts of 9.5 meters docked at Yangon’s ports, according to an MPA report.

The development is part of a five-year plan to enable larger foreign cargo ships to call at Yangon’s ports. Larger vessels allow more goods to be delivered per call, which, in turn, enables importers to accelerate delivery times and cut costs. Under the plan, Singapore-based Star High Asia Pacific Co was awarded a US$25 million five-year dredging contract in the Yangon River to facilitate these vessels.

6. Reviving tourism

The Ministry of Hotels and Tourism announced plans to revive tourism in Myanmar earlier this month. These include new offerings such as non-landing flight tours, road trips and Yangon river cruise tours. Myanmar’s first non-landing sightseeing flight tour to Kyaik Htee Yo and Zwekabin Taung, operated by Myanmar National Airlines, took off on December 20. Efforts to expand flight and cruise tours will continue depending on the public’s response and interest.

Some private Mandalay-based airlines have also made preparations to conduct 30-minute non-landing sightseeing flights to Bagan and Inle soon. Revenue from tourism has dropped by more than 80 percent, or around US$2.3 billion, to just US$543 million since the pandemic in Myanmar, according to a survey by the Ministry of Hotels and Tourism. The survey covered the tourism sector together with other related sectors like international airlines, domestic transportation, food and beverage, accommodation, entertainment and culture as well as shopping.

7. Industrial park focus

Myanmar partnered with international investors to open two new industrial zones which it hopes will lure foreign manufacturers to open up factories in Myanmar. On December 27, the government inaugurated the US$274 million Yangon Amata Smart and Eco City industrial park project in Dagon, which will be jointly constructed by the Myanmar Department of Urban and Housing Development and Thailand’s Amata Corporation PCL under the supervision of the Yangon Region Government.

The Yangon Amata Smart and Eco City was inaugurated shortly after development of the US$110 million Korea-Myanmar Industrial Complex commenced in Hlegu township, Yangon, on December 24. The two new industrial parks will give investors more options to open manufacturing facilities in Myanmar as they will come equipped with basic infrastructure such as roads and power plants and offer incentives such as tax exemptions.

According to the Directorate of Investment and Company Administration, the amount of foreign investment in fiscal 2019-20 fell short of the targeted US$5.8 billion due to the COVID-19 outbreak. In November, Japan also made an official offer to Myanmar and Thailand to invest in the long delayed Dawei Special Economic Zone (SEZ). The Japanese government will commence a survey to determine the total amount of capital expenditure required to participate in the development of the Dawei deep sea port project.

8. First modern credit bureau launched

Myanmar Credit Bureau Limited (MMCB) on December 30 launched the country’s first and only modern credit bureau. MMCB, which is licensed by the Central Bank of Myanmar, will provide Myanmar with a modern credit reporting system that will enable lenders to expand the financing options available for individuals and businesses. It will also encourage more responsible lending in the country.

The bureau has been centralising information gathered from financial institutions in Myanmar about their borrowers since its soft launch in November. With this information, the bureau produces credit reports on individuals or corporates to help financial institutions make better lending decisions and lower the risk of defaults. Borrowers, in turn, should expect faster and more competitive services from lenders.

9. Myanmar receives Malaysian LNG

For the first time in Myanmar, liquefied natural gas (LNG) will be used to power up seven new plants in Magwe, Shwe Taung, Kyun Chaung, Ahlone, Kyauk Phyu, Thanlyin and Thaketa to produce a total of 1166MW of power for summer this year. The country took delivery of its second load of liquefied natural gas (LNG) from Malaysia on November 25. A total of 126,000 cubic meters of LNG was delivered to CNTIC VPower at the Thilawa port in Yangon and will be transferred via a floating storage until to the 350 MW Thanlyin power plant and the 400MW Thaketa power plant.

The Ministry of Electricity and Energy signed agreements with Petronas LNG Ltd of Malaysia and CNTIC VPower of China earlier this year to purchase LNG over a five-year period. Petronas delivered the first two LNG cargoes – 190,000 cubic meters worth- to Myanmar in May and June. Electricity is generated mainly by hydropower and natural gas in Myanmar, meeting 55pc of the country’s electricity needs. The Ministry of Electricity and Energy plans to meet 75pc of the country’s electricity needs by 2025. It is also aiming to have renewable sources account for 14pc of its total generation within the five-year period.

10. Govt supports microfinance

The government extended K59.5 billion in loans to 44 microfinance institution (MFIs) at an interest rate of 2pc interest per annum this year. Small businesses like teashops and small restaurants will be able to apply for the loans. Up to K100 billion in short-term commercial loans to MFIs at interest rates not exceeding 9 percent with collateral and not exceeding 11.5 pc without collateral were extended through the State-owned Myanmar Economic Bank.

The Ministry of Planning and Finance issued several statements directed at microfinance institutions, instructing them not to force borrowers who are unable repay their debts to do so amid the current period of declining business and income.

Source: Myanmar Times

Recent developments 

• The second wave of the COVID-19 pandemic is having a more severe impact on Myanmar’s economy than the first wave.   
• Myanmar’s economy is estimated to have grown by 1.7 percent in FY19/20, a pronounced slowdown from growth of 6.8 percent in FY18/19.     
• The pandemic and associated containment measures have had both demand- and supply-side effects, weakening consumption and investment, and disrupting businesses’ operations and the supply of labor and inputs.  
• Activity in the manufacturing, retail, travel and leisure and recreational sectors contracted.  Other services using internet-based platforms were better able to weather the impact of mobility restrictions.   

Policy response 

• The government has responded to COVID-19 with a range of measures, including:
• disease prevention and treatment programs;  
• direct financial assistance to vulnerable households through in-kind and cash transfers  
• reductions in household electricity charges;  
• financial assistance to businesses through loans, guarantees, and tax deferrals and exemptions. 

Outlook 

• Growth is projected to remain relatively low at 2 percent in FY20/21, reflecting the significant economic disruptions associated with COVID-19 containment measures imposed in the first (December) quarter, when much of Myanmar’s growth for the year usually takes place.  
• Despite the impacts of the pandemic, medium-term growth prospects remain positive.  
• Growth is projected to recover to 7 percent on average, supported by new investments in industrial and urban development projects, roads, and communication and power infrastructure.  
• A gradual resurgence in manufacturing activities is expected, while increased use of digital technology could boost productivity across a broad range of sectors.  

Risks 

• However, risks to growth remain high.  
• Further waves of local transmission or a deeper and more prolonged global slowdown would have significant effects on the outlook. Financial sector vulnerabilities, exposure to natural disasters, and uncertainty around post-election reform momentum also pose risks.  

Policy recommendations 

• In the short term, the Government should focus on relief measures that slow the spread of the virus while protecting the most vulnerable.   
• Once the spread of the virus has been contained and economic activity gradually resumes, a demand-led strategy for a medium- to longer-term recovery will be required to stimulate the economy.  
• Measures should be considered to support private consumption and investment. Investments in priority public infrastructure would bolster aggregate demand and construction sector activity in the short to medium term, while increasing the productive capacity of the economy in the longer term.    
• In the near and medium-term, policy measures to accelerate the development of an efficient and stable financial system could deliver significant economic benefits. 
• Moreover, Myanmar could explore economic opportunities in the areas of digital technology, pharmaceutical production, insurance services, health and educational services and fintech as new growth levers.   

Source: The World Bank

There are seven areas that will be used to grow the digital economy, including four fundamentals, including digital infrastructure and cyber security. U Mya Moe Aung, Founder and Managing Director of Kinetic Myanmar Technology CO., Ltd said. “The Digital Economy Development Committee has identified seven areas for digital economy development. There are four basic principles. The first is to build digital infrastructure. The second is to enact encouraging policies and laws. The third is to improve cyber security. The fourth is to develop human resources and master digital technologies.”

It is believed that if these four foundations are strong, the capacity for innovation will increase. Then there are digital governance systems. Digital trading systems have improved, and manufacturing, With the advent of the Digital Transformation process, businesses will be able to build a digital society and a digital economy. Human resource development is very important in these seven areas. To leapfrog and develop our country; To Leap Frog To be able to leap into Quantum, human resources need to not only make good use of the latest technologies, but also develop to the level of innovation.

Digital skills to develop human resources; It is also necessary to develop the latest technology skills. Many people are exposed to digital skills, To learn the latest technology, you need to go through the Online Learning Platform. It is believed that Myanmar’s human resources would become international in a few years if it took full advantage of the opportunity to learn internationally taught subjects on the online learning platform. The human resources of young people are being used for business. Effective use of the latest technologies in SMEs will help increase the efficiency of businesses. Moreover, the use of technology in SMEs will increase the country’s competitiveness and help the country’s economy.    

Source: Daily Eleven                  

Myanmar’s companies scored slightly better in this year’s corporate transparency report but state-owned enterprises still trail far behind. The sixth Pwint Thit Sa (Transparency in Myanmar Enterprises) report assessed 260 public, private and state-owned companies, 12 more than last year. Launched by Yangon-based Myanmar Centre for Responsible Businesses (MCRB) and Myanmar consultancy ever since 2015, the index seeks to galvanise Myanmar companies to be better governed and more transparent.

According to the report, this year saw UAB Bank moving from 5th place to first in terms of transparency with a score of 96 out of 100, followed by City Mart Holdings, Shwe Taung Group, Yoma Bank and the Yangon Stock Exchange-listed First Myanmar Investment Public (FMI). After opening up its economy in 2011 following decades of cronyism and opaque business dealings under military rule, Myanmar has been making efforts to catch up with global standards in governance regulations.

While there was overall improvement in corporate disclosure following regulatory and market pressure for companies to reform, the lack of progress by state firms reflects as a failure to tighten the grip on a bureaucracy shaped. This lack of openness and transparency – which persists in the energy, commerce and other ministries has deterred foreign investors. The energy ministry’s solar opposition parties and the business community this year, but neither ministers nor their deputies actively reached out to engage.

The report analyses each company in four categories, namely its corporate profile, corporate governance, sustainability management and reporting. Corporate governance emerged as the best performing category with an average score of 129 out of 100 for the top 10 (bonus points for private companies voluntarily disclosing in specific areas led them to score above 100). The weakest areas are reporting and sustainability management with an average score, respectively, of 56 and 55 for the top 10.

In terms of online accessibility, 98 companies, or 38 percent of the 260 companies assessed this year do not have corporate websites, down from 108, or 44pc, of 248 from last year. Besides including all the state-owned enterprises, the report this year also evaluated all the local banks. The study said that Myanmar has relatively low legal requirements for corporate governance and disclosure, but international standards employed to scrutinise the country’s firms have encouraged them to go beyond compliance with the law.

Overall, listed companies, which scored an average of 39 out of 100, outperform non-listed public and private companies, whose average scores are 5 and 7 respectively. This year, more companies were keen to engage with MCRB or Yever despite the COVID-19 pandemic, and the direct engagement process helped the 34 companies to improve their score by 231 on average.

The top five state firms performers in the report are the Yangon Electricity Supply Corporation followed by Myanmar Shipyards, Myanmar Investment and Commercial Bank, Myanmar Economic Bank and Electricity Supply Corporation. However, even the highest-performing scored a total of only 9. There are also four state companies which made no disclosures at all : Electric Power Generation Enterprise, Myanmar Agriculture Development Bank, Myanmar Pharmaceuticals Enterprise and Myanmar Railways.

Source: Myanmar Times

Myanmar banks should inspect borrowers’ disclosed income before extending loans to them, according to the Central Bank of Myanmar (CBM). This is to ensure the disclosures are legit and that borrowers are not involved in potential money laundering activities. For example, some borrowers can disclose certain items as bank loans to avoid being taxed.

In February, the Paris-based inter-governmental Financial Action Task Force (FATF) put Myanmar on its grey list, implying that it had found strategic deficiencies in the country’s ability to counter money-laundering and terrorism financing. The decision places Myanmar banks, financial organisations and the CBM under negative pressure as international lenders now regard Myanmar as a high risk borrower.

The FATF wanted other countries to be more careful as money laundering is the conduit for illegal property, gold, gems and jewellery sales in Myanmar. The FATF deems cases of tax evasion and laundering the money and assets obtained from tax-related and other crimes as criminal cases.

As such, the CBM is taking efforts to prevent Myanmar from falling the FATF’s black list. It is now increasing supervision and inspections of Myanmar’s lenders based on money laundering risks, complexity and individual bank’s transactions. Among the measures is the latest requirement for banks to supply information on income sources regarding bank loans whenever requested by the CBM.

Meanwhile, when submitting instances of increased bank capital and share transfers, the shareholder himself should pledge that the funds represent taxed income and is free from money laundering activities. Approvals will be granted only when these declarations are submitted to the Ministry of Planning, Finance and Industry and Anti-Money Laundering Central Board for inspection of clearance from money laundering, the CBM stated.

Source: Myanmar Times

The US dollar against Kyat weakened to K1,350 within a week in the local forex market, following the Central Bank of Myanmar selling 3 million dollars, local forex market data indicated. When the dollar value was substantial in the local forex market, the Central Bank of Myanmar (CBM) started to sell 3 million dollars from the state’s foreign exchange reserves at an auction rate on 14 December. A dollar exchange rate stood above K1,400 on 15 December 2020. The rate fell to K1,350 on 21 December, with a decrease of over K50 within a week.

“The dollar gain will benefit the exporters. Yet, it will hike up the local food prices. The currency intervention is required to steer the own currency value, U Than Lwin, senior consultant to Kanbawza Bank shared his opinion. “A too-strong or too-weak dollar is not good for the economy. It is one of the responsibilities of the CBM to control the price. That is why the CBM practised the foreign exchange intervention,” he elaborated.

This year, the exchange rate moved in the range of K1,465-1,493 in January, K1,436-1,465 in February, K1,320-1,445 in March, K1,395-1,440 in April, K1,406-1,426 in May, K1,385-1,412 in June, K1,367-1,410 in July, K1,335-1,390 in August, K1,310-1,355 in September, K1,282-1,315 in October and K1,303 1,330 in November. Last year, the rates are pegged at K1,508-1,517 in July, K1,510-1,526 in August, K1,527-1,565 in September, K1,528-1,537 in October, K1,510-1,524 in November and K1,485-1,513 in December. On 20 September 2018, the dollar exchange rate hit an all-time high of K1,650 in the local currency market. 

Source: The Global New Light of Myanmar

The 17th China-ASEAN Expo and China-ASEAN Business and Investment Summit Kicked off on November 27,2020 highlighting booming digital economy cooperation and the implementation of a recently signed major trade pact. Themed “Building the Belt and Road, strengthening digital economy cooperation,” this year’s expo aims to deepen cooperation in trade, the digital economy, science and technology, health, and other fields. Chinese President Ci Jinping called for cultivating a closer community with a shared future for China and the Association of Southeast Asian Nations (ASEAN) when addressing via video the opening ceremony.

With an exhibition area of 104,000 square meters, the expo has 5,400 booths in Nanning, capital of south China’s Guangxi Zhuang Autonomus Region. More than 1,500 enterprises from home and aboard will participate virtually in the four-day event, according the organizers. The expo will also host 11 high-level forums and more than 160 economic and trade promotion activities. This year is designated as the China- ASEAN Year of Digial Economy Cooperation. Strengthening digital economy cooperation was the common call of ASEAN leaders at the opening ceremony. China is one of the countries that are at the forefront in developing infrastructure and is an important partner of ASEAN in promoting the digital economy in the region.

This year’s expo also highlights the Regional Comprehensive Economic Partnership (RCEP), the world’s biggest trade pact, which was signed earlier this month by 15 Asia-Pacific countries including ASEAN’s 10 member states and China. It was a massive move for regional economic integration, multilateralism and free trade. The expo features a “Belt and Road” exhibition area, and enterprises from RCEP countries including Japan, the Republic of Korea, Australia and New Zealand have participated in the event, according to Wang Lei, secretory- general of the expo’s secretariat.

High-level dialogue conducted during the expo will promote greater participation from RCEP members in the construction of the Belt and Road, said Wang, adding that the expo will help integrate the market advantages and resources of the 10 ASEAN members with the capital and technical advantages of other RCEP members. The RCEP will also provide a solid foundation for an open, inclusive, and rules-based global trade environment. Xu Ningning, executive president of the China – ASEAN Business Council, said that opening up the markets of the 15 countries to each other will bring about new changes and closer regional cooperation.

Source: Myanmar Times