Myanmar Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

The EU is Myanmar’s third most important trading partner (after China and Thailand). However, it can be expected that the importance of the EU for Myanmar’s trade relations will tend to decline. The reason is mainly the reduced interest in Myanmar goods on the part of European business chains as a result of the military coup and concerns of European customers about sanctions and reputational risks. This mainly concerns the textile and clothing industry, whose products make up roughly 90% of Myanmar’s imports into the EU. As clothing supplies are made on the basis of long-term contracts, it is likely that this decline will be gradual, spread over several years. The question of sanctions and complications with the payment system will also affect European exports and investments in the country.

Trade exchange with EU countries (million EUR)

2017 2018 2019 2020 2021
Exports from the EU (million EUR) 505.6 548.8 607.8 511.6 322.2
Imports into the EU (million EUR) 1372.5 2074.1 2,813.2 2,588.9 2,249.5
Balance with the EU (million EUR) 866.9 1,525.3 2,205.4 2,077.3 1,927.3

Source: European Commission

Trade relations with the Czech Republic

In the case of the Czech Republic, we observe a similar trend to that of the entire EU, namely a significant excess of imports over exports with a strong acceleration in 2018. Myanmar’s imports are mainly driven by clothing production, and it can be expected that exports will have reached their peak in 2020. In the Czech Republic, Myanmar clothing is purchased by the same multinational chains as elsewhere in the EU, and due to political developments in Myanmar, they are gradually ending their orders, or they do not enter new requests. At the same time, the import of Myanmar food products to the Czech Republic, especially rice, is gradually increasing, and in this case we can expect the maintenance or slight strengthening of existing trends.

Trade exchange with the Czech Republic (billion CZK)

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 0.1 0.1 0.2 0.2 0.1
Imports to the Czech Republic (billion CZK) 0.2 1.8 2.5 2.8 2.8
Balance with the Czech Republic (billion CZK) 0.1 1.7 2.3 2.6 2.7

Source: businesscarriers.com

Trade relations with countries outside the EU

Myanmar imports most goods from ASEAN countries (especially Thailand and Malaysia), the PRC and India. The reason is mainly the more favorable price of these products and lower transport costs. It should be noted that among the goods imported from neighboring countries are a number of products of European brands produced in South and Southeast Asia, either by subsidiaries of European (and American) companies, or under license by local manufacturers. This is also how Czech agricultural machinery assembled in India is imported into the country.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 14,074.5 13,685.0 12,206.9 11,501.9 6,478.8
Imports to countries outside the EU (million EUR) 7,810.6 8,293.0 7,333.9 8,088.9 5,513.7
Balance with non-EU countries (million EUR) 6,263.9 5,391.9 4,873.0 3,412.0 965.1

Source: EIU, Eurostat

Foreign direct investment

The government from 2016-2020 created a relatively functional system facilitating the implementation of FDI, including the so-called special economic zones, which enjoyed certain tax and administrative advantages. Thanks to this (together with a favorable location, low costs for almost all inputs and a generally quite accommodating regulatory environment), the country managed to attract a whole range of FDI in the total volume of USD 2 billion. Investments were directed mainly to the mining and processing of mineral resources, agricultural products (food, rubber), clothing production (which in this short time became one of the main export items of the country), and also to the production, assembly and packaging of consumer goods for local market. This system was taken over by the current military regime and procedurally keeps it going, however due to the sanctions and controversies surrounding doing business with the regime, the number of investors fell sharply (one year after the coup, the volume of approved investments amounted to less than USD 3 billion, whereas in previous periods plans for approx. USD 5 billion were approved annually) and a significant part of these investments was the expansion and modernization of already existing operations. The most important investors in the country are Singapore, the PRC, Thailand, Hong Kong and the United Kingdom (including overseas territories).

At the moment, we do not register any Czech FDI in the country, all Czech companies operate here through the business representation of a Myanmar partner, and this model can be clearly recommended given the current political, security and legal situation. Any investment in the country would require review and approval by the military regime’s authorities, exposing the would-be investor to the opposition’s risk of legal action, activist campaigns (in both cases outside of Myanmar), and potentially attacks on its Myanmar offices and operations.

FTAs and treaties

Treaties with the EU

The EU does not have an FTA with Myanmar, and such an agreement does not yet exist even at the EU-ASEAN level. The preparation of an EU-Myanmar investment protection agreement was considered, but it is unlikely that it will be negotiated in the coming years.

Contracts with the Czech Republic

On October 20, 2015, the Agreement on Trade and Economic Cooperation between the Government of the Czech Republic and the Government of the Republic of the Union of Myanmar was signed in the capital Neipyijto. The agreement creates a framework for intensive exchange of information, joint organization of business events and specific business opportunities. It further enshrines the existence of a joint body – the Joint Commission for Economic Cooperation, whose activities play an important role in the promotion of Czech export interests. The mixed commission meets alternately in both countries, its activities are coordinated on the Czech side by the Ministry of Industry and Trade of the Czech Republic. The first meeting of this commission took place in Neipyijto (2016) and the second meeting took place in Prague (2018). The third meeting was being prepared in Myanmar, however, due to the COVID-19 pandemic and the complex domestic political situation in the country, it is uncertain

Other important contracts between the Czech Republic and Myanmar include:

  • Agreement on Air Transport between the Government of the Czechoslovak Socialist Republic and the Government of the Union of Burma, Prague, 15 December 1965, No. 14/1966 Coll.;
  • Agreement on Economic Cooperation between the Government of the Czechoslovak Socialist Republic and the Government of the Socialist Republic of the Union of Burma, Rangoon, 12 January 1978;
  • Agreement between the Government of the Czech Republic and the Government of the Union of Myanmar on the Succession of Bilateral International Treaties Negotiated by Exchange of Notes, Bangkok, 19/12/2002;
  • Agreement between the Ministry of Health of the Czech Republic and the Ministry of Health of the Republic of Myanmar Union on cooperation in the field of health and medical science, Nay Pyi Taw, 31/12/2002.

Developmental cooperation

Myanmar is a recipient of development aid. According to the World Bank, in 2019 (the latest published figure), Myanmar’s total development assistance was US$2.08 billion (3.13% HDD). The Czech Republic also provides development cooperation to Myanmar. It mainly consists of humanitarian aid to areas affected by protracted ethnic conflicts and extreme manifestations of the monsoon cycle.

Czech companies can participate in development cooperation, e.g. by participating in tenders for the supply of goods and technologies for humanitarian aid implementers, they can themselves implement projects in the country from the B2B program managed by the Czech Republic, and it is also possible to request support for investment plans in Myanmar within the program Warranty.

Prospective fields of study (MOP)

An unrecognized military regime is trying to rule the country. Possible participation in public procurement tendered by the authorities of this regime therefore entails the risk of sanctions, reputational damage, but also problems with financing and insurance of such exports. In the overview of prospective industries, we therefore list those sectors for which we can expect buyers from the ranks of companies and end customers.

In addition, adverse socio-economic pressures affect purchasing power and consumer behavior. The “consumer class” narrows down to the segment of the population with the highest incomes, or savings. At the same time, the demand from companies, which for a number of reasons incl. increasingly frequent power outages interrupt or terminate operations (from sectors relevant to the Czech Republic, e.g. construction, healthcare).

With regard to the above, fields that can offer equipment or production inputs for those sectors of the Myanmar economy that are still functioning, as well as goods demanded by the highest layer of Myanmar society, which alone will probably be able to buy European products, can be considered promising.

Agricultural and food industry

Since taking power, the country’s military administration (SAC) has been striving to modernize agriculture and the food industry with an emphasis on building self-sufficiency, increasing the export of agricultural products above the current 70 billion CZK and increasing the added value of exported products. This development brings an increased demand for machines and equipment for the processing of agricultural products (oil presses, crop dryers, etc.), as well as for equipment for food plants (canneries, meat processing plants). There is also interest in irrigation equipment and systems to ensure year-round production and simultaneously reduce water consumption. Demand for fertilizers and other chemicals, as well as for seed and genetic material, is also increasing. Special emphasis is to be placed on animal production as part of the modernization, which also brings opportunities in the field of veterinary medicine (medicines, vaccines, devices and equipment) and breeding.

Healthcare and pharmaceutical industry

The instability caused by the military coup, together with the coronavirus pandemic, has led to a worsening of the population’s access to health care. As a result, there is a growing demand especially for medical equipment and devices for home use. In addition to over-the-counter medicines and supplements, these include, for example, blood pressure monitors, glucometers, but also physiotherapy devices and equipment for home use. Myanmar’s healthcare is 76% funded by direct patient payments, so the crippling of the public healthcare system has not dampened the market, but has shifted demand away from services and towards drugs and equipment. Myanmar’s pharmacies and stores with medical devices earn approximately 25 billion CZK annually, and this amount increases by approximately 10% per year in the long term. The pandemic, which has far from stopped in the country, also arouses interest in the purchase of quality protective equipment,

Glass and ceramic industry

On average, Myanmar people save up to 55% of their income. Due to the high instability of the currency and the financial system, the demand for commodities and goods in which saved funds can be kept is growing. Of the Czech products, it is especially luxurious decorative glass. There is also a demand for glass lamps of higher quality (crystal chandeliers). At the same time, both upper middle class products and high-end handmade pieces will find application, in both cases for a different income category of the consumer, or rather the investor. In order to apply to the Myanmar market, it is absolutely necessary that the manufacturer and distributor understand and present their products as luxury and emphasize their long-term, timeless value. In the case of handmade products, it is definitely recommended to present them as de facto works of art, with a certificate of authenticity, preferably with the name of the master who created the particular piece.

Mining, mining and oil industry

The economic plan of the military regime in the country (SAC) foresees the growth of the mining industry by up to 9.5% for 2022. Such growth will drive demand for mining machinery and related equipment. There is also potential for the export of services in the field of geology and mining engineering. At the same time, this does not always have to take the form of the purchase of the equipment in question, the acquisition of mining machines in the form of operational leasing is increasingly common, which can also lead to an increased interest in services in the field of servicing these equipment. Due to the currently valid sanctions and reputational risks, there is also a demand for certification of products and mining plants for their ability to participate in international supply chains.

Furniture industry

Myanmar is a major exporter of a wide range of wood and wood products. The local woodworking industry strives to increase the added value of its products, which now amounts to approximately CZK 10 billion per year. This creates considerable potential for the export of technologies and preparations for modern furniture and woodworking production in general. There are opportunities in all parts of the production process, perhaps with the exception of mining itself: that is, devices and equipment for sawmills, paper mills or pulp mills, as well as end producers of furniture and other wooden objects. In the case of furniture, there is also interest in preparations (varnishes, glues, etc.) or services in the field of design, certification of wooden products and marketing. Similar potential for technology and services can also be found in the area of ​​bamboo and rattan products.

Myanmar Trade