Posts in category: ECONOMY

THE US dollar exchange rate keeps falling in the local forex market. However, the Central Bank of Myanmar (CBM) purchased US$12.7 million in the auction market within four days, forex market data showed. In a bid to keep the exchange rate stable, the CBM purchased 1.8 million dollars on 21 September, 3.3 million dollars on 22 September, 3.8 million dollars each on 23 and 24 September at an auction market rate.

The CBM has purchased $30.9 million in the auction market between 1 and 24 September. Despite the CBM’s purchase, a dollar touched a low of K1,312 at the opening time on 24 September. The instability in the exchange rate posed difficulties to those stakeholders engaged in the agriculture and livestock supply chains including farmers, traders and exporters. That is why the stable exchange rate is vital of importance for the businesses. At present, the local forex market sees the weak sentiment amid the coronavirus outbreak and the trade disputes between the US and China, the business experts shared their opinions.

This year, the exchange rate moved in the range of K1,456-1,493 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 and K1,335-1,390 in August. 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 Japan International Cooperation Agency (JICA) will disburse ¥15 billion (K190 billion) in funds under an emergency two-step loan program to help small and medium size enterprise (SMEs) in Myanmar, said JICA loan project director at the Myanmar Economic Bank. This is also the third tranche of funds distributed under the program. They are preparing to approve phase 3 of the loan agreement with JICA.

JICA’s loan has a term of 40 years at an interest rate of 0.01 percent. The funds will be distributed to state-owned and local banks, which the repackage the funds into individual loans to borrowers. Under phase 1 the program, a total of K99 billion was distributed in 2018 via 10 local banks in 2018. Phase 3 was approved by parliament in August. A borrower is allowed a maximum loan of K500 million at an interest rate of 5.5pc if there is sufficient insurance coverage, or between 6pc-10pc with lower or no insurance coverage.

The loans are repayable to the banks in five years. In the past, 80pc of the loan amount had to be allocated for fixed capital purposes, while the remaining 20pc was for working capital. Due to the current COVID-19 circumstances though, borrowers are allowed to use the latest tranche of loans solely for working capital purposes. New businesses which are less than a year old and businesses with lower income levels are free to apply for the loans.

Source: Myanmar Times

The Ministry of Commerce has called for export potential with Myanmar products to Saudi Arabia’s market. The ministry recently negotiated with Saudi Arabian ambassador to Myanmar concerning the items identified as export potential, including honey, fish, prawn, fishery products. At present, Saudi Arabia has received Myanmar’s answers to the queries they sent regarding the new regulations. Suppose the cold storages and processing companies are found to be in accordance with the fishery import standards of Saudi Arabia. In that case, Myanmar can resume exports of the fishery products to Saudi Arabia. Myanmar exports to Saudi Arabia accounted for 30 per cent of its farm-raised fish exports and 40 per cent of rohu exports and 60 per cent of river catfish. Earlier, Myanmar yearly earned estimated US$20-35 million from fishery products exports to Saudi Arabia.

Myanmar exports marine products, such as fish, prawns, and crabs, to markets in 40 countries, including China, Saudi Arabia, the US, Japan, Singapore, Thailand, and countries in the European Union. Additionally, the wild-caught fish are sent to the UK, Italy, France, Cyprus, the Netherlands, Sweden, Greece, Belgium, and Germany markets. Export earnings from the fisheries sector during the period between 1 October and 11 September in the 2019-2020 financial year reached US$810.99 million, an increase of $119.8 million from the year-ago period, according to statistics released by the Commerce Ministry. Myanmar’s fisheries sector is hit hard by the coronavirus fallouts and the Ministry of Commerce is endeavouring to explore more fish and seafood foreign market to effectively mitigate the impacts caused by the pandemic, Yangon Region Fisheries Department stated. The MFF is making concerted efforts to increase marine export earnings by developing fish farming lakes which meet international standards and adopting advanced fishing techniques.

Myanmar’s economy is more dependent on agricultural sector to a large extent. Also, fisheries sector contributes a lot to the national gross domestic product (GDP). Its fishery production including shrimps and saltwater and freshwater fish are far better than the regional countries. If the country can boost processing technology, it will contribute to the country’s economy and earn more income for those stakeholders in the supply chain.There are 480,000 acres of fish and prawn breeding farms across the country and more than 120 cold-storage facilities in Myanmar. Myanmar exported 340,000 tonnes of fishery products worth $530 million in the 2013-2014FY, 330,000 tonnes worth $480 million in the 2014-2015FY, 360,000 tonnes worth $500 million in the 2015-2016FY, 430,000 tonnes worth $600 million in the 2016-2017FY, 560,000 tonnes worth $700 million in the 2017-2018FY, and over 580,000 tonnes worth $728.257 million in the 2018-2019FY, according to the Commerce Ministry. 

Source: The Global New Light of Myanmar

On September 16, the ministerial – level “Joint Commission on Cooperation in the field of Trade and Industries” was held in Nay Pyi Taw and Seoul respectively. Due to COVID-19, it was organised on-line. The Joint Commission was the first of its kind as a follow-up to the summit meeting in September 2019. President Moon Jae-In of the Republic of Korea (ROK) and Daw Aung San Suu Kyi, State Counsellor, signed the MOU on establishment of the Joint Commission with a view to elevating trade and investment to a new height. The Joint Commission was well-timed as this year marks the 45th anniversary of the diplomatic relationship between the ROK and Myanmar. The ROK government has been actively pursuing the New Southern Policy, its flagship diplomatic initiative, and in that context, looks to Myanmar as the last frontier market in the ASEAN region.

The leaders’ commitment to upgrading investment and enhancing people-to-people exchanges has shown specific outcomes. The two sides are working together to identify suitable projects, which will be borne by a newly established soft loan to the amount of US$ 1 billion. The Myanmar government has granted new working licenses to three Korean commercial banks, thus making Korea the country with the highest number with a total of four licensed banks in Myanmar. A new direct flight by Myanmar Airways International, launched in past December, is another welcome development. Korea-Myanmar Industrial Complex (KMIC) is expected to draw as many as 150 to 200 Korean companies once it is up and running. Korea is working with the Myanmar side on drawing blueprint for Dala new town.

At the Joint Commission meeting, both sides reaffirmed the importance of “Korea Desk”which will serve as a one-stop shop and gateway for new investors from Korea. Over the past few years, the horizon of Korean investment has considerably widened. The successful Joint Commission meeting was a small but significant step to make Korea’s commitment to working together with its time-honored friend, Myanmar, towards the visionary and inspiring message President Moon delivered during his state visit-“Korea will be a trustworthy partner in turning Myanmar’s dream of the miracle in the Ayeyarwady river into reality”.

Source: Myanmar Times

A second stock exchange, or pre-listing board, will be set up for the purpose of purpose of trading shares in public companies that have yet to list on the Yangon Stock Exchange(YSX). However, no futher details were provided on when this would take place. The pre-listing board is for investors to buy and sell the shares of Myanmar public companies that have yet to meet the criteria to be listed on the YSX, secondary listing boards are common to enable companies that have yet to meet main board listing criteria to raise capital by selling their shares.

This will be beneficial to small and medium-sized enterprises (SMEs) in particular, they will have the opportunity to raise capital. There are currently more than 260 public companies registered under the Myanmar Companies Law. Only six public companies are listed on the YSX. Most public companies do not meet the criteria for listing on the YSX. Establishing this market creates the right environment for unlisted public companies and exposes them to new challenges and opportunities that raise their potential of listing on the YSX in the future. The new board will be established with the approval of the Ministry of Planning, Finance and Industry and under the supervision of the SECM.

Discussions to establish a second stock exchange for public companies commenced last year. The move is also expected to create an official platform for the trading of shares in public companies. Currently, the shares are traded in the over the counter (OTC) market, which is loosely regulated. Public companies are set up with two main objectives- to raise capital from the public and compete for government tenders. They are also required to obtain permission from the SECM and other authorities and meet a list of criteria before they are officially allowed to sell their shares.

Source: Myanmar Times

A sugar glut in Myanmar has led prices to a 10-year low, as tonnes of sugar meant for export now remain in the country. There is too much sugar left in the market and the price can’t get any higher. Farmers have also started to reduce sugarcane acreage this year. According to the association’s estimates, there might be 150,000 tonnes to 200,000 tonnes of unwanted inventories in the country and prices are now between K840-K860 per viss, the lowest in over a decade. On the domestic front, “consumption has fallen drastically as there are no festivals or events during COVID-19. With people spending less, there is an impact on the sugar-rice snacks and beverage markets which in turn is having repercussions on the sugar market.

Overseas demand had fallen too. Earlier this year, Greece called off an offer to buy sugar from Myanmar at US$400 per tonne per month on a free on board system. But the future looks bleak for the sugar market. Despite lower sugarcane acreage, traders are predicting sugar prices will continue to drop in the coming months as a result of the glut and lower local consumption. There is now less than 50,000 acres of sugarcane fields in Myanmar and this is down from about 460,000 acre of sugarcane plantation before. Sesame and different types of paes are being planted instead of sugarcane.

In fact, sugar prices had already been on their way down since last year, and some 4500 sugarcane farmers from Sagaing, Mandalay and Shan State had submitted a report to the President to make their situation known. With domestic inventories piling up, the farmers also asked for a limit on sugar imports from aboard. The drop in demand and reduced sugarcane acreage has also impacted sugar mill operators further along the value chain.

Source: Myanmar Times

Jade sales have taken a hit as a result of poor demand from China in the wake of COVID-19 and prices of the green mineral have halved in recent month. Demand from China has fallen. The Chinese government does not encourage investments or trade in this area. Meanwhile, production of high-quality jade in Hpakant, Kachin State, has also declined amid the pandemic.

There are just a few active jade miners currently, even through small-scale jade mining blocks have been granted. As a result, commercial-quality jade has become more affordable in the market.The other reason for the lower demand is the cancelling of gems emporiums, where jade is legally auctioned to foreign buyers. Before COVID-19 , Myanmar typically held large-scale emporiums twice a year in Nay Pyi Taw. Other jade and gems fairs in Yangon, Mandalay and Myitkyina have also been called off, although there have been enquiries on when these will resume.

The majority of Myanmar jade is exported to China. As a result, the Myanmar government has potentially lost billions in revenue from having to suspend this year’s gems emporiums due to the outbreak of COVID-19. Each fair typically draws revenues of €500 million each. As the state receives a 40 percent share of capital emporium sales in the form of taxes, its revenue has declined about €400 million this year.

Source: Myanmar Times

Government travel restrictions and orders to defer repayments and lower interest rates on loans due to COVID-19 have reduced the ability of Myanmar’s microfinance companies to help rural people who desperately need capital. The inability to collect repayments from borrowers has hurt the companies’ liquidity and cash flows, limiting their ability to make loans. The Planning, Finance and Industry Ministry’s Microfinance Business Supervisory Committee overseas about 190 companies with 4.6 million members, most of them low-income.

The country hit by a second wave of COVID-19 infections, Daw Phyu Yamin Myat, general secretary of the association, shared her views on the challenges facing microfinance companies. They are following the Health and Sports Ministry’s guidelines and practicing social distancing as much as possible at their offices. Few clients can repay their loans. They cannot recover the money if the clients cannot repay their debts. The amount of money available to us has become less and less as they have loaned money to people who cannot make repayments. They think if people get back to work, the situation will improve and they will not have large losses. They are in semi-lockdown or lockdown, which can interfere with work.

Microfinance companies have not been able to grow during this time. All have been badly hit. If they compare business expansion with population growth, the development ratio is zero. Over 40 of the 200 financial companies are practicing corporate social responsibility under some of the government’s plans. There has been no damage to microfinance firms yet, but it could happen at any time. The lending of money to businesses is essential. Although there is an income stream from repayments, the companies might have other problems. They haven’t fully recovered loans from our clients. A business going belly-up might set off a chain reation, so they should advise their clients to consult with the association if they have problems.

Source: Myanmar Times

Japan’s aid agency is to provide US$280 million of concessional loans to the Myanmar government in support of the country’s economic recovery from the downtown brought up by the pandemic. The Myanmar government and the Japan International Cooperation Agency (JICA) signed a concessional loan agreement of ¥30 billion (US$280 million) in Nay Pyi Taw on Tuesday (September 1), called the COVID-19 Crisis Response Emergency Support Loan.

Based on the loan agreement, JICA is providing US$280 million concessional loan to the Myanmar government to support resilient economic recovery through implementation of COVID-19 Economic Relief Plan (CERP) and related policies for investment and trade promotion as well as financial sector strengthening. The CERP was announced in April by Daw Aung San Suu Kyi’s government and is estimated to cost $2 billion in total. The loan proceeds are going to be spent on this. This implementation of the policy reforms is also supported by JICA’s ongoing technical cooperation projects in the field of investment promotion, industrial development, trade facilitation and financial sector reform. JICA highly appreciates Myanmar government’s swift policy response to the economic impact of COVID-19 embodied in CERP.

The emergency support loan not only fills the critical financial gap for the implementation of short-term relief measures but also lays the groundwork for the sustainable long-term recovery through supporting prioritized economic policy reforms, leveraging JICA’s technical cooperation projects.This is the second measure from JICA to support Myanmar’s COVID-19 response. The aid agency in June rolled out a JPY5 billion SME financing programme. Last week, the EU and Myanmar inked a financing agreement support agriculture and nutrition in Myanmar. The EU will invest K180 billion over the next five years to support the Ministry of Agriculture, Livestock and Irrigation.

Source: Myanmar Times

Japan will provide ¥45 billion in emergency funding to assist Myanmar in supporting the economy in the wake of COVID-19. Japanese Foreign Minister Toshimitsu Motegi extended the financial support during his meeting with State Counsellor Daw Aung San Suu Kyi in Nay Pyi Taw on August 24. This will consist of ¥30 billion in emergency budget support and ¥5 billion in official development assistance (ODA) loans to help small and medium-sized enterprises(SMEs) in Myanmar respond to COVID-19. Japan is pursuing cooperation with Myanmar in all areas, including health, education, agriculture, and administrative capacity building while promotion responsible investment by Japanese companies.

The two sides also discussed plans to facilitate a rapid economic recovery in Myanmar and keep the channels clear for more Japanese investments in the country. Negotiations to relax travel restrictions to allow Myanmar technicians and businessmen to enter Japan under a business track program starting next month also took place. Japan has so far provided technical as well as medical supply and equipment assistance equivalent to US$30 million to Myanmar.The additional support came shortly after more than K80 billion was freed up for the prevention, control and treatment of COVID-19 activities in the coming fiscal year under a Debt Service Suspension Initiate (DSSI) endorsed by the World Bank and countries under the G20. The DSSI was endorsed in April in response to a call by the World Bank and the International Monetary Fund(IMF) to grant debt-service suspension to the poorest countries to help them manage the impact of the COVID-19 pandemic.

The main goal of the DSSI is to allow poor countries to concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of the most vulnerable people. Borrowers therefore commit to use freed-up resources to increase social, health, or economic spending in response to the crisis. Myanmar has so far also received half of a US$700 million fund provided by the IMF in July to support its economy. The second tranche of funds will be received in the coming fiscal year. The government will also be able to tap into remaining funds from the World Bank, Asia Development Bank and Japan International Cooperation Agency awarded this year to support the economy moving forward. It will also be spending more to ease the impact of COVID-19 on the economy, leading to a forecast budget deficit of 5.41 pc of GDP this year.

Source: Myanmar Times