HOUSE OF THE WEEK
Warm single-storey house in Thingangyun
UNCOMPLICATED suburban living sums up this single-level house in Thingangyun township. The house is not overly spacious but there is a nice garden and lawn as compensation. more
Commerce Min rings trade changes
(Volume 26, No. 510)
GOVERNMENT moves to further liberalise trade last month have led to a drop in the exchange rate for so-called export credits, which experts say will lead to more imports at lower prices.
Following rule changes that took effect on January 1 and January 25 allowing a wider range of businesses to import goods, the value of export credits has fallen from K1175 to the dollar on January 1 to K1105 on January 24 and K1103 on February 3 in the money exchange market, according to money changers in Yangon.
“This is good news for traders as well as consumers,” said one importer. “The high cost of export credits as a result of holders playing the market slowed trade and led to high prices for imported goods.
“Now we hope that the exchange rate of export credits will hold at a more suitable price.”
Myanmar firms that wish to import goods previously had to demonstrate they had obtained foreign currency through exports to qualify for an import license, which they still must acquire.
This led to the development of a market in export credits, whereby importers would use kyat to buy foreign currency from an exporter, at a premium.
Export credits are essentially foreign currency held in a bank account that can be shown to have been earned through exports.
The January 25 rule change, yet to be officially announced, allows companies with foreign currency services, such as hotels and law firms, to use that currency to import goods.
Previously, they could only use the foreign currency earnings to import goods directly necessary for day-to-day business operations.
Not only has the change allowed more companies to import goods – effectively opening up imports to foreign currency holders – it has also increased the pool of export credits available for trade, lowering the exchange rate through simple supply and demand, experts say.
The rule change follows a government directive that took effect on January 1 that allowed the private sector to import selected vehicles, and a range of goods, without first applying for an import license, though it still required that export credits were used.
This followed a government decision last year to abolish a regulatory body on fuel imports and allow private companies to import fuel, again requiring export credits to be used.
UMFCCI economist Dr Maung Aung applauded the changes, saying they will increase the availability of imported goods.
They would also bring down prices as an increase in the number of firms holding export credits would make it harder for them to unilaterally set the exchange rate.
It will instead be determined by supply and demand.
Exports were worth K37.028 billion in the 2008-2009 financial year, which ends on March 31, and imports worth K24.874 billion, according to figures from the Central Statistical Organisation.
From April 1 last year to October, the last month for which figures are available, Myanmar had earned K22.524 billion in export revenues and imported K15.051 billion worth of goods.
The government also changed the way taxes on imports are calculated from January 1.
The government levies a 20pc duty on most imports, which companies are required to pay in kyats.
Previously, this was determined on an exchange rate of K450 to the dollar, far below the exchange rate in the market of between K1050 and K1100.
From January 1, importers must work out their tax obligations based on an exchange rate of K1000 to the dollar, effectively more than doubling the amount of tax that importers must pay to the government.
