In general Myanmar remains an export-based economy. The government has a structure in place where trading companies need to export before they are allowed to import, which allows Myanmar to establish a positive trade deficit.
Although other industries have the potential to become big export earners, currently the biggest foreign income earners are:
1. Natural gas
2. Gems and Jewelry
3. Beans and pulses
4. Hardwood (especially teak)
You will notice that three of the four exports listed above are based on natural resource extraction. Ultimately, in order for Myanmar’s economy to grow, it needs to branch out of pure extraction based businesses and into services and manufacturing. But the transition into a more manufacturing-based economy has been so far limited by the lack of infrastructure. Because of its long term isolation, there are many domestic industries operating in Myanmar where one would expect to find international firms – for example in soft drinks and fashion.
Since 2010, the government has further privatized many industries that were formerly under State control, and has sold off many of the government’s assets. The privatization process continues today– with the telecoms industry seen by many as next on the chopping block.
The biggest foreign income earner for the Myanmar economy is its natural gas exports. Natural gas is extracted offshore by international companies (Total, PTT, Daewoo, etc.) who are in joint venture agreements with the State run oil and gas company Myanmar Oil and Gas Enterprise (MOGE). Most of the extracted natural gas is exported to Thailand, which is reliant on Myanmar natural gas for 30% of its energy needs. The Chinese are also constructing a pipeline which will pump natural gas from the Bay of Bengal to China’s Yunnan province, and other exploration efforts are currently in progress in other offshore blocks.
Natural gas is also quickly becoming a political issue in Myanmar as many citizens have started to wonder why Myanmar doesn’t utilize its natural gas resources for domestic consumption – especially given its unreliable electricity supply.
Gems and jewelry is another huge export earner for Myanmar, particularly the jade sold to China. Myanmar has also long been world-famous for its rubies and sapphires which are primarily mined in the Mogok valley – which remains closed off to foreigners. There is so much illegal activity in this sector that it is almost impossible to calculate statistics accurately, but many believe this to be Myanmar’s second largest export earner behind natural gas. We expect that in the future this industry will see much more regulation, causing illegal black market trading to decrease. The current government realizes the potential tax revenue to be gained from a fully legal gems trade and has already taken steps to further legalize and consolidate the industry. One of these steps was the opening of biannual gem fairs in Naypyidaw which allow international traders to buy Myanmar gems legally at good prices. Like in most Myanmar industries, the majority of gems are sold are raw and uncut – they are cut and polished in other countries that have better technology. Gems cut in Myanmar are generally for the local market only.
Beans and Pulses
The beans and pulses sector has recently become big business in Myanmar. Currently Myanmar is the second largest exporter of beans and pulses in the world behind Canada. Over 70% of bean exports go to India, which has huge market demand that cannot be met by domestic production. The remainder of bean exports go to Singapore, Pakistan and other countries. The beans and pulses market can be highly volatile, with market prices dependent on global production. Currently Myanmar faces competition from African nations who have seen their market share increase in recent years.
The beans and pulses market usually operates on futures contracts, where Myanmar traders agree to sell at a certain price on a fixed date. The supply chain for beans and pulses usually works like this: farmers cultivate 1-2 bean crops per year and sell them at farm gate prices to local traders. These traders collect the beans from individual farms and then sell them on to large wholesalers who store them in large warehouses. These large wholesalers are exporters who then negotiate contracts with foreign buyers and export the beans. Almost every major bean wholesaler in the country is based out of the Bayinnaung Wholesale Market in Yangon. Foreign investors looking to get into this market will find relatively few options, as currently all beans and pulses trading companies in Myanmar are locally owned.
Teak and Hardwood
Myanmar is one of the world’s largest exporters of wood, and Myanmar teak is world renowned for its quality. While most other countries in the region have gone to farming teak in plantations, Myanmar still exports ancient teak trees grown in the wild. Obviously there is a finite supply of this teak, which makes it very valuable on the world market. Teak is mostly used in the construction of outdoor furniture because it is very resistant to moisture and rotting. Historically teak has also been used in shipbuilding and it is still used for this purpose today – albeit in smaller quantities – for the decks of yachts and smaller boats.