Myanmar’s Trade Takes a Turn for the Worse

Since Myanmar’s 2021 coup, the military regime has undertaken widespread changes to the country’s trading system. This includes adopting thousands of new trade licences as well as extensive foreign exchange (forex) controls. While Myanmar’s trade increased significantly in 2022, the drivers of this were unsustainable. Since then, the longer-term implications of Myanmar’s trade regulations have started to show, compounded by the effects of prolonged conflict and a conscription law that have had significant economic implications. Together, these developments and other structural changes in the economy suggest that Myanmar’s trade performance is set for an extended and durable downturn that the current military rulers will not be able to reverse. This will have long-lasting negative effects on Myanmar’s people and businesses.

In the decade before the coup, Myanmar’s trade more than doubled, with two-way trade hitting US$46 billion in 2020. However, in the immediate aftermath of the coup, Myanmar’s trade – like economic activity across the country – declined drastically. This was partly due to protests by civil servants at Myanmar’s customs offices. However, after a few months, trade volumes and port traffic bottomed out and recovered in the second half of 2021.

According to trading partners, whose trade data is more reliable than that of Myanmar’s military regime, exports hit an all-time high of US$28 billion in 2022. Export growth was strong for both garments and jade (Figure 1). However, this growth, driven by non-renewable resource extraction and kyat depreciation, was neither sustainable nor beneficial for Myanmar’s people. Real wages for salaried workers, which includes most garment workers, fell 23 per cent in 2022. Export growth came at a cost to many people in Myanmar instead of benefitting them. Imports also increased in 2022, with data from trading partners showing an increase of US$5.7 billion (about 25 per cent). While data from both Myanmar and its trading partners suggested a trade deficit in 2022, it was a small two to three per cent.

Figure 1. Myanmar’s Imports & Exports (2012-2023)

In 2023, trade started to decline as post-coup policies and conflicts started to overcome the effects of the depreciating currency. Exports fell by an estimated US$4 billion, partly due to conflict-related declines in jade exports but garment exports – almost exclusively traded via seaports and not as heavily affected by conflict – also declined significantly. The decline in Myanmar’s garment exports was part of a broad and significant global decline from 2022 to 2023 but also reflected supply-side factors, such as the withdrawal of brands like Primark. Imports were down by about US$1 billion. Other measures of trade, notably port traffic, echoed this trend. After holding steady in 2022, traffic at Yangon’s seaport declined in 2023, especially in the second half of the year (Figure 2).

Myanmar’s trade is likely to suffer further in 2024, as conflict has reduced border trade and outmigration – especially since the conscription law – has reduced the availability of workers.

Figure 2. Vessels Moving Through the Port of Yangon (2018-2023)

Myanmar’s trade data tells a somewhat different story, albeit one that is increasingly unreliable for a few reasons. One is that traders are deceiving the State Administration Council (SAC) about the value of their imports and exports. The incentives to do this are clear. Exporters undervalue their goods so they can keep some export proceeds offshore, where they are not converted at below-market exchange rates. Importers also undervalue their goods to minimise taxes. Another reason is that Myanmar’s border trade is increasingly moving through informal channels. Last, the regime’s exchange rate system, which does not reflect market rates, results in incorrect local currency valuations of traded goods.

Myanmar’s trade data also shows trade is changing in ways that will have long-term impacts. Myanmar is importing fewer “investment products”, which include the durable goods and equipment that are used in economic activity and are key for improving productivity. These have fallen much more than other types of imports. Under the National League for Democracy and Union Solidarity and Development Party governments, “investment products” accounted for between 32 and 50 per cent of imports. However, under the SAC, this has fallen to around 20 per cent. Individuals and businesses are reducing new investment as uncertainty, conflict, and general economic decline cloud the horizon. This suggests that the SAC’s efforts to become more self-sufficient and achieve a trade surplus may be counterproductive, reducing the very types of imports the country needs for economic growth.

Myanmar’s trade is likely to suffer further in 2024, as conflict has reduced border trade and outmigration – especially since the conscription law – has reduced the availability of workers. Key export sectors, notably garments, may decline further if foreign brands like H&M and Inditex follow through on announced plans to exit Myanmar. These declines do not reflect a temporary phenomenon but a more lasting decline that the SAC is unlikely to reverse. Capital flight and the decline of productivity-enhancing imports show a lack of confidence in the regime and suggest that trade and economic growth will continue to stagnate. These trends may worsen as the kyat depreciates and the distortions of the country’s multiple exchange rate system grow.

For Myanmar’s people, these trade trends are doubly worrisome. Fewer capital imports could hurt productivity, while declining exports could reduce livelihood opportunities – both of which could hit incomes. It is unlikely that the SAC can or will do anything to forestall this.

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