US EXIM Bank's support can help spur growth

 

“Like World Bank and Asia Development Bank, which have been supporting Myanmar to reintegrate the global economy, US EXIMBank has now taken the first step to support our country. I think it is a good sign for the development of our country,” said Maung Aung, senior adviser to the Ministry of Commerce.

“This is very important because our main shortcomings are lack of capital, and technology. The announcement of US EXIM Bank is a kind of support to us. As soon as all the sanctions are lifted, all the exporters in Myanmar will try to reach the US market. Likewise, there are also many US businesses that are really interested to extend their exports to Myanmar.”

The US trade bank announced on February 6 that it can now provide export-credit insurance, loan guarantees and direct loans for creditworthy export sales to Myanmar from that day onwards. The announcement helps the bank to provide Myanmar with its long-term support, including financing arrangements that eliminate or externalise country risks, such as asset-backed financings and structures that earn revenues offshore in a third country.

“The Export-Import Bank is sending a strong signal that we are committed to strengthening economic ties with Myanmar as the nation continues its transition,” the bank’s chairman and president Fred Hochberg was quoted as saying in a statement.

“After a diligent review, the Bank’s Board reached this decision — which will improve trade flows between our two countries and help reintegrate Myanmar into the global economy. Furthermore, this decision will open an important new market for American exports and support American jobs.”

Short-term insurance is available for sovereign transactions with repayment terms of 180 days or less, and up to 360 days for capital goods. Medium-term insurance, loan guarantees and loans are available for sovereign transactions with terms typically up to five years.

“The bank’s working capital guarantees, which help US exporters or their suppliers to obtain funds to produce or buy goods or services for export, will be available to support exports to Myanmar as well,” the statement said.

Maung Aung commented that there may be improvements on financing, FDI, and trade due to the bank’s support. “I believe this is a sign of improvement in enhancing bilateral economic ties, with the prospect of significant growth in trading between the two countries,” he said, adding that the garment sector has a lot of potential as bilateral trade improves. 

Exporters and importers in Myanmar also welcomed the US’s trade bank’s announcement.

“That is good news for us. We hope to enhance bilateral trade with the support of the bank and other organizations. We’ve heard that the EXIM Bank of Korea as well as India already decided to expand their activities in Myanmar. So we need to take advantages of such opportunities,” said Naing Oo, who has been exporting garment products to the US and western countries for more than a decade.

Naing Oo however admitted that most of the exporters and importers in Myanmar do not know such trade incentives. “We need a lot of capacity-building. We should build up our knowledge and improve the English language skills so that we can keep abreast with the development of other ASEAN countries.”

As some American companies have entered Myanmar, the bank’s support could brighten the opportunity that the country can draw more investment from the US.

Myanmar hopes to receive more investments from the US and western countries in the next fiscal year, according to the Directorate of Investment and Company Administration, which plays a key role in promoting foreign investment and trade.

“We expect Myanmar to win US$4-$5 billion in foreign direct investment in the 2014-2015 fiscal year, compared to $3 billion in this fiscal year,” said Aung Naing Oo, director general at the Directorate of Investment and Company Administration, adding that more US companies have shown interest in entering Myanmar.

China now stands as the top investor in Myanmar. On the top 10 list included Hong Kong, South Korea, Thailand, the UK, Singapore, Malaysia, Vietnam, France, and India.

The small presence of US business in Myanmar is a result of the economic and trade sanctions, imposed in the 1990s. There were calls from international organisations that the sanctions are lifted, so that Burmese citizens can benefit from increased investment by American multinational companies - investment that brings technology, better working conditions, and Western ideas. That came in May 2012, with the easing in some rules. Some sanctions remain to ensure further reforms, the US said.