Myanmar's Foreign Trade under Military Rule: Patterns and Recent Trends

Summary

After gaining independence from the British in 1948, Myanmar's economy was heavily dependent upon foreign trade with exports constituting on average some 45 per cent of its gross domestic product (GDP) during the early 1950s. This proportion fell to around 33 per cent in 1961, the year before the March 1962 military coup that led to 26 years of socialist command economy. During this period, foreign trade became marginalized, despite the fact that it was the major source of acquiring foreign goods and services in the absence of foreign direct investment (FDI) and limited official development assistance (ODA). For example, during fiscal year 1985–86, external trade reached a total volume of US$900 million, accounting for only around 11.3 per cent of the GDP. During the socialist era, Myanmar posted persistent deficits in its trade balance.

When the military took over control in September 1988 in the aftermath of a widespread popular uprising against the one-party socialist government, market- oriented reforms were quickly introduced after abolishing the socialist economic system. In 1989, foreign trade, which was formerly the sole prerogative of the state, was liberalized to allow private participation and an “open door” policy towards FDI and foreign trading firms. This led to a revival of foreign trade as a significant driver of economic growth, a major source of fungible hard currency, and of revenue for the state. The private sector quickly realized its potential for quick returns and rapid expansion. Trading enterprises blossomed in the early 1990s with the number of registered export-import companies increasing from none in 1988 to 2,813 in April 2001 and to 19,494 in June 2005. Since the Myanmar currency is not convertible, exports became the private sector's sole vehicle in obtaining the scarce foreign exchange needed not only to import consumer goods but also to obtain materials and equipment for the services and manufacturing sectors. By the fiscal year 2005–2006 the value of foreign trade reached US$5.5 billion — six times the volume achieved 20 years ago.