How Myanmar can benefit from the worsening trade war between the US and China, which is shifting both supply chains and industrial clusters

16 พฤศจิกายน 2561

Back in July 2018, Myanmar Business Today highlighted how an awakening U.S. economy and its emerging trade war with China could benefit Myanmar. After four months, where do things stand now?

A recent report from Reuters highlighted the fact that, “The trade war between the U.S. and China is shifting both supply chains and industrial clusters, mostly towards Southeast Asia.”

Well, this looks promising for Myanmar, but how should they proceed, and what should Myanmar keep in mind? We reached out to Brock Silvers for his thoughts on the situation.

Mr. Silvers is a Multi-Asset Strategist and founder of Kaiyuan Capital based out of Hong Kong. He’s also a regular guest on: BBC’s Asia Business Report; Australian News Channel’s Sky News Business; Singapore’s Money FM 89.3; CGTN’s Global Business; and other media outlets.

Highlighting the current US-China relationship, Mr. Silvers said, “Despite earlier optimism, it seems unlikely that the Trump-Xi G20 meeting will result in a substantive trade deal. Absent a deal, the U.S. has threatened new tariffs on the remainder of Chinese imports, while existing tar-iffs will automatically increase from 10% to 25% in January. A booming U.S. jobs practically as-sure a Fed rate hike in December. All of which adds to a gloomy 4Q outlook in China.”

As the slowdown deepens, can Myanmar benefit? Mr. Silvers continued: “There are two main types of opportunities: First, attracting supply chains to move to Myanmar; and second, supplying China with products currently being imported from the U.S.”

What do we know about supply chains and this first opportunity? Mr. Silvers explained, “Western firms are increasingly interested in moving production from China. China was a favored destina-tion for decades, but labor & land costs skyrocketed, as did regulatory & bureaucratic burdens. With increased tariffs & taxation, China has lost allure for Western companies.”

This first opportunity Brock mentions is indeed a big one. In fact, the Reuters article pointed out that, “70 percent of U.S. firms operating in southern China are now considering delaying further investment there, and moving some or all of their manufacturing to other countries.”

70 percent! If Western companies are keen on relocating to the Southeast Asian Region, why not Myanmar?

“To attract transplants,” Mr. Silvers added, “Myanmar will need to offer comprehensive packages including favorable tax policies, safe legal framework, secure energy supply, & business-friendly labor regulation. This could be done on a regional or even local basis.”

This sounds like the Special Economic Zones (SEZ) and Industrial Zones that Myanmar already has set up, so it’s not a stretch of the imagination that Myanmar could entice Western companies to come here.

Then Brock gave this warning, “This is a time-limited opportunity requiring quick public-private cooperation.”

A recent update from DICA on the Korea-Myanmar Investment Protection Agreement, revealed that those talks actually started in 2012, were signed in 2014, and after four years are just getting started. That’s too long. Myanmar needs to apply lessons its learned from crafting eleven other agreements with various foreign countries, and speed up the process.

If relevant authorities can quickly agree, transplants will gravitate to Myanmar’s lower costs, large labor pool, natural resources, central location, domestic market, & growth potential.

Now, what about that second opportunity? In the July article titled, “Tantalizing Opportunities For Myanmar Emerge Amid US-China Trade Scuffle,” Myanmar Business Today previously talked about this opportunity. In this article we learned that China placed a 25 percent tariff on some US goods, including soybeans, and what Myanmar can do to take advantage of this change.

Brock then gave one last bit of advice on this subject, “When replacing U.S. exports, Myanmar businesses should be able to succeed on their own. They simply need to determine which im-ported products to target, and then start soliciting Chinese importers. Myanmar embassies in China should be able to help coordinate. Agricultural products seem particularly promising. If we look at the China International Import Expo (CIIE) which was held November 5-10 in Shanghai, we see China is keen to establish import relationships, and if the G20 meeting fails to result in a Trump-Xi agreement, Beijing may be eager to diversify beyond U.S. suppliers for a variety of goods. Myanmar companies should be preparing now for worsening US-Sino trade relations. Once Trump & Xi reach an agreement, as they eventually will, this opportunity will be reduced.”

The opportunities are real, if Myanmar can quickly & flexibly grasp them.

 

(Myanmar Business Today: https://www.mmbiztoday.com/articles/how-myanmar-can-benefit-worsening-us-sino-trade-relationship )