Jun 4, 2011

Exporters concerned about the decline in dollar's value

Myanmar businesses that rely on foreign markets, including garment factories and exporters of agricultural products, are worried about the impact of a recent drop in the value of the US dollar against the kyat, according to business sources.

For the first time in many years, the dollar has fallen below 800 kyat, reaching just 780 kyat on the foreign exchange market at one point on Wednesday morning.

An executive member of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) told The Irrawaddy that industries still recovering from the effects of the 2008 global economic crisis could face further difficulties if the trend continues.

“If the US dollar continues to decline, exports of rice and various types of beans will stop. The situation of fish and shrimp businesses, which have faced significant losses since the global downturn in 2008, will be even worse off,” he predicted.

A rice dealer from Yangon's Bayintnaung wholesale market said that although the new government now allows rice exports of 30,000 tons per month, few traders will be interested in selling overseas if exchange rates don't stabilize.

“Exchange rate fluctuations, and the weakness of the US dollar in particular, could bring rice exports to a complete halt,” said the rice dealer.

This in turn would lead to a domestic surplus of rice, which will cause prices to fall, hurting farmers, he said.

“Rice prices will not fall much if there is demand from overseas and we can export it. It doesn't really matter how much we export, as long as we can export regularly,” the rice dealer explained.

According to statistics from the Myanmar Rice Industry Association, Burma produces nearly 1.5 billion paddy baskets of rice every year, of which two-thirds are consumed domestically by the country's more than 50 million people.

Meanwhile, bean traders also said that the export of various types of beans could come to standstill if the dollar doesn't recover in the domestic market.

“The exchange rate is vital to bean exports. If the dollar drops, we can't continue to run our business, and farmers will certainly be affected,” said a bean trader in Yangon.

Commerce Minister Win Myint told participants at the recent UMFCCI annual meeting that Myanmar could only export 0.9 million tons of various types of beans to India in the 2010-2011 fiscal year. He said this was 400,000 tons less than the previous year because Canada and Australia tried to take over the market.

Meanwhile, a businessman in Yangon's Shwe Pyi Thar industrial zone said that the garment business, which includes 293 factories and employs 70,000-90,000 workers, will not be able to withstand the impact of the dollar's decline.

“The garment business is already struggling because of economic sanctions imposed on Myanmar by the West. Due to the sanctions, we have to charge less than factories in Vietnam, Laos, Cambodia and Thailand. The current dollar exchange rate will force us to stop our business. Right now, we will be lucky if we can break even and just keep going,” said the businessman.

In early 2010, one US dollar was equivalent to more than 1,000 kyat, but dropped to less than 900 kyat by the end of the year.

Source: Irrawaddy