TRADE procedures at the Tamu-Moreh border check-point between Myanmar and India are likely to soon change with the introduction of a banking system to handle payments.

The opening of Letters of Credit to facilitate cross-border payments between traders of the two countries signals a shift from border trade to normal trade procedures, which are easier to monitor for tax purposes but also cheaper for traders as the value of goods is calculated at a different exchange rate.

U Hla Maung, president of the Myanmar-India Border Traders’ Association, said the transformation would bring benefits over the long term to those involved in cross-border trade with India.

“There may be delays when using normal trade, such as in processing remittances and transactions which are to be done through banks, but normal trade procedures will help traders avoid fraud,” he said.

Early indications from a move to restrict betel nut to normal trade were that the transition would not be too disruptive, said U Hla Maung, who is also an executive member of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

Betel nut is one of 22 items approved for cross-border trade with India and has been restricted to normal trade since March.

“The process has gone very well so far,” said U Hla Maung. “Other items will also be restricted one after another.”

To facilitate the trade, a branch of the Myanma Economic Bank in Tamu will cooperate with the United Bank of India (UBI) in Moreh, according to an India-based report citing an official from the Ministry of External Affairs in New Delhi.
Letter of Credit facilities at the two banks will allow kyats and Indian rupees to be legally converted to US dollars, which would lead to an increase in the volume of trade as the exchange of cash would not only become legal but easier as well, the Indian ministry official said.

An official from the Myanmar Ministry of Commerce told The Myanmar Times on condition of anonymity that the Myanma Economic Bank was yet to reach a final agreement with UBI but they were currently offering letters of credit via the Bank of Sinapore.

“The two banks have been discussing how to carry out the opening of letters of credit directly between them,” she said.

There was still no direct phone line between the banks in Tamu and Moreh, which limited communication by fax, she added.

A shift to normal trade will mean traded goods will have their values calculated using a different exchange rate to that used in border trade.

From April 1, 2007, the government has been using a floating rate to calculate the kyat’s value – currently around 1270 to the US dollar – in border trade instead of the previous rate of K850 to the dollar.

In normal trade, goods are valued using a rate of K450 to $1 for tax purposes. As a traded item’s value is determined in dollars but tax is paid in kyats, the change from border trade to normal trade will mean a reduction of about 65 percent in duty owed.

As part of efforts to enhance Indo-Myanmar trade, the Indian government is also upgrading its check post in Moreh. The Manipur regional government is acquiring 45.5 acres near the border for this purpose, The Imphal Free Press reported earlier this month.

Meanwhile, authorities from both countries are working to increase the range of goods that can be traded across the border.

New Delhi is considering items like life-saving drugs, bicycle parts, fertilisers, cosmetics, garments, motorcycle parts, X-ray papers, and imitation jewellery – items it says are in great demand in Myanmar.

Agro-forest products such as herbs, spices, medicinal plants, cane and bamboo, could also be added to the list in the future, Indian officials have said.
But while Myanmar officials insist there is great potential for trade with India to increase, they say security problems in India’s northeastern states are holding back border-trade’s share of the total bilater trade volume, which fell short of its $1-billion target for 2006-07.

According to the Ministry of Commerce’s latest figures published in its weekly journal The Commerce last week, total trade with India reached $895 million in the fiscal year to March 31, 2007 – including items that would likely be counted as transit trade were such trade permitted in Myanmar. Border trade was said to have reached $17 million for the year.

“There is clearly a lot of room to improve border trade if India strengthens security in Manipur state,” the ministry official told The Myanmar Times.
U Hla Maung agreed. “We did business for an average of just seven days a month last year because of blockades in Manipur. If it continues this year, no amount of new facilities will help improve border trade,” he said.

Myanmar has been trading with India via the Tamu-Moreh borderpoint since April 1995. The only other border trading point, between Falan township and India’s Mizoram state, is not easily accessible, U Hla Maung said.