The manufacturing industry has been hit by the financial crisis. Pic: The Myanmar Times Archive

MYANMAR has so far been spared the worst effects of the world financial crisis but local business sources fear that its indirect consequences may soon begin to bite.

Major sectors facing potential problems include the export/import trade, tourism and migra-nt employment, the experts said.

“The crisis has had no direct impact on Myanmar yet,” said Mr Serge Pun, president of First Myanmar Investment (FMI), a large Myanmar public company. This is mainly because Myanmar is not directly linked to inter-national financial institutions, he said. Nevertheless, neighbouring countries are now encountering the repercussions of the crisis. Especially in China, some factor-ies have suspended production and operations, Mr Pun said.

“For example, a toy factory in China that supplies the US market has had no orders, so it reduces production. Then, other businesses dependent on that factory, such as raw materials suppliers, and its workforce, are affected. The factory reduces its intake of raw materials by 80 percent, and its employees by 60pc,” he said.

The global financial crisis, so far largely confined to Western markets, has now begun to spread to emerging markets, recalling the effects of the 1997-1998 emerging market turmoil of the Asian economic crisis.

A senior official from the Ministry of Commerce said world commod-ity prices were fluctuating daily. “So it is very difficult for exporters and importers to set a price on the invoice. More important, they find it difficult to open a Letter of Credit (LC) for transactions with international banks abroad when trading,” said the official.

Productivity, employment, income and consumption are all interrelated, and all are falling, said Dr Maung Aung, senior economist and researcher from the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI).

Myanmar migrant workers might lose their jobs due to lower production in the host country, Dr Maung Aung added. Faced with falling demand from the US and Europe, China was stockpiling electronics goods and had reduced production.

Relatively low-income workers in Singapore were now facing the impact. Workers relying on over-time were particularly at risk, according to overseas employ-ment industry sources in Yangon.

But U Than Naing, managing director of Shwe Zabu Deik Employment Agency, told The Myanmar Times that labour recruitment from Japan was continuing as usual.

“As a matter of fact, what we are recruiting now is just grassroots labour – trainee workers for small and medium businesses through the Japanese government, not professionals and white collar workers. So the demand is still there, as Japanese do not take jobs at that level,” he said. “Companies that tighten their belts are likely to reduce only white-collar workers such as accountants and engineers, I think. They would not reduce many general workers as there is no replacement for them.”

The global financial crisis “is the major challenge facing the local business community, especially the trading industry,” U Myat Thin Aung, chairman of the AA Group of Companies, a leading exporter-importer in Myanmar and president of Hlaing Thar Yar Industrial Zone, told The Myanmar Times.

That’s why the Export/Import Control Committee is now adjusting procedures to speed up the issuance of export/import licenses, effective the first week of November.

“We’ve devised two strategies for traders – first to relax licence application procedures, and second to search for new beans and pulses markets in India and the Middle East through associations instead of individually,” a director of the Ministry of Commerce said.

U Than Win Aung, managing director of AA Electronics, said electronics or luxury items were bearing the brunt of the recession.

“The sale of electronics goods depends on peoples’ disposable income. If their income is low, they are less inclined to consume electronics or luxury items,” said U Than Win Aung.

In past emerging-markets crises, the economic and financial health of developed economies has been good and the flow of funds throughout the global system has supported the underlying base of emerging markets. Recovery this time will depend on the return of financial markets to some sort of normality. This could take time, say experts.