May 10, 2012

Thura Swiss Research

CARS (Myanmar version)
The market for cars in Myanmar is far from being simple, being subject to complex and tight importing rules. The latter require an import permit to be obtained before one can buy a car abroad which significantly limits the supply of cars and drives prices up given the fact that the number of cars produced in Myanmar is limited. Another hurdle is that not everyone can get an import permit. This is probably related to

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Cars in Myanmar

the still existing prohibition for Myanmar people to hold foreign currency except for exporters and legal labor migrants. Myanmar in figures Facts about motor vehicles in Myanmar: According to World Bank Data, there were about 7 motor vehicles (cars, buses and large freight vehicles) per 1,000 people in Myanmar in 2009. According to our calculations, there are 75 motor vehicles per 1,000 people in Yangon. GDP (PPP)- $82.72bn (2011) GDP (official ex.rate) - $50.2bn (2011) Population58.4m people (2009) Inflation8.9% (2011) Foreign trade$16.1bn (FY2011/2012 est.) FDI- $40.42bn (2011)

However, the third quarter of 2011 saw some relaxation of the import permits policy with the government launching a program of old car substitution. The program basically meant that owners of cars that were produced 20 to 40 years ago could get permits to import newer models (manufactured after 1995) if they surrendered their old cars. The program has helped drive the value of the dollar up against the kyat, a positive moment for exporters and employees of foreign companies who saw the kyat appreciating since March 2010 and their dollar -denominated earnings plummet.

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The substitution scheme was also designed in a way as to keep the dollar at a more or less constant value (around 800 Kyat per dollar) throughout the first quarter of 2012 and until the unification of kyats official and unofficial exchange rates. Thus, 40 -year old cars were to be exchanged for permits from September 19 to October 2011, 30-to 40-year old car were to be exchanged for permits from November to December 2011 while 20- to 30 -year old cars were to be exchanged from January to March 2012.

The program also allowed legal labor migrants and sailors to apply for discounted priced import permits. While a normal import permit costs about $18,200, permit for sailors and overseas workers costs $8,495.

This is a publication of Thura Swiss Research. Thura Swiss research is non-partisan and expresses no other views than those of its author(s). These views may be subject to change in the future without any obligation on the part of Thura Swiss to reflect these changes in the current publication. The information contained in this publication has been obtained from public sources and Thura Swiss is not responsible for its accuracy. The information in the publication does not constitute provision of investment advice.

Thura Swiss Research

10.05.2012

Steps towards importing a car in Myanmar Apply for import permit Open a bank account worth at least $5,000 Import a car Pay import tax including road tax, commercial tax and customs duty (the total comes up to 165% of the original car value) The relaxation of import permits under the overage car substitution scheme have led to an increased activity on the car market and to the decrease in prices for cars. By November 2011, prices for cars fell by 70% y -o-y. Chart 1. Prices of popular car models, mln kyats

Cars in Myanmar

Source: Myanmar Times, November 2011

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The increased activity on the car market has allowed new showrooms to open in Yangon. There are currently about 11 showrooms in Yangon although the Hantharwaddy market probably remains the biggest car trading zone in Yangon. 100% foreign owned car dealers are not yet allowed to operate; however, the government may soon allow foreign automobile companies from China, Japan, Thailand and South Korea to set up showrooms in Myanmar in the near future (Source: Irrawaddy, September 2011). It already issued licenses to 67 used car sales centers as of May 2012. The centers are mostly located in Yangon, Nay Pyi Daw and Mandalay. The government has already lifted the need to apply for import permits in relation to cars produced in 2007 and after. In this way the government of Myanmar is untangling its complex system of import restrictions in order to allow for a more open economy.

This is a publication of Thura Swiss Research. Thura Swiss research is non -partisan and expresses no other views than those of its author(s). These views may be subject to change in the future without any obligation on the part of Thura Swiss to reflect these changes in the current publication. The information contained in this publication has been obtained from public sources and Thura Swiss is not responsible for its accuracy. The information in the publication does not constitute provision of investment advice.