BURMA: SIGNIFICANT INCREASE IN TRADE IN 2008

C O N F I D E N T I A L SECTION 01 OF 04 RANGOON 000057 SIPDIS STATE FOR EAP/MLS, INR/EAP PACOM FOR FPA TREASURY FOR OASIA, OFAC E.O. 12958: DECL: 01/30/2019 TAGS: ECON ETRD EFIN PREL PGOV BM SUBJECT: BURMA: SIGNIFICANT INCREASE IN TRADE IN 2008 REF: RANGOON 20 RANGOON 00000057 001.2 OF 004 Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 (b and d). Summary -------------- ¶1. (SBU) The Burmese Government recorded an increase in both exports and imports in 2008 compared to previous years. While the value of natural gas exports remained constant, trade was bolstered by substantial exports of jade, gems, and agricultural products. Burmese exports totaled USD 6.6 billion, an 11.4 percent increase over 2007 year-end figures. Burmese imports increased by 36 percent over 2007 year-end levels, to USD 3.8 billion. These trade figures do not include border trade, for which accurate statistics are difficult to obtain. Thailand remains Burma's largest official trading partner, followed by Hong Kong, India, and China. Economists predict 2009 trade values will be lower, as commodity prices have fallen by up to 50 percent. The GOB appears concerned that the world financial crisis will affect Burma's trade potential, evidenced by an unprecedented request to meet with foreign missions to discuss trade promotion. End Summary. Emphasis on Trade and Exports -------------- ¶2. (SBU) According to researchers from local consulting company Business Information Group (BIG),the Burmese Central Statistical Office compiles trade figures from Customs and import/export information listed on trade licenses issued by the Ministry of Trade. This combination results in over-inflated figures, they added. BIG instead relies only on Customs data when compiling its trade statistics, which appear below. It does not include border trade, which often does not go through Customs inspection, in its figures. Post believes BIG's figures represent the best available estimates of Burma's trade. -------------- -------------- Burma Import/Export Figures, 2005-2008 Value in USD -------------- -------------- Year Exports Percent Imports Percent Change Change -------------- -------------- 2005 3,526,596,300 -- 1,937,053,055 -- 2006 4,122,772,276 16.9 2,236,682,990 15.5 2007 5,939,407,654 44.1 2,788,692,103 24.7 2008 6,615,603,864 11.4 3,794,985,317 36.1 -------------- -------------- Source: BIG, January 2009 ¶3. (C) Burma's trade hit a record in 2008, totaling more than USD 10.4 billion. According to BIG, Burma's exports rose by 11.4 percent in 2008, up from USD 5.9 billion in 2007 to USD 6.6 billion. Exports of natural resources, including natural gas, timber, and gems, accounted for the majority of overall exports. Natural gas exports alone totaled USD 2.5 billion. Exports of agricultural products, including rice, onions, garlic, and beans and pulses, increased approximately 28 percent in 2008 from 2007 figures. The regime also earned substantial revenues from sales and exports of precious and semi-precious gems. Exports increased 30 percent, up from USD 561.6 million in 2007 to USD 731.9 million in 2008. ¶4. (C) Despite increases in agriculture and gem exports, RANGOON 00000057 002.2 OF 004 the value of many of Burma's primary exports, such as timber, fisheries, and minerals, decreased in 2008. According to BIG, although the quantity of exported timber increased in 2008, prices fell by up to 50 percent, resulting in an overall decrease in export values. Exports of marine products also declined, reflecting the impact of Cyclone Nargis on Burma's fisheries industry. The substantial decrease in minerals exports, 76 percent from 2007 levels, reflects the more than 60 percent drop in mineral prices and Myanmar Ivanhoe Copper Corp. Ltd.'s decision to close its copper mine due to ongoing problems with its state-owned partner, Mining Enterprise-1 (Ref A). -------------- -------------- Burma's Exports by Sector, 2007-2008 Value in USD -------------- -------------- Category 2007 Value 2008 Value Percent Change -------------- -------------- Natural Gas 2,703,165,496 2,504,463,354 - 7.4 Ag Products 1,032,896,547 1,232,103,541 28.1 Timber Prod. 572,913,157 524,958,021 - 8.4 Gems 561,637,794 731,920,869 30.3 Textile/Appl 286,802,745 286,670,889 - 0.1 Marine Prod. 366,308,384 323,756,130 - 11.6 Minerals 94,084,869 22,339,942 - 76.3 Other 321,699,662 670,856,194 207.6 -------------- -------------- Total 5,939,407,654 6,615,603,864 11.4 -------------- -------------- Source: BIG, 2009 ¶5. (C) More than two-thirds of Burma's exports went to Thailand, the main importer of Burmese natural gas. Burmese exports to Thailand decreased by 8.3 percent in value compared to 2007. Exports to Burma's top five export destinations - Thailand, India, Hong Kong, China, and Singapore - increased overall in 2008, with exports to Hong Kong and Singapore increasing by 26 percent and 147 percent, respectively, due to the increase in exports of agricultural products, gems, jade, and timber. Official trade with China increased slightly, although most of that trade flows illegally across the border and is not reflected in this data. Burmese economists predict that once China begins to import natural gas from the offshore Shwe Gas fields by 2012, China will become Burma's largest trading partner. -------------- -------------- Burma's Export Markets, 2007-2008 Value in USD -------------- -------------- Country Exports Exports Percent 2007 2008 Change -------------- -------------- Thailand 2,804,260,801 2,572,646,075 - 8.3 India 743,517,185 737,910,298 - 1.8 Hong Kong 575,935,831 723,333,726 25.6 China 475,579,468 498,985,931 4.9 Singapore 347,141,440 858,174,907 147.2 Japan 186,707,607 179,393,602 - 3.9 Malaysia 113,509,099 328,645,096 189.5 Bangladesh 41,461,422 108,378,235 161.4 South Korea 57,569,553 78,768,518 36.8 Indonesia 88,125,977 25,968,258 - 70.5 Germany 67,812,545 56,101,655 - 17.3 UK 61,406,832 54,013,521 - 12.0 Other 536,817,701 393,284,042 - 26.7 -------------- -------------- RANGOON 00000057 003.2 OF 004 Total 5,939,407,654 6,615,603,864 11.4 -------------- -------------- Source: BIG, 2009 Rising Imports -------------- ¶6. (C) Burmese imports in 2008 increased substantially, by 36 percent over 2007 year-end levels. Imports of oil and diesel fuel, primarily from Malaysia and Indonesia, increased by 23 percent, accounting for almost 20 percent of overall 2008 imports. According to prominent Burmese economist U Myint, the increase in value was due to both higher world prices during the first half of 2008, and also to substantial imports of diesel and oil immediately after Cyclone Nargis. He predicted that, due to lower world prices and less demand, oil and diesel imports in 2009 will drop dramatically. -------------- -------------- Burma's Imports, 2007-2008 Value in USD -------------- -------------- Product 2007 Value 2008 Value Percent Change -------------- -------------- Oil/Diesel 471,960,839 581,788,497 23.3 Machine Parts 243,894,103 289,687,998 18.8 Textile 275,915,696 269,096,093 - 2.5 Steel/Iron 177,684,589 199,828,295 12.5 Food/Beverage 107,582,695 111,544,467 3.7 Medicine 112,013,679 115,459,808 3.1 Plastic 139,991,354 145,738,585 4.1 Car 192,746,223 125,964,079 - 34.7 Palm Oil 251,242,458 271,513,586 8.1 Chemicals 30,922,209 33,225,474 7.5 Tires 43,484,500 45,642,086 4.9 Computers 12,194,900 9,322,178 - 23.6 Other 792,057,859 1,596,174,171 101.5 -------------- -------------- Total 2,788,692,103 3,433,867,083 23.1 -------------- -------------- Source: BIG, 2009 ¶7. (SBU) Most of Burma's imports came from Singapore (USD 1.1 billion),as traders continue to use Singaporean companies to bring in products from the U.S., Europe, and Australia. China was second, with USD 670 million in exports to Burma, followed by the Bahamas (USD 450 million),Thailand (USD 246 million) and Indonesia (USD 207 million). According to BIG officials, the Bahamas, an unusual trade partner for Burma, became Burma's main supplier of oil and gas equipment, primarily drilling well machinery and pipeline materials. (Note: Oil and gas companies Daewoo and MPRL were the primary buyers and distributors.) Possible Trade Slow Down? -------------- ¶8. (C) Although 2008 was a record year for Burmese trade, export/import data indicate a slowdown during the 2008 fourth quarter. In December, the value of imports dropped more than 50 percent, from USD 724 million in November to USD 361 million. Economist U Myint noted that December is usually a strong month for imports, but many Burmese companies were unable to access credit and secure import permits at the end of 2008. Additionally, the value of Burma's imports, particularly oil, diesel, and palm oil, decreased in the third quarter, reflecting the impact of the world financial RANGOON 00000057 004.2 OF 004 crisis on commodity prices. Exports also dropped in December, from USD 690 million to USD 510 million due to a decline in the value and quantity of agricultural exports. The Ministry of Commerce, cognizant that the world financial crisis has begun to Burma's affect trade, summoned officials from select European and ASEAN countries (plus us as observers after we finagled an invite) on January 13 to discuss trade promotion possibilities. The meeting did not yield any concrete results. Comment -------------- ¶9. (C) Burma's year-end trade figures indicate Cyclone Nargis had less of an effect on overall trade than predicted in the Tripartite Core Group's Post Nargis Joint Assessment Report. To be sure, Nargis devastated the Delta's fishing industry (which has yet to recover),reducing exports and compelling the GOB to increase imports of diesel and gasoline for electricity-generation purposes. Nargis also destroyed infrastructure, such as roads and ports, making trade even more difficult. Nevertheless, Burma was able to capitalize on high world prices for commodities during the first half of 2008 to increase trade value substantially. Given the recent falling prices of natural gas, timber, agricultural products, and precious gemstones -- Burma's top exports -- we expect that 2009 trade values will be less than 2008 levels, assuming volumes remain relatively constant. DINGER