An Insight into Factors Enhancing SMEs’ Export in Myanmar

SMEs in Myanmar

1. In Myanmar, the role of Small and Medium Enterprises is crucial as SMEs comprise approximately 94 per cent of all registered enterprises and 52-97 per cent of the labour force. SMEs in Myanmar can be generally classified into five categories-

(a) Import substitution in industrialization

(b) Export-oriented SMEs

(c) Rural-located SMEs

(d) Local and traditional SMEs

(e) International subcontracting SMEs

2. Myanmar is heavily dependent on imported products, even daily necessities. This heavy dependence on imports can be fixed only by promoting import-substituting SME businesses. Some SMEs in Myanmar are engaged in export, but it is needed to promote more varieties of exported goods. Hence, it is essential to encourage SMEs to produce processed export products, using local raw resources. Some business sectors that have a high propensity to export include agricultural processing, food processing, woodworking, metalworking, and the processing of marine products, among others. The registered number of SMEs, in line with the list issued by the SME development centre in 2023, is approximately 46,014. SME registration rates are the highest in Yangon Region and Shan State.

SME Development Law and Policies in Myanmar

3. When the State Law and Order Restoration Council was in power, the official law for small- and medium-sized enterprises (SMEs) was enacted in 1990. Then, the 2011 Private Industrial Law was promulgated and gave definitions of SMEs based on four criteria: (i) horsepower used, (ii) number of employees, (iii) capital investment, and (iv) annual production. The most recent SME-related law is the SME Development Law (2015), which gives the definitions of SMEs based on business sectors, namely manufacturing, wholesale, retail, service and others. Then, SME development rules were enacted in 2017. In 2018, the term Small and Medium Enterprises was renamed MSMEs, which stands for Micro, Small and Medium Enterprises by the Central Committee for Development of Micro, Small and Medium Enterprises.

SMEs’ export

4. A great deal of previous literature provides factors enhancing SMEs’ exports. Concerning factors enhancing export, there are two widely used approaches listed as resource-based approach and the contingency paradigm. The resource-based approach focuses on the firm’s internal variables, whereas the second method focuses on the external aspects. Internal determinants include management qualities such as age, education, innovativeness, foreign exposure and export dedication as well as export marketing techniques such as product, pricing, promotion, distribution, service and networking tactics. The external factors are the characteristics of the foreign market, such as legal, political, and economic system, cultural similarities, market dynamics, consumer and competitor behaviour and the characteristics of the domestic government, which include government tax rates, government export support, government policies and the domestic business environment.

5. Compared to other ASEAN countries, SMEs in Myanmar are less likely to export, reporting that only 4.2 per cent of medium-sized firms and 0.8 per cent of small enterprises export directly or indirectly at least one percentage of their sales (World Bank’s Enterprise Survey, 2014). Export destinations of Myanmar SMEs differ across firm size. Large firms have much more export propensity than SMEs, and large firms can export to high-income markets such as the EU and the US. However, SMEs opt for regional mar kets such as China, Malaysia and Thailand, whose target customers are less demanding. According to the World Bank Enterprise Survey, on the bright side, only 27 per cent of medium-sized firms and 13 per cent of small enterprises in Myanmar use material inputs of foreign origin. In Myanmar, SMEs from four states, seven divisions, and the Union Territory, Nay Pyi Taw, are engaged in export. ASEAN is an important market for Myanmar’s exports, and Myanmar SMEs mainly export to China and Japan. Most exported products are agricultural products, marine products and wood and wood-related products. Agricultural products mainly include rice, different types of beans, white yam powder, coffee seed and coffee powder, Myanmar Tea, tamarind, jaguar, coconut, groundnut oil, sesame oil, ginger oil, oil palm, rubber, sugar, bees, lemon and honey. Marine products consist of fish, frozen fist stakes, shrimp, soft shell crab, squid and lobster. Wood and wood-related products are wood, teak, value-added wood products, rattan products and bamboo placemats.

Government Export Assistance Programmes

6. In accordance with Notification 64/2023, which was issued by the Ministry of Planning and Finance, the government provides exemption of commercial tax on 27 kinds of goods listed as different kinds of corn, fresh fish and shrimp, soil bean, milk and dairy products, yogurt, animals and animal products, fertilizer, various kinds of pesticide and weed killer that are used in agriculture, animal, fish and prawn medicines, veterinary preventative medicines, raw and finished materials for animal, fish and prawn feed (not included animal food that used for pets), pure seeds and seedlings of crops, raw materials for cotton, agricultural products, coconut oil, state flag, stationeries, X-ray, absorbent cotton wool, gauze, bandages, hospital sundries to take medicines, surgical mask (once used), cap, surgical glove, masks that used to prevent flu infection, household pharmaceutical and other medicines and traditional medicines, fire engine and hearse, raw materials used in making soap, battery electric vehicles and goods purchased by donated fund. The government offers tax incentives such as exemptions for SMEs from income tax for three consecutive years under the Union Taxation Taw. The government strives to adjust their tax rates with the enactment of the Union Taxation Law each year as a way of rehabilitating the economy when the economy slows down. Furthermore, SME loans are offered through different loan programmes. It has recently been announced that small and medium businesspeople can get loans from 15 private banks, as well as the State-owned Myanmar Economic Bank (MEB) and Myanmar Agricultural Development Bank (MADB).

7. In conclusion, the Central Committee on Development of Micro, Small and Medium Enterprises has been planning an exhibition of MSME products to encourage SMEs. I happened to visit one of those exhibitions and witnessed a lot of local SMEs’ products, which are displayed well. I gladly realized most SMEs just made use of local raw materials. Some SMEs’ products are not well-recognized in the local market, but these products are value for money. These potential SMEs need some assistance in making their quality products well-recognized in the market. Some SMEs do not have enough capital to make mass production, and these quality products sadly disappear from the market. Some of these local products are equal to other imported products. I believe that if these local products are well-promoted with special support from all responsible government organizations, it would be a great thing. If SMEs’ requirements and the government’s export assistance programmes coincide, these products can survive in the domestic market as well as the foreign market.

References

The Global New Light of Myanmar

Myanmar Micro, Small and Medium Enterprise Survey (2019) Myanmar Business Insight Report (2020). Inya Economics. Factors Affecting Propensity to Export: The Case of Indonesian SMEs.

By May Thu Htay

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