M YA N M A R DIAGNOSTIC TRADE INTEGRATION STUDY (DTIS): OPENING BUSINESS FOR Something glorious and majestic. With people. Something positive Door opening? Market? Photo credit © Nick Fox / Shutterstock.com CONTENTS ABBREVIATIONS AND ACRONYMS iii ACKNOWLEDGEMENTS vi FOREWORD vii OVERVIEW x EXECUTIVE SUMMARY xvi 1. Following through on reforms to encourage trade openness is xix critical for poverty reduction 2. Diversification into light manufacturing, services and sustainable xxi agri-business would be a powerful way of reducing poverty, while also rebalancing the economy away from its over-dependence on natural resources 3. Infrastructure development and regulatory reforms can occur in xxiii tandem POLICY PRIORITIES xxviii 1. TRADE POLICY REFORMS xxxii 2. ENSURING INCLUSIVE EXPORT-LED GROWTH xxxvii 3. BUILDING CAPACITY IN A QUALITY INFRASTRUCTURE xli 4. ENCOURAGING GROWTH IN TRADE IN SERVICES xlv 5. DEVELOPING EFFICIENT TRADE CORRIDORS xlviii 6. ACILITATING TRADE THROUGH BETTER LOGISTICS liii AND FINANCE ACTION MATRIX lvii TRADE POLICY lxii INCLUSIVENESS lxx QUALITY INFRASTRUCTURE lxiv TRADE IN SERVICES lxvi CORRIDORS lxvii TRADE FACILITATION AND LOGISTICS lxx JUNE 2016 ABBREVIATIONS AND ACRONYMS ACIA ASEAN Comprehensive Investment Agreement ACLED Armed Conflict Location Events Dataset AEC ASEAN economic Community AFAS ASEAN Framework Agreement on Services AFTA ASEAN Free Trade Area ADB Asian Development Bank AML Anti-Money Laundering Rules ASEAN Association of South East Asian Nations ASW ASEAN Single Window ATIGA ASEAN Trade in Goods Agreement CBM Central Bank of Myanmar CIF Cost Insurance and Freight CIS Customs Intelligence Database System CLMV Cambodia, Lao PDR, Myanmar and Vietnam CMT Cut Make Trim CSIS Centre for Strategic and International Studies (Indonesia) CSO Central Statistical Organization CSR Corporate Social Responsibility DFAT Department of Foreign Affairs and Trade (Australia) DFID Department for International Development (UK) DICA Directorate of Investment and Company Administration DNSQ Department of National Standards and Quality DTIS Diagnostic Trade Integration Study EAG Ethnic Armed Group EBA Everything-But-Arms Initiative EIF Enhanced Integration Framework EITI Extractive Industries Transparency Initiative EPZ Export Processing Zone EU European Union EUTR European Union Timber Regulation FDA Food and Drug Administration FDI Foreign Direct Investment FIQCD Fish Inspection and Quality Control Division FLEGT EU Forest Law Enforcement, Governance and Trade FOB Free On Board FSC Forest Stewardship Council FVO Food and Veterinary Office GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (German International Development Organization) ) GSP Generalized System of Preferences GVC Global value Chain HACCP Guidelines for ASEAN Audit and Certification of Food Hygiene and Hazard Analysis and Critical Control Points ICD Inland Container Depot ABBREVIATIONS AND ACRONYMS IMF International Monetary Fund IMF DOTS International Monetary Fund Direction of Trade Statistics INGO International Non-Governmental Organization IOM International Organization for Migration ISO International Standardization Organization ITES Information Technology-Enabled Services IWT Inland Waterway Transport JICA Japan International Cooperation Agency KIA Kachin Independence Army KIO Kachin Independence Organization KNU Karen National Union KOICA Korea International Cooperation Agency KYC Know-Your-Customer Rules L/C Letter of Credit LDC Least-Developed Country LPI Logistics Performance Index MACCS Myanmar Automatic Cargo Clearance System MAFPEA Myanmar Agro-Based Food Processors and Exporters Association MAST Multi-Agency Support Team MFN Most Favored Nation MGMA Myanmar Garment Manufacturers Association MIC Myanmar Investment Commission MITS Myanmar Inspection and Testing Services MNDAA Myanmar National Democratic Alliance Army MoPF Ministry of Planning and Finance MNSQ Myanmar National Standards and Quality Department MALI Ministry of Agriculture, Livestock and Irrigation MoC Ministry of Commerce MoHT Ministry of Hotels and Tourism MREC Ministry of Natural Resources and Environmental Conservation MLIP Ministry of Labor, Immigration and Population MoTC Ministry of Transport and Communications MPA Myanmar Port Authority MRA Mutual Recognition Agreement NACCS Nippon Automated Cargo and Port Consolidation System NAFTA North American Free Trade Agreement NES National Export Strategy NCA National Ceasefire Agreement NDS National Development Strategy NSW National Single Window NTM Non-Tariff Measures ABBREVIATIONS AND ACRONYMS NTMC Non-Tariff Measures Committee OECD Organisation for Economic Co-operation and Development PTB Physikalisch-Technische Bundesanstalt (German National Metrology Institute) RCEP Regional Comprehensive Economic Partnership REER Real Effective Exchange Rate ROO Rules of Origin SDR Special Drawing Rights Special Economic Zone SMEs Small and Medium-Sized Enterprises SOE State-Owned Enterprise SPS Sanitary and Phytosanitary Measures TBT Technical barriers to Trade TEU Twenty-Foot Equivalent TFA Trade Facilitation Agreement TTSC Textile Training and Support Centre TVET Technical and Vocational Training UMFCCI Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry UNCTAD United Nations Conference on Trade and Development UNIDO United Nations Industrial Development Organization UNSD United Nations Statistics Division USAID United States Agency for International Development WFP World Food Programme WTO World Trade Organization WTTC World Travel and Tourism Council This report was prepared by World Bank Group team led by Sjamsu Rahardja ACKNOWLEDGEMENTS with the assistance from Fabio Artuso, Min Ye Paing Hein, and Olivier Cadot, under the guidance of Aide for Trade Coordination Unit and Department of Trade of the Ministry of Commerce of Myanmar. The team consisted of Alina Antoci, Diep Nguyen Van-Houtte, Massimiliano Cali, Elizabeth Ruppert-Bulmer, Maria Monica Wihardja, Daniel van Tuijl, Sebastian Saez, Martin Moluninuevo, Habib Rab and May Thet Zin. The team also received background notes from Marc Auboin (WTO), Michael Jensen, Christian Ksoll, Denis Audet and Jared Bissinger (ILO). Overall supervision and guidence for the preparation of this report is provided by Mona Haddad (Program Manager), Abdoulaye Seck (Country Manager), and Ulrich Zachau (Country Director). Inputs were also received from Charles Schneider, Thitsar, and administrative support was provided by Ei Yin Yin Phyu and Tin Hninn. The team received feedback from Declan Magee (DFID), Paul Brenton, Mari Pangestu (Columbia University and CSIS), and Sanjay Kathuria provided useful feedback. Report editing was done by Peter Milne. The team is especially grateful to the Ministry of Commerce (MoC) for providing strategic guidance, providing data and coordinating meetings with the other ministries . The team also thank Myanmar’s Customs, the Central Statistical Organization, the Central Bank of Myanmar, Myanmar Port Authority, Inland Water Transport, the Ministry of Hotel and Tourism, the Ministry of Labors, Immigration and Population, the Ministry of Construction, the Ministry of Transportation and Communications, Plant Quarantine, the state governments (in Shan and Kayin), and border posts in Muse, Myawaddy, and Tamu, for sharing data and information. Enhanced Integrated Framework (EIF) Secretariat also provided inputs and guidance to the team. The team also thank various organizations that were consulted/interviewed: Republic of the Union of Myanmar Federation of Chambers of Commerce (UMFCCI), Mandalay Regional Chamber of Commerce, Myanmar Association of Freight Forwarding, Myanmar Garment Manufacturers Association, Global Witness. Also Development Partners members of Trade Sector Working Group: Asian Development Bank, Australia-Aid, European Union, ITC, JICA, UK-Aid, UNIDO, and USAID . This DTIS report funded by Enhanced Integrated Framework (EIF) Trust Fund with additional support from Australia DFAT and UK-Aid As part of the Enhanced Integrated Framework (EIF) program for Trade-Related FOREWORD Assistance to Least Developed Countries (LCDs), which Myanmar joined in April 2013, the Government of Myanmar has asked the World Bank Group (WBG) to be the implementing agency for a Diagnostic Trade Integration Study (DTIS). The general objectives of a DTIS are: (i) to assist the government in mainstreaming trade and competitiveness in the country’s overall development strategy; (ii) to provide a diagnostic and analytical tool to prioritize and sequence key reforms in the area of trade and competitiveness; and (iii) to provide a platform for development partners to coordinate action and align trade-related assistance with government priorities. This DTIS has identified a number of domestic and external constraints facing Myanmar as it strives to leverage regional and global integration for inclusive, export-led growth. Based on this, the current report provides analytical input on the linkages between trade and poverty, and highlights key steps to remove bottlenecks in terms of trade policy and trade facilitation. EXECUTIVE SUMMARY x Photo credit © Zzvet / Shutterstock.com EXECUTIVE SUMMARY OVERVIEW After waiting in isolation for almost four decades, its re-integration into the global economy has presented Myanmar with a unique opportunity to leverage growth in trade to reduce poverty, promote shared prosperity and sustain the nationwide peace process. Following Myanmar’s dramatic decision to change its trajectory in recent years, the boom in trade and investment has boosted average economic growth beyond 7 percent per year as the country starts to catch up with its neighbors. With significant natural and agricultural resources, and comparative advantages from its resources, pool of labor and location as a natural hub to 40 percent of the world’s population, Myanmar has great potential. What is crucial now is that this potential is not squandered, but used to achieve transformational development gains that will improve the lives of its citizens by reducing poverty, spreading wealth, and helping to reduce social and ethnic tensions. All of this is within Myanmar’s grasp if it can seize the moment to design and apply appropriate policies to encourage trade and economic openness, and ensure that all stakeholders in the country’s future can share in the benefits, especially those in the most vulnerable and marginalized groups. in the benefits, especially those in the most vulnerable and marginalized groups. xi EXECUTIVE SUMMARY While growing fast, Myanmar’s trade still has enormous potential for further growth. But it is crucial that the benefits from greater trade are also shared more equally and help to sustain the ongoing political transformation. While the challenges are daunting, with strong Myanmar’s trade started from a relatively low base political will to maintain the momentum of reform but is growing fast and moving towards the country’s and support in applying the right policies, the comparative advantages. government’s goals can be achieved. The challenges may be daunting but the Government of Myanmar Myanmar has a comparative advantage in its pool is nonetheless ambitious in its plans for the future. of untapped labor, natural resources and location, Myanmar’s goal is for sustained GDP growth of 7.7 wedged as it is between China, India and Thailand, percent per year which, if achieved, would double the and especially as China’s cost advantages start to fade. country’s GDP in about 9 to 10 years. Such growth Indeed, it shares borders with markets that account for is almost unheard of outside of China. However, with 40 percent of the world’s population. After Western the right policy options to drive growth, including a countries removed economic sanctions imposed on focus on sustainability, poverty reduction and equal Myanmar, garment exports grew threefold between opportunities for all, and with the political will to 2005 and 2014, while cargo handled by the ports of maintain the reform momentum, such levels of growth Yangon increased fourfold in the nine years to 2014. is not beyond reach. This report aims to provide such Meanwhile, tourism, which has never been fully policy options based on a thorough diagnostics analysis developed in Myanmar, posted average annual growth, of the current situation regarding trade in Myanmar, as measured by annual tourist arrivals, of about 35 including the country’s strengths and weaknesses. This percent between 2009 and 2015. toolkit of policy options will help Myanmar to achieve Some of the key challenges that Myanmar faces. these goals, and provide the citizens of Myanmar with The country is still constrained by weak institutions a new future—one they could only have dreamt of just (underdeveloped regulatory framework, cumbersome a few years ago. procedures for investment), high costs of trade (the lowest ranking in ASEAN in the Logistics Performance Index for customs clearance, poor quality of logistics services, lack of logistics infrastructure), underdeveloped quality and standards infrastructure, and a lack of trade financing, among many others. xii 3 main EXECUTIVE SUMMARY drivers can ensure that greater trade helps to both reduce poverty & share prosperity in Myanmar Understanding these drivers and SOFT INFRASTRUCTURE WILL BE JUST AS IMPORTANT AS HARD designing policies to promote INFRASTRUCTURE them is the focus of this report. Developing not only hard infrastructure but also the soft infrastructure that is crucial to make the economy work efficiently. This includes simplifying procedures and licensing for trade and investment, building institutional capacity in trade-related government PUSHING AHEAD WITH REFORMS agencies, and ensuring broader ownership of reforms across society, including disadvantaged groups. Maintaining the momentum of the reform agenda towards greater trade openness and ensuring Figure A: Trade-related activities in Myanmar are rapidly that there is a fair distribution of gains from picking up trade, especially for the poor and vulnerable, and those living in conflict-affected areas. Index 2010 = 100 300 400 DIVERSIFICATION AWAY FROM 250 300 OVER-RELIANCE ON NATURAL 200 150 200 RESOURCES 100 100 50 Diversifying away from the current over-dependence 0 0 on natural resources towards other sectors with 2006 2007 2008 2009 2010 2011 2012 2013 2014 high potential, such as light manufacturing, Value of garment exports services and sustainable agri-business. Only Cargo handled by Yangon Port (TEUs) through such a diversification can the economy Annual Tourist Arrivals (Right Axis) provide the employment and sources of rural income to share the benefits of increased trade. Source: UN Comtrade, Myanmar Port Authority, CSO xiii EXECUTIVE SUMMARY The policies suggested in this report have the potential not only to transform Myanmar’s economy through greater trade, but also to transform the lives of all of Myanmar’s citizens. Trade can be honed by policymakers into a tool for wealth distribution and poverty reduction. Myanmar is at a historic juncture when it could transform its economy into one that addresses these issues through improved trade openness. xiv EXECUTIVE SUMMARY This report recommends the following policies OVERHAUL OF TRADE POLICY and mandatory standards. hub and at the same time also transform poor local communities in border areas. REGULATIONS AND BUILD CAPACITY IN TRADE POLICY AND ENCOURAGE GROWTH OF TRADE PROMOTION IN SERVICES The import tariff structure could be simplified, while Myanmar still has administrative and regulatory non-tariff measures could be further rationalized to barriers that constrain further development of trade render them simplified and more transparent. Trade- in services, such as discretion in approving foreign related data could be harmonized for better informed direct investment (FDI) and restrictions on FDI in trade policies and promotion strategies. This would the tourism sector. Cross-cutting and also sectoral allow trade policies to further facilitate and sustain the reforms would help to unleash the full potential of process of industrialization in Myanmar. trade in services. Awareness and greater capacity among government ministries to coordinate policies ENSURE INCLUSIVE EXPORT-LED in trade in services could also be further developed. GROWTH Trade in Myanmar has huge potential but, without DEVELOP EFFICIENT TRADE the necessary policies and safeguards, it risks creating CORRIDORS tensions by benefitting elites and undermining Improving efficiency in Yangon’s port terminals and vulnerable groups through expropriation, their connectivity with hinterland (via roads, railways environmental degradation and poor working and inland waterways) and facilitating investments in conditions. Myanmar could avoid this situation by logistics infrastructure (private bonded warehouses, addressing skills shortages, improving access to finance logistics parks and container depots) would help and providing support to drive local economic activities. to leverage Myanmar’s position as a trade hub. Local communities could also be consulted in the Connecting lagging regions to markets through better design of trade-related projects. Another opportunity logistics infrastructure at the same time will also help to is in the potential sharing of Myanmar’s huge benefit poor local communities, particularly in border wealth from jade mining exports, which would also areas, but only if done with input from and support of benefit from more transparency in data, community conflict-affected communities and ethnic armed groups. consultations and a greater sense of ownership. . FACILITATE TRADE THROUGH ESTABLISH A ROBUST QUALITY BETTER LOGISTICS AND FINANCE INFRASTRUCTURE FOR MYANMAR Improving cargo turnaround times is key for PRODUCTS Myanmar’s competitiveness. It will therefore be Meeting demand for quality products from local important to modernize trade logistics if supply consumers and international buyers is important for chains are to be competitive. Myanmar could Myanmar if it is to compete successfully. The focus also consider phasing out restrictions on foreign could be on narrowing regulatory and institutional companies in logistics, reforming Customs procedures gaps by adopting international quality standards (e.g. valuation, risk management and coordination (e.g., for rice exports), establishing guidelines for SPS across trade-related departments), and improving management according to international practices, and access to trade finance through the financial system. develop a national accreditation body, while avoiding conflicts of interest with the potential for rent-seeking opportunities when introducing technical regulations xv EXECUTIVE SUMMARY EXECUTIVE SUMMARY Myanmar’s elections in 2015 marked another historic milestone in the country’s political and economic transition that began in 2011. In November 2015, the people of Myanmar voted overwhelmingly for change and reform. It is now up to Myanmar’s policymakers to deliver on the people’s hopes and aspirations for a more prosperous, equitable and peaceful Myanmar, with support from development partners, including the World Bank Group. Leveraging trade to underpin inclusive growth and poverty reduction is within reach. While growing rapidly in recent years, Myanmar’s trade is still modest as a proportion of its GDP compared with its neighbors. It still has huge potential to grow. Developing into a major trading partner with its ASEAN neighbors and beyond offers Myanmar a unique opportunity to empower the private sector to drive its economic opening, and spread the benefits of increasing trade more equitably throughout society and across regions. After all, Myanmar shares borders with countries that account for some 20 percent of global GDP and 40 percent of the world’s population. Expanding trade can help Myanmar to rebalance its economy away from over-reliance on natural-resource industries that very often offer little in the way of employment to ordinary people, and have a history of provoking social tensions and unrest in Myanmar’s more remote ethnic-minority regions. xvi EXECUTIVE SUMMARY xvii 3 EXECUTIVE SUMMARY A new paradigm for private-sector driven growth. Based on its diagnostic analysis of Myanmar’s current trade environment, this report offers suggestions for fostering competitiveness and a dynamic environment for private sector growth to drive trade. Myanmar is poised to take off on a new and ambitious trajectory going forward. The challenges are daunting and success cannot be guaranteed, but our hope is that the findings in this report can provide important guidance and policy options that can help to ensure success. Figure A: Myanmar’s trade has room to grow more 9 8 Adjusted openness 7 6 5 4 4.0 6.0 8.0 10.0 12.0 ln GDP per capita, PPP dollars Other countries ASEAN Myanmar Fitted values Source: World Bank Group team calculations. Figures are adjusted according to size of population and share of natural resources in the economy. xviii 3 EXECUTIVE SUMMARY key messages emerge from the analysis as follows 1. Following through on reforms to encourage trade openness is critical for poverty reduction Unleashing Myanmar’s trade potential has only But for trade to grow it will be important for just begun. Non-gas exports grew at 11 percent Myanmar to continue to reform in order to stay per year between 2011 and 2014, despite weak competitive and share the gains equitably. Looking commodity prices and softening global demand. And forward, continuing to reduce costs for the private yet Myanmar’s trade (exports and imports) as a share sector to conduct trade will be key if Myanmar is to of GDP is still below average for ASEAN countries remain competitive, while just as important is the need (Figure A). These numbers partly reflect catching up to ensure a fairer distribution of the gains from trade. after decades of isolation, with Myanmar starting its Decades of economic isolation and armed conflict have growth surge roughly at the same export/GDP ratio as left Myanmar with widespread poverty, informality Vietnam in 1989, and Indonesia and Thailand in the and lingering fragility. Thus, it will be important to early 1980s. sequence reforms carefully, while also implementing complementary policies for the poor and vulnerable, both men and women, particularly those who live in conflict-affected areas, so they can also benefit from greater trade. xix 2 EXECUTIVE SUMMARY Myanmar exports $million 12'000 10'000 8'000 6'000 4'000 2'000 - 2007 2008 2009 2010 2011 2012 2013 Other products Gas & derivatives Jade Beans & pulses Apparel products Fish & crustaceans Wood products Cambodia 3.5 2.5 East Asia & Pacific Myanmar (developing only) 1.5 0.5 -0.5 Enabling environment Thailand Lao PDR Indonesia Bangladesh Quality of infrastructure Customs clearance process Ease of arranging shipment Competence and quality xx 2 EXECUTIVE SUMMARY Diversification into light manufacturing, services and sustainable agri-business would be a powerful way of reducing poverty, while also rebalancing the economy away from its over-dependence on natural resources Tourism in Myanmar has never been fully explored Crossing-cutting reforms can be introduced and developed. Myanmar has huge potential in simultaneously to attract FDI. A successful industrial tourism, making the sector an obvious “quick- policy aimed at attracting FDI will benefit from win” development priority. Developing the tourism upgrading infrastructure, improving the business sector would build on existing strengths (tourism environment, and implementing social regulations receipts tripled between 2007 and 2012) and provide through coherent sectoral and cross-cutting plans employment and sources of income in rural areas, designed in collaboration with all stakeholders. provided that key infrastructure constraints are International experience also shows that international addressed. Meanwhile, leveraging the potential for buyers are increasingly demanding environmental export-oriented manufacturing could be a key poverty- and labor regulations consistent with international reduction engine. International experience suggests standards. that every US$1.00 of value-added is two to six times more powerful in reducing poverty in manufacturing Reforms can also help to bring a transformation in than in other sectors, while mining has very little agriculture. In an agriculture-based transformation, impact on poverty (Cadot et al., 2015). Myanmar can also seize opportunities to raise the market value of farming products, providing a rapid and Over-dependence on natural resources could direct impact on poverty reduction. The government’s undermine manufacturing competitiveness. initiatives on conflict-affected land-tenure reform and Continued over-reliance on non-manufacturing systematic land registration are perquisites for the sectors exposes Myanmar to macroeconomic risks success and sustainability of the agricultural-based from volatile commodities prices, together with poverty reduction strategy. Once again, it will be chronic currency overvaluation (Dutch disease) that important for the government to provide integrated would also undermine the manufacturing sector’s and coherent farm support to both men and women competitiveness. Export-led manufacturing would also from farming households (agricultural research and help formalize employment (61 percent of Myanmar’s extension services, rural roads, irrigation, and seed, workforce is currently self-employed, or in casual or as well as access to product and agri-processing informal domestic labor) and raise productivity and knowledge), and complement this support by wages, provided that Myanmar’s educational system upgrading of the national quality infrastructure based can improve on its ability to deliver skills demanded on demand from exporters and regulators to safeguard by the market. consumer health and safety. xxi EXECUTIVE SUMMARY POPULATION with access to ELECTRICITY 33% 60% 99% MYANMAR BANGLADESH VIETNAM xxii 3 EXECUTIVE SUMMARY Infrastructure development and regulatory reforms can occur in tandem Only one-third of homes have electricity in Myanmar. Only 33 percent of Myanmar households have access to electricity, compared with 60 percent in Bangladesh and 99 percent in Vietnam. Myanmar’s logistics infrastructure (ports and their hinterland connections) ranked 137th out of 160 countries in the 2014 Logistics Performance Indicator (LPI), the lowest among ASEAN countries. It is also less connected with global shipping-liner networks than Bangladesh or Vietnam. Both Yangon’s seaport terminals and highways along the country’s main economic corridors (i.e., Yangon-Mandalay-Muse) will soon reach their capacity limits, while the road along the Mandalay- Tamu corridor has been severely damaged by flooding. The business environment remains challenging for the private sector. While securing electricity and starting a business in Myanmar have become much easier and boosted its ranking in the World Bank Group’s 2016 Doing Business survey from 177 in 2015 to 167, the business environment in Myanmar remains challenging for the private sector. International experience has shown time and again that in order to reap the benefits of hard infrastructure investments, it is also vital for the government to work in parallel on “soft” infrastructure reforms, including, in Myanmar’s case, (i) reforming procedures and regulations; (ii) strengthening institutional capacity; and (iii) ensuring broad ownership of the reforms. xxiii EXECUTIVE SUMMARY Why these Myanmar has embarked upon a high- stakes transition and major challenges remain. Myanmar is going through reforms matters a critical triple transitions in its development path — from isolation and fragmentation to openness and for Myanmar’s integration; and from pervasive state control, exclusion, and individual disengagement, to inclusion, development participation, and empowerment. These reforms have the power to agenda bring back international investors and unleash the transformational power of local entrepreneurship. However, the challenges and risks are considerable. xxiv EXECUTIVE SUMMARY Lifting sanctions Accelerating growth does not guarantee does not guarantee accelerating peace growth Second, even if an acceleration in growth does materialize, Myanmar’s own experience shows that this is not enough to ensure the viability of First, while the transition has set the stage for peace agreements. Growth benefitting only large an end to sanctions and the re-engagement of natural-resource investors could prove corrosive crucial international trade partners, international for the transition; only inclusive growth, bringing experience and recent research show that, income, empowerment and employment gains to all of itself, lifting sanctions does not guarantee stakeholders, in particular the most vulnerable, can be acceleration of growth the basis for a lasting peace. While private sector export- led growth has a key role to play in achieving this, (Freund and Jaud, 2013) success cannot be entrusted to market forces alone. For instance, inclusive rural development cannot take place without well-defined land titles and the protection of vulnerable groups, who may be unable to assert their claims, including women, against expropriation. It will also be important that investment is forthcoming in sectors that open up employment opportunities for men, women and youth as enterprise owners and formal workers. xxv EXECUTIVE SUMMARY Wealth will not automatically trickle down. Third, be greatly supported by the establishment of land trade integration could have an impact on income rights for farmers (improving their access to credit), distribution: there will be winners and losers from including recognition and promotion of women’s trade. Export-led private sector development will joint title claims, as well as a rise in productivity generate a trickle-down of wages to the local economy through better farming practices, improved access only with social protection, rules to safeguard the to agricultural inputs, and better access to domestic mostly low-skilled workforce from exploitation, and and international markets. Poverty also arises where improvements in workers’ skills. there is exclusion from economic opportunities, and so reforms could be used to offer economic entry The economic and political transitions are taking points for men and women, in urban and rural areas, place against a legacy of widespread poverty... and youth and ethnic groups. Urban poverty rates are Notwithstanding the difficulties involved in measuring also high and often relate to informality and the lack and comparing it, poverty appears to be high in of stable jobs. Export-led growth will be crucial to Myanmar, with a relatively high proportion of the enable the generation of stable jobs in manufacturing population living below the national poverty line and services. Finally, poverty is multidimensional, (World Bank, 2014a). Poverty rates are particularly involving not just low incomes but also lack of access high for certain ethnic groups, highlighting the need to basic services (e.g., water, sanitation, electricity and to promote conflict-sensitive economic opportunities public transportation), lack of education, and poor among them which can also help to consolidate the health. Regardless of the rate of economic growth, it peace process. Related to this, poverty rates are likely to is only through deliberate, planned improvements in be high in border and remote provinces. With the right the state’s delivery of these basic public goods that trade policy and infrastructure investments, cross-border poverty will gradually recede. While such efforts are trade could play a key role in providing much needed not directly part of a trade competitiveness strategy, opportunities. Poverty is also overwhelmingly rural, they are highly complementary to it and necessary to and within rural areas is often linked to landlessness ensure that the benefits of increased openness are felt or quasi-landlessness. Reducing rural poverty would across all segments of the population. … and an ongoing but vulnerable peace process Despite recent progress, the peace process remains there are natural resources in many of the conflict areas, fragile and fragmented. Some ethnic armed groups with flashpoints and grievances relating to exploitation (EAGs) signed a Nationwide Ceasefire Agreement (aggravated by the lack of established land rights) and/ (NCA) in October 2015, which provides the space or large windfalls going to elites.1 Expanded resource- for cooperation with the government on economic based trade, when controlled by the parties in conflict, development. Other groups have bilateral ceasefires can even fuel future conflict by financing it. This may that are holding, while still others are in active conflict. have happened, for instance, with logging in Kayin and Kachin states. More generally, opening up will be International experience shows that the development accompanied by large-scale upheaval in occupational of agricultural cash crops for export can provide and locational choices, as well as the distribution of individuals with better earning opportunities and raise income, with accompanying adjustment costs. In the opportunity cost of conflicts. Regional trade and making these choices acceptable it will be important for cooperation can also reduce the incentives for other the government and other actors to keep a constant and countries to interfere with the peace process—a common vigilant eye on dialogue and fairness, with consultation cause of internal instability in fragile states. However, followed by effective follow-up, and working checks trade can also be a destabilizing force, especially when and balances. it comes to natural resources. As in many countries, 1 An example is a clash over a copper mining site http:// www.wsj.com/articles/protesters-clash-with-police-in-central-myan- mar-over-copper-mine-1419251063 xxvi EXECUTIVE SUMMARY The government’s transition objectives are ambitious The National Development Strategy’s (NDS) target is to sustain economic growth at 7.7% annually for at least the next five years. Given the limited purchasing power of Myanmar’s diffuse, causing the formation of blocking coalitions. domestic market at current poverty levels, faster-than- Even a seemingly harmless reform, such as improving GDP export growth is the only way to fuel growth at the performance of a border post, can erode the rents this level. Trade as a percentage of GDP is currently at a of local groups controlling informal cross-border low 30 percent, about half the international benchmark trade, inducing resistance. Attenuating such resistance for Myanmar’s level of income. Combining the NDS’s involves careful on-the-ground assessments of the kind target growth rate with a doubling of the trade-to- of compensation and inclusion needed (e.g., local GDP ratio up to its normal level (consistent with the reinvestment of some of the collected border taxes, or government’s openness strategy), exports will need encouragement of local employment in border posts). to grow at 20 percent a year. This is very ambitious, On a larger scale, improving the import regime (e.g., especially in a period of weak external demand and through the abolition of licensing) may be perceived a weakening link between global GDP growth and as a threat by politically-connected firms selling trade (Constantinescu et al., 2014). But doubling on the domestic market. Complementary policies the trade-to-GDP ratio is not impossible if Myanmar could involve targeted pro-competitive infrastructure can attract a substantial share of the coming massive investments that are public inputs (e.g., energy or relocation of garments manufacturing out of China’s transport), which would spill over to other players. high-wage area. Success in such an export-led growth One of the challenges is that reform and compensation strategy will provide an intimate two-way relationship mechanisms typically do not fall under the authority of with the political transition. First, reputable investors the same ministry. Coordination is therefore key and will not commit large sunken costs in the country may benefit from a specific mechanism (see below). without assurances of political stability. Second, they are likely to demand international standards …and remain manageable by a government with in key areas including governance, labor rights and limited policy-formulation and implementation environmental sustainability. Failing to meet these capabilities. While the transition’s challenges are standards would lock Myanmar into a market segment daunting enough, the government is also challenged dominated by fly-by-night investors contributing little in carrying out large, multi-dimensional reform to the country’s development. Conversely, export-led programs, and is already flooded with outside advice. growth holds the key to the country’s diversification It is therefore crucial to remain focused and to into manufacturing, market-oriented agriculture and identify simple, quick wins on which to build reform trade in services, which have all been shown elsewhere momentum. This DTIS report aims to contribute to be powerful engines of inclusiveness and poverty by identifying such quick wins in terms of trade reduction. policy and facilitation. Beyond the identification of priority reforms, implementing them, and keeping To succeed, it will be important for reform the momentum going year after year in the face of to overcome resistance through adequate difficulties and resistance, is a formidable challenge complementary policies... Deep reform programs against which many a reform program has stalled. In cannot avoid displacing established interests. The this regard, the experience of successful reformers and experience of successful reformers, such as in Chile in recent theories of “change management” suggest that the 1980s, shows that designing efficient compensation the government might consider appointing a team of policies is key to success (Edwards and Edwards, 2000). highly competent technocrats to be in charge of the The costs of reforms that eliminate inefficient rents are reform process’s overall drive and coherence, with often perceived most clearly by the losers, while the top-level political support and a mandate to overrule distribution of the benefits to the winners is more resistance and enforce inter-ministerial cooperation.1 1 An example of such a team is the Task Force for Private Sector Reform spearheaded by the MoC. xxvii EXECUTIVE SUMMARY Policy PRIORITIES I Against this background, Establish “lighthouses” to the DTIS proposes a limited showcase the positive impact of and focused program of reforms in reducing trade costs and alleviating poverty. sequenced reforms in the area of trade policy, This includes: (i) simplifying the processes for trade facilitation and infrastructure, licensing and automating procedures whenever possible; (ii) removing practices that add costs for as summarized in a synthetic trade (e.g., advance income-tax payment for exports, way in Table A below. restrictions on foreign companies importing by themselves); (iii) highlighting the employment or income dividends of certain reforms for both men and women; (iv) rolling out automation, proper valuation of customs procedures; (v) improving hard and soft infrastructure at border check-points and for cargo The reform sequence is handling in Yangon river ports; harmonizing the tariff based on three immediate structure to reduce “nuisance”; and (vi) harmonizing trade data collection by Customs and the Ministry of priorities: Commerce (MoC), including in Special Economic Zones (SEZ). xxviii EXECUTIVE SUMMARY II III Build institutional capabilities. Engage relevant stakeholders with a view to developing a common It is important for institutional capabilities to be rolled out immediately in order for the MoC and strategic vision and inter- other relevant ministries to coordinate and take full ministerial cooperation. ownership of the trade policy reform agenda. The priorities here are to build momentum from reform While conditions for such a vision may take time in customs procedures by: (i) implementing risk to create, they can be used to set the longer-term management in cargo inspection; (ii) establishing a goals. These might include: (i) the development of a “data dashboard” for trade-related data enabling the realistic and demand-driven quality infrastructure; (ii) government to implement or advocate evidence-based implementation of a trade sector strategy to promote policy decisions; (iii) building up capabilities in policy firms’ participation in global value chains (GVCs); (iii) analysis and understanding of trade in services and identify and roll out an economic-corridor program trade remedies; and (iv) setting up a committee to to link the development of transport infrastructure design and implement trade facilitation reform with a and logistics services with trade development projects; regulatory-overview mandate and capabilities to review (iv) address concerns over negative externalities from NTMs. The capacity of the financial sector could also trade in extractive products (e.g., precious stones); and be strengthened to meet increasing demand for trade (v) engage with women- and youth-led enterprises to finance (e.g., pre-shipment and post-shipment credits, address their niche barriers to trade and growth. Given export insurance). To ensure trade development projects the interest in using SEZs to concentrate efforts in the are inclusive for local communities, it will be important provision of hard and soft infrastructure to facilitate to establish a proper protocol for consultations with trade and investment, Myanmar could also consider local ethnic communities in the design of trade-related reviewing the recent experiences from developing projects and complementary policies. SEZs in Thilawa and identifying areas of potential improvement, such as the governance of SEZs, provision of services and facilities for investors, and linkages with local economic activities. xxix 3 EXECUTIVE SUMMARY 2 Synthetic view of DTIS proposed priorities TABLE A 1 ESTABLISH “LIGHTHOUSES” Streamlining procedures trade licensing and automate them whenever for possible START BUILDING INSTITUTIONAL CAPABILITIES Harmonize data collection, improve capacity in policy analysis, trade negotiation, services trade, trade remedies and trade promotion DEAL WITH COMPLEX REFORMS Map out and implement reforms and capacity-building for Myanmar firms to participate in GVCs (e.g., garments, agribusiness, tourism, light manufacturing) Review practice in trade of extractive products to reduce Consult new trade regulations negative externalities, promote Eliminate costly practices with with private sector and publish all transparency and inclusivity little value (e.g., advance income trade regulations in Trade Portal tax payments for export, trade Map out and implement pilot for Implement ASEAN Trade economic corridor development licensing, roadblocks and payments) in Goods Agreement and which integrates development Roll out Customs automated WTO TFA, implement risk in logistics infrastructure system and rationalize management for cargo inspection and logistics services with import tariff structure Build acceptable quality trade development projects Review and amend legislations in infrastructure for Myanmar products Engage with women and youth- logistics and trade facilitation to Develop capacity of financial led enterprises to address their further facilitate development of sector to meet demand for niche barriers to trade and growth logistics infrastructures by private trade finance instruments sector (e.g. warehouse, inland Review experiences from Thilawa SEZ countainer depot, river barges) Establish a precedent for consultations with ethnic Improving night navigation along minorities in the design of trade Yangon river and align practices development projects especially to increase capacity of cargo in conflict-sensitive areas handling and logistics efficiency. Pass new Investment Law to promote certainty and level playing field for investment in Myanmar xxx EXECUTIVE SUMMARY Given Myanmar’s political transition, the overall development objectives of trade reform can only be sustained by a properly designed local trade development program A set of cross-cutting reforms are outlined in the Action thorough consultation of local communities on how Matrix at the end of this Executive Summary. However, to implement the Action Matrix locally. The output further analytical work could be undertaken at the of the local workshops could become the basis for a subnational level in order to craft accompanying policy concept note to be used to mobilize resources and measures and make sure the benefits of national trade to start project appraisals. The diagram below shows development can trickle down to local populations one option for local consultation. The analysis of nationwide. The definition of local policy targets and the local dimension of poverty, conflict and gender the description of local specific constraints could focus across the DTIS thematic areas (trade facilitation and on three dimensions, namely: (i) the state/regional logistics; trade regulations; standards; and private sector poverty profile; (ii) the local conflict situation; and development) could include a mix of qualitative and (iii) gender. The government could consider using the quantitative assessments, leading to the formulation opportunity offered by the DTIS dissemination at of specific project proposals for the benefit of the local the subnational level to start a structured diagnostic population. of local needs and opportunities by carrying out a Figure B: The thematic areas of the DTIS and cross-cutting issues DTIS Workshop in provinces POVERTY CONFLICT GENDER DIMENSION DIMENSION DIMENSION Enhancing trade facilitation logistics Improving trade regulations Local reforms Implementation prioritization Improving standards Pilot initiatives for private sector development Local project Concept Note appraisal/funding development xxxi EXECUTIVE SUMMARY xxxii 1 POLICY REFORMS Changes in procedures and TRADE incentives could be considered to reduce trade costs and stimulate the provision of services. xxxiii 1. On top of the steps already taken to reduce import and export licenses, a number of other procedures could also be considered for removal, and whose objectives can be better addressed through other means. Changes in procedures and incentives could be considered to reduce trade costs and stimulate the provision of services. On top of the steps already taken to reduce import and export licenses, a number of other procedures could also be considered for removal, and whose objectives can be better addressed through other means. Examples include: (i) the requirement for exporters to pay 2 percent income tax in advance; (ii) limits on how much banks can charge traders to process L/Cs; and (iii) requirements to demonstrate that foreign buyers have already paid for exports (or have used L/Cs). Another example is the flat and relatively low charges levied for storing containers in port (of just US$2/day), creating port congestion. The Ministry of Commerce (MoC) could consider reviewing these practices and consulting stakeholders, including the Myanmar Business Forum, with a view to removing them. • Availability of reliable trade-related data (action A2 in the Action Matrix). Myanmar’s trade statistics are inadequate, while plenty of technical assistance from the World Bank Group, the WTO, the International Trade Center (ITC) and the UN Statistics Division (UNSD) is on hand to help build up the necessary know-how. In the interim, the MoC could start working with the Ministry of Finance, in particular with Customs, to put in place a reliable trade-statistics tool and forward the data to the UNSD for inclusion in the UN Comtrade database. • Capacity to analyse data and develop policy briefs (action A3). The MoC could consider working with other ministries (e.g., Labor, Planning and Finance, and Central Statistical Organization) and think-tank organizations to build up the statistical capabilities needed to inform policy through data collection and sharing protocols, together with the hiring of competent professionals. It could also consider creating and strengthening the capacity of specialist teams with capabilities in data analysis and report writing. Although training is important it does not necessarily address a lack of effective organizational structure—human resource capacity, incentive structure and organizational arrangements—to ensure that the demand for quality policy analysis can be met. • Organizational capabilities to effectively respond to the needs of reforms (action A5). Building capacity through training is important but does not necessarily address the lack of effective organizational structure—human resource capacity, incentive structure, and organizational arrangements—to ensure that the demand for quality policy analysis can be met. Myanmar’s tariff structure could be streamlined and simplified, with the role of protection against market disruptions being devoted to safeguards. This implies tariff reform, as well as continued efforts to improve capabilities to use the WTO’s Agreement on Safeguards through training of MoC officials, for which Myanmar has been receiving technical assistance from UNESCAP. Appropriate but non- excessive use of trade defense measures could both shield domestic employment from temporary market disruptions and facilitate the phasing-out of licenses by alleviating concerns about exposure (action A4). Diversifying exports requires reducing distortions in the allocation of resources, particularly from the burdensome use of non-tariff measures (NTMs). Countries can legitimately make use of NTMs to safeguard consumers’ health and safety, protect the environment, and meet other norms. But NTMs xxxiv EXECUTIVE SUMMARY with onerous administrative requirements can also While constraints on Myanmar’s attractiveness in be misused to impose costs on the private sector agri-business, light-manufacturing and tourism that are equivalent to import tariffs. For this, the are largely cross-cutting, sectoral plans would MoC could work with other ministries to set up help to encourage thinking about them in context. an NTM Committee (NTMC) with a mandate to Given current limitations on government and review existing and new regulations (action A5), and administrative resources to simultaneously address recommend simplifying and automating the process issues, an industry focus may help. For instance, the whenever necessary. It will be important for the MoC and the Ministry of Industry could work with NTMC to be endowed with a technical secretariat other agencies to build on the Myanmar Garment to conduct reviews and benefit from technical Manufacturers Association’s (MGMA) 10-year strategic assistance from development partners, for instance development plan, to work out a well-sequenced plan the World Bank Group, which is supporting similar in all its relevant aspects, which may, from a societal bodies in Cambodia and Lao PDR. The NTMC perspective, be broader in scope than the MGMA’s and the Trade Facilitation Committee mandated plan. Such a strategic development plan would include, by the WTO could be located in one single body. among others: Regulatory transparency is key during a transition • Trade logistics and customs clearance: This period with rapid changes in the legal and would cover addressing constraints in the value regulatory environment and the entry of new chain, from fabric supplier to factory, and from investors. The MoC could consider undertaking a factory to buyer, including customs clearance, systematic inventory of all trade-relevant regulations road and port infrastructure, maritime freight, and and NTMs, creating a trade portal, and populating ship rotations. For agri-business, this would cover the portal with the inventory of regulations in both micro-financing for farmers, access to quality seed, Burmese and English, with codes corresponding to certification, quality processing, and marketing UNCTAD’s MAST classification (action A6). This is channels. an action that all ASEAN members have committed • Targeted capacity-building: Working with to and will require support from trade-related agencies. industry associations, Myanmar can help firms to comply with labor/environmental regulations to Continuing reforms on the investment climate meet buyers’ requirements, increase workers’ skills will help Myanmar to increase and diversify its and improve the capacity of entrepreneurs, both export base. The adoption and implementation of men and women, in modern business practices several fundamental pieces of legislation would help (accounting, use of ICT, standards and quality, to establish the foundations of a strong business- supply chain management, etc.). enabling environment. The Investment Law is a key law, which unifies the Foreign Investment Law and the • Export promotion and market access: This Myanmar Citizens Investment Law to provide a level would involve supporting the promotion of playing field for all investors, ensure adequate investor Myanmar products abroad, or domestically protection, and provide mechanisms for the settlement through tourism. Promoting linkages between of disputes between investors and the government, Myanmar suppliers with firms in the SEZs and should they occur. The government could streamline regional value chains (e.g., access to intermediates procedures related to the investment approval process from Thailand) and tariff preferences in final and minimize the discretionary role of the Myanmar markets (“Everything-But-Arms” program in the Investment Commission (MIC) in approving EU and possibly preferential treatment in US and investments (action A7). large Asian markets as well) could be supported by the Ministry of Foreign Affairs. If well-designed, such a plan could then be replicated in other sectors, such as automotive parts, or light electronics/electrical equipment. xxxv EXECUTIVE SUMMARY xxxvi 2. EXECUTIVE SUMMARY INCLUSIVE ENSURING EXPORT LED GROWTH While trade opens new economic opportunities, it also carries the risk of increased tensions if its benefits are not perceived as being shared fairly, or if proper safeguards are not in place to protect vulnerable populations from expropriation, environmental degradation, or poor working conditions. xxxvii 2. Ensuring that trade development works to reinforce rather than undermine the peace process will require a number of steps to be adopted (a positive list) and mistakes to be avoided (a negative list). Trade expansion and an influx of investment may also aggravate employment, skills development and wage disparities between men and women, and women may not be able to access economic opportunities if their interests as enterprise owners, traders and workers are not taken into account. Myanmar has an opportunity to raise its share of the gains from mining, in particular in jade mining. Jade is currently exported raw and the current system fails to provide local communities with a sense of ownership or any of the gains from Myanmar’s huge scale on the world jade market. In this regard, economic theory suggests that a small export tax would raise government revenue without any offsetting economic loss.1 Such a tax would generate revenue that could then be used with the advice of local communities to fund local development programs, such as vocational training, poverty reduction and health programs, and other basic infrastructure in Kachin State (the source of most of the country’s jade). (action B1). For the mining sector to support greater development objective in Myanmar, transparency in data could be improved. This issue has contributed to the generation of social discontent and frustration. The Secretariat for Extractive Industry Transparency Initiative (EITI) could work 1 With monopoly power over international jade market, export tax on jade can create a positive wedge between interna- tional price and domestic price. Theoretically this means Myanmar government revenue generated from tax will be greater than loss together with the Ministry of Natural Resources and Environmental Conservation to advocate improved transparency in terms of the identity of the key players, license allocation mechanisms and concession terms. In particular, it could consider ensuring that EITI principles are fully applied to the jade mining sector. There is currently very little knowledge of the rate at which Myanmar is depleting its natural- resource wealth. Exhaustion of natural resources, including subsoil wealth and environmental resources, contributes to making economic growth non-inclusive by depriving future generations of the benefits of a country’s natural capital. The government could consider commissioning a natural wealth study, based on a proven methodology, such as a study undertaken for Mauritania, which gives estimates of net national savings adjusted for the depletion of the natural capital stock (action B2).2 Such a study would be a first step towards a broader assessment of the environmental and social impact of mining in affected areas. 2 http://documents.worldbank.org/curated/ in revenue of miners which is “terms of trade gains” that can be en/2014/05/19553476/mauritania-counting-natural-wealth-sustain- distributed locally. able-future xxxviii EXECUTIVE SUMMARY It will be important to ensure that the roll-out of knowledge of the local context are extremely important selected trade-related and infrastructure projects for the successful implementation of such projects. in ceasefire areas is carefully sequenced to align Anecdotal evidence suggests that development partners with the ongoing peace process (action B3). This are sometimes limited from working in some areas by would help to prevent the trade-development strategy government or EAG restrictions. Such restrictions in conflict areas from moving ahead of the peace imply that projects may not reach the most remote process. Trade-related infrastructure could be deployed and impoverished areas, which negatively impacts the only after the parties had agreed on the protocol for distribution of benefits. How development partners military and ethnic armed group (EAG) activity in implement projects in ceasefire areas, not just what ceasefire areas, in accordance with the NCA or bilateral they implement, can determine the success or failure of ceasefires. In contrast, development plans would those projects and, even more importantly, the future have to avoid a number of traps that could re-ignite trajectory of social and ethnic relations in the areas hostilities and undermine trust. The government concerned. could consider postponing trade-related activities and infrastructure development in areas close to existing Myanmar could avoid tying its industrialization conflicts, including the corridors from Lashio-Muse, strategy to social or environmental “dumping” Lashio-Chin Shwe Haw and throughout Kachin State. m(action B6). Wage compression to rock-bottom Risks associated with current conflicts in these and levels not only alienates the best buyers; it is also self- other areas could include increased grievances; project defeating economically, preventing the trickle-down of stoppages and trade patterns shifting quickly and salary gains to the population at large. Industrial salaries dramatically. Work on other trade corridors in NCA set at fair levels (i.e., equal to the value of the marginal areas would need good consultation with EAGs and product of labor rather than the subsistence level) can communities to eliminate the conflict issues that have have positive spillovers beyond the workers themselves, already affected, for example, the Kachin corridor. for example through remittances to farm households that are then better able to invest in productive assets Over the longer term, more labor-intensive and inputs. While minimum wages that are equal economic activities could be promoted in conflict- for men and women should not be set at levels that affected areas. These might include, in particular, jeopardize competitiveness, they should ensure that horticulture, tourism, manufacturing, and certain the gains from trade trickle down and become “growth agro-industrial production. For this, development enablers”. In order to do this, Myanmar could share plans could be designed to improve the functioning the experience of other countries and put in place an of all markets, including the labor market, through adequate social/labor regulation environment at the investment in training and vocational education as outset; experience from Cambodia’s “Better Work” part of a broader, longer-term plan to improve labor- factories program could be useful in this regard. force employability. The need for investment in basic Similarly, market access for logging products will be education and improvements in the education sector’s enhanced by adherence to international standards performance is universal in Myanmar and benefit from (e.g., the Forest Stewardship Council (FSC) and the swift action (action B4). This need is even more acute European Union Timber Regulation (EUTR)) in in conflict and remote areas. terms of legality and sustainability. The MoC could also include these issues in sectoral plans early on Similar concerns apply to the distribution of and adopt a broad, multidimensional approach to benefits from development partner-funded trade- competitiveness rather than a narrow, price-based one related interventions. Ethnic representation and that could end up serving special interests. xxxix EXECUTIVE SUMMARY xl 3 INFRASTRUCTURE IN QUALITY CAPACITY BUILDING The need for a quality infrastructure in Myanmar is gradually rising. xli 3. In Myanmar today, most export-oriented production struggles to comply with important technical regulations and voluntary standards. However, the quality requirements are largely informal and few producers demand the full array of services offered by a modern quality infrastructure. Global reintegration will only reinforce this trend, but change will be slow. Therefore, commercial demand for quality infrastructure services will be specific. Likewise, the demand for quality services that is derived from the regulators needing to enforce regulations to protect consumer safety and health will be specific to particular health threats. Even in the best of cases, the supply will be slow to come forward, in particular the public supply of quality infrastructure services, because the capacity of the government within quality infrastructure is very limited and a rapid expansion of services cannot be realistically expected. In order to compete successfully in export markets, Myanmar might consider adapting its quality infrastructure to meet the demands of buyers with their various levels of demands in terms of quality and SPS certification. This could be achieved with both a legislative/regulatory modernization effort and a capacity-building effort in ministries involved in setting and enforcing standards. However, it will be important for the process to be driven by the demand of the market and from regulators seeking to protect consumer health and safety. Furthermore, it will also be important for Myanmar to avoid rushing to build a quality infrastructure disproportionate to the enforcement capabilities. The regulatory framework will benefit from being carefully designed to avoid conflicts of interest and rent-seeking by the ministries However, it will be important for the process to be driven by the demand of the market and from regulators seeking to protect consumer health and safety. Furthermore, it will also be important for Myanmar to avoid rushing to build a quality infrastructure disproportionate to the enforcement capabilities. The regulatory framework will benefit from being carefully designed to avoid conflicts of interest and rent-seeking by the ministries involved. The key issue is how to balance the present and future demand for quality infrastructure services with current design and enforcement capabilities based on consultations and value-chain analyses (action C1). Current capacity-building plans and projects aim at closing Myanmar’s standards and conformity assessment gap with the international best practice model, while tailoring it to the Myanmar context. The initiatives proposed in the National Export Strategy (NES) and others could be strengthened by making them less supply-driven and more tuned into demand. The key challenge is to ensure the availability of reliable and recognized services that are used by the private sector and the regulators, and thus sustainable in the longer term. It is important that NES and recently- designed development partner-funded capacity- building projects avoid estimating capacity-building needs by comparing Myanmar’s current system with the international best practice model. But, the experiences of other LDCs in rapidly establishing a local variant of the international best practice model are not very encouraging. Few if any LDCs have a strong quality involved. infrastructure and even fewer have a strong quality infrastructure of the kind that the NES and recent projects support most, namely a government-run quality infrastructure. xlii EXECUTIVE SUMMARY The crucial element for a demand-driven needed, such as promoting better rice varieties and modernization of Myanmar’s SPS/TBT environment improving cultivation practices. More studies of value is to rely on private-sector requests for reviews chains, including men and women’s productive roles, channeled through the NTMC (action C2). Once along the lines of the World Bank Group rice study the NTMC has been established with compOnce would help to the NTMC has been established with competent analytical capabilities, the private sector is likely to Investment in upgrading testing laboratories use it to request reviews and promote useful reforms could be calibrated to the demand of business of the most problematic regulations. With technical and regulators (action C4). The extensive laboratory assistance from development partners, the NTMC investment program suggested by the NES can be could work in collaboration with similar bodies set up viewed as a long-term strategy. Short term, focus in the sub-region to ensure the convergence of SPS/ could be on investments selected based on demand TBT environments. from business and regulators. It will be important not to crowd out potential private sector investment Focusing on exports can help drive capacity- in conformity assessment. Both the knowledge of building and generate positive spillovers for the demand and the capacity of the major government management of domestic safety and quality issues. quality institutions are weak. Thus, legal reforms and In seafood exports, for example, the implementation of laboratory capacity-building could be accompanied by stringent food safety management to comply with EU research into how best to develop a demand-oriented import demands could be used to increase awareness of quality infrastructure and build capacity at the main food safety issues at home, such as the use of antibiotics institutions to act strategically and plan. in shrimp farming. In this example, satisfying the commercial demand for a quality infrastructure would Finally, the authorities could implement the help to satisfy the demand from regulators to manage roadmap to establish a Myanmar accreditation domestic food-safety problems. body agreed between the Accreditation Division, UNIDO and PTB (action C5). There is currently no The transition strategy could start with quick wins, accreditation body, but the government has agreed to for example in rice. A recent World Bank Group select the Singapore Accreditation Council as a partner study of the rice sector identified the colonial-era in setting up a future Myanmar accreditation body. Beale rice classification system as a major constraint on Myanmar’s competitiveness. This classification system could be abandoned (action C3). This report also found that improving the quality of Myanmar’s rice is about much more than improving the quality infrastructure. Basic supply chain interventions are xliii EXECUTIVE SUMMARY xliv 4. EXECUTIVE SUMMARY ENCOURAGING IN SERVICES IN TRADE GROWTH As part of the country’s broad- ranging economic and regulatory reform process, Myanmar’s general policies for trade in services are increasingly open and non-discriminatory to foreign participation. Nevertheless, lingering restrictions remain in the governance and administrative framework, as well as in laws and regulations. These barriers introduce high costs in the operation of services firms in Myanmar, limiting the benefits of market opening. xlv 4. EXECUTIVE SUMMARY Myanmar could raise awareness and strengthen the • The telecommunications sector: strengthening institutional set-up for trade in services regulation regulatory capacity to ensure competition and policy. Trade in services remains a new area for and quality telecom services. Myanmar policymaking for Myanmar’s institutions and policy could consider capacity-building efforts in the formulation would benefit from a skilled coordinator telecommunications regulatory regime, which and efficient procedures to share information and currently suffers from analytical weakness. determine policy directions. While Myanmar, as a Telecommunications regulations, in particular WTO and ASEAN member, is involved in various license-allocation rules, could be streamlined and trade negotiations, including trade and investment published in both English and Burmese on the in the services sector, the government does not have a trade portal. specific department taking the leading in formulating • The tourism sector: coordination to manage a comprehensive policy on trade in services. destinations and improve the capacity of Consequently, strategy on trade in services policy and services providers. Developing tourism in negotiations are carried out in an ad-hoc manner, Myanmar would help to reduce poverty, as often trying to keep pace with more advanced regional potential tourist destinations are often in rural partners and without bringing a strategic view to the areas where poverty is high. Coordinated efforts negotiations. could help various ministries to improve the management of heritage sites and the provision A number of cross-cutting reforms would also be of public services, such as infrastructure, access to beneficial in the area of services-trade regulations. information, etc. in tourist destinations. Myanmar Small-scale services providers face regulatory obstacles can also strengthen the links between tourism and that could be easily removed (action D2). Transparency local economies by engaging in public-private in licensing procedures could be improved and initiatives to increase the capacity of local workers, streamlined. More importantly, significant gaps are hotels and restaurants. observed between rules and administrative practice, while many rules are conflicting or unclear. The MoC, • The distribution sector: phasing out restrictions through a Task Force for Private Sector Reform, on import licensing for foreign firms and could spearhead dialogue to streamline regulations allowing them to engage in distribution relevant to trade in services for review and reform services. Allowing FDI in the distribution recommendations. subsector would facilitate knowledge transfers and help to modernize Myanmar’s antiquated A sectoral approach could be used to identify logistics network. With fragmentation of the priorities and quick wins that are expected to manufacturing process in different locations, bring major economy-wide gains. The objective of allowing foreign distribution companies to this approach is not to have sectoral silos but instead become established in Myanmar in order to trade to coordinate policies and open up potential for the intermediate products would help to strengthen various trade subsectors to have a major impact on Myanmar’s attractiveness as a destination for economic development (action D3). This DTIS manufacturing investment in the region. identifies three such subsectors: xlvi EXECUTIVE SUMMARY xlvii 5. DEVELOPING EFFICIENT TRADE CORRIDORS EXECUTIVE SUMMARY xlviii EXECUTIVE SUMMARY xlix 5. Located on the ancient Silk Road, Myanmar holds a strategic position to facilitate trade, which is key to unlocking its economic potential. Myanmar shares land borders with China, India, Lao PDR and Thailand, together accounting for about US$15 trillion, or one-fifth, of global GDP. As poverty tends to be higher isolated and remote areas, while industrial agglomeration occurs in cities, a coherent approach would help to link infrastructure development with local economic potential, particularly in mountainous and western coastal areas, and link these areas to industrial agglomerations and nearby international markets. Such an approach would benefit from a coordinated effort to reduce hard and soft bottlenecks in logistics infrastructure, which could generate huge competitive gains for local economic development. Planned upgrades of the country’s infrastructure offer opportunities for transformational change. Both inclusive development and the needs of international investors point towards the need to build infrastructure to international standards. Myanmar’s highway network is around 36,000 km, of which only two-thirds are paved. Moreover, the overall design is inadequate for the needs of an efficient market- based economy. Port capacity in Yangon, a river port 32 km inland currently handling 80 percent of the country’s trade, is likely to reach saturation soon. Cargo throughput has grown fourfold over the past decade and is slated to grow even faster going forward, The Yangon-Mandalay road corridor is the country’s main logistics backbone and could be prioritized for upgrading. According to traffic projections by JICA (2014), by 2017 heavy traffic along the AH1 will surpass the highway’s capacity. This could be temporarily alleviated by allowing container trucks to use the National Expressway between Yangon and Mandalay with certain tariff rates, before the combined capacity itself will become insufficient by around 2028. Therefore, opening the National Expressway to container trucks seems inevitable (action E1). In order to control road damage from heavy vehicles, axle weights could be limited as a first step. Simultaneously, the highway would benefit from major upgrading, as it will deteriorate rapidly once heavy traffic is allowed; such upgrading would be closer to a total reconstruction, including ballast and widening. It will be important for this work to commence soon, as today’s low traffic will be easier to divert onto the AH14 than the increased traffic in a few years’ time. The road link with the Yunnan province in China could be made more logistics friendly. Eighty-six percent of Myanmar’s border trade is with China, and most of that trade uses the road link from Mandalay suggesting the need to consider a new deep-sea port. to Muse via Lashio. Traffic on this corridor will l EXECUTIVE SUMMARY continue to grow over the next few years, fueled by trade can promote peace by increasing the opportunity economic growth in the two countries, as well as cost of communities engaging in conflict. To this end, Chinese government efforts to develop its hinterland. Myanmar can review and simplify procedures for local Facilitating private investment in inland logistics park communities to engage in cross-border trade with and container depots will help consolidate cargo and neighboring communities (action E4). Improving improve logistics efficiency (action E2) connectivity to border checkpoints (e.g., in Tamu) can be done rapidly. Inspection and testing facilities can Freight rail and inland waterway transport could also be improved to facilitate trade of more types of be developed to relieve pressure on roads for bulk products. transport (action E3). The rail network has 5,992 km of track, of which only 705 km are double-track. Myanmar could leverage its current transport plan The tracks are one-meter gauge and not electrified. into an economic-corridor development strategy. Myanmar Railway, a state-owned enterprise, is the only Myanmar has developed a National Transport operator providing transport services for passengers and Development Plan (with JICA support) and a Road freight. Railway reform and investment may be one Development Plan (with KOICA support). It will be way of addressing highway congestion as the country important to ensure that these transport infrastructure industrializes. Inland waterways also suffer from a lack development plans are well linked with local economic of basic infrastructure for proper loading-unloading of potential and connect this potential to the nearest freight. growth poles. In this regard, a coherent, multi- stakeholder effort could help to remove bottlenecks to Facilitating local communities to engage in cross- private investment in transport infrastructure, freight border trade could be a powerful means of raising logistics services and productive capacity at the local income and reducing poverty. Greater trade can level (e.g., in agribusiness, manufacturing and tourism). bring convergence in prices and job opportunities, both Developing an economic corridor plan and identifying important for the livelihoods of poor households in an institutional framework for implementation could border areas. International evidence also suggests that be prioritized (action E5). li EXECUTIVE SUMMARY lii 6. EXECUTIVE SUMMARY & LOGISTICS FACILITATING TRADE THROUGH BETTER FINANCE Improving port efficiency and cargo turnaround times are key for logistics efficiency in Myanmar and improvements can be made in a relatively short timeframe. liii 6. Around 80 percent of Myanmar’s trade is handled by river ports in Yangon and Thilawa situated 32 km in-land. Cargo throughput (measured in TEU) grew from 155,000 TEU in 2004/05 to more than 617,000 in 2013/14, a fourfold increase. While extending the berthing area for vessels is one option, this may not be an optimal strategy given that berth productivity of Myanmar’s main port in Yangon is still relatively low due to constraints on vessels navigating the channel at night. Port congestion due to the stacking of containers and local traffic in Yangon city is contributing to a lack of reliability of logistics services. Developing a deep-sea port with smooth links to industrial zones and a transport network to hinterland and border areas is desirable. However, such a major investment will take time and the following options may be considered in the interim: • Upgrade/revamp night navigation on the Yangon River. In order to allow vessels to call at ports at night and help to increase utilization of the available capacity at Yangon’s ports, night navigation on the Yangon River needs to be upgraded. This action should also be accompanied by reviewing the tariff structure, including the low and flat fee for storing containers in port, to allow higher cargo turnaround (action F1). • Facilitate the transport of containers from port to Yangon’s industrial areas using river barges (action F2). Increased traffic congestion around Yangon will increase time and reduce reliability for cargo arrivals. Myanmar’s authorities (MPA, Customs and the Ministry of Transport and Communications) could consider facilitating the transport of containers from ports to industrial areas around Yangon by using river barges as an alternative. Thilawa Port has this option already but in order to make it cost effective handling will have to be minimized and customs procedures • Facilitate discussion between Customs and the private sector in the Myanmar Business Forum on investment in private bonded warehouses (action F3). Customs has recently issued regulations on bonded warehouses. It is important for the private sector to become familiar with the procedures and discuss any remaining issues with Customs that might prevent investment in, and operation of, private bonded warehouses. The quality of logistics services could be improved by capacity-building in the supply chain, phasing out restrictions on foreign companies in domestic distribution services and facilitating the development of cargo insurance. Myanmar’s “competence and logistics quality” in the 2014 World Bank Group’s Logistics Performance Index (LPI) was ranked 150th out of 160 countries. As Myanmar’s economy grows, demand for quality logistics services from manufacturers and retailers will also grow. Interviews suggest that the supply of quality logistics services in Myanmar is still constrained by skills capacity, access to finance and technology. Addressing these issues will require coherent effort and time. Those in the industry, such as the Myanmar Association of Freight Forwarders (MAFF), working together with the Ministry of Transport and Communications can start by facilitating training programs in logistics/ supply chains for workers seeking jobs in logistics services providers and supply chain management/ procurement (action F4). Establishment of a Trade Facilitation Committee is a key step for Myanmar in implementing the WTO accommodative. Trade Facilitation Agreement (TFA). (action F5). liv EXECUTIVE SUMMARY Myanmar can build on the momentum of customs • Embracing the use of IT more thoroughly. modernization to push for further reforms in trade Myanmar could leverage its engagement in facilitation. Myanmar has started to operate an SEZ regional and multilateral fora of economic in Thilawa with a one-stop customs clearance process. integration to sustain reform momentum on trade It is also moving ahead with customs modernization facilitation. It can use ASEAN’s commitment to and the Myanmar Automated Customs Clearance implement a National Single Window (NSW) as System (MACCS) is expected to be operational by late impetus for further simplification of procedures 2016. However, while this is an important start, it is for trade facilitation, including aligning business inadequate to meet growing demand from Myanmar’s processes of separate border agencies, to allow private sector for efficient and reliable supply chains. traders to submit electronic forms to relevant Trade facilitation can be made more efficient by border agencies and obtain rapid responses. Such improving procedures. changes in border agencies would allow them to provide one-day turnaround in approvals No single agency can resolve the cross-cutting compared with the current 8 days. and inter-agency nature of problems in logistics • Phasing in risk management to replace physical and trade facilitation. Important stepping-stones inspections. At present, there is no effective risk would include the establishment of a coordinating management system that Customs can use to mechanism, a Trade Facilitation Committee and the decide which containers or shipments to fully development of a clear action plan to improve current inspect. The decision process for Customs to practices. decide whether containers of non-green channel It will be important for Customs reform to proceed importers should go to the red channel (for full with a broad agenda to align cargo clearance inspection) or the yellow channel (for inspection procedures with international best practice. While by X-Ray machine), or the green channel the ongoing customs modernization is important, it (documents inspection only), is based on a “lucky will not be exhaustive in covering the wide-ranging draw”. needs and problems in logistics and trade facilitation • Implementing a vigorous administration in Myanmar. Logistics and trade facilitation are key training effort. The problems created by to the efficiency and reliability of the supply chain. cumbersome procedures are compounded by a Therefore, a comprehensive reform agenda—going frequent lack of knowledge in the administration beyond customs automation—could be considered of which rules apply. In a transition period and implemented (action F6): when many of those rules are evolving and new economic actors appear, vigorous training would help to ensure that the new rules are effectively understood and applied on the ground, while the old rules are phased out. lv 6. EXECUTIVE SUMMARY Having an enabling regulatory environment would help Customs and other trade-related departments to align their procedures with international standard.To date Myanmar has been amending the 1878 Sea Customs Act to accommodate modernization of customs and trade facilitation practices. Myanmar may want to consider reviewing existing Customs and other trade-related legislations and assist with writing a new National Customs Code (action F7). Making it easier to issue certificates of origin. One of the key aspects for Myanmar’s exporters in utilizing preferential tariffs in ASEAN is to use Form-D to establish “origins of the product” according the rules of origin (ROO). Currently, Myanmar is the ASEAN member that least utilizes Form-D, so it may be important to review current practices and encourage automation in the issuance of certificates of origin (action F8). Finally, although sanctions have been largely lifted, access to trade finance remains a key issue for Myanmar’s traders. Many players in Myanmar have little awareness of the potential benefits of trade-finance instruments, and a communication and training effort would help to raise awareness among business players and in the banking sector (action F9). Domestic banks have little capacity to process or provide trade finance instruments, such as receivable financing or letters of credit. They could be encouraged to make trade finance available through the adoption of an appropriate legal framework, technical assistance, and guarantee for risk and liquidity. Finally, capacity-building could be facilitated for more banks to open access to receivable financing for Myanmar’s exporters. lvi EXECUTIVE SUMMARY lvii EXECUTIVE SUMMARY ACTION MATRIX ON TRADE POLICY REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE A1 Cumbersome procedures that add Remove unnecessary practices through 2016 – 2018 trade costs (e.g. advance income tax consultations with stakeholders Procedures for export, restrictions for foreign companies to import) A2 Lack of foreign-trade statistics and Capacity-building on recording and On going other relevant data for policy making classifying trade data on HS-system and consolidation of data for normal and Data border trade and in SEZs Conduct firm-level and labor surveys A3 Limited capacity in analyzing impact Capacity building for government 2017– 2021 of trade policy changes on growth, departments and think tank organizations Capacity-building prices, trade in services, trade on data and policy analysis, safeguard agreements, and trade negotiations measures Review incentives, mandate and organizational structure of trade-relevant departments A4 MFN tariff structure is too complex Conduct tariff rationalization 2017– 2019 Tariffs & safe- guard A5 Reform in trade licenses and Assign NTM/Trade-facilitation committee 2016 – 2019 certificates is underway but not (NTMC) to review selected NTMs have completed clear objectives around protecting safety, social norm, environment, and public health and procedures Streamline and simplify procedures NTMs in trade licenses and encouraging automation whenever possible A6 Lack of updated information on Set up Trade Portal and amend legislation 2016 – 2019 NTMs including permits & Customs to require trade-related departments procedures in a single platform report NTMs + procedural information √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lviii EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Cutting red tapes Legislation MoC WBG √ Reliable trade data UN Comtrade, MOC, CSO, MoC, TDP √ regularly published in UN Central Statistical Customs, Min. Comtrade for informed Organization (CSO) of Transport & trade-policy making Comm (MoTC) Better analytical input for Workshops, trade MoC, CSO, TDP, WBG, HM decision-making, better data analysis in policy Ministry ESCAP coordination, better documents of Planning ability to use safeguards &Finance (MoPF as temporary protection Streamlined tariff Tariff schedule, WTO Customs, MoC, TDP, WBG √ structure notifications MoPF Improved trade MOC, % of tariff subject MoC, FDA WBG facilitation while meeting to licenses objectives of NTMs MoC, MoPF Improved predictability Trade portal accessible MoC, NTMC USAID √ and transparency in online, exhaustive NTM procedure for Customs inventory clearance lix EXECUTIVE SUMMARY ACTION MATRIX ON TRADE POLICY (CONTINUED) REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE A7 Improve certainty in rules for private Pass a new investment law, company Ongoing investments registration, consider having negative list to limit discretion of line departments to restrict investment via ad-hoc decision Private- sector develop. A8 Limited capacity in modern business Introduce capacity building program with 2018 – 2021 practices among SMEs with export rigorous impact-evaluation structure in potential place Build on NES plan to elaborate a broad-based industrial policy in light- manufacturing, starting with garment, agribusiness and tourism lx EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Certainty and clarity for Legislation DICA WBG, ADB √ private sector investment Best-practices are Program evaluation Private WBG HM identified and made report operators, available to firms MOC, Ministry of business willing to engage in Industry (MOI) associations, international trade MoC and Proper sequencing of Ministry of key competitiveness- Industry (MOI) UNIDO, WBG, enhancing measures ITC MOC, MOI lxi EXECUTIVE SUMMARY INCLUSIVENESS REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE B1 Limited benefits from mining-based Review/streamline jade taxation regime 2017 – 2020 Strengthening of the peace process through trade for local communities, limited to benefit local communities and transparency in trade-related mining encourage local processing, e.g. through activities a small export tax on raw gems trade-led development Through EITI mprove transparency on mining operators’ identity and terms of their licenses B2 Limited information on rate of Commission a report on Myanmar’s 2017 – 2020 natural-resource depletion & natural wealth: carry out environmental environmental degradation audit of jade mining B3 Risk of heightened tensions if trade- Coordinate overall sequencing of trade- 2016 – 2021 related projects (infrastructure, related investments in conflict areas with Inclusive development extractive) deployed too quickly progress of peace process B4 Underdeveloped labor-force skills & Vocational training and basic education On going employability programs, in particular for women & vulnerable groups √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lxii EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Development of local NGOs MoC, MoPF, √ jade processing, leading EITI Ministry of Natural to the development of Resources and jewelry manufacturing Environmental Conservation (MNREC) Improved transparency EITI Secretariat, MNREC Improved sustainability MNREC MNREC HM of extractive activities Better buy-in of NGOs Regional HM development projects by Governments, LEGs MoHA Employment gains in Labor-force survey Ministry of Labor, ILO, GIZ HM particular for vulnerable Immigration and groups Population lxiii EXECUTIVE SUMMARY QUALITY INFRASTRUCTURE REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE C1 Capacity and awareness of demand Assess demand for standards and quality 2017 – 2021 Private-public dialogue for quality infrastructures is low infrastructure through value chain studies and targeted capacity building program for government quality infrastructure and other methodologies. Initiatives can be built by refining existing studies to ensure that they are tuned into demand. Increase awareness of and capacity of applying good practice on technical regulation and quality infrastructure C2 Underdeveloped SPS/TBT Review and issue legislations On going Regulatory framework regulations for technical regulation and quality infrastructure C3 Export quality for rice is based on TA to abandon the Beale rice 2017 – 2018 a system that is not internationally classification system and replace it with a recognized system allowing rice to be sold for export by variety C4 Limited capacity in laboratory Support to selected public and On going testing (conformity assessment) accredited private laboratories Institution building C5 Underdeveloped accreditation Body Implement the roadmap to establish On going the Myanmar accreditation body agreed between the Accreditation Division, UNIDO and PTBA √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lxiv EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Increased strategic Policy note, workshops DNSQ TDP, ADB HM capacity in public quality and infrastructure. More knowledge on Proposed laws and Department USAID, WBG, √ modern legal framework regulations including of National TDP for quality infrastructure framework for technical Standard and regulation Quality (DNSQ) Improvement in buyers’ Policy change, workshop Ministry of √ confidence of quality Agriculture system of Myanmar rice ,Livestock and Irrigation (MALI) Better access to # of upgraded MALI, MoC, TDP HM authorized laboratory laboratories DNSQ, FDA, testing facilities Increased capacity to Roadmap completed DNSQ UNIDO HM undertake accreditation lxv EXECUTIVE SUMMARY TRADE IN SERVICES REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE D1 Lack of coordination across Re-design instit. framework for 2017 – 2019 formulation capabilities departments handling services trade coordination and oversight in service Institutional & policy- trade to one department and align mandates of other sectoral departments D2 Limited information in gaps in Request regulatory reviews and reform 2017 – 2019 Cross-cutting regulatory regulation and practices, regulatory regulations based on recommendations obstacles faced by small service providers licensed at MIC and DICA reforms Establish services portal 2018 – 2021 D3 Underdeveloped institutional Training & capacity-building 2017 – 2020 capabilities of regulatory agency in telecom Sectoral interventions Lack of coordination across multiple Review license process for hotels and 2017 – 2018 departments and cumbersome establish coordination on policies and licensing process for hotel infrastructures in certain destinations investments Limitation for foreign firms to Gradually phase out restrictions 2017 – 2020 directly import and distribute products √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lxvi EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Enhanced services policy MoC and departments MoC, MoPF, WBG √ formulation conducting trade in CBM, MoTC, services negotiations. Ministry of Hotels and Tourism, Ministry of Labor, Immigration and Population (MLIP) Expansion of small- Publication of new texts DICA HM service provider activity on services portal Better transparency and Services portal DICA, MoC HM certainty of rules Better oversight Workshops MoTC √ Sustainable tourism Legislations Ministry of Hotel WBG, JICA and Tourism Improved access Legislations MoC to imported intermediates, enhanced competitiveness lxvii EXECUTIVE SUMMARY CORRIDORS REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE E1 Trucks carrying containers are not Improve Yangon-Mandalay Expressway 2017 – 2021 permitted to use the National to allow containerized trucks to pass with Expressway certain tariff E2 Limited access to inland logistics Conduct feasibility study with PPP options 2018 – 2020 infrastructure for investment in logistics park and island Hard infra-structure container depot E3 Railway and inland waterways can be Conduct feasibility studies and 2018 – 2020 alternatives to road transport which implement infrastructure development is increasingly congested E4 Underdeveloped infrastructure in Review practices in in-land border trade, 2017 – 2018 border check points, constraints for and invest in infrastructures at border border trade check points E5 Lagging regions can be better Develop and implement corridors 2017 – 2021 linked with markets development strategy Soft infra-structure √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lxviii EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Faster shipments of Corridor Assessment MoC, MoTC JICA √ containerized trucks Study Greater cargo/container Traffic data MoTC, HM movement Customs, Regional Governments Reduced congestion on Strategic investment MoTC, Customs JICA HM highways, reduced inland plan developed and transport costs discussed Decreased clearance Trade data MoC, MoTC ADB √ time, greater volume for inland border trade Wage and employment Household survey MoC, MoTC, WBG HM growth, generation of MoPF, Regional local purchasing power Governments lxix EXECUTIVE SUMMARY TRADE FACILITATION AND LOGISTICS REFORM ACTION CONSTRAINT TO BE ADDRESSED INTERVENTION TIME LINE AREA CODE F1 Low berth utilization at port and Upgrade night navigation in Yangon river 2017 – 2019 congestion between port and inland to allow ship to call ports past midnight and review tariff structure to increase container turn-around F2 Road congestions in transporting Facilitate transport of containers from 2017 – 2019 goods inland port to Yangon industrial areas through river barges Logistics F3 High demand for private logistics Adapt enabling regulation to facilitate 2017 – 2018 park and bonded warehouses private investment and improve capacity outside port to supervise F4 Underdeveloped capacity in Capacity building TA and review 2017 – 2021 delivering quality logistics services constraints for development of quality logistics services F5 Irregular coordination across trade Establish National Trade Facilitation 2016 – 2018 Border procedures/ related departments form reforms in Committee with a Secretariat and cargo clearance and trade logistics mandate to coordinate reforms in WTO- TFA and cargo clearance procedures NTM F6 Cumbersome processes for customs Streamlining/harmonization, use of 2016 – 2018 clearance and inspections IT, implementation of WTO Customs Valuation Agreement, risk management F7 Existing Customs and other trade Reviewing existing Customs and other 2017 – 2019 department legislations are old trade department legislation and Border procedures/ and requires constant amendments assisting in writing a new National to address new technologies and Customs Code. NTM processes. F8 Low utilization of ASEAN’s Form Capacity building on ASEAN ROO and 2017 – 2019 D and manual processing for review process and propose automation Certificates of Origins and on-line application of such process F9 Limited capacity of financial sector Training for traders and bank staff 2017 – 2019 to deliver trade finance instruments Trade finance Review of legislations and practices for banks to provide trade finance instruments at market prices √ : High priority and high impact actions; HM: high impact actions that require longer time frame for implementation lxx EXECUTIVE SUMMARY EXPECTED IMPACT SOURCE OF RESPONSIBLE ONGOING/ PRIORITY INFORMATION FOR AGENCIES PLANNED AND HIGH VERIFICATION SUPPORT BY IMPACT ACTIONS DEV’ PARTNERS Greater capacity to handle # container throughputs MPA WBG √ increase in freight and more efficiency in logistics More efficiency in logistics # of containers MPA, MoTC, √ transported Customs Cargo consolidation # of private bonded Customs, MBF WBG, ADB, √ outside ports, Improved warehouses with on-site ESCAP competitiveness for export- inspections processing activities Improved services & LPI MoTC, WBG, ADB HM competition Associations Smoother process in Guidelines and MoC, MoPF, WBG, TDP √ implementing regulations legislation Customs Lower congestion at port, LPI, Doing Business Customs and JICA, TDP,WBG, √ lower transaction costs, other border ADB improved lead time departments Improved efficiency in border Existing Legislation Customs, MoPF WBG HM management Review Increased use of forms such Trade data MoC, WBG HM as Certificate of Origin Quarantine, FDA Expanding use of TF Number of workshops Central Bank of instruments and trainings Myanmar (CBM) Commercial banks make Number of L/C CBM HM trade finance services processed, receivable available to their clients financing offered by domestic banks i EXECUTIVE SUMMARY ii Photo credit © Zzvet / Shutterstock.com EXECUTIVE SUMMARY EXECUTIVE SUMMARY