The junta’s latest attempt to alleviate the severe shortage of foreign currency needed for international trade – by pushing businesses to try barter trade – is generating confusion and alarm in what is left of Myanmar’s business community.
“We don’t understand it at all,” a trader in Yangon said, adding that barter trade is archaic.
“We have read about the barter trade system in books describing ancient practices, but such a system does not fit with the modern economy,” the trader explained.
Other traders lashed out at the new barter trade system as “incomprehensible” and “absurd.”
A May 28 statement from the Union of Myanmar Federation of Chambers of Commerce and Industry explaining how the newly implemented barter system works left its members even more confused, business sources said.
“The federation passed out letters and forms for us to use to join the barter trade system, but it seems it does not understand how it works either,” one trader said.
The federation’s statement explained the procedures that must be followed for the new “Barter Transaction Arrangement” and distributed the Export Bill Receivable Exemption and Import Bill Payment Exemption forms.
According to the statement, companies that want to conduct barter trade need to submit the exemption forms to the Foreign Exchange Management Department of the Central Bank of Myanmar.
The statement followed the introduction of a new process for barter trade transactions by the commerce ministry’s Department of Trade on May 2. Referred to as Barter Transaction Arrangements, the department said barter trade could have significant effects on trade practices in Myanmar.
“Businesses and traders must adapt to these changes, which may influence market dynamics, import and export processes, and overall economic activity in the country,” the May 2 BTA instructions read.
A retired commerce ministry official described the new barter trade system as “ancient,” saying: “The theory is the same as in ancient eras and this is why it does not work in practice [now] … I have not heard of such trade [practices] still happening in the modern world.”
The official noted, however, that barter trade does have a more recent history in Myanmar and socialist countries. “The barter trade system that was used in the colonial era and in the socialist era in Myanmar,” he said.
The source cautioned, however, that even when barter trade was used in the past, it was primarily implemented between governments, not companies.
“There was barter trade [between Myanmar] and other socialist countries under the Soviet Union, especially back in the 1960s and 70s. But even in such times, the trades were made only under agreements between governments. So, it worked only as government-to-government trade.”
One trader asked: “We have to ask who will accept barter trade with us and from what country are they from?”
Others said barter trade is only possible between governments.
Before 2010, when Myanmar began a transition to quasi-civilian rule, the previous junta tried a barter trade system on the border with India.
A report by the Indian Council for Research on International Economic Relations said the system was in place for two decades and that it failed. Trade was low. In 2015, a shift to normal trade occurred.
The previous junta also tried to interest China and Thailand in barter trade but failed.
Since the coup, the junta has faced a collapse in exports and foreign direct investment. At the same time, Myanmar businesses can no longer access international loans. With almost no US dollars flowing into Myanmar, the regime has had to sell the country’s foreign reserves.
Still, it has found money to buy weapons. In the two years following the coup, it imported at least US$1 billion worth of weapons and related materials from Russia, China and other countries, according to United Nations estimates.
