Monday, September 25, 2017

Construction materials trade opened to local-foreign joint ventures

The Ministry of Commerce has further relaxed trade restrictions on foreign companies, opening onshore trade in construction materials to local-foreign joint ventures, according to a July 7 announcement.

A salesperson handles construction materials at a store in Yangon.StaffA salesperson handles construction materials at a store in Yangon.Staff

International firms were barred until last year from Myanmar’s import-export industry, which was tightly controlled until 2011 by companies with ties to the former military regime.

Last November, as part of a wider trend toward liberalisation, the government allowed foreign companies access to onshore trade for the first time – initially only in agricultural products and hospital equipment – on condition they partner with a local company.

The new rules are part of an agreement between Myanmar and the World Trade Organization: Myanmar started practicing WTO trade policies last year despite being a member since 1995 and plans to ease restrictions on importing other products in the future.

The commerce ministry said it hopes foreign companies will import high-quality building materials and that the regulatory change will promote development in the construction sector, which has slowed since 2014 following a three-year boom.

Contractors across Myanmar have struggled with low-quality and counterfeit materials produced locally or smuggled across the country’s borders, to such an extent that at least one major developer has resorted to building its own cement plant.

Licences for trading construction materials will be awarded to local-foreign joint ventures if they meet standards set by the relevant department, the commerce ministry said, while joint ventures will be expected to follow the same rules as local traders, including limits on the value of trade.

Joint-venture partners will not be able to adjust their company’s equity ratio once it is registered, the announcement said.

The market for building materials has all but dried up over the past few weeks after the Yangon government halted construction of high-rise buildings across the city for a review that has not yet finished, while demand for low-rise apartments has fallen due to oversupply.

“As usual, the market has slowed during the rainy season and the freeze on construction has made things worse,” said a wholesaler at Padamyar construction materials.

U Myo Myint, a developer at MKT Construction, said developers will benefit if joint-venture companies enter the market. More competition will lead to higher-quality materials at lower prices, he said. On the other hand, local traders who fail to find a foreign partner may suffer.

“We, the developers, have no problem with this, but maybe local traders will struggle to adapt to the competition,” he said.