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U.S. Ex-Im Bank to Provide Financing for Companies Exporting to Myanmar

On February 6, the U.S. government announced that its export credit agency will begin providing special financing for American companies that export to Myanmar.

The Export-Import Bank, an independent federal agency charged with “filling in the gaps in private export financing,” said that it will make available export-credit insurance, loan guarantees and direct loans for export sales deemed creditworthy beginning immediately. Specifically, it will provide short-term insurance on all sovereign transactions with repayment terms of 180 days or less and, for capital goods, up to 360 days. Additionally, it will provide medium-term insurance, loan guarantees and direct loans for sovereign transactions with terms that extend to five years.

Also, the Bank will provide long-term capital support in Myanmar, contingent upon the proper establishment of financing strategies that minimize external country risks. Examples of these risks include financing backed by assets or financial structures that earn offshore revenues.

Myanmar embarked upon an aggressive agenda of democratic reform in 2012, with plans to liberalize its previously cloistered markets and attract foreign investment. In response to these reforms, The U.S. government has eased sanctions on the country. Nevertheless, progress has been slow, with U.S. exports to Myanmar reaching only $145 million in 2013, and imports of $30 million.

Following a slackening of Myanmar’s once oppressive restrictions on commerce, Western nations have been eyeing it as a potential goldmine of untapped opportunity. However, its eventual maturity as an attractive manufacturing destination for major retailers has been undermined by a ramshackle infrastructure and dearth of adequately skilled labor.

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The signposts of Myanmar’s future progress have been many, even leading competitors like Cambodia and Vietnam to fret anxiously about its economic ascendency. Once infamous for its political oppressiveness, the government has made widely lauded strides toward both democratization and market liberalization. A bevy of legal reforms passed in 2012, including the Labor Organization Law and Trade Disputes Act, empowering workers to form unions, bargain collectively and address grievances with their employers.

However, some remain anxious that Myanmar’s government is insufficiently rehabilitated, still clinging to tyrannical ways. And the country has also been roiled by ethnic conflict, particularly regarding the Muslim population living along the northern border with Bangladesh. Dissident leader Aung San Suu Kyi said, “I am here to encourage you to invest in the right way, in the truly responsible way, which is taking into consideration the political and legal dimensions of investment.”

Besides nagging doubts about Myanmar’s democratic aspirations, apprehensions abound regarding chronic electricity shortages and unskilled, woefully underpaid labor. Local businesses have expressed outrage that the Ministry of Electric Power plans to raise the price of electricity by an astounding 43 percent. Many factory owners have complained that they are addled with increased costs, unable to increase productivity fast enough to reach profitability in the current economic environment.

Uneasiness about labor conditions, especially low wages, has prompted many Western nations to shy away from investment in Myanmar. While the government reports that its average wage is approximately $100 per month, evidence has surfaced suggesting this is a generous estimate. Some believe the wages, even at larger factories in Yangon, can be as low as $25 per month. Currently, Myanmar has no government mandated minimum wage.

Export-Import Bank officials say they see great potential for U.S. exports to penetrate Myanmar, especially in agriculture, commodities, mining equipment and power.