Myanmar creates special zones to become trade hub for China Myanmar creates special zones to become trade hub for China

Myanmar creates special zones to become trade hub for China
22 Nov 2018

Myanmar is in the process of setting up new “economic cooperation zones” (ECZs) on its border with China, which is keen to position the country as a trade hub for its goods and services in South and Southeast Asia.

As a result, Myanmar’s Ministry of Commerce recently issued a call for investment in the new Zones, which are intended to boost commerce and investment between the two neighbours under the framework of China’s ambitious Belt and Road Initiative (BRI).

The genesis of the ECZs

In May 2017, the heads of China and Myanmar’s respective commerce ministries signed a memorandum of understanding to establish ECZs at the Sino-Myanmar border. A ECZ Central Committee was set up to manage the specifics of how to set them up. According to Myanmar’s Commerce Ministry, a free flow of goods and services will take place across the border once the zones are up and running.

The location of the ECZs

Contracts have been signed to set up trading and processing zones in the provinces of Kachin and Shan in Myanmar, and Yunnan in China. In Myanmar, economic processing areas will be set up in Kanpiketi town in Kachin State’s Special Region One, Chinshwehaw in Shan State’s Laukkai Township and Shan State’s Muse Township, as agreed in July 2018.

The three planned ECZs are to form part of the Myanmar-China Economic Corridor (MCEC) under China’s BRI, which will connect Yunnan Province with Mandalay in central Myanmar and stretch as far as Yangon in the south.

The impact of China’s Belt and Road Initiative on the ECZs

From China’s point of view, Myanmar’s ECZs fall under its BRI. They are intended to promote economic integration between Myanmar and China’s southern border and to become a catalyst for developing suitable infrastructure in the border areas.

China’s aim is to use this newly established infrastructure in Myanmar to develop the country as a trade hub that will distribute Chinese products and services in South and Southeast Asia. Myanmar also hopes to benefit by means of technology transfer and the development of infrastructure in underdeveloped regions in the west and south of the country.

But although it may appear like a win-win for both sides, concerns have been voiced about the arrangement. Potential problems include Myanmar ending up in a debt trap.

Nonetheless, a memorandum of understanding was signed by both countries in September 2018, and the MCEC is now in the process of being planned for and built.

Possible economic potential of the ECZs

According to Myanmar’s Minister of Commerce Dr Than Myint, the ECZs will process the country’s agricultural products and export them to China. This situation is expected to create job opportunities for the local population and generate more tax revenue for the government. The Zones are also expected to promote tourism in the border areas by making it easier for Chinese tourists to get into Myanmar.

Additional plans are likewise in place to construct further industrial zones near the ECZs to house processing facilities and logistics centres close to general packing facilities. The Myanmar government also tends to encourage the creation of small and medium-sized enterprises to support the trade and manufacturing activity of larger companies located in the ECZs.

A taxation centre to simplify the tax process, a trade procedure office to cut bureaucracy and a currency exchange office will likewise be set up to facilitate trade and investment between the two countries.

 

By Piet Flintrop.

 

This article was first published on ASEAN Briefing

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

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Myanmar is in the process of setting up new “economic cooperation zones” (ECZs) on its border with China, which is keen to position the country as a trade hub for its goods and services in South and Southeast Asia.

As a result, Myanmar’s Ministry of Commerce recently issued a call for investment in the new Zones, which are intended to boost commerce and investment between the two neighbours under the framework of China’s ambitious Belt and Road Initiative (BRI).

The genesis of the ECZs

In May 2017, the heads of China and Myanmar’s respective commerce ministries signed a memorandum of understanding to establish ECZs at the Sino-Myanmar border. A ECZ Central Committee was set up to manage the specifics of how to set them up. According to Myanmar’s Commerce Ministry, a free flow of goods and services will take place across the border once the zones are up and running.

The location of the ECZs

Contracts have been signed to set up trading and processing zones in the provinces of Kachin and Shan in Myanmar, and Yunnan in China. In Myanmar, economic processing areas will be set up in Kanpiketi town in Kachin State’s Special Region One, Chinshwehaw in Shan State’s Laukkai Township and Shan State’s Muse Township, as agreed in July 2018.

The three planned ECZs are to form part of the Myanmar-China Economic Corridor (MCEC) under China’s BRI, which will connect Yunnan Province with Mandalay in central Myanmar and stretch as far as Yangon in the south.

The impact of China’s Belt and Road Initiative on the ECZs

From China’s point of view, Myanmar’s ECZs fall under its BRI. They are intended to promote economic integration between Myanmar and China’s southern border and to become a catalyst for developing suitable infrastructure in the border areas.

China’s aim is to use this newly established infrastructure in Myanmar to develop the country as a trade hub that will distribute Chinese products and services in South and Southeast Asia. Myanmar also hopes to benefit by means of technology transfer and the development of infrastructure in underdeveloped regions in the west and south of the country.

But although it may appear like a win-win for both sides, concerns have been voiced about the arrangement. Potential problems include Myanmar ending up in a debt trap.

Nonetheless, a memorandum of understanding was signed by both countries in September 2018, and the MCEC is now in the process of being planned for and built.

Possible economic potential of the ECZs

According to Myanmar’s Minister of Commerce Dr Than Myint, the ECZs will process the country’s agricultural products and export them to China. This situation is expected to create job opportunities for the local population and generate more tax revenue for the government. The Zones are also expected to promote tourism in the border areas by making it easier for Chinese tourists to get into Myanmar.

Additional plans are likewise in place to construct further industrial zones near the ECZs to house processing facilities and logistics centres close to general packing facilities. The Myanmar government also tends to encourage the creation of small and medium-sized enterprises to support the trade and manufacturing activity of larger companies located in the ECZs.

A taxation centre to simplify the tax process, a trade procedure office to cut bureaucracy and a currency exchange office will likewise be set up to facilitate trade and investment between the two countries.

 

By Piet Flintrop.

 

This article was first published on ASEAN Briefing

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

OTHER ARTICLES THAT MAY INTEREST YOU

Myanmar introduces controversial new minimum wage

Guide to employment permits for foreign workers in Myanmar

Exploring tax rates across the ASEAN region

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