When left is right

Traders are right to feel aggrieved given the many snap policy changes since 2011, many of which have often left them worse off.

IN LATE 2011, the former government of U Thein Sein embarked on an ambitious liberalisation of car imports. This was a commendable move that benefited businesses and the country’s small middle class by making cars significantly more affordable.

It was also a brave decision because it hurt those who had been hoarding Toyota Land Cruisers and Prados as a means of storing wealth – mostly serving and former military officials, and those businesspeople who had enjoyed close ties to the regime. Vehicles that had been worth hundreds of thousands of dollars dropped quickly in value by half, then two thirds, then three quarters.

Incremental policy changes enabled a flood of late model used cars to enter the country. But the government prioritised price over safety. Almost none of these cars were suitable for Myanmar’s roads, as they were right-hand drive vehicles from Japan, where cheap and reliable second-hand cars are widely available.

Rectifying that mistake is a victory for common sense. Anyone with experience driving outside Myanmar who uses a right-hand drive car can tell you that it’s a more risky proposition. Overtaking on a potholed, two-lane highway into oncoming traffic can be downright scary at the best of times – combine that with reduced visibility from being on the right and you’ve got a potentially fatal mix.

Research appears to back up these safety concerns. A study published in the Accident Analysis & Prevention journal in 2009 of right-hand drive cars in Canada, which like Myanmar drives on the right side of the road, found these vehicles were more likely to be at fault in accidents.

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More controversially, the government has declared that only cars produced in the past two years can be imported from January 1. Car dealers have complained these measures will make buying a car more expensive. They are probably right. But more than two-thirds of all countries drive on the right like Myanmar. Japanese used cars are cheap, but there are plenty of other markets from which to source affordable vehicles.

Rising car prices are also not a bad thing. For a start, it would give the government time to improve infrastructure and public transport in Yangon, which the Asian Development Bank has warned could “grind to a halt” unless urgent steps are taken. It would presumably also slow the import of cars. This would help to narrow Myanmar’s trade deficit, which is contributing to the depreciation of the kyat.

In the longer term, Myanmar needs to move toward a model where people buy new cars. As owners trade up, a used-car market would grow organically, rather than through imports.

In line with the government’s job-creation agenda, the goal should be to manufacture a significant proportion of the parts for these new cars – if not entire vehicles – in Myanmar. It’s important that a manufacturing ecosystem is developed; simply assembling the cars here from parts produced abroad, as some have done in the past, will create only a limited number of jobs. Local production would also ensure that vehicles are made for Myanmar’s climate and conditions, not those of Japan or Europe.

The problem is that rising car prices in the short term are a tough sell. Traders are right to feel aggrieved given the many snap policy changes since 2011, many of which have often left them worse off. Those who were hoping to soon enter the market for their first car, upgrade to a newer model or expand their business fleet will also be unhappy.

And that’s not likely to change while the government is unable or unwilling to articulate a long-term vision. While we’re talking about the auto industry now, it applies to pretty much every challenge the National League for Democracy government faces. It creates the perception that the government is lurching from one crisis to another, with no plan for the future – and that’s hardly going to instil faith in its ability to govern.

This editorial appeared in the December 8 edition of Frontier.

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