State-run newspapers carried an announcement from the Ministry of Rail Transportation (MRT) on Sept. 11 which claimed substitution programs would be adopted for vehicles registered at the Directorate of Road Transport as over 40 years old.
After all these cars have been exchanged there are plans to also replace cars over 30 years old and then 20 years old.
The substitution scheme was reportedly leaked to the business community—much of which has close ties with government ministers—almost two weeks before the official announcement. Consequently, the average price of vehicles increased by at least 1,000,000-1,500,000 kyat [US$ 1,355-2,033].
“We found out about the substitution scheme around a week ago. People rushed into the market to buy old vehicles so a car that cost approximately two millions kyat [US$ 2,710] became 3.5-4 millions kyat [US$ 4,743-5,420].
“Businessmen and children of high ranking officials were among those who looked for old vehicles. When the official announcement was made in state-run newspapers on Sept. 11, owners of those vehicles didn't want to sell their cars anymore,” said a car broker in Rangoon.
In a press conference in Naypyidaw on Sunday, MRT Minister Aung Min explained how to write off over-age vehicles and import new replacements.
After registering for the substitution process, he said permits will be issued to owners to purchase and import models built after 1995 that cost less than US$ 3,500 in the manufacturer country. The old vehicles will then be sent to the foundry, he said.
The Ministry of Finance and Revenue will reportedly collect 40 percent customs tax and 25 percent commercial tax from the imported automobiles.
It has been speculated that this substitution plan will cause great opportunities for corruption among government employees.
“The MRT announcement said that the names described in the vehicle ownership books must be the same as the names of those who hand over the vehicles. So people will bribe government employees to change ownership names.
“And although people will be allowed to import automobiles worth less than US$ 3,500, those who want to purchase more expensive cars may bribe officials to obtain permits to do so. I think many bribery cases will be involved in this process. If we cannot contain them then a chain of problems may follow,” said a retired official from the Internal Revenue Department.
The continued use of vehicles which are under repair will be allowed if the owners still want to retain them. However, vehicles would be substituted if the Directorate of Road Transport consider them dangerous when their licenses are being renewed, claims the MRT.
Furthermore, the announcement said the Ministry of Commerce has a plan to give vehicle-buying permits to export industries, hotels and tourism agencies, investors, legal workers abroad and sailors who officially open foreign exchange accounts at state-owned banks.
According to car dealers in Rangoon, legal workers abroad and sailors will be given permits to import one vehicle each if they have savings of US$ 30,000 in state-owned banks, while businessmen involved in export industries, hotels and tourism agencies plus other investors will be given the same permits if they have savings of US$ 100,000. However, the price and model of vehicles they can import will not be fixed, claim sources.
The MRT announcement said the government will allow automakers from Japan, China, India, Korea, Malaysia and Thailand to open showrooms in Burma. But car brokers in Rangoon predict that prices in the automobile market will remain unstable due to the government's new substitution plan.
“The automobile market is quite shaky at the moment. Most of us think car prices will go down. However, prices may go back up again if this substitution plan involves bribery or a monopoly. I don't think prices of newer model cars will get much lower as they are used by the community of high ranking officials and connected businessmen. I just hope that people can own vehicles at cheap prices,” said another car broker in Rangoon.
Aung Min claimed in the Sunday press conference that more than 50,000 vehicles over 40 years old would be included in the government's substitution plan.
Automobile import permits in Burma have been a privilege for the military-owned Union of Myanmar Economic Holdings, Ltd. and businessmen close to military top brasses for many years.
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