Their motors growl, belch and clank. Their fan belts whine. Their doors and steering wheels rattle and squeak.

Years of isolation and trade-crippling sanctions have left Myanmar's streets with one of the world's oldest vehicle fleets, dominated by wheezing Japanese cars from the 1980s or older.

The ageing rust-buckets are unmistakable, their stinging exhaust harking back to an era before emissions standards.

That is about to change as Myanmar, home to nearly 60 million people, pursues reforms after nearly half a century of authoritarian rule. Among them is an overhaul of antiquated car import rules that could clear its pockmarked streets of jalopies.

In an echo of the U.S. government's Cash for Clunkers trade-in incentives in 2009, cars 30 to 40 years old or older with eligible licence plates can be exchanged for scarce permits to import newer models built no earlier than 1995.

The new rules, which came into effect on September 19, have shaken Myanmar's car market. Demand has surged for old cars that can be swapped for import permits, such as the blue 1960s-era Mazda B-600 driven by taxi driver Aung Gyi, 32.

The owner of my taxi Mazda B-600 handed it over to the government on Sept 20 and I've been out of a job ever since, he said. Dozens of other taxi and bus drivers in Yangon, the country's biggest city, are now similarly jobless, he added.

Buyers of the old cars then use the permit to purchase a newer model, or sell it on.

As part of the reforms, a Commerce Ministry official said showrooms would open in major cities to sell new and second-hand cars from Japan, South Korea and neighbouring countries such as Thailand -- a manufacturing hub for the top producers.

All these things will happen one after another very soon. Just save your money and wait to buy in the showroom, said the official, predicting U.S. and European models would follow if Western sanctions are lifted.

That prospect improved last week when U.S. President Barack Obama hailed flickers of progress in Myanmar and asked Secretary of State Hillary Clinton to visit the resource-rich country neighbouring China next week. She will be the highest-ranking American to do so in more than 50 years.

Washington has demanded Myanmar release more political prisoners, make peace with armed ethnic minorities and demonstrate credible elections before it can consider easing sanctions imposed in response to years of human rights abuses.

But, in recent weeks, signs of progress on those fronts mark the most dramatic changes in the former British colony since the military took power in a 1962 coup when it was known as Burma.

Sanctions will come down very soon, I predict, Nay Zin Latt, a businessman and official political adviser to President Thein Sein, told Reuters on the sidelines of a recent regional summit in Bali, Indonesia.


Not only new cars are scarce. Car showrooms, too, are a rarity. And for many Burmese, so is the money to buy them.

Shiny new cars -- from smuggled European sports models to fancy SUVs purchased with coveted import permits -- have traditionally been the privilege of the generals who ceded power to a nominally civilian parliament in March.

They and their business cronies have lived lavishly while a third of Myanmar's population toil in poverty, according to World Bank statistics.

The latest rules, however, would help meet the aspirations of a new middle class, a senior Transport Ministry official said.

If everything keeps going well, I'm sure any citizen will be able to buy the car of their choice from showrooms in the very near future, said the official, who declined to be identified because he was not authorised to speak to the media.

He said the rules could also slow the rise of the local kyat currency, which trades in the unofficial parallel market that reflects most transactions in the country at about 760 to the dollar, up from about 850 in May.

The surge reflects higher sales of natural gas, jade and gems, and a rise in foreign investment from China. But the more people buy cars, the more they will need U.S. dollars to finance them, the official said.

The government has expressed concern over the rising currency, aware that bread-and-butter issues can turn violent in Myanmar. The biggest and bloodiest uprisings against military rule, in 1988 and 2007, were sparked by discontent over soaring fuel prices and inflation.


The rusting rattletraps on Myanmar's streets draw parallels to another sanctions-blighted country, Cuba, where classic American cars from the 1950s and 1960s dominate the roads but where change is also in the air.

In September, just as Myanmar's reforms were gathering pace, Cubans were granted the right to buy and sell cars for the first time since the 1959 revolution.

Myanmar's reforms are expected to accelerate. The rule allowing replacements for 40-year-old cars was followed by a similar move for 30- to 40-year-old cars, and 20- to 30-year-old vehicles are likely to be next.

Newer imported vehicles must have been built in 1995 at the earliest and there's a hefty 165 percent in combined taxes. So a car worth $5,000 (3,234.15 pound) sells at a sticker price of $13,250.

Despite the costs, the scheme offers a business opportunity.

A 37-year-old accountant with an international aid group, who gave her name as Rose, said the measures allowed her to import a relatively new car.

As soon as we heard it, my husband and I decided to buy a 40-year-old Mazda 360 ... We'll hand it over to the government later this week here and apply for an import permit at the Commerce Ministry.

She could then sell the permit or the new car for a profit.

According to data from the Directorate of Road Transport, only about 370,000 registered cars plied Myanmar's rutted streets and dirt roads in August. Some 55,417 had been driven for more than 20 years, but maybe not much longer.

As of November 18, a total of 16,566 cars of 30-years-plus have been swapped out under the programme, the ministry official said. We will accept the rest, phase by phase, up to March.

Not everyone is smiling. Among the losers are car repair workshops that keep all the jalopies on the road.

Before this measure was launched I had over 30 workers. Now only eight are left, said Naing Tun, owner of a garage in Insein Township in Yangon.

Owners of old cars are more interested in changing theirs with import permits than having them overhauled, he said.

And the market for locally assembled jeeps collapsed.

I've decided to shut down factories. I haven't sold any cars since October, said Ko Tuu, a jeep manufacturer from South Dagon Industrial Zone on the outskirts of Yangon.

Now nobody's going to buy my jeeps at about 7 million kyat (5,950.84 pound) since they can get a good second-hand Japanese car at this price. At the same time, it wouldn't be viable for me to reduce the price lower than that.

(Writing and additional reporting by Jason Szep; Editing by Alan Raybould and Raju Gopalakrishnan)