Myanmar: More belt-tightening

1998

Frank Milne

The economy of Myanmar, already stagnating, has suffered a further blow with the drying up of investment from other South East Asian countries, resulting from the regional financial crisis. Nearly half of all foreign investment in Myanmar has come from ASEAN, in particular Thailand, Malaysia and Singapore, but these inflows have declined sharply in recent months. At the same time investment from Western countries is constrained by sanctions and political pressure. Only a small proportion of the US$ 6 billion of investment projects approved by the Government in the last financial year has actually materialised - according to some estimates, less than one quarter. Official statistics for the balance of trade in 1996/7 show imports increasing to US$1955 million, over twice the value of exports. Though this imbalance may partly be offset by the value of unrecorded and unofficial cross-border trade, it is putting a severe strain on foreign exchange reserves, which are now at a dangerously low level. While the Government persists in maintaining the massively overvalued exchange rate for the kyat at 6.2 to the US dollar, the unofficial rate has blown out, recently passing the US$300 level. In the absence of a broad tax base or effective collection system, the government is relying on the printing press to finance its activities, including a high level of military expenditure, thus fuelling a serious level of inflation. Adding to the country's economic woes is the high level of corruption and over-regulation. Some elements in the leadership appear to recognise the need for reform, and have even discussed ways to improve the economic outlook, at a seminar with private sector economists and businessmen in January. This unusual willingness to hear alternative views will probably not produce any early changes, and economic policy considerations will still be subordinated to perceived political imperatives. Myanmar looks to be in for a period in which the people will be called on to tighten their belts even further, and in which the virtue of "self-reliance" will be preached, even though its time seems to have passed.

WATCHPOINT: How can Myanmar resolve its problems without greater accommodation of the outside world?

 

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