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Though reliable economic statistics on Myanmar are in short supply, there is little doubt that the economy is plumbing new depths. The value of the kyat has declined on the black market to a low of 820 to the United States dollar, and inflation is soaring, at a rate of up to 50 per cent per annum. External debt is now more than 100 per cent of Gross Domestic Product, and over one third of this is in arrears. One of the mysteries is how Myanmar, with minimal foreign exchange reserves, now around US$240 million or less than 2 months imports, manages to run massive annual trade deficits of up to 24 per cent of GDP without a corresponding increase in external debt. In the three years up to 2000, the external trade deficit has averaged over US$1.4 billion annually, while over the same period external debt increased by just under US$1 billion. It is clear that income from foreign investment, which declined to less than US$60 million in 2001, and from tourism does not make up the difference. Remittances from Burmese workers overseas and informal border trade account for part, but a major part must be made up by the proceeds of the illegal drug trade, laundered through shady financial institutions in Rangoon. Estimates of Myanmar's opium production this year range up to 3,000 tons, making it the world's leading producer. This suggests that the Government's publicly announced crackdown on the drug trade is a move to improve its international image rather than the precursor of effective action, which might disrupt the income streams of many well-connected individuals. The protection of personal economic interests also seems to lie behind the recent arrest of Ne Win's son-in-law and members of his family, who face possible treason charges for plotting to overthrow the current regime. Aye Zaw Win, his wife Sanda, and their sons had allegedly exploited their privileged position to build up a business empire. This apparently antagonised other would-be military capitalists who wanted their share of the action. If there was a plot, it seems to have been a very amateur affair, but Aye Zaw Win and his business associates in the armed forces are said by some commentators to have behaved incautiously enough to give their rivals an excuse to move against them. As a consequence several senior officers have been dismissed, and others arrested and interrogated. The government has sought to reinforce its reform credentials by suggesting that the accused were opposed to the ongoing talks with opposition leader Aung San Suu Kyi. Meanwhile, despite official hints that of an imminent breakthrough, there is little sign of progress in these talks, and the government continues to give the impression that it is playing for time, rather than seriously aiming at a solution.
WATCHPOINT: Will the government take serious action against the drug trade, which must include a major showdown with the United Wa State Army?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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