Myanmar: The Problem of Military Succession, Rumours and Inflation



Ever since the former prime minister and military intelligence chief, General Khin Nyunt, was dismissed in October 2004 and his intelligence apparatus was subsequently dismantled, speculation about a major shake-up in the tatmadaw command hierarchy has been grist for the incessant rumour mill in Yangon and beyond. To many observers, it seemed that with Khin Nyunt gone the delicate triangular balance of power had been disrupted and the emerging dyadic relationship would degenerate to a fight for supremacy. As such, rumours revolving around the theme of a power struggle between Senior General Than Shwe and his deputy Vice Senior General Maung Aye have surfaced time and again. A reshuffling of six out of twelve regional commanders in late May fuelled further speculation. As different permutations of alliances among the junta members and regional commanders were dished out to gauge the balance of support between the two alleged protagonists and the possibility of a palace coup, intense scrutiny of the public appearances and disappearances of leading players, together with scrutiny of the observed protocols and apparent pecking orders became the de rigueur for some pundits.

Depending on the intensity and perceived significance of those rumours, the market value of the US dollar in relation to the local Kyat (K) as well as the gold price has fluctuated sharply around an upward rising trend mainly due to speculative pressures. These were further aggravated by the extreme centralization of decision-making and general tightening of rules and regulations in foreign trade, rumoured to have been ordered by Maung Aye to redress the lax regime and plug loopholes created by Khin Nyunt's 'pragmatic' business-friendly approach. An unprecedented triple bombing in Yangon in early May and the government's closure of another private bank (allegedly for money laundering) in late May, just a few months after the closure of two major private banks that were suspended in the wake of a bank run in early 2003, did nothing to alleviate the anxiety and uncertainty in business circles either. All of these developments combined to produce inflation in consumer goods prices, which rose to unprecedented levels in the third quarter of 2005.

The latest bout of palace coup fever began in July when rumours surfaced that the dismissed agriculture and irrigation minister, who was close to Madame Than Shwe, was arrested and his possessions confiscated after the families of the top brass and their cronies reportedly suffered huge losses in a scam by his brother-in-law who had fled overseas. Investigations supposedly revealed huge payoffs by the former agriculture minister to Madame Than Shwe, which greatly embarrassed the junta leader. Meanwhile, in early August, the education minister, who was believed to be close to Than Shwe, was dismissed and two regional commanders (one was Maung Aye's brother-in-law) swapped commands, while two junta members also exchanged staff positions in the army headquarters. Then the rumour spread on 23 August that Than Shwe had been deposed and replaced by Maung Aye, after being confronted over his wife's corruption by Maung Aye and some disenchanted generals. The rumour died as quickly as it erupted, but lingering suspicions that something was amiss refused to dissipate. Many still believe that Maung Aye is consolidating his grip on the Army and the government and biding his time for the next move. Before the quarterly meeting between the junta and the regional commanders convened in the second week of October there was speculation that a succession line-up would be announced. To the dismay of those pining for a major shake-up the meeting ended on a seemingly business-as-usual note.

On the other hand, the Myanmar currency has taken a severe beating since the coup rumour and has not fully recovered, closing at over K1,200 per US dollar in mid-October compared to around K900 in early 2005. Fuel prices have shot up by over 50 per cent and have been further aggravated by the government announcing an eight-fold increase in the heavily subsidized prices of petrol and diesel with effect from 20 October. This would certainly produce a knock-on effect on commodities prices through higher transport charges and dearer imports. Until and unless the junta can resolve its succession problem within the command hierarchy and turn its attention to seriously addressing the economic issues, the spiral of rumours and inflation will continue to feed upon each other.

WATCHPOINT: How will the junta react to the latest round of inflation in the face of increasing international pressure to release Aung Sun Suu Kyi and hasten the transition to civilian rule.


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