Surging black market prices add to woes

PUBLISHED : Thursday, 05 June, 2008, 12:00am
UPDATED : Thursday, 05 June, 2008, 12:00am

Cyclone Nargis exposes flaws in Myanmar's strange economy

In the last of a series, our Staff Reporter examines the mysterious economy of Myanmar - one of the region's poorest countries - in the wake of Cyclone Nargis.

For a glimpse into the strange workings of Myanmar's economy, just wander around the crowded streets of downtown Yangon, the country's biggest city and former capital.

You will hear sounds that have long disappeared from elsewhere in the region - the clak-clak-clak of old typewriters, the purr of a manual sewing machine and rattling ceiling fans. It is not so much a city frozen in time but one in a constant state of decay.

The cars and taxis are mostly battered Japanese models from the late 1980s and early 1990s, kept running despite smashed windows and shot shock absorbers.

Wander into the poorly stocked shops in decrepit British-era buildings and it is hard to find an electric till or a computer. A cashier will stash notes of the troubled Myanmese currency, the kyat, into a wooden drawer, writing the transaction into a dusty ledger.

Peer a little closer into the backrooms and signs of more furtive activity abound - bricks of neatly bound kyats are exchanged for dollars, rice is traded and petrol poured from tanks into smaller bottles for distribution.

As you wander, an odd silence becomes gradually apparent - you can walk for miles without hearing a ringing mobile phone. Local SIM cards trade at up to US$2,000 on the black market - more than five years' wages for the many Myanmese earning less than a dollar a day.

Such images speak volumes about the mismanagement of Myanmar's isolated ruling junta, which keeps a vice-like grip on many aspects of the nation's trade, from staples such as rice and fuel to its key exports, including oil, timber and gems. Mobile phones and new cars remain highly restricted.

For the shadowy band of generals of the State Development Council, and a small group of favoured businessmen who thrive on concessions, that means vast wealth, some of it on display in the gilded chambers of the new capital cut from the jungle, Naypyidaw. For ordinary Yangon residents, it has come to mean poverty and negotiating an expensive and illegal black market instead.

One month since Cyclone Nargis lashed the Irrawaddy delta in the world's worst natural disaster since the Asian tsunami of December 2004, Myanmar's strange economy is swinging sharply into focus. Local residents, businessmen and foreign envoys are all trying to gauge the impact of Nargis on an economy and a society that is one of the most hidebound and poverty-stricken in the region.

Anti-junta protests last September still resonate. Like the pro-democracy movement of 1988, inflation was the spark that got Myanmese on to the streets. Both movements ended in bloodshed as the junta cracked down on dissent and many activists involved remain wary of risking further trouble at this point.

Nargis' impact is expected to be vast, however. The delta is one of the country's key rice growing areas, helping it produce enough for export in recent seasons. Rice planting is about to start but vast swathes of the delta remain flooded with salt-water. Fishing fleets and seafood-processing factories have been wiped out.

'The pain is already being felt,' said one senior Asian diplomat based in Yangon. 'But the big question remains: will it hurt the regime? That is very hard to tell at this point. They have constantly shown they are immune from the pain felt by ordinary people.'

That pain is already visible on the streets of Yangon, where the prices of rice and fuel are surging on the black market - rises on top of inflation that topped 35 per cent last year, according to the International Monetary Fund. Fuel is particularly interesting barometer, given its importance in running generators in a city where mains electricity is patchy.

'Two years ago many Rangoon [Yangon] residents considered themselves middle class, by our local standards,' said U Hla Min, a local black-market trader. 'No one talks like that now, even before the storm hit ... at best it is a kind of genteel poverty, at worst, even people with good office jobs are struggling to stay above the breadline. Inflation is the killer.'

Many ordinary residents talk with considerable bitterness. Myanmar, they stress, is not supposed to be a poor country. They point out that at the time of the country's independence from British colonial rule, in the late 1940s, it was considered the richest country in Southeast Asia, given its vast natural resources. Now it is one of the poorest.

Economists warn realistic growth figures are difficult to gauge, given rubbery junta accounting that uses official exchange rates to disguise inflows. Various international estimates suggest a GDP growth rate of 5.5 per cent last year - a far cry from the more robust growth of the mid-1990s when more liberal junta officials pushed reforms and courted foreign investors.

Growth appears to be kept alive by export revenue from oil and gas, with Thailand contributing as much as US$1.5 billion last year alone. Infrastructure projects involving Indian and Chinese investment in a port at Sittwe on the west coast and a gas pipeline to land-locked Yunnan are also topping up junta foreign reserves. Less is known about a 25-year loan secured on concessionary terms last year from Saudi Arabia.

'We know our country is still rich,' said one activist in Yangon. 'The problem is that the generals have all of the wealth ... and they've got the guns, too.'

Street money

Officially, Myanmar's kyat trades at about six to the US dollar. On the black market, however, US$1 buys: 1,200