Forex-starved nation takes to barter

FEW business activities are as challenging as trading with Burma. The country is short of foreign exchange, is burdened with foreign debt payment arrears of about US$1 billion, and has an official exchange rate that values the local currency, the kyat, at20 times its black-market rate.

As if this were not enough, the military junta is regarded with such distaste by Western governments because of its dismal human rights record that Burma - one of the world's poorest countries - has largely been denied foreign aid. Corruption is widespread.

The Burmese economy, however, has grown by about five or six per cent a year for the past couple of years; the generals have cautiously liberalised the economy, encouraged border trade with China, welcomed more tourists and courted foreign investors fromThailand, Singapore and further afield.

Barter, or counter-trade, is playing an important role in this economic revival. Swapping products allows traders to bypass problems caused by the overvalued official kyat, and many Burmese and foreign import-export companies have found themselves reluctantly involved in barter deals.

While some government ministries have access to foreign exchange, most private Burmese companies are allowed to pay for imports only with money earned from their exports.

Furthermore, private traders must spend a quarter of their export earnings on imports deemed to be essential - such as palm oil - or convert a fifth of their dollars into kyat at the official rate, akin to throwing money down the drain.