Asia's poorest feel the bite [AFP]

[moe@xxxxxxxxxxxxx]

JUN 29 1998
Asia's poorest feel the bite 




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Currencies of Cambodia, Laos and Myanmar get pummelled and trade with
wealthier neighbours dwindles



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BANGKOK -- While the spotlight is firmly on Asia's crippled "tiger"
economies, the region's poorest countries are also feeling the pinch as
their already weak currencies slump and trade with wealthier neighbours
takes a dive. 

The long-isolated currencies of Myanmar, Laos and Cambodia have taken a
hammering, serving only to reinforce the dominance of the US dollar in many
circles in the poverty-stricken countries and driving up prices for basic as
well as luxury goods. 

The crisis, which began with last July's float of the Thai baht and has
since spread across Asia, has dragged land-locked Laos into the era of
globalisation, with its kip currency trading at record lows of about 3,400
units to the US dollar, down nearly 75 per cent from a year ago. 

Cambodia's riel rallied from a record low of about 4,800 to the US dollar
just before historic UN-backed elections in 1993 to around 2,700 before the
crisis and domestic upheaval last year sent it plunging. 

Earlier this month the riel slumped as low as 4,300 to the greenback but has
since steadied to about 4,000. 

Myanmar, one of the most closed countries in the world, has also been forced
to face up reluctantly to the crisis. 

Although the official exchange rate of about six kyat to the US dollar
persists, traders say the authorities have abandoned attempts to crack down
on the black market whenever it starts selling US dollars for more than 300
kyat. 

"It used to be that every time the rate gets to the benchmark of 300 kyat to
the US dollar, you could expect intelligence personnel to move in," one
businessman involved in black market currency dealing said. 

Beside the impact of the Asian economic crisis, Myanmar's junta contributed
to the currency's decline through its "tendency to mint more of the stuff in
an effort to balance the Budget", a Yangon analyst added. 

"Even if present import restrictions were removed, most of us would hesitate
to import simply because it is not practical to do so at this time when the
free market value of the kyat is so low." 

The turmoil has forced up prices across the board in Myanmar and the costs
of basic items such as beans, pulses and onions have soared by about 100 per
cent on Yangon's markets in the last two weeks alone. 

In Cambodia, the economic woes have been compounded by seasonal rice
shortages, drought-affected harvests and hoarding of some commodities ahead
of the country's scheduled elections on July 26. Finance ministry figures
show rice prices surging from US$400 a tonne in April to the current rate of
about US$430. 

In neighbouring Laos, efforts by the authorities to stabilise the kip
currency are doomed to failure and the country has little hope of emerging
unscathed from the regional crisis, according to a recent report by the
Bangkok-based Thai Farmers Bank Research Centre. 

The report said dwindling overseas investment, low foreign reserves, a sharp
decline in border trade with neighbouring Thailand, and a heavy reliance on
loans and aid meant Laos could not isolate itself from regional woes. 

As the kip has declined, the government has introduced a range of measures
to stabilise the unit, including halting the sale of foreign currencies by
banks and imprisoning black market dealers. 

Early this month the authorities announced that foreign currencies could be
purchased only by businesses registered in Laos in an effort to control
speculation and currency flows. 

The move followed a ban on the use of foreign currencies in trade last June,
but the use of the Thai baht and the US dollar in everyday business
transactions remains widespread. 

Both measures backfired by effectively bringing an end to the local foreign
exchange market, stimulating the re-emergence of a thriving black market for
currencies, the research centre report said. 

Now Laos, Cambodia and Myanmar await the effects of the so-called
"second-wave" of the crisis on their fractured economies. -- AFP