Mizzima: Burma: Financial crisis an

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             Burma: Financial crisis and foreign assistance

By Win Htein, May 20, 2001
Mizzima News Group (www.mizzima.com)

Last week, Burma's beleaguered kyat currency fell to 900-kyat per dollar
as a new record low in the recent history while the official rate
remains 6-kyat to the dollar.

The kyat has been gradually sliding in exchange with the foreign
currency since the military came into power thirteen years ago. Last
month, the exchange rate was 500-kyat per dollar. In the beginning of
this year, it was 350-kyat. At the time when the military seized power
in 1988, the exchange rate was 70-kyat to the US dollar.

So, one wonders why the Burmese currency has plunged so badly! A
spokesman of the military junta recently blamed some money dealers in
the country for the kyat slide. "These unscrupulous people are
circulating groundless rumors to fan panic so that they can cash in on
the situation", he said. Some dozens currency-dealers were jailed after
his comment.

A source in Rangoon said that people have lost confidence on kyat
currency. "It is because of the rumors that the government will announce
deflation soon", said a journalist who works for a business magazine in
Rangoon.

There are also reports that the military-own company (U Pi limited) had
lost 2-million dollars in competition with private companies and thus
the junta decided to buy dollars in open market in any rate.

"They needed dollars immediately as a credit before the Asia Development
Bank (ADB) and Least Developed Countries (LDC) annual meetings. So that
they can get resumption of loans from the ADB and the World Bank or the
IMF".

Last month, the ADB, in its annual report of Outlook for 2001, had
warned that the Burmese junta needs to implement immediate economic
reforms and suggested to change the official exchange rate of 6-kyat per
dollar.

It said that at the end of March 2000, "the country?s gross foreign
exchange reserves were only about $ 240-million- less than two months of
exports".
According to a Washington-based think tank, Cato Institute, Myanmar is
number 122 of 123 countries which have freedom of economy in 2001.

The United Nations Human Development report has ranked Myanmar as 125
out of the 174 countries in the world that are the least developed.

However, the regime has its own statistics. The State Peace and
Development Council (SPDC) claimed that GDP of the country is growing 12
percent every year. ?The government constructed the dams, bridges, roads
and all basis infrastructures in the whole country. So the Myanmar is
now progressing like never before," said Gen Than Shwe, head of the
regime, in his recent visit to central Burma.

"This inflation will bite the civil servants whose salaries were just
promoted 5-times recently. Last month, a teacher's salary is 10,000 kyat
or 20-$ while one dollar is equal to 500-kyat. But now his salary is
only 10-$ with the current exchange rate" said a government servant in
Rangoon.

Many Burma observers believe that the root of this currency crisis is
based on the international sanctions and on-going Thai-Burma border
clashes.

After the fighting broke out between the Thai and the Burmese troops in
the northern border in February, the SPDC ordered to ban all Thai goods
and to close border-bridges.

Since then, the border-trade is broken and the Burmese face shortage of
Thai food. The price is now higher and the inflation is wider. The
exchange rate in border is now 16-kyat per 1 Thai Bhat currency from 8
Bhat in early this year.

Although the junta is trying to substitute the shortage of Thai goods
with the Chinese goods, it is not successful. The border-trade with
China is also not working now because of fallen kyat. Now, the kyat is
declined to 90-kyat per 1 Chinese Yen from 60-kyat in January.

"The junta copied many things form China, but not an economic policy,"
said a trader in Sweli (China-Burma border) who had served several years
for the Communist Party of Burma. "China is opening for a real free
market. But in Burma, the generals do just lip service and nepotistic
policy".

According to a 'White Paper' of junta's foreign ministry, the
border-trade is the main business to go against the US-led international
trade sanctions on the regime. The 5-pages paper dated 2nd December last
year said, "The ILO and UN's economic and social affairs committee will
sanction us soon due to the exiled groups which are lobbying on human
right records and force labor in the country".

However, the ILO and UN are now on holding their procedures on Burma.
This is because the junta started having 'Secret Talks' with opposition
leader Aung San Suu Kyi in last October. But the EU Council and US
government decided to continue their trade sanctions on Burma, as they
don?t see any real progress.

Meanwhile, the Japanese government has decided to give 28-million dollar
to junta as a reward for talking with opposition leader while the ASEAN
countries protested against the ILO's decision to punish the junta for
the use of forced labor.

In this situation, is there any way for the junta to come out of the
financial crisis?

Last week, the junta's finance minister U Khin Maung Thein appealed to
ADB, in annual meeting at Hawaii, to lift the 1986 aid embargo saying
that his country is on the road to reforms.

However, he did not get positive response from ADB. "We are still
monitoring the political situation in Burma", ADB President replied. He
did not say when and how the ADB plans to resume aid to Burma.

Currently, the junta's economic planning minister U Soe Tha is trying in
a similar way at the Least Developed Countries (LDC) annual meeting in
Brussels to erase the country?s 6-billion dollar debt.

"This is impossible. Because they must do something before they come
here. This includes reforming economic policies and progress on the
country?s human right situation," commented Dr Zaw Oo, a
Washington-based economic researcher who is attending the LDC meeting.

"Without changing the policy, there is no way to solve the current
financial crisis. Without changing the system of government, there is no
hope for external aid", he added.

Win Htein is a correspondent for Democratic Voice of Burma.



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<center><b><font color="#0000FF"><font size=+2>Burma: Financial crisis
and foreign assistance</font></font></b></center>

<p><b><font size=+1><font color="#990000">By </font><font color="#006600">Win
Htein</font><font color="#990000">, May 20, 2001</font></font></b>
<br><b><font color="#990000"><font size=+1>Mizzima News Group (<a href="http://www.mizzima.com";>www.mizzima.com</a>)</font></font></b>
<p><font size=+1>Last week, Burma's beleaguered kyat currency fell to 900-kyat
per dollar as a new record low in the recent history while the official
rate remains 6-kyat to the dollar.</font>
<p><font size=+1>The kyat has been gradually sliding in exchange with the
foreign currency since the military came into power thirteen years ago.
Last month, the exchange rate was 500-kyat per dollar. In the beginning
of this year, it was 350-kyat. At the time when the military seized power
in 1988, the exchange rate was 70-kyat to the US dollar.</font>
<p><font size=+1>So, one wonders why the Burmese currency has plunged so
badly! A spokesman of the military junta recently blamed some money dealers
in the country for the kyat slide. "These unscrupulous people are circulating
groundless rumors to fan panic so that they can cash in on the situation",
he said. Some dozens currency-dealers were jailed after his comment.</font>
<p><font size=+1>A source in Rangoon said that people have lost confidence
on kyat currency. "It is because of the rumors that the government will
announce deflation soon", said a journalist who works for a business magazine
in Rangoon.</font>
<p><font size=+1>There are also reports that the military-own company (U
Pi limited) had lost 2-million dollars in competition with private companies
and thus the junta decided to buy dollars in open market in any rate.</font>
<p><font size=+1>"They needed dollars immediately as a credit before the
Asia Development Bank (ADB) and Least Developed Countries (LDC) annual
meetings. So that they can get resumption of loans from the ADB and the
World Bank or the IMF".</font>
<p><font size=+1>Last month, the ADB, in its annual report of Outlook for
2001, had warned that the Burmese junta needs to implement immediate economic
reforms and suggested to change the official exchange rate of 6-kyat per
dollar.</font>
<p><font size=+1>It said that at the end of March 2000, "the country?s
gross foreign exchange reserves were only about $ 240-million- less than
two months of exports".</font>
<br><font size=+1>According to a Washington-based think tank, Cato Institute,
Myanmar is number 122 of 123 countries which have freedom of economy in
2001.</font>
<p><font size=+1>The United Nations Human Development report has ranked
Myanmar as 125 out of the 174 countries in the world that are the least
developed.</font>
<p><font size=+1>However, the regime has its own statistics. The State
Peace and Development Council (SPDC) claimed that GDP of the country is
growing 12 percent every year. ?The government constructed the dams, bridges,
roads and all basis infrastructures in the whole country. So the Myanmar
is now progressing like never before," said Gen Than Shwe, head of the
regime, in his recent visit to central Burma.</font>
<p><font size=+1>"This inflation will bite the civil servants whose salaries
were just promoted 5-times recently. Last month, a teacher's salary is
10,000 kyat or 20-$ while one dollar is equal to 500-kyat. But now his
salary is only 10-$ with the current exchange rate" said a government servant
in Rangoon.</font>
<p><font size=+1>Many Burma observers believe that the root of this currency
crisis is based on the international sanctions and on-going Thai-Burma
border clashes.</font>
<p><font size=+1>After the fighting broke out between the Thai and the
Burmese troops in the northern border in February, the SPDC ordered to
ban all Thai goods and to close border-bridges.</font>
<p><font size=+1>Since then, the border-trade is broken and the Burmese
face shortage of Thai food. The price is now higher and the inflation is
wider. The exchange rate in border is now 16-kyat per 1 Thai Bhat currency
from 8 Bhat in early this year.</font>
<p><font size=+1>Although the junta is trying to substitute the shortage
of Thai goods with the Chinese goods, it is not successful. The border-trade
with China is also not working now because of fallen kyat. Now, the kyat
is declined to 90-kyat per 1 Chinese Yen from 60-kyat in January.</font>
<p><font size=+1>"The junta copied many things form China, but not an economic
policy," said a trader in Sweli (China-Burma border) who had served several
years for the Communist Party of Burma. "China is opening for a real free
market. But in Burma, the generals do just lip service and nepotistic policy".</font>
<p><font size=+1>According to a 'White Paper' of junta's foreign ministry,
the border-trade is the main business to go against the US-led international
trade sanctions on the regime. The 5-pages paper dated 2nd December last
year said, "The ILO and UN's economic and social affairs committee will
sanction us soon due to the exiled groups which are lobbying on human right
records and force labor in the country".</font>
<p><font size=+1>However, the ILO and UN are now on holding their procedures
on Burma. This is because the junta started having 'Secret Talks' with
opposition leader Aung San Suu Kyi in last October. But the EU Council
and US government decided to continue their trade sanctions on Burma, as
they don?t see any real progress.</font>
<p><font size=+1>Meanwhile, the Japanese government has decided to give
28-million dollar to junta as a reward for talking with opposition leader
while the ASEAN countries protested against the ILO's decision to punish
the junta for the use of forced labor.</font>
<p><font size=+1>In this situation, is there any way for the junta to come
out of the financial crisis?</font>
<p><font size=+1>Last week, the junta's finance minister U Khin Maung Thein
appealed to ADB, in annual meeting at Hawaii, to lift the 1986 aid embargo
saying that his country is on the road to reforms.</font>
<p><font size=+1>However, he did not get positive response from ADB. "We
are still monitoring the political situation in Burma", ADB President replied.
He did not say when and how the ADB plans to resume aid to Burma.</font>
<p><font size=+1>Currently, the junta's economic planning minister U Soe
Tha is trying in a similar way at the Least Developed Countries (LDC) annual
meeting in Brussels to erase the country?s 6-billion dollar debt.</font>
<p><font size=+1>"This is impossible. Because they must do something before
they come here. This includes reforming economic policies and progress
on the country?s human right situation," commented Dr Zaw Oo, a Washington-based
economic researcher who is attending the LDC meeting.</font>
<p><font size=+1>"Without changing the policy, there is no way to solve
the current financial crisis. Without changing the system of government,
there is no hope for external aid", he added.</font>
<p><i><font size=+1>Win Htein is a correspondent for Democratic Voice of
Burma.</font></i>
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