Burma's economic crisis deepens
BBC
by the BBC's Larry Jagan from Bangkok
19-11-01
The price of vegetables has doubled
Burma has not escaped the economic fall-out from the attacks on the United States and Washington's war on terrorism. The fall in consumer confidence in America will also affect Burma's exports to the US, while the general downturn in international travel will have an adverse impact on Burma's tourist industry. The latest symptom of financial crisis has been a run on the country's large kyat notes.
"No one wants to hold thousand or five hundred kyat notes for fear that the government is planning to withdraw them from circulation," said a Burmese businessman. Decades ago the Burmese had withdrawn large denomination notes overnight, devaluing many people's savings instantly.
Shoring up confidence
But the government has been quick to intervene. "As long as the military government is in charge, there will be no withdrawal of the official currency notes, be it the 1,000 kyat note or the 500 kyat note," the country's deputy chief of military intelligence Major General Kyaw Win said at the weekend.
While the government's intervention has stopped the panic selling of the large kyat notes, it has not stemmed the fall of the value of the kyat on the informal market. "It's been sliding downwards for several months now," said a Rangoon-based analyst. "It's virtually in free-fall against the dollar," he added.
'Rampant inflation'
The exchange rate is now more than eight hundred kyat to the dollar. Money changers in Rangoon expect it to fall even further in the next few weeks.
"The country's rampant inflation has also caused many people to buy dollars, gold and imported cars as a hedge against price increases," said a Rangoon-based journalist. The price of cars has more than doubled in the last two months. The fall in the kyat is also forcing the prices of imported goods like medicines and cosmetics to rise.
A recent visitor to Rangoon said many women were no longer buying cosmetics. "Residents in the capital are continuously complaining about rising prices," said an Asian diplomat in Rangoon.
Expensive food
Eggs, vegetables and peanut oil have all more than doubled in the last two months. "One egg," complained a resident, "now costs more than 30 kyat."Although meat prices have only increased marginally, many families have given up eating meat to be able afford the other essential foodstuffs, which have increased astronomically.
Rice of course has remained relatively stable because of government intervention to control its price. The military authorities have long feared that large price increases in rice would provoke food riots.
Humanitarian crisis?
Privately UN officials fear a massive humanitarian crisis is looming. They estimate that one child in three is already malnourished. If the economic crisis remains unchecked, they fear that this could double with the next 12 months. The situation they say is particularly critical in the countryside.
Power shortages
On top of this, the residents of Rangoon are increasingly facing power shortages. According to one resident, people in residential areas have had no electricity for more than eight hours a day, almost everyday for the last four weeks.
The acute lack of diesel has caused the closure of two major fertiliser factories in the past month, a Burmese economist based in Singapore told the BBC. An international petroleum company executive, who knows Burma well, says if the Generals do not do something soon, "by March next year, the lights in Rangoon will go out".
Business exodus
Many businessmen are also now complaining about the economic crisis. More than half of the Singaporean businessmen have left in the last 12 months. Diplomats say there are now only 85 Singaporeans now compared to more than 300 two years ago. Many of the South Koreans are also now planning to leave.
Conciliatory?
The military government is increasingly worried about the country's spiralling inflation and the falling value of the kyat.
Analysts believe the government's conciliatory attitude towards the international community has been prompted by the realisation that only international financial assistance, increased foreign trade and investment can save Burma from economic collapse.
The country's deputy foreign minister, Khin Maung Win, has privately told diplomats that economic recovery will only come when the country has solved its political problems. The international community is hoping that the Burmese military authorities realise that this can only mean agreeing to some form of power-sharing with the country's opposition leader Aung San Suu Kyi.