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Business in Burma: Display me the money, but only if it s crisp

Business in Burma: Showcase me the money, but only if it’s crisp

It may take more than a lifting of sanctions to revive Myanmar’s isolated economy.

By Simon Roughneen , Correspondent February 17, two thousand twelve

Yangon, Myanmar — As Myanmar’s reform-inclined government undertakes a political opening, Western businesses are watching to see if this leads to an end to Western sanctions imposed during the country’s brutal military rule.

But even if sanctions are liquidated, potential investors would face many hurdles in an economy where opaque rules and edicts have made life raunchy for ordinary citizens.

“We are still living in the dark ages, we haven’t seen many switches,” says Aung Zeyn, who runs a puny business repairing photocopiers, and whose opinion echoes similar sentiments across Yangon.

One example: Peering with the gimlet eye of a gem trader as he examines a crisp fresh $100 bill, one of Yangon’s hundreds of black-market money traders says, “we can only accept the fresh, no old.”

Just any old $100 is no good in Yangon. In order to exchange money and get the best rate on the black market, a visitor needs crisp, fresh bills. The trader holds the note up to the light, checking for blemishes that could render it worth substantially-less than the average unofficial market rate. The script, fully normal for most Burmese, highlights the dual exchange rates: the official government rate and the unofficial “Myanmar rate,” or black market exchange.

The official rate is $1 per six kyat (pronounced “chat”), but unofficially, $1 is worth about eight hundred kyat, a discrepancy that Myanmar’s opposition allege permits the government to hide billions of dollars in oil and gas revenues.

Some speculate the government will adopt a more nimble treatment to exchange rates.

Sean Turnell, an economist and Myanmar (Burma) experienced at Australia’s Macquarie University, visited the country in early February. He says that an exchange rate reform is just one of numerous switches needed there before Myanmar and the West can mutually benefit from any opening.

“The government needs to introduce a fresh foreign investment law, and present the budget in a see-through way and – above all – using the parliament to rescind many of the old laws, some of which date from the socialist era, that greatly restrict legitimate enterprise,” says Dr. Turnell.

Government pledges to open up

For decades, a military dictatorship ran Myanmar with an metal knuckle. Less well-known than the junta’s propensity for human rights violations, is that the country’s rulers embarked on a disastrous “Burmese way to socialism.” But even that old-school system of self-sufficiency was infused with arcane caprices such as a one thousand nine hundred eighty seven re-denomination of the country’s currency into notes divisible by 9, deemed a fortunate number by superstitious ruling strongman General Ne Win.

Money hassles lightly encountered by visitors are just a minor problem compared with the day-to-day difficulties faced by Myanmar citizens fighting to make a living in an economy that seems frozen in time – even as the government pledges to open up to Western investors and institutions.

“We have begun the process of re-engaging with the government to support reforms that will benefit all of the people of Myanmar, including the poor and vulnerable,” said Pamela Cox of the World Bank, in comments posted online on Thursday.

In the past, Asian countries such as South Korea, Thailand, and Malaysia underwent economic reforms before democratization, but Myanmar seems to be going at it from the opposite direction.

“There has been something of a miracle, politically, with all the reforms that have happened,” says Luc de Waegh who goes up West Indochina, a consultancy that advises prospective investors in Myanmar. “But economically speaking, it is unlikely to have such an influence straight away. It is a elaborate and difficult task and will take time,” He says.

The dual edged sword of investment

Nonetheless, the country’s latest political switches – such as the freeing of political prisoners and the loosening of media confinements – have raised the prospect of Western countries reducing or eliminating economic sanctions, and with that in mind, potential investors from Europe and North America are jockeying for position.

Investment could bring much-needed jobs and switch laws that presently throw up fences for business owners. But, it can be a double-edged sword, and, in another squeeze on ordinary Burmese, property prices in Yangon are enhancing, partly due to the prospect of Western investment returning to the country.

Aung Myo immigrated to South Korea in two thousand five to work in the country’s car industry. He joined several million compatriots who fled the Army ruled repression in Myanmar that lasted from 1962-2011, and an economy ranked as one of the poorest in Asia, despite its lush resources such as gas, oil, hydropower, gems, and timber.

Mr. Aung Myo’s wifey, Phyoe Thein Tar, who wields a clothing shop, last spotted her spouse more than two years ago. “He will comeback to Myanmar for good later this year,” she says as her youthful daughter clambers onto her lap. “I will keep my shop and I hope he can drive a taxi, ”she says, “but it is not effortless to buy a car here.”

When Aung Myo comes back, the family will come up against the country’s corrupt and tangled car permit system, which boundaries the number of fresh cars and coerces even the Burmese who are able to afford one to haggle for vastly-overpriced, late-1980s Japanese models. “I applied for a car permit a year ago,” she says, “but have not received any reply.”

Yangon streets were visible through the floormat-sized crevices in the floor of the taxi that maneuvered its way toward Ms. Phyoe Thein Tar’s shop. It is just one of thousands of such beat-up old cars on Yangon’s streets. Driver Myint Naing said his father helped him purchase the one thousand nine hundred eighty six Toyota five years ago, for the equivalent of $15,000. “That is Myanmar price,” he laughed, pointing to the rusting bits of steel visible through the cracked and faded dashboard, and alluding to the country’s high rates of inflation.

Phyoe Thein Tar says she has grown her business, moving from a streetside stall to the twelve x ten shop she now rents, and hopes to find a thicker place next year. She pays 180,000 kyat ($225) per month to rent the space, but the going-rate for the size and location is usually closer to 400,000 kyat ($500).

“The possessor of the building is a friend of my mother so he gave me the good price,” Phyo Thein Tar says, adding that without that concession and remittances sent by Aung Myo from Korea she would not have been able to embark her business. “We cannot get bank loans here,” she says, another thing that the government says it will switch.

The International Monetary Fund (IMF) is talking up Myanmar’s economic prospects, telling it “could become the next economic frontier in Asia.” But for most people, prosperity is distant fantasy.

One third of Myanmar’s citizens live on less than $1 per day and the country’s estimated $50 billion GDP pales in comparison with neighboring Thailand, which has a similar-sized population but a $348 billion GDP.

The government has said it wants to help some of the migrant workers overseas come back home, as investment increases and jobs become available. But Aung Zeyn, the photocopy repair shop holder, is instead thinking about emigration. “I am taking an IT class now,” he says. “Once I am done I might attempt to get a job in Singapore.”

He would choose to stay in Yangon, he says, but he’s not persuaded there will actually be any promising IT jobs in Myanmar any time soon.

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