Myanmar facing hard times as it moves to free economy

Myanmar facing hard times as it moves to free economy

By Rajan Moses

YANGON (Reuter): Soaring inflation, a fall in the kyat exchange rate, traffic jams and port congestion have hit Myanmar as its military rulers cautiously loosen reins on the economy, diplomats and economic analysts said.

Inflation runs at about 40 percent compared with official estimates of 20-30 percent and the kyat's black market value against the U.S. dollar has sunk to about 150 from about 130 seven months ago, they said on Thursday.

Officially, the kyat stands at six to the dollar.

The addition of about 500 mainly second-hand and reconditioned cars imported from Japan each week has begun to clog Yangon and other city streets, the analysts said. And traffic in the main Yangon port has grown, with cargo turnaround time now about 40 days.

Impoverished Myanmar was one of Asia's richest nations in the early 1960s but a disastrous "Myanmarese Way to Socialism" adopted by the then leader, General Ne Win, led to sweeping nationalization and global isolation.

The annual per capita income in this multi-ethnic nation of 45 million is now about $255.

Over the past few months prices have jumped sharply, and frustrated citizens are beginning to complain.

Rice prices have risen to 70 kyats per pyi (two kgs) for the popular Emata brand from 55 kyats per pyi in December.

"Rice prices have risen very fast every month and we are finding it really hard to keep up with salaries that have not gone up as fast," said one Yangon resident.

Rising prices of goods like rice could spark unrest, analysts and diplomats said. They referred to 1988 pro-democracy uprisings that were caused in part by frustration over the economy.

The current ruling body, the State Law and Order Restoration Council (SLORC), took power in September 1988 and quickly quelled the demonstrations.

Yangon residents said even the price of tickets at cinemas, where American, Myanmarese and some Hindi and Chinese films are shown, had risen by about 20 percent.

Analysts said inflation was aggravated by a government move in April to allow civil servants to take out loans of up to 10 times their salaries at low interest.

"Civil servants with fixed salaries are the worst hit by the inflation in major cities as are the poor working class with low salaries. Private businessmen do well," said a diplomat.

Despite the economic hardships, Myanmarese people are resilient and tolerant. But analysts said the SLORC needed to curb price increases or face the prospect of protests.

A senior member of the SLORC, Lieutenant General Kyaw Ba, told Reuters that the government wanted to control rising prices and would act to stop greedy traders from exploiting the situation.

"We want to control (prices). Some traders are taking advantage of the situation. We must make them understand they must not be too greedy and take advantage of the people," he said.

The value of the kyat has slipped further in recent months because of the rising dollar abroad and greater domestic demand for the American unit to finance fast growing imports, analysts said. A year ago the exchange rate was 115 kyats to the dollar.

Heavy imports of cars as well as hotel and service industry items to equip about $1.0 billion worth of hotel projects from neighboring countries like Singapore caused the port congestion, the analysts said.

To supplement the overworked Yangon port, a new one at nearby Thilawa industrial zone is being built by foreign investors.

Traffic jams have made car travel in once free-flowing Yangon difficult, but Myanmar has vowed not to become another Bangkok, infamous for its traffic-clogged streets.

"We have to limit the importing of cars. We don't want to be like Thailand. More roads and underpasses for car movement are being built to beat the traffic," minister Kyaw Ba said.