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Myanmar’s economy in danger of standing still
Friday, 02 November 2018
Country’s business community appeals for change as government faces international outcry over alleged abuses and claims of genocide in Rakhine state

By Peter Janssen Yangon, October 22, 2018
As hopes of a new, prosperous future for Myanmar under Aung San Suu Kyi have dramatically disappeared, the country’s business community is paying the price of a stumbling economy and pleading for government help that is unlikely to materialize.
The World Bank has downgraded its economic growth projection for Myanmar this fiscal year 2018/19, ending on March 31, to 6.2% from its original forecast of 6.8%, blaming the slowdown on mostly domestic factors such as floods, inflation and the “Rakhine crisis.”
The country’s economic data doesn’t look great –approvals for foreign direct investment (FDI) applications in the April-September period reached $1.7 billion, compared with $3 billion during the same period last year. Inflation is at 8.5%, compared with 5.5% last year, and the kyat currency has depreciated 25% in recent months, more than other regional currencies impacted by the strengthening dollar.
Currency depreciation
To its credit, the Myanmar Central Bank handled the currency depreciation sensibly, allowing a de facto float against the dollar–Myanmar’s foreign currency reserves equal three-months-worth of imports–removed trading bands and stopped the re-export trade of oil and sugar to China.
Merchants imported these items paying in dollars and then re-exported across the border to China, creating a needless demand for dollars.
“In the past, a nervous central bank would have imposed capital controls, would have stopped dollars from flowing out, would have stopped imports and would have fixed exchange rates,” said one Myanmar fund adviser who asked to remain anonymous.
While the kyat steadied somewhat in October at less than 1,600 to the dollar, further falls are possible, which poses a real threat to Myanmar’s predominantly import-led economy.

“What we need to do on the currency is longer-term stuff, like infrastructure to support manufacturing, the removal of red tape for exports, tighter border controls but lighter customs procedures,” said the fund adviser. ”We need all of that to promote trade.
“That’s the only way we’re going to get through the currency reserve issue. And, in the short term, FDI in a big way would offset the currency.”
Myanmar’s business community, including the FDI that rushed in after things opened up and western sanctions were lifted on the once-pariah state in 2012, is growing increasingly frustrated with the elected government of State Counsellor and de facto leader Aung San Suu Kyi and her National League for Democracy, and their angst stems not only from the mishandling of the Rakhine crisis.

Ethnic cleansing backlash
The United Nations Human Rights Council’s damning fact-finding report published on September 18, 2018 on alleged abuses by the Myanmar military in Rakhine in August 2017, that sent 700,000 Rohingya Muslims across the border to Bangladesh, has sparked calls to investigate Myanmar’s generals for “genocide.”
Since the military is part of Suu Kyi’s government–the 2008 military-backed constitution assures them of 25% of the seats in Parliament and control over the defense, border and home affairs ministries–she bears some of the blame, especially for failing to condemn the ethnic cleansing.
The Rakhine situation, as well as the jailing of two Reuters reporters for the crime of writing about the genocidal incident, has pretty much eliminated the ebullient buzz that pervaded the country in November 2015, following the NLD’s triumph at the polls.
“The brand capital that Myanmar had in 2015 was huge,” said Filip Lauwerysen, executive director of Eurocham Myanmar. “That is completely gone, and that is because of Rakhine. Now it is impossible to arrange a Myanmar promotion event in Europe.”
The threat of new economic sanctions is under consideration. The European Union Trade Commission is to dispatch a team to Myanmar later this month to look into withdrawing Myanmar’s GSP– a move that threatens the country’s nascent garment export sector,which earned the country $2.7 billion last year, with much of the shipments heading for Europe.
Losing its GSP status, and with it possibly 300,000 factory jobs, might lead to street protests elsewhere, but they are unlikely in Myanmar.
“It will not be seen as ‘Why isn’t the NLD dealing with the situation.’ It will be seen as–the international community is bullying us and persecuting us and not understanding us,” said one Myanmar business-woman.
Already ultra-nationalist Buddhist groups are organizing mass rallies against western interference.
And it is unrealistic of the EU to imagine that sanctions would force the NLD-led government to bring their naughty generals to account. The military is Suu Kyi’s partner in government, like it or not.

(To be continued)