Myanmar’s Response to the 2008 Global Financial Crisis
115
7
MYANMAR’S RESPONSE TO THE
2008 GLOBAL FINANCIAL CRISIS
Khin Maung Nyo
INTRODUCTION
Some studies1 suggest that the Myanmar government spending will remain
heavily focused on military expenditure, with few (if any) initiatives in the
pipeline to support households and businesses or to stimulate the economy
in the face of the global economic downturn. The Myanmar government
announced that the current global economic slowdown has had only a
marginal impact on Myanmar.2 It seems doubtful, however, that it would
be capable of taking effective action to limit damage, as indicated by the
speeches of military leaders and articles in the daily papers.
In an article entitled “Resilient Country, Resilient People”, which
appeared in the New Light of Myanmar on 18 December 2008, Kyaw Ye Min
(the pseudonym of an official) claimed that Myanmar had suffered no
spill-over effects from the crisis of neighbouring Southeast Asian countries
during the Asian financial crisis in 1997. Myanmar, he said, was capable of
managing the economy to stabilize it and of isolating itself from economic
crises in other countries. A country without any external aid and help
could survive easily in the face of difficulties, it was assumed.
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In 2003, Myanmar experienced a banking crisis.3 Problems in subprime financial services infected banks, creating a liquidity crisis. To make
things worse, rumours spread which influenced people to withdraw their
deposits. Some private banks had a poor record of financial discipline and
depositors had a low level of trust and confidence in Myanmar’s banks.
The government provided 59.90 billion kyat of credit to banks as emergency
liquidity during this period. In addition, as a lender of last resort, the
central bank extended a credit line of a further 50.68 billion kyat. With a
total of 110.58 billion s given to thirteen private banks, the banks recovered
by January 2004, which was an indication, the article said, that the Myanmar
government was willing and capable of helping people in times of need
and emergency.
To help victims of Cyclone Nargis, which left Irrawaddy Division and
Yangon Division helpless in May 2008, subsidies of 88.44 billion kyat were
provided by the government, with 42.32 billion kyat more coming from
private donors. Even if Myanmar is a poor country, the help from
government should be recognized, the columnist added.
Myanmar is a developing country with a very low level of financial
and trade relations with the United States and Western industrialized
countries, which means there will be almost no direct impact from the
global financial crisis. As Myanmar’s major trading partners are India,
China and ASEAN countries, any impact would come indirectly through
any recession in those countries. However, remittances from Myanmar
workers working abroad would also be significantly reduced and some of
these workers were likely to become unemployed. As these workers
returned to Myanmar, measures for their re-employment in the domestic
economy would need to be considered, the article continued.
The tourism and hospitality sectors were likely to suffer most, which
would be followed by a decline in trade. The export of garments and
fishery products would decline and the import of luxury goods would be
reduced, the article predicted.
However, some blessings and positive impact could be expected, the
columnist asserted. The price of fuel would decline and reduce the cost of
Myanmar’s oil imports. India and China, Myanmar’s major trading
partners, were less vulnerable to the effects of the global financial crisis.
As an agricultural economy which meets its own basic food requirements
and necessities, Myanmar relied less on imports, reducing the demand for
hard currency and thus making Myanmar less vulnerable to the crisis.
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This article reflects the optimistic and less realistic outlook of Myanmar’s
government. But it would pay us to examine what is really happening in
Myanmar’s domestic market and Myanmar’s response to the impact of
the global financial crisis.
WHAT HAPPENED IN MYANMAR’S MARKETS?
The first signs of the global financial crisis hitting Burma could be traced
in the plummeting prices of goods such as rice, beans and palm oil in the
Rangoon marketplace. The price of a 50 kg (108 lb) sack of rice at
Bayintnaung Market fell from 16,200 kyat (US$12.85) to about 14,200 kyat
(US$11.25) within a month, even though demand for rice traditionally
increases in November. The price of beans dropped 50 per cent, from
740,000 kyat (US$580) per ton to about 500,000 kyat (US$394) per ton,
according to businesspeople in Rangoon as demand dropped. Indian
companies suspended imports from Burma when the crisis began (see
Irrawaddy News, 19 November 2008). This problem resulted in the nonpayment by bean traders of the moneys they owed to bean sellers.
The Burmese military government’s income from selling natural gas
abroad is likely to suffer from falling prices triggered by the global financial
crisis. Income from gas sales — mostly to Thailand — had already slumped
in the first nine months of the 2009 financial year, the Burmese Ministry of
National Planning and Economic Development disclosed in its “Quarterly
Economic Indicators”.4
The ministry said gas exports, which account for about 40 per cent of
all export income, fell 28.5 per cent in value between April and December
— a loss of US$670 million compared with the same period a year earlier.
At the same time the cost of imports rose, resulting in a 39 per cent drop
in trade surplus.
Against the backdrop of plummeting prices of pulses and beans in the
Indian market as a result of the global recession, some Myanmar wholesale
traders were put on trial for non-payment to sellers. The wholesale traders
joined futures trading in green beans and other beans in the export market
and owed billions of kyat to the sellers and their sub-contractors, who in
turn bought these commodities from the producers. These big buyers
bought hundreds of tons of beans for anything between 500 and 1,000
tons. Trading in beans had become sluggish as prices were falling. The
small traders suffered and big traders lost a lot of money. Their profit fell
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by about 33 per cent over the previous year. The futures traders paid high
prices when they bought the commodity and then could not pay their
dues when they had to settle their accounts because of the falling prices.
The big wholesale traders from Rangoon usually appoint their agents to
buy commodities on their behalf from the producers by paying 1 per cent
commission as fees on the trade value. They were having difficulty when
their principals did not pay on time. Most of these agents could not pay
their dues on behalf of the wholesale traders.5
This problem in the agricultural commodity market spread to other
areas and caused a liquidity crisis in the private sector. The root causes of
the problem might be poor understanding of international markets and a
low level of education among traders. In his chapter, Sean Turnell explains
the problems in regard to rural credit.
Gold dealers said that prices were heading downward, with a strong
kyat and weak demand to blame. As of 3 March 2009, on the London
market the price of gold was US$912.50 per ounce. The price of an ounce
of gold in Myanmar was about K831,666, or about US$832 and it was
expected to fall further because of the reduced demand for gold. Some
dealers reported that they had lost a lot of customers, particularly farmers
from the countryside. The dollar/kyat exchange rate is indirectly linked
to the gold price. If gold rises, the value of the kyat usually goes down.
Even if the world gold price increased to US$1,000 an ounce, if the dollar
is worth less than K1,000, the domestic price cannot reflect the
international price.6
Hit by a 46 per cent shortfall in its target for fisheries exports in 2008,
the government lowered the target for 2009 to US$700 million. Export
income for this key sector in the financial year 2008/09 was only US$480
million, falling far short of the targeted US$850 million. Officials blame
Cyclone Nargis, which hit the country in early May 2008, and the world
financial crisis for falling fisheries income. The falling prices of fisheries
products around the world were still hitting Myanmar products in mid2009, and exporters said that although orders are nearly back to normal,
prices are still low. Prices were still 30 per cent down compared to before
the crisis.7
Education service firms in Myanmar, which organize students from
Myanmar to study at universities abroad, introduced innovative ways to
attract students. As the universities could not reduce tuition fees, they
offered full scholarships, partial scholarships or study grants. Singapore
universities use these promotional techniques to attract students (Kumudra
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Journal, 24 July 2009) in recognition of the reality that family incomes had
been affected by the crisis and that some Myanmar parents would no
longer be able to afford foreign tuition fees.
According to The Economist magazine, more than a million people from
Myanmar have opted to work in Thailand. However, the global downturn
has conspired to make their prospects even bleaker, with garment workers
typically taking home about 70 baht ($2) a day, less than half the legal
minimum wage in Thailand. The downturn was quick to hit Mae Sot’s
export-focused garment factories, where many Burmese workers are
employed. Workers reported that production had dwindled and the value
of their remittances was further eroded by the appreciation of the kyat,
which had risen by a quarter against the baht over the previous year.
Because of low levels of border trade, Myanmar traders bought less Thai
currency, which later caused the price of the baht to decline.
The plight of migrant workers in Thailand is worsened by many of
them being unregistered: the illegal status makes at least half of them
vulnerable to exploitation by employers, frequent extortion by the police
and periodic clampdowns. Migrant workers have been quietly encouraged,
but no new registrations have been accepted by the Myanmar authorities
since 2006. The impact of the slump on migrant labour may not be
straightforward. Garment workers will doubtless continue to feel the
pinch and suffer redundancy and lost income. But those working in dirty
and dangerous jobs may still be in demand, even as prices and incomes
fall, as cheap labour is rarely scorned in a downturn.8
Sometimes falling commodity prices were not attributable solely to the
global financial crisis: government policy and actions have also had an
impact. The price of leaf tea declined by about 40 per cent after a number
of pickled-tea brands were banned from sale locally by the Myanmar
government. In April 2009, the US Food and Drug Administration (FDA)
banned forty-three brands of pickled tealeaves after discovering the
chemical dye O Auramine — considered dangerous for human
consumption — in packets of tea. The U.S. government ban reduced tea
consumption, which led to a fall in the Myanmar price. The result of the
decreased sales revenues from the sales of tea products has been severely
felt by workers at tea plantations, where wages declined by 30 per cent.9
According to news reports,10 Myanmar youth no longer hope to get
employment abroad, but they try to find local employment. As a result,
enrolment at training schools which could provide the necessary skills
increased. Up until 2008, young people had tended to opt for courses,
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such as in tourism and the hospitality industry, which would be useful for
working abroad. After 2009, however, their interests shifted back to
employment in the local market.
In October 2008, the strong flow of computers and accessories through
stock-clearing sales caused a remarkable decline in prices. However, in
mid-June 2009 prices increased again in line with the change in the exchange
rate and the price of imported goods — personal computers, laptop
computers, mother boards and graphic cards. Generally, prices increased
by between 5–7 per cent. Industry experts complained that producers
controlled production and inventory, thus causing prices to jump. However,
they estimated that there would be no change in demand for computers.
Wholesalers are no longer practising cut-throat competition to attract
customers. Rather, they are using post-purchase services to promote sales
in the domestic market.11
Each year, on 29 July thousands of people gather at a site near Mandalay
for one of Burma’s most popular festivals, the week-long Taung Pyone
Pwe, a celebration of the ancient belief in nats, inhabitants of the spirit
world, which many believe have the power to grant them good luck,
health and wealth. Many make the pilgrimage to Taung Pyone to give
thanks for good fortune. A typical three-day excursion from Rangoon
costs 35,000 kyat (US$35). In 2009, tour companies reported a drop in
interest by half, which they attributed to Burma’s economic difficulties
and the slowing economy.12
MYANMAR’S RESPONSE TO THE IMPACT OF THE
GLOBAL FINANCIAL CRISIS
Myanmar’s military leaders pride themselves on their ability to keep
outside influences at bay. Thus, in December 2008 Prime Minister General
Thein Sein was widely reported as saying that Myanmar would not be
affected by the global financial crisis and that workers returning from
neighbouring countries could be employed in the cyclone-devastated rice
fields of the Irrawaddy Delta and in the rubber plantations in other areas.13
However, on the ground, no returnees have joined the rice fields and
rubber plantations.14
The Ministry of Commerce announced a series of measures to mitigate
the potential impact of the crisis.15 Firstly, it encouraged expansion of
market share through finding new and potential markets and attempts are
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being made to access end-user markets directly, without going through a
third country. Quality improvements, standardization, and waste control,
better packaging, storage facilities and the development of post-harvest
technologies were among other measures mentioned as means of improving
value and gaining market share.
When applying for export licenses, current prices need to be specified.
Adjustments, which used to be made fortnightly, are now made on a
weekly basis to be consistent with changing international markets and to
facilitate trade.
Inputs for the agriculture sector, such as fertilizer and insecticide,
could be imported easily to encourage and support farmers. Red tape was
to be reduced to ease the import of raw materials for small and mediumsized domestic industry and to encourage employment. The smooth flow
of capital and commodities would be maintained, the ministry announced.
During the crisis, expenditure on unnecessary and luxury items would
be controlled.
Trade — sea-borne and cross-border — was to be promoted; research
teams and information networks were to be established. Trading
associations, commodity exchanges and traders were advised to join hands
with the public sector in the broader interest of people.
Such measures seemed designed to solve long-term structural issues
and cannot expect immediate results.
The government seemed to be trying to utilize resources from the
private sector in economic and social-sector development. It has instructed
twenty-five companies to disburse agricultural loans to farmers.
Businessmen dealing in rice have been asked to provide agricultural
loans of 50,000 to 100,000 kyat (approximately US$50) per acre to farmers
in the Irrawaddy and Pegu Divisions at two per cent interest rates per
month. The loans are to cover production costs and provide technology
and farm implements to rice producers. Htoo Trading Company will
invest three billion kyat in the business. Local businessmen from Bogale
invested two billion kyat. Gold Delta Company invested ten billion kyat
and will provide loans of 100,000 kyat per acre to the farmers in about
500 villages.16 Even private-sector funding of certain high-profile sporting
activities seemed to be timed and designed to underpin economic activity.
Thus, Yangon United FC spent over 500 million kyat (approximately
US$450,000) on the club for the recently established Myanmar National
League (MNL) soccer tournament.
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In an effort to legalize citizens working illegally in Thailand, the Burmese
government has opened “citizen identification centres” at three immigration
checkpoints along the Thai border, at Ranong, Chiang Rai’s Mae Sai District,
and Mae Sot District in Tak province.17
Thai employers had until 30 July 2009 to register their intent to hire
Burmese workers at local employment offices. Those whose citizenship is
confirmed by Burma will then be issued with a “worker’s passport”
which enables them enter the country legally after getting a 2,000-baht
“work visa” stamped at the Thai border. These visas would allow them to
work for up to two years. Citizenship verification has long been a stumbling
block in getting workers properly registered. Unofficial estimates of the
number of Burmese working in Thailand surpassed the one million mark
in the year 2000 and have now reached 1.2 million. The Thai Deputy
Minister for Foreign Affairs hoped that by this arrangement all parties —
both governments, the workers and their employers — stand to benefit.18
At another level, the authorities sought to encourage confidence in
the currency and underwrote credit for some public services. The Central
Bank of Myanmar announced that it was making arrangements to replace
some old and worn banknotes that are no longer suitable to be kept in
circulation. The central bank also provided small change to the All Bus
Lines Supervisory Committee and Market Departments of the municipal
authorities of Naypyitaw, Yangon and Mandalay on a weekly basis.
Official measures for improving electricity supplies, another key
indicator, had mixed results. The supply of electricity for daily household
consumption in Yangon Division increased to some extent in mid-July
2009. All households had power from 11pm to 5am, with electricity
shared among three households for other periods. Meanwhile, industrial
zones receive nine hours’ supply daily during the day, but could not
operate around the clock. Hospitals, police forces, and gas stations usually
have constant supply of energy. Improvements in electricity supply were
achieved by buying energy from China-Myanmar Joint Venture Shweli
River electricity production, as generators using natural gas are still
under repair.19
CONCLUSION
Usually academics in Myanmar refer to the country indirectly when
they make comments which could displease authorities. For example,
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Dr U Myint has referred to Myanmar as one of the Bottom Billion leastdeveloped countries.20 Bottom Billion countries like us think that, because
we have few dealings with the United States and the outside world, have
no stock market, rudimentary banking, no multinationals and a low-level
economy, we are immune to the global financial crisis. Indeed, official
statistics give no indication of there being any economic problems in the
country. But, globalization affects all such countries. The unofficial,
underground economy plays a dominant part in these countries.21 In any
event, the credibility of official statistics is always being called into
question.22
We believed that, as underdeveloped countries, financial disease could
be kept out by taking “administrative measures” — closing border trade,
cancelling import and export licenses, arresting foreign-exchange dealers.
However, we are not in an isolation ward. No border can be totally closed.
Official statistics deal with the formal or official economy, but the majority
of people live in the informal economy which, since it is linked with the
outside world, can be devastated by a global financial crisis.
Moreover, the large human costs borne by young people and poor
families can never be quantified and reflected in official statistics. With an
undiversified economic structure, poor infrastructure, insufficient foreign
reserves, and limited administrative capability, we do not have any shock
absorbers, or resilience or the capacity to cope with any type of economic
disturbance. And when the crunch comes, the burden falls heaviest on the
poor and the masses on the lowest rung of society.
As Professor Suiwah Leung warned at the 2009 Myanmar/Burma
Update Conference in Canberra, Australia, when the world economy
emerges from this recession, Myanmar will be further behind in the
competitiveness stakes than it was before the crisis.23
Notes
1. See, for example, Economist Intelligent Unit (2009).
2. However, in his September 2009 General Assembly address, Prime Minister
Thein Sein stated: “The global financial and economic crisis and the climate
change crisis have compounded the problems we face in the last few years”.
3. See Sean Turnell’s article “Myanmar’s banking crisis” in ASEAN Economic
Bulletin, December 2003.
4. See The Irrawaddy News, 8 January 2009.
5. See Mizzima News, 18 November 2008; Modern News, 26 December 2008.
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6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
Khin Maung Nyo
See Myanmar Times, 19 March 2009.
Myanmar Times, 4 March 2009.
The Economist, 19 March 2009.
Myanmar Times, 4 March 2009.
This was reported in journals such as Weekly Eleven News at that time in 2009.
Myanmar Times, 3 June 2009.
See The Irrawaddy News, 29 July 2009; Mizzima News, 29 July 2009.
See Myanmar News Agency 2008. However, when the Prime Minster spoke at
the 64th United National General Assembly on 28 September 2009, he said:
“The global and financial crisis and the climate change crisis have compounded
the problems we face in the last few years.”
The Irrawaddy News, 7 December 2008.
See Myanmar Ministry of Commerce 2008.
Mizzima News, 22 July 2009.
Phuket Gazette, 14 July 2009.
Ibid.
Mizzima News, 28 July 2009.
Myint (2009).
For an explanation of the role of the informal economy, see Mya Than and
Myat Thein (2007).
See Steinberg (2001), p. xxxiii, for example.
Remarks by Professor Suiwah Leung, Crawford School of Economics and
Government, Australian National University, at the Myanmar/Burma Update
Conference, Canberra, 17 August 2009.
References
Economist Intelligence Unit. Country Report Burma, 19 March 2009.
Kyaw Ye Min. “We are not perturbed”. New Light of Myanmar, 17–18 December
2008.
Mya Than and Myat Thein. “Transitional Economy of Myanmar: Present Status,
Developmental Divide, and Future Prospects”. ASEAN Economic Bulletin 24,
no. 1 (2007): 98–118. Retrieved 21 December 2009 from ABI/INFORM Global.
(Document ID:1382667751).
Myanmar Central Statistics Organization. Selected Monthly Indicators. <http://
www.csostat.gov.mm/csomonthly.asp>.
———. Statistical Yearbook 2007. <http://www.csostat.gov.mm/csocd.asp>.
Myanmar Ministry of Commerce. Commerce Journal 8, no. 48 (5 November 2008).
Myanmar News Agency. “State aims to build up industrial nation based on
agricultural sector”. New Light of Myanmar, 2 December 2008.
Myint, U. “The US Dollar, the IMF and the Global Financial Crisis”. The World
Economic Journal Anniversary presentation, 1 August 2009.
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Steinberg, David. Burma: the State of Myanmar. Washington, D.C.: Georgetown
University Press, 2001.
Thein Sein. Statement at the 64th UN General Assembly. 28 September 2009. Available
at <myanmargeneva.org/statement&speech>.
Ye Lwin. “Financial crisis will have impact: Business community”. Myanmar Times
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