Myanmar’s Lid Lifting Loops
As Myanmar military chief turned President Thein Sein called for “lifting the lid” with the total removal of trade and assistance sanctions, the US responded during a visit by Secretary of State Clinton with provisional financial services and investment authorization, and the World Bank opened a local office with preliminary steps toward clearing $400 million in arrears from past decades’ loans. The caution was reinforced by Nobel laureate Aung San Suu Kyi when she traveled to Europe finally to receive the prize and warned of “opening the right way” after previously noting “reckless optimism” by business executives at a World Economic Forum session in Thailand. After moving to unify the exchange rate and promote banking modernization under a proposed omnibus commercial code, the president signaled to foreign delegations a second reform wave including consideration of stock exchange launch with Japanese help. Agreements have also been signed with all ethnic rebel groups except the Kachin, and 2015 goals were set to slash the poverty rate to 15 percent and triple per capita income. Washington continues to ban imports and impose asset freezes on regime leaders and dealings with the behemoth state oil company will only be allowed under strict reporting requirements. Natural resource extraction will also fall under tighter guidelines soon to be finalized under the two-year old Dodd-Frank law. On a multilateral basis Yangon agreed to join the EITI process which promotes petroleum revenue transparency and is often a precondition for development agency engagement in the sector. A handful of dedicated Indochina private equity funds have begun operations, and noted frontier telecoms pioneer Digicel has a longstanding presence as big multinationals like GE prepare for entry. As official lenders prepare to extend technical capability NGOs like the Soros Open Society Foundation and volunteers including Nobel economist Stiglitz are providing policy advice. California-based Chevron is already in a joint pipeline venture with France’s Total which fell within a boycott loophole and may soon be expanded.
The US-Asean Business Council meeting where Washington’s easing was announced also set its sights on Cambodia where the infant stock market has two listings. GDP growth and inflation which are largely determined by agriculture are both around 5 percent, as textile exports and tourism especially toward the Angkor Wat temple area remain firm. With the fiscal deficit at 6 percent of GDP the IMF cited risk from contingent liabilities under public-private power projects in a recent report. 30 percent credit growth should also be reined in through tighter monetary policy and supervision of the bifurcated banking sector comprising several big and dozens of tiny lenders. The system is highly dollarized and foreign exchange trading must deepen with the greenback initially the denomination option for settling bourse transactions as inaugural investors stake their claims.
