Myanmar’s Hidden Landmine Laments
As the International Red Cross pointed out 5 million Myanmar citizens live in landmine-infested areas where clearance has often not started, the IMF completed its first Article IV consultation under the staff-monitored program through end-2013 bemoaning “stretched capacity” despite political and economic reforms. Separately with upcoming 2015 elections the example of Cambodia’s July poll which extended the three decade rule of strongman Hun Sen received a mixed investor response as opposition leader Raimsy claimed widespread rigging even though his party gained seats. Private equity firms have been active there as the nascent stock exchange adds listings and Chinese aid backs infrastructure projects with 7 percent GDP growth. Agriculture, garments and tourism are mainstays but the campaign focused attention on income inequality benefiting commercial and family elites. Myanmar’s ethnic and religious tensions may further fuel resentment, although external reconciliation with bilateral and multilateral creditors was an overriding theme the past year. Debt restructuring was agreed with Japan and arrears were handled with the World Bank and Asian Development Bank as a Paris Club deal forgave half of outstanding obligations. Natural resource and construction-driven growth was over 6 percent the last fiscal year on 5 percent inflation and a 4 percent of GDP fiscal deficit. Foreign reserves reached $4.5 billion or 4 months imports as the currency appreciated until a May slide. The current account hole has been covered by FDI, and private sector credit is up double-digits from a low base at 10 percent of output. The central bank has intervened after the exchange rate system was unified but lacks formal independence and standard monetary tools for policy conduct and still must operate through the state bank network. Current account transactions should be fully liberalized in the coming months but capital ledger progress awaits financial services modernization. Foreign bank branches have yet to be approved, and although credit cards and ATMs are available market-determined interest rates and detailed prudential standards are absent. The four government-owned banks have been repositories for Treasury borrowing compelled by inconsistent and weak tax collection especially outside the commodities sector. A VAT and other levies could be applied as revenue from current offshore block oil and gas tenders is better mobilized and channeled into priority anti-poverty spending, the Fund urges.
Basic national and international account statistics are missing which inform business decisions and in capital markets a stock exchange and Treasury auction process have just been launched. Asian neighbors have offered technical assistance but Western advice has also been welcomed reflecting the path of Vietnam’s pioneer Indochina efforts. Its structure now includes a central asset management company for potential securitization of bad bank debt with an initial $500 million endowment. US distressed funds have arrived to bid and present their expertise as the de-mining drive forges deeper.
