Economic View

Who were benefiting during past Myanmar Economic Sanction?

Will isolation, economic sanctions, low technical capacity, foreign ties cut hurt Myanmar?

Just 3 decade ago, Myanmar known as Burma that time undergoes its historical 2nd coup in September 18, 1988 following the 8888 uprising. The martial ruled SLORC promise 1990 election, but not recognised the outcome and try to administrate country in their way. In 1992, there was power shuffle between Junta and then tried to build international image with inviting international business to invest in the newly changed name Myanmar, a few came. Tourism seems a booming sector in Southeast Asia and 1996 was set for Visit Myanmar Year. In 1997, Myanmar was admitted to Association of South East Asian Nations (ASEAN). SLORC renamed to State Peace and Development Council (SPDC).

In 1997 May, US start imposing series of sanctions on Myanmar, and European Union and other countries has also impose sanction, it escalating by adding restriction almost every year. Economic sanctions on Myanmar included blocking access to assets, prohibiting investment to Myanmar, restriction on import of goods from Myanmar. Very distinct things to the people in Yangon is the garment factories closed down, owner got stock pileup for years some even till 2014. A few hundred thousands labour worked at those factory that depend on export to US got jobless.

here is the Question:

How does Myanmar under decade of isolation, economic sanctions, low technical capacity, foreign ties cut, finally solve their issues out toward new capital Naypyidaw in 2005 and new semi-civilian Government in 2011?

Answer:

1. Oil & Gas.

Analysis on Myanmar have pointed out the main reason that allow SPDC got budget necessary to move capital to Naypyidaw is credit to income from Oil and Gas. During economic hard days, Apyauk gas field was discovered by Shell in 1991. Following the discovery about 20 syndicates were invest in discovery including the Gulf of Martaban gas fields by Total. In late 1990s, the gas fields can went full production and let SPDC Government having stable inflow of cash, that in some indicator they beef up their military power, and build the all new capital Naypyidaw.

2. Permit expense

During the 1990s, because of economic sanctions from the west, Asian neighbors are having certain economic activities with this isolated Asean country. Those foreign company who access to government, and home grown cronies become the new well to do billionaire within single decade. They provide whatever the country want from grocery, food, medicine, tobacco to luxury cars even arms routing via border trade and proxy trading companies. Domestics construction, manufacturing, importing are much depend on license and permit where the rights to sign was in the hands of powerful Junta.

3. Double Exchange rate

When ever comes to foreign currency, the rate with government is 1 US$ equal to 6 MMK, regardless of market rate that you sell or buy on streets. Around 1995 market rate was 100, and gradually increase to 1999 reach 250 MMK, with inflation rate close to 30% it gradually increase, where 1st April 2012 the Central Bank of Myanmar began allowing for a managed float rate that set at 818 MMK, where the free market was trading at 50% more. The exchange rate trick is whenever there was inflow of US$, the SPDC junta keep it and put equivalent MMK to government income, ofcourse with the government rate of 6 MMK.

4. Trading using Proxy Countries

If you have been to Singapore Penesula plaza around 2000–2012, you will see abundance of Myanmar shops and compaies there. There are not just restaurants and homemade groceries, they are hosting hundred of Myanmar own companies, registered and operate in Singapore. Majority of these copanies will act as proxy for trading. Whenever there is a Purchase order, the proforma invoice, payment documents and bank Letter of Credit matter will use this Singapore registered company, to hideout from western economic sanction. (Singapore here just used as a metaphor to understand “Proxy Countries” concept). Office renting and Companies secretary services become serving Myanmar business outlet in foreign, spreading to nearby office tower like Funan, and even further to other countries such as Thailand, Malaysia.

So, what happen? It is we both okay business model, but proxy countries get job creation as well as office rental, legal, accounting etc services income. Moreover tax and duties has paid to the proxy country.

5. Country of Origin

Myanmar is known for natural resource such as teak and many kind of forestry product, ruby and jade. Burma ruby, Burma Jade, Burma Teak are like high value brand or common name and become standard in their industry, thus welcome by everyone. During the isolated time, they also reach oversea market via neighbours countries. Jade via China and Thailand, Teak and forestry product use Thailand or Malaysia, like this. How this make happen?

For Forestry product such as wood, containers of wood will ship to, for example, Penang port first, then do the document that specified the product’s country of origin is Malaysia. No one including europe and US don’t question the import. Done. As mention previously the proxy countries will also benefit the shipping fee, yard service charges, and even tax and duties.

During the last 3 decade until Myanmar become openly accepted by the world again, the regional economy is really not benefiting people of Myanmar. Everying import was expensive due to import permit, and proxy charges, tax paid to proxy countries. Everything export the cost of goods subsidize to permit fee and the process of country of origin change, while have to compete international market price.

In the world of globalization, and many industry revolutions, the coming decade should not let the people in Myanmar suffer like above anymore. There is one thing everyone can do, help to voice this concern.