Chiang Mai (Mizzima) – Foreigners who visit Burma for the first time are always surprised to find happy, smiling Burmese praising things like their telephone service, electricity and the Internet.
Why? Because they’re used to not having telephone service, electricity and Internet service.An interesting and amazing thing about Burma is its economy. Everyone knows that the military government officially adopted a market-oriented economic policy when it abandoned state Socialism in the early 1990s.
However, no one knows exactly what Burma’s market-oriented economy really is. The economy is still in its infancy and a die-hard mindset and practice which creates a controlled economy is still firmly in place in both the public and private sectors.
Generally, the Burmese economy’s dominant trait is inflation, as a result of the government’s monetization scheme to address the budget deficit.
Fixed income earners like pensioners and many salaried workers suffer daily from high inflation. The government frequently raises wages for public employees. Workers in the private sector are relatively better off than civil servants. Some people are lucky enough to enjoy the fruit of their labour at new shopping centers and new sorts of consumer services such as upscale beauty parlors, massage parlors, spas, etc.
Nowadays, many of the Burmese elite and their families enjoy holidays in Europe or America instead of Caungtha or Bagan. Some consumers who experienced rationed goods and services under Socialist governments now even spend their extra income on imported products from neighboring countries.
But, even those lucky people don’t have many more choices for consumer goods and services than the poor, because of a general lack of availability of products in the Burmese market, largely because of a lack of interest on the part of the military government to open up and to stimulate the economy.
Thus, the Burmese economy is a seller’s market in which importers and traders dominate under a true monopoly or monopolistic-like practices. The system has created an oligarchy. As a result, there is no such thing as consumer protection or consumer rights. Consequently, consumers with low levels of income have very low levels of bargaining power.
A result is that prices trend upward and seldom are lowered through competition. One exception occurred at the end of 2010, when prices of assets like motor vehicles decreased considerably because of the continuous auctions of seized illegal cars by the government. It also illustrated that money and liquidity usually flows from the private sector to the government.
The Burmese kyat appreciated by about 25 percent during 2010, at a cost to local exporters of primary products. Imported goods such as IT products seldom decrease in prices. However, prices of locally produced essential goods and consumer products increase because of increased demand, the increase in transportation cost and manipulation by traders.
One should not underestimate the role of rumours where transparency and access to information is tightly controlled. However, according to experienced Burmese, rumors usually turn out to have important elements of truth.
An immediate increase in the prices for gold and the dollar during the second week of February reflected the rumors of an increase in the salary of public servants and concerns about political stability under the new government.
Whenever it appears that military leaders will retire or are kicked out, or there is a transfer of senior military officials, it can have a huge impact on firms and businesses closely related to the officials.
Investors who plan to get involved in Burma need to monitor rumors before and after making business decisions. Reading the tea leaves is an important part of understanding the business practices of Burma.
Zun Khaung is an observer of the business community in Burma.
