Business (February 2010)
covering burma and southeast asia
Monday, October 15, 2018

Business (February 2010)



Gold Price Rise Blamed on Inflation Fears

A Burmese gold vendor waits for business inside her shop at Bogyoke Aung San market in Rangoon.
A rush by members of the ruling junta and their families to buy gold was cited as a major reason for the sudden rise in the price of the precious metal in Burma recently. Trade in gold was slack until Dec. 29, in line with trends on the international market. But at the end of the year and in the early days of 2010, gold shops reported a boom in business. In that time, the gold price increased from 594,000 kyat (US $594) a tical (16.4 grams) to 598,500 kyat ($598), peaking on Jan. 5 at 602,100 kyat ($602). The gold price increase occurred as reports circulated that low-paid civil servants would receive a salary increase of 20,000 kyat ($20) a month, and many junta members were investing in gold as a hedge against inflation.

Junta Issues New Government Bonds, Securities

Many investors snapped up newly issued Burmese government treasury bonds and securities, released on Jan. 1 by the Myanmar [Burma] Central Bank. More than 1 billion kyat (US $1 million) worth of bonds and securities sold on the first day. In addition, the Central Bank issued two-year treasury bonds for the first time and raised the maximum investment per speculator from 1 million kyat ($1,000) to 10 million kyat, making government bonds more attractive to long-term investors. The Central Bank has recently changed some of its investment regulations allowing speculators to buy and sell bonds freely and will pay 11 percent and 11.5 percent interest rates for three-year bonds and five-year bonds respectively. 

Tay Za Granted Electricity Contract

The Htoo Trading Co Ltd., owned by Tay Za, a business crony of senior Burmese generals, and other companies were awarded a contract to build, operate and sell electricity from two hydro power projects in Burma. Sources in the Rangoon business community said the contract between the government and Htoo Co. was for 75 years. Observers in Rangoon say privatizing hydro-power projects could be a first step in the military government’s attempt to resolve electricity shortages in the country. Almost the entire country lacks enough electricity to fill its needs.

China Eyes Burmese, Cambodian Textiles

China appears interested in cheap-labor garment factories in both Burma and Cambodia under the terms of the new China-Asean Free Trade Area agreement. Beijing has already singled out textiles as a sector where the two regions could move closer, according to the official newspaper China Daily. Many garment factories in Cambodia—where thousands of workers are employed at low wages—are Chinese-owned. Some Asean countries have expressed concern that they risk being flooded with cheap Chinese goods which could undermine their own industries and lead to unemployment. The new agreement reduces or eliminates import tariffs on a huge range of goods. Burma along with Vietnam, Cambodia and Laos, however, will not have to drop their tariffs until 2015 because of their underdeveloped economies.

Global Recovery Stronger Than Expected: IMF

Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), said China and other developing Asian economies are leading a global recovery that is faster and stronger than expected, but warned that money rushing into emerging markets could lead to asset bubbles and a sudden drop in foreign investment. He strongly suggested that the IMF would raise its 2010 global growth forecast from the 3.1 percent it projected in October. While hundreds of billions in stimulus spending by governments around the world avoided another Great Depression, he said, the most important risk facing the global economy is deciding how and when to reverse those policies and deal with resulting debt burdens. The best indicators for timing fresh growth strategies are monitoring private demand and employment, he said.

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