No end to the mess? Financial Panic in Burma
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"The service companies are not accountable and transparent. But people just want to take risks and put their money in these companies," a Rangoon-based business magazine editor, who attended Thit Sar Pan Khinn’s annual meeting, explained to The Irrawaddy. Some service companies are well connected with the junta’s top generals. "Remember, Khin Cho Oo–who runs Pang Lon Htate Htar Service Company–is the wife of the former third secretary of the regime, Lt-Gen Win Myint," the editor says.
The private service companies engage in various ventures ranging from real estate, construction and automobile sales, to the running of hospitals and private boarding schools. However, many of the enterprises that service companies engage in are shady, to say the least. Many service companies are also involved in gambling on illegal lotteries and soccer matches, business sources in Rangoon say.
"As a media organization, we try to inform the public about the service companies and their unreliable nature," explains the magazine editor. But get-rich-quick speculation is highly attractive in Burma because of a lack of good investment opportunities and red tape. "The private banks can not function freely. Foreign banks are not allowed to form joint ventures with local banks or to establish banking operations in their own right. The government has stopped issuing licenses for opening bank branches," comments a Rangoon-based economist, who asked not to be named. "These and other factors encourage the informal sector such that non-bank economic institutions are thriving," he says.
However, the recent arrest of Thit Sar Pan Khinn owner Daw Khin Khin Sein and her husband U Thein Oo, ignited further panic among investors. An increasing number of stakeholders are rushing to company offices to get back their money. "People are now queuing outside the company offices of Thit Sar Pan Khinn and Aye Yar Myae everyday. The companies do not allow us to withdraw our money but they delay our monthly interest payments. We can’t survive without monthly earnings," complains Daw Hnin Hnin, who invested money in both Thit Sar Pan Khinn and Aye Yar Myae service companies. But some companies allocated a certain amount of money for interest payments. In this case, people go early to queue and pick up their money. Otherwise, their monthly interest payments are on hold.
According to the business sources in Rangoon, some private service companies are now preparing to change themselves into public companies so that they can trade legally. "The government forced them to register as public companies in order that stakeholders–who already put their money in–do not suffer. But registration may only allow them to conduct enterprises one level lower than the banking institution. It can be a sort of finance company," a government official explained to the Rangoon-based
Living Color magazine.
Many business insiders and observers note that if Burma could open a free stock exchange, problems would be largely resolved. However, this will not be an easy task considering the state of Burma’s moribund economy. With irrational government policy, hyper-inflation, the absence of a properly functioning banking and financial systems, prevailing cronyism and shady business deals, the speculation-oriented informal sector economy will continue to thrive, one way or another.
People will continue to see speculation as the best bet.
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