Friday, May 29, 2009

Slowdown Strains Myanmar Economy

Scarce Jobs, Dwindling Remittances and Limited Credit Strain Economy Further Amid Tension Over Dissident's Trial

YANGON, Myanmar (wsj)-- Myanmar's financial system and economy are largely cut off from the outside world -- but not the global economic crisis.

As the country's military junta wraps up its trial of dissident Aung San Suu Kyi, conditions in the capital and rural areas illustrate the effects of the slowdown on this isolated nation's already-tenuous economy. Key sectors such as agriculture and tourism are reeling, and business in the commercial center of Yangon has dwindled, residents and economists say.

Credit has dried up, remittance income is falling as thousands of workers returning from abroad are discovering that jobs are scarce.

"People don't have money these days, and if they do have it, they don't spend it," says Kyi Kyi Win, a saleswoman at a store in Yangon. Last year, the shop was selling $300 to $400 in merchandise a day, she says, but now it's selling less than $100 a day.

Myanmar's economic health is critical now, as discontent over Ms. Suu Kyi's fate spreads. The 63-year-old Nobel laureate is accused of violating the terms of her house arrest, imposed by the government six years ago, by allowing an American well-wisher to visit her residence without state approval.

Some residents say they hope the verdict -- which is widely expected to be "guilty," potentially resulting in up to five years in prison for Ms. Suu Kyi -- could ignite protests and destabilize a regime that has ruled the resource-rich nation since the 1960s.

The trial has drawn international outrage, which Myanmar's leaders addressed on Thursday. According to Reuters, Deputy Foreign Minister Maung Myint, at a meeting in Cambodia, accused critics of meddling in the country's affairs and denied that the prosecution was a political or human-rights issue.

Maung Myint, Myanmar's deputy foreign minister, accused critics of meddling in the country's affairs.

There is little indication of serious unrest now. But the relatively calm circumstances could change if the verdict is seen as harsh. Ms. Suu Kyi is widely viewed as Myanmar's most legitimate leader after her political organization, the National League for Democracy, won Myanmar's last elections in 1990; the government ignored the results.

Economic distress has played a role in past unrest. The last major protests in September 2007, which were crushed by the military, were ignited largely by a surge in fuel costs.

Myanmar's economy has long suffered from high unemployment, minimal foreign investment and crumbling infrastructure. With few successful domestic industries, the country relies heavily on sales of natural gas, timber and other commodities to the few countries that continue to do significant business with the regime, notably China, Thailand and India.

U.S. and European sanctions in place for years prevent all but a few Western companies from operating there. Commodities prices have collapsed over the past year, and with few links to external capital markets, Myanmar is unable to raise cash for new lending.

Conditions in Yangon are especially difficult. Fewer than 300,000 of its six million residents have mobile phones and power blackouts are becoming more common and many taxis are so worn that the road is visible through holes in the floorboards. Abandoned colonial buildings rot in the monsoon weather, with vines growing out of broken red-brick windows.

Myanmar doesn't provide timely economic information. Official data indicate the economy grew 10% or more a year since 2000, but the Asian Development Bank and private analysts say such data likely are exaggerated, with actual growth probably less than half the government's estimates and headed lower this year.

The situation isn't all bad. Lower commodities prices have helped ease inflation, which hit 30% in recent years, and weaker demand for imported goods has improved the country's trade balance. Some shops, such as computer dealers, that cater to Myanmar's wealthy elite, say business is holding up.

Government finances are in relatively good shape. With the help of natural-gas revenue, Myanmar has more than $3 billion in foreign-exchange reserves, and has improved tax collection, the Asian Development Bank says.

But natural-gas revenue has fallen by as much as 50% this year, says Sean Turnell, a Myanmar expert at Macquarie University in Sydney. In addition, the past year has been disastrous for agriculture, which accounts for about 45% of Myanmar's gross domestic product.

Cyclone Nargis, which killed 135,000 people a year ago, wiped out much of the equipment and livestock in Myanmar's southern rice bowl, and many indebted families have been unable to replace both. Tourism is suffering, too. Arrivals have declined since 2006, according to local media reports and travel agencies.

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