An auspicious date as the reform effort continues
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April 1 will see historic by-elections and the floating of the Burmese currency - two events that seem to indicate that the country is serious about political and economic change
The decision by the Burmese government to reform its currency system is welcome because it marks a significant step towards economic openness and modernisation.
Burma, however, is still a long way from achieving full economic and political reform. Apart from a credible currency system, the country still needs technical assistance in order to establish an effective banking sector and to embrace the modern economic system. The once-isolated state also needs responsible investors who plan to co-prosper with the Burmese people and do not over-exploit local resources.
The currency revamp, scheduled to take effect on April 1, should propel more foreign investment into the impoverished country, and should improve the status of the Burmese currency, the kyat, which has been traded for many years at dual rates.
The complicated currency trading system in Burma has long been an obstacle to business transactions. In addition, it has eroded the credibility of the kyat because most people have ignored the official exchange rates for the local currency, instead preferring to use the prevailing rate on the black market, which is often 100 times higher.
The unification of the currency rates is a big step forward that suggests Burma is moving into an era of economic modernisation. After all, the dual rate has always been a loophole for corruption because it provided an opportunity for the regime to profit from obtaining revenue at an unrealistic rate and then converting the currency on the black market. It will be interesting to see how the new floating rate will fare to begin with.
The managed float currency is set to take effect on the same day as the country sees historic by-elections in which main opposition leader Aung San Suu Kyi will take part. This symbolises the Burmese government’s apparent determination to show the world that it is seriously proceeding with reform, both economically and politically. It demonstrates President Thein Sein’s intention to move the impoverished country towards modernisation. This is good news for Asean because it will pave the way for Burma to further integrate its economy with the regional grouping, with the Asean Economic Community set to become fully operational by 2015.
At any rate, Burma still faces many challenges ahead. For instance, the banking system will have to be improved to better facilitate business activities and investment opportunities. An entrepreneurial spirit already exists among the Burmese people, and they are ready to do business with the world, but the authorities need to ensure that locals are the main beneficiaries of the changes. The Burmese people should thus be encouraged and trained to capitalise on upcoming economic opportunities.
As things stand now, some Burmese have felt the effects of the sudden economic interest in the country. The mostly impoverished Burmese have been affected by recent price rises, driven by the inflow of speculative money. The end of economic sanctions should lead to much greater trade flows. The planned changes in legislation that will facilitate foreign investment are likely to encourage even more investment money and speculation.
The biggest challenge in Burmese reform is to ensure that economic prosperity will be distributed fairly and equally to all. Burmese people with existing international business connections will benefit from the opening up of the country. But the majority of the Burmese people are still living in poverty.
At any rate, the choice of date for the floating of the currency should raise optimism over the future possibility of free and fair elections in Burma, which is among Asia’s poorest countries due to mismanagement and isolation under harsh military rule.
These two major events on April 1 should add to the sense that Burma is going to turn around. Asean members and the international community should provide Burma with necessary technical assistance to ensure a smooth transition in the country.
Burma wants responsible investors who will provide job opportunities for local people, helping transfer knowledge and caring for the environment in this natural resource-rich country. This must happen to ensure that reforms lead to the improved wellbeing of all the Burmese people.
