Saturday, 14 April 2012

A newly managed floating Kyat

Since April 2nd, the Kyat (Myanmar's currency) moved from 6.4335 MMK/USD to 818, in a decision to adapt the unrealistic former rate to a more market-based one. The intention forward is to let the Kyat float completely, with a current quasi-managed regime aiming to it. That will require Myanmar to start accumulating more foreign reserves and the country's Central Bank will be accepting foreigners to freely bring in international currencies in amounts up to 10K USD without any declaration and free international transfers will be soon on the way.
Myanmar's Kyat (MMK) evolution over the last month.The evolution between March 31st and April 2nd should show as a discontinuity in the rate of the currency.
As for all countries opening their economies to international markets under the pressure of others,
the expected forthcoming evolutions are clear: (1) allow foreign banks to operate in Myanmar, (2) allow free human flows (importing workers, etc...), (3) allow foreigners to own or lease land and operate resources in their own name, etc... Of course, there is a debate on how sanctions should be lifted and aid provided, aiming at sustainable development in the country instead of just enrichment of the still-current apparatchik. As BusinessWeek has put it, look at Cambodia's counterexample.
Now, the kind of openness we see and are expecting for Myanmar is typical of countries that have been granted access to the WTO (World Trade Organization) under that sort of pressure by other nations. For example, look at Vietnam's accession on November 7th, 2006 (2001 for China, and 2004 for Cambodia and Nepal)....but with seminal works dating...January 1995! Now, interestingly, Myanmar is a member of the WTO since January 1st 1995 (as many other states, i.e. the inception's date of the WTO, after the GATT's round negotiations), part of the subgroups G-90 and LDCs (Least-developed countries). For reference, three countries in Asia are still out of the WTO: Laos and Bhutan, that are both in the process of accession (latest draft in 2012 and 2007 respectively), and North Korea.
Today in Burma, the situation shares some ressemblance with that of May 1990, when the NLD party of Aung San Suu Kyi won a landslide victory. At that time, Aung San Suu Kyi was detained and finally released in... 1995. As The Economist mentions it: "The victory [of April 1st 2012], when the NLD party won 43 of the 44 available seats in the parliament] is more symbolic than practical. The NLD won 6% of the 650-odd seats in parliament". And a quarter of these seats are reserved by Constitution to army-appointed MPS. Let's see how the president Thein Sein, a liberalising reformer from being a general before, will combine with Miss Suu Kyi charism and oratory strength, to overcome the challenge of promoting a real vent of change but country stability at the same time.
In the meantime, hoping to see one day a developed and open stock exchange in Myanmar (the MSEC actually exists but trades 2 stocks and government bond issuances through a 50-50 Japanese-Burmese joint venture acting for the Central Bank), we can watch Kyat's evolution. This is still a country where everything is possible; look at the change of capital from Yangon to Naypyidaw, the later being one of the 10 World's fastest growing cities!

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