May 2, The Japan Times
The rape of Burma: where did the wealth go? - Sean Turnell
Burma, once the richest countries in Southeast Asia, today is mired in
deep poverty - its economy ruined by nearly 50 years of economic
mismanagement under military rule. And yet, over the last few years Burma
has also emerged as a significant producer of energy in Southeast Asia.
Thanks to large fields of recoverable natural gas located offshore, Burma
now earns substantial foreign exchange revenues. At present, most of these
revenues ($1 billion to 1.5 billion per year, depending on price
fluctuations) come from Thailand. Gas from Burma, piped onshore from the
Gulf of Martaban, generates around 20 percent of Bangkok's electricity
supply.
If all goes well, new gas fields recently discovered in the Bay of Bengal
will provide even more gas for China's Yunnan Province. To get the gas
into Yunnan, a much longer pipeline - running the length of Burma - must
be built. The project will be as difficult as it will be controversial.
But, with no environmental or labor standards to contend with, few doubt
that the pipeline will proceed.
So, given its newfound energy riches, one might expect Burma's public
finances to be rather flush, with surpluses aplenty to spend on health,
education and much else that the country so desperately needs. Alas,
almost none of Burma's gas revenues actually feed into its budget, owing
to a rather ingenious device employed by the Burmese junta. The device is
simple. Like many countries ruled by authoritarian regimes, Burma has a
dual exchange rate system. The official exchange rate pegs Burma's
currency, the kyat, at a rate of six to one against the U.S. dollar.
The informal or black market exchange rate determines the value of the
kyat according to supply and demand in the marketplace. Trading kyat in
the black market is formally illegal, but it is the only way that people
unconnected to the regime can ever hope to come across foreign currency.
According to the informal exchange rate, the kyat's worth is currently
about 1,000 to one against the dollar. Given this dual exchange rate
system, hiding Burma's gas earnings becomes easy. By recording earnings at
the official exchange rate, they are worth nearly 200 times below what
they should be.
Thus, Burma's gas earnings of around $1.2 billion for 2006-07 are rendered
into a mere 7.2 billion kyat in the country's public accounts - less than
1 percent of the regime's official public spending. Recorded at the market
exchange rate, however, these earnings translate into 1.2 trillion kyat -
an amount large enough to eliminate Burma's budget deficit, as well as the
destructively inflationary money printing that is the regime's preferred
method of public finance.
So where do Burma's generals hide all the money they keep away from the
state's budget? No one but the generals knows for sure. An inspection of
the vaults of the country's Foreign Trade Bank might be a good place to
start, however, as well as those of some accommodatingly unscrupulous
banks offshore.
Whatever the precise location of Burma's riches, these hoards enable the
junta to spend at its whim. A nuclear reactor, a new capital city,
military pay increases - all of these and more have been on the menu of
late. The one group that almost certainly will not benefit from any of the
largesse is the Burmese people themselves, who are entitled to it and for
whom it would mean an end to lives of poverty and want.
Sean Turnell is professor of economics at Macquarie University in Sydney.
© 2008 Project Syndicate. www.project-syndicate.org
|
