Housewives huddle over jewelry counters in Yangon’s bustling Chinatown, but fashion is not foremost on their minds. This is banking in Myanmar’s dysfunctional economy.
On nearby Shwe Bontha Street, the heart of the gold market since colonial times, Nyan Tun is more than just a trader: He is an unofficial banker in the military-ruled country.
“Normally, the major buyers are farmers. They will buy gold with a little bit of extra money to sell before the next harvest,” he said. “Second are the housewives, who love to buy jewelery as savings.”
The global economic crisis may have reignited suspicion of banks worldwide, but in isolated Myanmar such distrust has long run deep and savers have no desire to put their money into the backward banking system.
Not that people have much to spare: Decades of economic mismanagement by the country’s rulers, plus international boycotts and sanctions, have generated a population struggling to get by and facing soaring consumer prices.
Between 2005 and last year, the annual inflation rate in Myanmar averaged 20 percent, according to the Asian Development Bank.
“If you want to catch up with inflation, you buy gold. If you save money in the bank you lose money,” Nyan Tun said.
“People have much more trust in gold as a store of value,” added the trader, whose name has been changed in this article at his request.
In military-ruled Myanmar, saying anything seen as critical of the junta can have serious consequences.
Nyan Tun said the value of a gold “tical” — about half a troy ounce — had increased more than 30-fold in the local currency, the kyat, since his early days as a gold trader in the late 1980s.
Sean Turnell, a specialist in Myanmar’s economy at Macquarie University in Sydney, said rampant increases in consumer prices were largely a result of the government’s habit of simply printing more money to fund its spending.
An abundance of natural treasures — including gold, gas, teak, oil, jade and gems — could make the country a rich nation as it once was before coming under military rule in 1962.
But Myanmar remains one of the world’s least developed countries, with nearly a third of the population living below the poverty line, according to World Bank figures, as the junta and its associates exploit these raw materials for their own benefit.
“The fiscal situation should be good,” said Turnell, on the basis that earnings from gas supplies should fund government spending. “But they [the military rulers] don’t bring money they get from gas properly into public accounts. These funds are not recorded.”
Few believe Myanmar’s controversial first election in 20 years, due on Nov. 7, will bring about much-needed economic reform, as the polls are widely expected to simply cloak military rule with civilian clothing.
However, there have been some shifts in the economic landscape ahead of the election, with the junta instigating a spate of privatizations of state firms and properties.
Along with these sell-offs of assets including ports, factories and cinemas, four conglomerates on international sanctions lists and run by junta-friendly tycoons have been given licenses to start up new banks.
Turnell said the cronyism apparent in these recent developments suggested the country was “drifting in a really strange direction away from a totalitarian system into one that works like a semi-criminal economy.”