Economy

The Irrawaddy Business Roundup (Jan. 17, 2015)

By William Boot 17 January 2015

Market-Based Financial System Reforms Needed for Growth

Burma’s economic growth in 2015 will “remain robust” but an inadequate financial system continues to pose a problem, according to a new analysis.

“Reforms are in progress, but further steps to establish market-based money and financial systems are needed to maintain the momentum,” said a study by Mantis, a Dutch economic forecasting company specialising in frontier markets.

It said that although Burma’s central bank has already internally adopted reserve money targeting under the guidance of the International Monetary Fund, “missing money market instruments are preventing active monetary policy.”

“In order to move away from the current state of administratively set interest rates, the [bank] needs to step up its efforts to establish a working money market and introduce monetary policy instruments.”

Burma’s first market-based treasury bonds are due to be offered via an auction system at the end of January, Mantis said.

The study forecasts that the kyat will take a “gradual depreciation path” but inflation could rise to 12% for a time in 2015 “fuelled by fast real growth and exchange rate pass-through effects”.

“Lagged reforms or sustained pressures on [Burma’s] current account would lead to faster depreciation of the kyat. On the other hand, if recent reforms are successful and FDI [foreign direct investment] remains strong, then appreciation of the kyat is possible.”

Health Spending Set to Triple by 2020

Spending on healthcare in Burma is forecast to grow over 300% up to 2020 as more products enter the retail market and more people have disposable income, a study has said.

Spending on over-the-counter healthcare products is anticipated to grow three-to-four-times, from about $140 million in 2013 to $480 million in 2020, the report by US analysts Research & Markets said.

“The strong overall market growth is partly driven by the vast increase in government spending on pharmaceuticals and medical devices. Specialty products, in particular cardiovascular, diabetes and oncology products are expected to experience high growth rates for the next years,” a summary of the study said.

However, the study also noted that the market will be restrained by Burma’s “opaque regulatory environment, the abundance of counterfeit products, complex channels to market and the extremely fragmented point of sale network”.

“Collaborating with a local distribution partner is the only viable means of efficiently accessing the market in [Burma],” it noted.

Arakan Factories Complex Proceeding Early

Plans are going ahead for an industrial development zone in an area of Arakan State close to the port of Sittwe.

The zone, Ponnarkyun, will accommodate factories for garment manufacturing, food and wood processing, and vehicle parts assembly, Myanmar Business Today quoted state authority spokesman Hla Thein saying.

“As we have secured 24-hour electricity supply recently all the development operations will be implemented sooner than expected,” Hla Thein said.

It is unclear why the zone is not being developed at Sittwe, whose port facilities are being renovated and expanded by Indian companies to provide a commercial cargo route linking with northeast India.

Rights Groups Urge End to Burmese Fishing Labor Abuse in Thailand

The plight of thousands of Burmese working in Thailand’s sea fishing industry which feeds Western supermarkets has been spotlighted in a letter to the Thai government signed by 45 NGOs.

The letter urged the Bangkok government to rethink proposals to push Thais serving prison sentences, or just finishing sentences, into an industry suffering an acute labor shortage.

“The plan would merely augment the migrant workers from Burma and Cambodia who currently comprise the majority of the workforce on Thai fishing vessels,” the letter said. “Migrant fishers are almost entirely undocumented and without legal status, making them afraid to report to Thai authorities about rights violations they suffer on fishing boats.”

There is ample evidence of “gross labor violations on Thai fishing boats, including forced labor, physical violence, illegally low wages and human trafficking,” it said.

Spotlight on Abuses in Hydro Dam Proposals

Community rights abuses associated with the development of controversial hydroelectric dams in Southeast Asia have been underlined in a new report by the US-based International Rivers.

The NGO has lodged a complaint with the United Nations over allegations that thousands of people will lose their homes and ancestral land with the construction of two dams in Cambodia.

The dams not only undermine the rights of the people directly affected but will have a knock-on impact on all people living along the River Mekong, including Burma, the NGO warned.

One of the criticised dams, the Lower Sesan 2 project, will necessitate the forced relocation of 5,000 people, said International Rivers.

“Thousands of people’s lives will be devastated and destroyed by this project. Despite its severe impacts, there has been no transparency in the decision-making and no real consultation with the communities in order for them to express their concerns,” the NGO said.

It is urging the Mekong Rivers Commission, of which Burma is a dialogue partner, to urgently reassess all dam projects in the region, which it argues will undermine fishing and food supply on upper and lower reaches of the River Mekong.

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