Page 2 of 2 Fuel price policy explodes in
Myanmar By Larry Jagan
pressures will
also inevitably lead to demands for salary and
wage increases among government and private-sector
workers.
Economic analysts say it is
highly unlikely that the government will any time
soon increase wages, having shouldered a major
wage increase for government employees last year.
The private sector, already suffering from slack
domestic demand, will also likely find it hard to
meet employees' demands to increase wages. Some
private businesses have already closed down, at least
temporarily.
Some
economic analysts have speculated that the SPDC
rolled back fuel-price subsidies because it is
strapped for cash. In particular, the analysts
believe the massive expenditure associated with
building the new capital at Naypyidaw, some 400
kilometers north of Yangon, has depleted the
national coffers. The government is also
reportedly building a massive new Internet and
communications-technology center known as
Yadanapon Cyber City near the newly built capital.
"The cost of building Naypyidaw was
bleeding the government's coffers dry," said Sean
Turnell, a specialist on Myanmar's economy at
Macquarie University in Australia.
"The
government is acutely short of revenue. Naypyidaw
is itself absorbing more than the increase in
income from gas revenues. On top that, there are
the dramatic [increases] in government salaries of
last year, as well as now the potentially large
expenditure needed for the planned nuclear
reactor," he said.
Neo-liberal
prescriptions Ironically, perhaps, the
junta had recently attempted to improve the
national finances through better tax collection.
The IMF and World Bank had warned the regime this
time last year that if it did not reduce its high
budget deficits - which it has traditionally
covered by rolling the monetary presses, sparking
inflation - the economy would suffer.
"Living standards are low and inflation is
increasing. The prospects for sustained growth in
real incomes are constrained by inflation,
structural rigidities, weak economic policies and
low investment," the IMF team warned after its
mission to the country last year.
The
government has recently moved to implement some of
the IMF's less stringent reform recommendations,
including a campaign to collect more taxes from
private businesses. This year, the authorities
mounted a major investigation into businesses
suspected of tax evasion. Some of the country's
biggest companies, including Max Myanmar, AA
Pharmacy, the Peace Myanmar Group and
International Beverage Trading, were targeted by
the investigation and several leading business
people were arrested on tax-evasion charges.
Last year, the IMF reported that Myanmar's
revenue collection had risen slightly, and the
budget deficit had dropped to about 4% of gross
domestic product. "The tax-revenue increases are
real, but they're from such a low base they're
more a 'promise' of a better fiscal future than
[achieving] one now," argued academic Turnell.
What is more critical, according to
economists, is that the junta move to reduce
spending - something the military regime appears
loath to do. The SPDC has shown no signs of
reducing military spending, expenditures related
to finishing the new capital and cyber-city, and
big-ticket energy projects, including new dams and
the country's first nuclear reactor, economic
analysts say. Hence the only fiscal card it had
left to play was reducing fuel subsidies.
The IMF has long advised the SPDC to
reduce government subsidies, particularly on fuel
prices. It's unclear whether the IMF and World
Bank pressured the junta into making the policy or
whether they recommended a more phased approach to
removing the subsidies.
Now, the more
pressing question is whether the already
impoverished population can absorb the sudden
shock therapy. "More than 90% of the country's
population already lives in dire poverty," said an
economist based in Yangon. "It is not so much a
case of food shortages as families' incomes being
insufficient to purchase their daily needs."
Recent United Nations country surveys for
Myanmar reveal a trend toward increasing poverty
and a growing income gap between rich and poor.
"More than 90% of the population live on
less than 300,000 kyat [about $300] a year," a
senior UN official who spoke on condition of
anonymity told Asia Times Online. "Food security
has become a significant issue in many parts of
the country, especially in the remote and border
areas."
Meanwhile, the street protests in
Yangon showed no signs of abating. Some
Yangon-based economic analysts have even started
to draw political parallels with the period
leading up to the junta's bloody crackdown on the
pro-democracy demonstrations in 1988, which then
were sparked by an abrupt government decision to
demonetize the local currency.
"The
military learned its lesson last time and will try
to nip [demonstrations] in the bud this time
before they get out of hand," said a local
analyst.
If so, expect more repression and
revolt in Myanmar in the weeks ahead.
Larry Jagan previously covered
Myanmar politics for the British Broadcasting
Corp. He is currently a freelance journalist based
in Bangkok.
(Copyright 2007 Asia Times
Online Ltd. All rights reserved. Please contact us
about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
