Burma Looks to ‘Liberalize’ Fuel Imports
By Violet Cho January 22, 2008
Due to the continued increase in global fuel prices, the Burmese military government has “liberalized” trade by permitting the private sector to import fuel. Burmese economists dismiss the move as ineffective for Burmese consumers.
The Burmese junta recently announced that it would permit private businesses to seek fuel imports through the Trade Council, the country’s highest authority in terms of importing and exporting, according to local weekly Myanmar Times.
Under the existing procedure, only two companies—Union of Myanmar Economic Holding Ltd, a military generals’ syndicate, and Tay Za’s Htoo Trading Company—are allowed to import fuel.
Burmese economists believe that the military regime will allow so-called “private” companies to import fuel as a strategy to use the private companies as a source of hard cash or foreign currency, which is in great shortage in Burma.
“The government requires more hard currency, so they use private companies—which have their own hard currency in foreign banks—to solve their problems,” US-based Burmese economist, Sein Htay, told The Irrawaddy on Tuesday.
The economist also claimed the junta is currently facing problems with a lack of hard cash/ foreign currency since economic sanctions and banking surveillance was imposed by the United States government in December.
The US House of Representatives imposed sanctions against the Burmese military government, including the freezing of military officials’ bank accounts, following the junta’s brutal crackdown on peaceful protesters and monks in September.
The Burmese regime holds a monopoly on the sale of fuel in the country and regularly subsidizes prices. In August, the government raised the price of fuel from 1,500 kyat ($ 1.20) per imperial gallon to 3,000 kyat ($2.40) for diesel; and from 1,500 kyat to 2,500 kyat ($2) per gallon for gasoline.
Since then, black market fuel prices have been as high as 4,800 kyat ($3.84) per gallon for diesel and 4,600 kyat ($3.68) for a gallon of gasoline.
The massive price hikes sparked demonstrations that quickly grew into an anti-government uprising, as the increased fuel prices affected commuters in vital areas, such as public transport and the price of basic consumer goods.
According to the Ministry of Energy, Burma produces some 80 million gallons of diesel every year for domestic use, but, over the last few years, has had to import about 330 million gallons of the fuel every year from neighbouring Southeast Asian countries, Malaysia, Thailand and Singapore.
Meanwhile, there have been rumours and allegations surrounding fuel rationing since the beginning of the year. The government recently announced that it would continue to conserve two gallons of fuel per vehicle per day for all vehicles in Rangoon.
However, Zaw Oo, a Burmese economist based in Washington, said that “government privatization will intensify the already high inflation that people are encountering at the moment.”
According to the Economic Intelligence Unit, a global economic think tank, annual inflation in Burma hit 50 percent by the end of 2007, but should ease back to around 30-40 percent in 2008/09.
As global fuel prices increase, it is imperative that the state takes measures to solve the problem through subsidizing the import of fuel and selling it back to the public at a lower price,” said Zaw Oo. “Privatization is not the correct approach currently for economic reform in Burma.”
Due to the continued increase in global fuel prices, the Burmese military government has “liberalized” trade by permitting the private sector to import fuel. Burmese economists dismiss the move as ineffective for Burmese consumers.
The Burmese junta recently announced that it would permit private businesses to seek fuel imports through the Trade Council, the country’s highest authority in terms of importing and exporting, according to local weekly Myanmar Times.
Under the existing procedure, only two companies—Union of Myanmar Economic Holding Ltd, a military generals’ syndicate, and Tay Za’s Htoo Trading Company—are allowed to import fuel.
Burmese economists believe that the military regime will allow so-called “private” companies to import fuel as a strategy to use the private companies as a source of hard cash or foreign currency, which is in great shortage in Burma.
“The government requires more hard currency, so they use private companies—which have their own hard currency in foreign banks—to solve their problems,” US-based Burmese economist, Sein Htay, told The Irrawaddy on Tuesday.
The economist also claimed the junta is currently facing problems with a lack of hard cash/ foreign currency since economic sanctions and banking surveillance was imposed by the United States government in December.
The US House of Representatives imposed sanctions against the Burmese military government, including the freezing of military officials’ bank accounts, following the junta’s brutal crackdown on peaceful protesters and monks in September.
The Burmese regime holds a monopoly on the sale of fuel in the country and regularly subsidizes prices. In August, the government raised the price of fuel from 1,500 kyat ($ 1.20) per imperial gallon to 3,000 kyat ($2.40) for diesel; and from 1,500 kyat to 2,500 kyat ($2) per gallon for gasoline.
Since then, black market fuel prices have been as high as 4,800 kyat ($3.84) per gallon for diesel and 4,600 kyat ($3.68) for a gallon of gasoline.
The massive price hikes sparked demonstrations that quickly grew into an anti-government uprising, as the increased fuel prices affected commuters in vital areas, such as public transport and the price of basic consumer goods.
According to the Ministry of Energy, Burma produces some 80 million gallons of diesel every year for domestic use, but, over the last few years, has had to import about 330 million gallons of the fuel every year from neighbouring Southeast Asian countries, Malaysia, Thailand and Singapore.
Meanwhile, there have been rumours and allegations surrounding fuel rationing since the beginning of the year. The government recently announced that it would continue to conserve two gallons of fuel per vehicle per day for all vehicles in Rangoon.
However, Zaw Oo, a Burmese economist based in Washington, said that “government privatization will intensify the already high inflation that people are encountering at the moment.”
According to the Economic Intelligence Unit, a global economic think tank, annual inflation in Burma hit 50 percent by the end of 2007, but should ease back to around 30-40 percent in 2008/09.
As global fuel prices increase, it is imperative that the state takes measures to solve the problem through subsidizing the import of fuel and selling it back to the public at a lower price,” said Zaw Oo. “Privatization is not the correct approach currently for economic reform in Burma.”
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