By Daniel Ten Kate on October 03, 2012
Traffic moves through the streets of Yangon, Myanmar. Photographer: Brent Lewin/Bloomberg
On a tree beside a crumbling road in Myanmar’s biggest industrial estate, Thein Oo hangs plastic sheets, part of the trash he collects and sells for recycling to support his wife and five children.
Behind his pile of scavenged bags and cans, a gated empty lot, filled with weeds and stray dogs, is valued at more than $500,000 an acre, about 10 times the price of industrial land in Orlando, Florida.
The contrast of Thein Oo, 55, in his ripped shirt, dirt- stained shorts and red flip-flops, and the soaring price of the land by his makeshift thatch house illustrates the government’s challenge in opening the country without leaving most of its population behind. Lots in the Hlaing Thar Yar zone have risen more than 100-fold in the local currency since the park opened in 1995, driven by billions of dollars from jade miners who had few other investment outlets.
“The government needs to do more for us,” Thein Oo said, surrounded by children playing among the rubbish. “There’s no permanent work here.”
President Thein Sein is trying to undo economic distortions caused by sanctions and military rule that resulted in $100,000 used cars, $500 SIM cards and the need to carry stacks of crisp, unblemished $100 bills. With foreign investors rushing into the country after the U.S. and Europe began lifting sanctions this year, office and residential rents are also soaring.
‘Rampant Corruption’
“Attempts to protect the little guy through rules, regulations, legislation usually just end up in rampant corruption and no protection at all,” Sean Turnell, an associate professor who researches Myanmar’s economy at Macquarie University in Sydney, said by e-mail. “There really has been very little in the way of implemented investment in areas that would employ large numbers of people.”
The economic inequality is typified by the jade trade. After the U.S. banned imports of Myanmar jade in 2008 and tightened rules to hinder financial transactions among gem traders, the industry underwent a boom due to Chinese demand, according to Renaud Egreteau, a research assistant professor at the University of Hong Kong. Jade export revenues topped $1.75 billion in the 2010-2011 fiscal year -- a fifth of Myanmar’s exports -- he wrote in a paper last year.
The resulting funds pushed property prices “to a point that is totally ridiculous,” said Moe Kyaw, a member of a presidential advisory committee and an official in the Union of Myanmar Federation of Chambers of Commerce and Industry. Traders sold 527 million euros ($681 million) of gems at a nine-day sale in March, according to state-run Myanmar Gems Enterprise.
‘Not Clever’
“These are jade miners who are not that clever in how they part with their money,” said Moe Kyaw, founder of Yangon-based Myanmar Marketing Research & Development Co., which conducts market research for companies such as Unilever NV and Nestle SA. “Because of the American sanctions, they can’t even get a credit card, so they plow their money into property. They don’t realize they can have a beautiful condo in Thailand or Singapore because they are just too scared to go outside the country.”
The jump in real estate prices is a deterrent to foreign manufacturers who could bring jobs to Myanmar. With factory land selling for as much as twice the price of lots in neighboring Thailand, the millionaire miners are hampering the country’s fledgling efforts to draw labor-intensive industries.
“It is a significant barrier to attracting foreign investment,” said Cyn-Young Park, the Asian Development Bank’s assistant chief economist, referring to high property prices. “Administrative measures wouldn’t help in this situation. Provision of adequate infrastructure would help mitigate these pressures on property prices by allowing more land to function efficiently for any business purpose.”
U.S. Investment
Since Thein Sein took power in March last year, he has freed hundreds of political prisoners, eased media restrictions and started peace talks with ethnic minorities. The moves prompted the U.S. to allow companies to invest in Myanmar for the first time in 15 years and ease a ban on imports.
Opposition leader Aung San Suu Kyi, who met President Barack Obama last month on a trip to the U.S., backed the easing of sanctions. The former political prisoner joined parliament for the first time in May after reaching an agreement with Thein Sein in 2011.
Ref;businessweek
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