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Sunday, November 8, 2015

Gold and Inflation!

Gold and Inflation

Gold is a "Crisis Hedge" not an  Inflation hedge
In times of uncertainty investors turn to Gold as a hedge against unforeseen disasters since physical gold is one of the few investments that is not simultaneously an asset and someone else's liability. In other words it is a real asset not just an IOU. 
With inflation adjusted prices reaching levels we haven't seen since the 1980 peak, there is talk once again of Gold as an "Inflation Hedge". But how well does it really work? 
For those who argue that Gold is an inflation hedge all they have to do is look at the chart at the right and they will see that it is not a perfect (or even imperfect) inflation hedge.
Simply put if Gold were truly a perfect inflation hedge the red line in the chart would be perfectly flat. But instead there are significant spikes. 
If gold were an inflation barometer why did the inflation adjusted price of gold fall from over $2400 in 1980 to $364 in 2001? Over that time period 21 years, it lost over 80% of its value. At the same time the CPI index went from 82.4 to 177.07 i.e. prices more than doubled.
Historically, gold and money have been pretty much synonymous so pure Gold was immune to inflation. But that didn't stop currency inflation. In the early days kings discovered that they could "extend" their money supply by adding just a bit of lead to the melting pot.  Unfortunately, as the percentage of lead increased the value of the coins decreased causing the first cases of inflation. (And also creating the habit of biting coins to see how soft they were and thus how much lead they contained).
Need a few more Gold coins? Just throw a little lead in the melting pot... no one will notice...
Egyptian Pharaohs issued the earliest gold coins, around  2700 B.C.  But they were primarily as gifts for friends and not for commerce (i.e. more like medals or commemorative coins). 
It wasn't until (560-546 B.C.), that King Croesus of ancient Lydia began issuing Gold coins for general circulation. (Incidentally after 2500 years, the saying "rich as King Croesus" is still floating around.
Incidentally, every country that has employed fair Gold coinage has prospered while those that inflated their coinage with "base" metals failed. 
One example is Spain. During the time that Spain was issuing their famous "pieces of eight" it was a world "superpower" but lost that status as it debased its currency.

Gold in the U.S.

Gold circulated as currency unofficially in the U.S. since the beginning... using coins minted in other countries like the Spanish "Pieces of Eight". But the U.S. did not have its own gold coinage.
It wasn't until the Coinage Act of 1792 established official U. S. monetary units based on a world Gold price of $19.39 per Troy ounce. Congress changed the gold specification of money in 1834 and again in 1837 when it was set at $20.67 per ounce.
1795 Gold $10 coin
From 1805- 1837 no $10 Gold coins were minted.

The U.S. had periods of high inflation during both the Revolutionary and Civil wars because they were not on a "gold standard" and issued "Greenbacks" instead. 
In an effort to curtail inflation at the end of the civil war in 1879, the U.S. government  made the "greenbacks" that they had issued during the Civil War convertible into gold putting us on a de facto gold standard.
Finally, in 1900 the government officially adopted the gold standard once again. 
By 1914 most countries in the world were on a Gold standard.
1866 $10 Gold Coin
 From 1880-1914 the U.S. dollar official gold price was $20.67 per ounce and the U.K. official gold price was £ 4.24 per ounce. This resulted in an exchange rate of   US $4.87 per £ 1 Pound Sterling.
This Gold exchange rate was maintained by a complex system of transferring Gold from New York to London. Creating a system of checks and balances that should have prevented the onset of inflation
This worked fairly well until other countries began abandoning their Gold standard to finance the First World War. The U. S. entered the war late and was able to maintain its gold standard.
However because other countries currencies "floated" against the dollar the true value of the dollar also floated and inflation still occurred (basically other countries were able to export their inflation to the U.S.). 
Remember at that time people spent gold and silver coins. Even though the price of Gold was fixed other prices weren't fixed and so the amount of goods people could buy with their Gold could still fluctuate. 
Note: Now we are exporting some of our inflation to China as they send us goods and buy our debt.

See that in the graph the nominal price of Gold from 1913-1931 is flat but the inflation adjusted price is not. This is because the price of gold was fixed by the government. Once gold was allowed to float freely in the 1970's, if Gold perfectly hedged inflation the inflation adjusted price of gold would be flat. The thin black line is the linear regression line (in inflation adjusted dollars) which measures the exact middle of the price with half the volume above the line and half below. This shows that the trend is up, but it might also be said that if the price is above the line gold is overpriced and if it is below the line it is underpriced (based on historical averages).
Inflation Adjusted Gold Price
Click Chart for Larger Image
 Notice in the chart "Cumulative Inflation by decade" below that from 1913 through 1920 inflation (as measured by the CPI) had increased by almost 98% (in other words in 7 years prices had almost doubled) but the price of Gold remained flat (by Government decree).
Cumulative Inflation by Decade

Over the next 10 years deflation set in as the roaring 20's unfolded and the US economy boomed and Europe suffered the after-effects of WWI. 
Finally, in 1929 the system could not stand the internal stresses and the stock market crashed ushering in the Great depression. 
In 1933, President Franklin Roosevelt realized that the U.S. could not maintain the pretense that Gold was still worth only $20.67 per ounce (because at that price Foreign governments would have bought all our gold). So he perpetrated one of the greatest frauds ever on the American public. 
Rather than simply repricing Gold at it's real price and allowing the citizens to be richer, he forced U.S. citizens to sell their Gold at the official price of $20.67 and once he had collected all the Gold into government coffers, he adjusted the price to its real price of $35 per Troy ounce. Thus the government made a handsome 69.33% profit in a few months (equivalent to a 69% tax on Gold owners). Imagine paying a 69% tax sometime!
This effectively, increased the money supply and "legitimized" the inflation that had silently been occurring behind the scenes as prices increased but gold values did not. In hindsight, this increase in the money supply may have been the key factor in the emergence from the Depression. 
Notice that inflation from 1913 to 1930 was up about 64% ... is it any coincidence that FDR raised the Gold price 69%?
NO!  That one time adjustment just brought the gold price in line with inflation (plus a 5% bonus for the government). But that didn't solve the problem permanently. It just postponed it.  By 1970 inflation was up 306% and gold was still officially $35 an ounce. Once again the price of gold needed adjusting.
But this time there was no gold in the hands of private citizens for the government to steal. This put the government in a bind because although US citizens could not own gold, foreign governments could continue to present their foreign exchange tickets at the "gold window" and the US was obligated to pay up in Gold!
So in 1971 President Nixon ended the US gold standard pretense. At that point the price of gold bullion was allowed to float freely and find its own level.
This time rather than take all the Gold from the people (since they had none) the Government raised money by allowing the people to buy Gold back at the new higher free market prices. Thus the government was able to profit once again from the gold FDR stole from its citizens. 
Government gold sales had a tempering effect on gold prices for a while as the government liquidated it's "excess" gold bullion. But by the late 1970's the government had stopped its gold sales and the price really took off. 
Many felt that this rise was in response to inflation fears (and partly it was) but partially it was pent up demand and fear, as we will see in a moment inflation doesn't necessarily translate into higher gold prices. But fear of any sort usually does translate into higher gold prices.
In 1980 the price of Gold peaked and the inflation rate declined but cumulative inflation climbed steadily upward.  As we can see from the chart above, in 1980, cumulative was 780% and by the year 2000 cumulative inflation was 1675%.
If gold were a true inflation hedge, gold would have climbed with it.  But rather than keeping up with inflation the price of Gold fell from the peak of $850 per ounce down to under $300 in 2001 losing 65% of its value.
But in inflation adjusted dollars the scene is even worse. The 1980 peak in current inflation adjusted dollars was over $2337 and by 2001 it fell to $351 losing a whopping 85% of its inflation adjusted value!
Gold Prices
So even though inflation rose... gold fell... because the fear level was low (and possibly because governments worldwide manipulated the price).

Inflation was slow and steady but not enough to cause fear. So Gold was not a very good inflation hedge! 
So why did Gold rise in the new millennium?
Partially because it is a commodity like all other commodities and demand has picked up from China (perhaps they got tired of the gold manipulation game).
But mostly because fear reentered the market. And the more fear there is over defaults, inflation, etc. the higher the gold price climbs. So although Gold isn't a perfect inflation hedge in the short run it is a very good crisis hedge. When paper can't be trusted, Gold will always retain some value.

What type of fear triggers gold to rise? 

  1. Fear of inflation
  2. Fear that paper assets will return to their intrinsic value (zero)
  3. Fear that governments like Greece, Ireland, Iceland, Portugal and yes even the United States will not be able to pay their debts.
  4. Fear that markets will collapse.
  5. Fear that the housing market will continue to collapse.
Yes, there is plenty of fear in the market these days to fuel the price of gold.
In addition to Fear... Chinese demand may be driving up the price of Gold. See:  Why (and How) China is Boosting the Price of Gold for more information. Another way to measure prices is in terms of another commodity. See Oil vs. Gold to get an idea of how much gold is worth in terms of barrels of oil or how much oil is worth in terms of gold.


Paris Baguette FRANCHISE


Across the globe, Paris Baguette has presented delicately crafted products, inviting atmosphere, and stellar service, all of which were made possible by the passion and expertise of those who operate our stores. That’s why we are committed to searching for candidates who meet our qualifications so that our relationship can be long-lasting and fruitful.


We are looking for owner operators that are passionate about Paris Baguette and are also excited about sharing the unique PB experience with each person that walks through our doors.  Here are the details of our requirements:
  • Net worth of $1 million
  • Liquid assets of $400,000
  • Preferred food industry, business and marketing experience
  • Detail-oriented and well-organized
  • Flexible, open-minded, and strive for excellence
  • Ability to inspire action and lead with ethical business practices
  • What is the initial franchise fee?
    The initial franchise fee is $50,000 for each store you develop.
  • Does Paris Baguette offer financing?
    We do not offer any direct or indirect financing to the franchisee.
  • What types of support can I expect as a Paris Baguette franchisee?
    We provide pre-opening assistance including training, grand opening assistance and on-going support after you open.
  • What are the financial qualifications for becoming a Paris Baguette franchisee?
    Paris Baguette requires that you have net worth of $1 million of which $400,000 must be liquid asset.
  • What are the average development costs associated with building a Paris Baguette location?
    The total development cost varies by size and location of the store.  Investment amounts may range between $655,600 and $1,865,000 for each store.
  • Where are the available markets for Paris Baguette franchises?
    Currently, we are offering franchise opportunities in California, New York, and New Jersey.
  • What is the time frame for the development process?
    It typically takes approximately 6-12 months from signing the franchise agreement to opening day.
  • What is the term of the Franchise Agreement?
    You will be granted a term of 10 years during which you may operate your multiple units.

Paris Baguette The Company
With around 3,500 store locations worldwide, our brand continues to expand at an impressive pace. Want to know more about us? Find out what is driving our success and growth in this ever competitive market.


Din Tai Fung Restaurant Franchise Requirements

I went to Taiwan's most famous dim sum restaurant where it was so famous that I had to wait like 1.5 HOURs in the HOT scorching afternoon sun just to get a seat. There were a lot of foreign tourists among its customers. From my googling, I got to know that Din Tai Fung have branches in Malaysia,Japan, Beijing, Korea and recently Australia. My friend told me that the franchise fee alone is about USD300K (without factoring the costs to train employees, chef, restaurant renovations,etc) to bring it into the Singaporean market.

IMHO, I think the food itself is quite okey (I am not a picky eater, so opinions might differ), similar to what you can find in high class dim sum restaurant in Malaysia or Singapore. 

What impressed me alot is that the restaurant is very efficient in terms of serving the customers and also the cleanliness of the toilet. There was a DEDICATED cleaning lady that always mops the floor each time a customers exit the loo!! (You will not see any step stains) Wow..talking about dedicating a resource just to ensure that the toilet is always sparkling clean. I never heard of anything like this before in my life even in the 5-Star hotels.

Like any franchise business, the franchisee must follow strict operating procedures (SOP) in their management of the brand as stated by the franchiser. I think anyone trying to pick this business up will face a very hard time because of the this single requirement (which also made this restaurant chain very famous in Taiwan). There are 3 restaurant branches in Taiwan alone and all of them, according to my friend adhere to this golden rule.

The requirement is....drum roll..please...

You need to hire very pretty waitress and waiters to work in your future restaurant for this franchise. Here is the proof. I am very curious about their wages since in Asia, it is not common for waiter/waitress to depend on tips as their main source of income. (I assume that they were highly paid) Btw, the service was exceptionally polite & good, an typical epitome for the Taiwanese people. My every cent dining there were really worth it although the meal there was not very cheap, comparatively there of course.

The attending waitress

The Cashiers: Paying up premium prices for a dim sum meal

I thought he was a air steward or a model at one time..too bad girls, this pic's angle is not very good.
Not to be left out... Some eye candy for female readers :P

Pretty ladies that make waiting under the sun a tolerable predicament

P.S I did not take all the photos of the employees, (quite a number of them) as I am felt very "paiseh" considering that they were very busy serving the customers but glad that they still willing to give a beautiful refreshing smile to their customers. (especially after i waited like eternity just to finish the meal in 20mins, okey i was hungry because of all the waiting :P)

- Posted using BlogPress from my iPadair2

Is Temasek waiting for Standard Chartered to collapse?

Is Temasek waiting for Standard Chartered to collapse?

In 2006, Temasek bought 152 million Standard Chartered shares and continued building up its stake to 19% by 2008. Since 2008, Temasek has also subscribed to rights issues between 390 pence and 1280 pence.
The average price of Temasek’s investment is estimated to be 1350 pence. This is because it had bought the bulk of Standchart at prices ranging between 1500 pence and more than 1800 pence from 2006 to 2008.
If Standchart was such a good bet, Temasek would not have been looking to divest since 2012. Unfortunately, due to its ‘concentrated’ position, there has been no buyer for its then £6bn investment. If it had taken a smaller stake instead of risking more than S$10 billion on a single investment, divestment would have been a breeze.
The 438 million Standchart shares owned by Temasek would have cost at least £5.9 billion. At its current share price of 650 pence, it is sitting on an unrealised capital loss of £3.1 billion after 9 years.
Source: Marketwatch.com
Similar to its billion-dollar losses in Barclays PLC and Merrill Lynch, net unrealised losses in Standchart will be just as costly even after taking into account more than 300 pence per share in dividends.
Unlike other about-to-collapse Temasek investments such as Olam, SMRT, etc which had been propped up with billions of our reserves and tax dollars, PAP is unlikely to prop up Standchart with our reserves.
Does Temasek have any plan or is it planning to sit on Standchart for 2 to 3 decades?
There are other long-term underwater investments which have been kept out of the public eye.
One of them is NIB Bank which Temasek invested in 2005 and presently owns 88% of NIB. Temasek is also in trouble with this low profile, almost-S$1 billion investment which has earned next to nothing since 1 decade ago. And EVEN if it manages to get rid of this lousy investment costing taxpayers about $1 billion, it has to take into account the exchange rate which has halved.
Temasek has also been looking to divest NIB since 2011 but who would be interested in a lousy investment?
Temasek claimed its investments had recovered but how could it be possible when it divested at depressed prices in 2009 and 2010? Many of its investments were also bought at inflated prices near the market peak in 2007. When prices were depressed between 2009 and 2011, Temasek’s 3 year investments were equivalent to its one year investment in 2008 (see chart below)!
It appears Temasek has been investing heavily at inflated prices. Instead of buying in a lelong sale, Temasek was a net seller. Hmm .. how to make money like that??
Were profits from the sale of national assets included in its returns calculation?
Since our reserves do not belong to the PAP government, it should come clean and publish all relevant information pertaining to Temasek’s investments. Selective disclosure of information will only breed more distrust.

History of the Present: Yangon!

History of the Present: Yangon

Emerging from a half century of dictatorship, can Myanmar’s principal city be a model of sustainable, democratic development?
This is the first article in an ongoing series, “History of the Present: Cities in Transition.”
Coming soon: An overpass at Kaba Aye Pagoda Road, Yangon. [Andrew Rowat]
Coming soon: An overpass at Kaba Aye Pagoda Road, Yangon. [Andrew Rowat]
Time and again, I spotted signs marking construction zones. Coming soon: a guesthouse; coming soon: a bank; coming soon: a hotel. It might as well have been the city’s official slogan. Yangon: coming soon. In the historic heart of the city, the Secretariat Building, the colonial seat of British Burma, sat abandoned and fenced off behind barbed wire, foliage growing out of its roof. Known as the Ministers’ Office since independence, the massive red-brick pile was left to ruin in 2006 when the military regime that has ruled the country for decades packed up and moved to a new capital city. Now, locals debated what it would become. Surely, something was coming soon.
This is a dynamic moment to visit Myanmar. After decades in isolation, the world’s longest-lasting military dictatorship is giving up power. The country has a new constitution, a new Parliament, and a National Human Rights Commission. In the past two years, it has welcomed Barack Obama (the first-ever visit by an American president), hosted the global business elite of the World Economic Forum, and assumed the chair of the Association of Southeast Asian Nations. National elections in 2015 are the next step toward civilian governance (though a quarter of parliament seats will still be reserved for the military). If the transition comes off without a hitch, democracy itself is coming soon.
Almost by definition, the fall of the junta means the rise of Yangon, Myanmar’s principal city and largest port. The military rulers always hated the metropolis, feared it, stifled it. And yet, despite decades of repression, they never managed to subdue it. Not in 1988, when they responded to a democratic uprising by forcibly relocating migrant slumdwellers. Not the next year, when they placed opposition leader Aung San Suu Kyi under house arrest, where she remained for most of two decades. Not in 1993, when they levelled coffeehouses popular with the city’s activists and intellectuals to construct the luxurious 26-story Traders Hotel.
1988 protests in Yangon (then Rangoon). [Photo by Gaye Paterson]
1988 protests in Yangon (then Rangoon). [Gaye Paterson]
Sule Pagoda at dusk as seen from the Trader's Hotel (now the "Sule Shangri-la"). [Andrew Rowat]
Sule Pagoda at dusk as seen from the Traders Hotel (now the “Sule Shangri-la”). [Andrew Rowat]
Now, Yangon is on a path of liberalization, and a speculative wave is sweeping the city. Since 2010, office rents have increased eightfold; residential rents in desirable neighborhoods jumped 50 percent in 2013 alone. Meanwhile, an influx of tourists has spurred a hotel construction boom. In 2012, international arrivals at the Yangon airport topped one million, a 53 percent annual increase over the previous year. The official goal for 2014 is triple that figure. This is a tremendous challenge for a city that has had no experience with comprehensive urban planning in close to a century. In 1998, the city’s population was 2.5 million; now it is twice that, and by 2040, it is predicted to hit 11.7 million. Barring a concerted effort by city planners, most of the new growth will be in the form of shantytown sprawl — informal settlements on the outskirts, unconnected to utilities or transit.
Just a month before I arrived in Myanmar last winter, international advisors from the Japan International Cooperation Agency (JICA), with the support of local officials, released a proposed master plan for the city. Predicated on preserving the historic colonial center, the blueprint calls for directing development to a series of dense nodes arrayed around the region to be linked together by an improved transportation network. While the transitional government has endorsed the plan and is already implementing parts, this is the lamest of lame-duck governments — a regime that openly admits it has no legitimacy. And no one knows what will happen in next year’s elections.
In this region, it’s all bad models.
What makes Yangon’s future doubly unpredictable is that it is taking the leap into democratization and hyper-urbanization simultaneously. Long described as the place “where China meets India,” on account of its geography, Myanmar now lies between two very different models of urban development. To the east, there is China’s model of authoritarian politics and rapid economic change, where cities sprout up almost overnight and anyone standing in the way gets moved. To the west, there is the model of democratic India, where NGOs get a say in planning but squatters hold up infrastructure projects and rent control makes renovation of historic neighborhoods all but impossible. Democracy has many strengths but municipal transformation in long-stagnant societies does not seem to be one of them. Unsurprisingly, Southeast Asian nations like Vietnam and Cambodia have chosen to emulate China.
If Yangon is to develop more democratically than a Chinese city and more functionally than an Indian one, it will have to write its own script. As Moe Moe Lwin, the General Secretary of the Association of Myanmar Architects, told me, “In this region, it’s all bad models.” Indeed, in many Southeast Asian boomtowns, development has come at the cost of leveling historic downtowns (Hong Kong) or sprawling out into traffic-clogged nightmares (Bangkok). The cities that have managed to avert those fates — Hanoi with its heritage preservation, Singapore with its excellent transit and public housing — have done so under authoritarian rule. With no template for success, Myanmar will have to thrive on its own terms. “Maybe,” Moe Moe Lwin mused, “Yangon could bethe model.”
Secretariat Building, north gate. [via Flickr]
The abandoned Secretariat (Ministers’ Building), north gate. [via Flickr/Commons]

A City Up for Grabs

If Myanmar was for decades the black hole in the heart of Asia — a frozen nation in the middle of the most dynamic region on earth — the Secretariat Building is the black hole in the heart of Yangon. The walk there leads through a manic section of the historic downtown, a New World-style grid laid out by the British colonialists in a bid to impose Western order. In this stretch of the city, virtually every storefront is occupied, many with shiny new establishments like Tokyo Donut, a local chain that trades on Dunkin’s graphic design and Tokyo’s urban cool. But the real action is out on the sidewalks. Hawkers selling newspapers and mobile phones — commodities that were tightly restricted by the junta until just recently — share space with food stands offering pan-Asian fusion cuisine, a reflection of the city’s cosmopolitan roots. One popular snack is a fried wonton stuffed with lentils and potatoes, essentially a spring roll crossbred with a samosa. At dusk, an impromptu night market breaks out, as fishmongers sell the day’s catch from woven wicker baskets filled with fast-melting ice. Down the block, young foodies (and stray animals) congregate around the barbeque stalls where, for a few dollars, they can pick out a dinner, ranging from simple tofu cubes on a stick to a spice-rubbed whole fish. They dig in at tiny plastic tables set out in reclaimed parking spaces.
But on the superblock where the Secretariat Building sits, all the action stops. Back during the height of the junta’s power, the Ministers’ Office was so heavily guarded that people were afraid to walk alongside the building on the street. “Then, one day, it was suddenly vacant,” recalled Fran├žois Tainturier, a French architect who has lived in Yangon for over a decade. On New Years Day, 2006, the junta announced that it had moved the capital to the newly-built city of Naypyitaw in the center of the country. Even the civil servants who worked in Yangon were unaware that a new capital was under construction; they were simply told to pack up their offices and move north. To this day, no hawker dares set up shop on the sidewalk abutting the building.
The Secretariat is now ready for a new life, but as with so many other Yangon institutions, its rebirth is contentious. In 2011, the building was privatized, but the auction was open only to bidders with government connections. The new owner is the daughter of a former minister of industry. A scheme by foreign investors to convert the building into a hotel so outraged locals that the government stepped in to stop it. Current plans call for a cultural center or museum — it was here that armed paramilitaries assassinated independence leader Aung San and six cabinet ministers in 1947 — but many are skeptical. “Maybe one section will be a cultural center or a museum with an entrance fee,” Tainturier predicted, but “they’ll lease out the [rest] and make money.” We spoke in the lobby of an upscale hotel that was, like just about everything else in Yangon, undergoing renovations.
The Secretariat (Ministers' Building). [Andrew Rowat]
The Secretariat (Ministers’ Building). [Andrew Rowat]
No one quite knows what is coming soon for the Secretariat and other underutilized historic government buildings, but it is an ominous sign that even buildings with perfectly valid public uses are being privatized. At the time of my visit, the pale stone, stripped-classical edifice that had been the regional courthouse was covered in bamboo scaffolding and swarmed by construction workers, some from as far away as China. The erstwhile courthouse, I learned, was being converted into a luxury hotel. A few blocks away, the High Court, a red-brick building completed in 1911 that boasts Yangon’s most famous clock tower, had been auctioned off to Thein Tun, the junta crony universally known as “Pepsi” for his monopoly on bottling the American soft drink.
A kleptocratic petrostate spinning out billions of natural gas wealth each year.
Just because the military is ceding political power doesn’t mean its leaders have any intention of ceding economic power. Myanmar has long been a kleptocratic petrostate spinning out billions in natural gas wealth each year. Under military rule, the money was pocketed by generals and lavished on dubious vanity projects like the new capital, which boasts a 20-lane road (reputed to be the widest in the world), leading to a moated, 31-building seat of government — a full-blown, modern-day Forbidden City. Even after the transition to civilian rule, the departing dictators hope to retain their outsize role in the Burmese economy. The military’s holding company has no plans to divest its large stakes in banking, mining, and breweries. And through the privatization of public buildings, government officials and their cronies will retain personal control over prized parcels that would have otherwise been transferred to democratic control.
In this strange interregnum between dictatorship and democracy, the several factions that constitute a loosely-organized opposition are challenging the junta and its cronies for the right to determine Yangon’s future. First among these is the country’s intellectual elite. During the most repressive decades, persecuted Burmese intellectuals, many having done time in Yangon’s Insein Prison, leapt at opportunities to study and work abroad, in places like Singapore, Thailand, Europe, and North America. Now they and their children are repatriating to Yangon, hoping to apply expertise and experience gained abroad. The best known is Thant Myint-U, the founder of the historic preservation group Yangon Heritage Trust. The grandson of a former UN Secretary General, he grew up in New York City and Washington, D.C., before studying at Harvard, Johns Hopkins, and Cambridge. Bringing a Western view of historic preservation to a region where it is just taking root, Thant Myint-U has convinced local authorities to institute a building height limit in Yangon’s historic downtown and preserve the grand structures of the city’s colonial past.
Density in downtown Yangon. [Andrew Rowat]
Density in downtown Yangon. [Andrew Rowat]
The transitional government has also welcomed international advisers. JICA has crafted its master plan for the growing city, and UN-Habitat has opened a Yangon office to train Burmese urban planners and upgrade local building codes. Though staffed by earnest international-development professionals (including many inspired by Aung San Suu Kyi), these agencies serve at the pleasure of the current government, so there are limits to what they can propose. And because Myanmar was such a closed society for so long, most international experts, by definition, have little firsthand knowledge of the country. The director of the local UN-Habitat office at the time of my visit was an American, just relocated from Germany, who had spent even less time in Myanmar than I had.
Even as new policies have been proposed and some enacted, there remains a sense that everything is up for grabs. Signs of political backsliding over the last year —including harsh sentences for journalists reporting on sensitive issues and slow progress on a constitutional amendment that would permit Aung San Suu Kyi to run for president — have drawn warnings from foreign diplomats. And even if the democratic transition takes place on schedule, politically connected developers will still try to roll back planning reforms. I saw this openly laid out during my time in Yangon, when the privatized former Ministry of Foreign Affairs building reopened as high-end apartments. Here, the possibility of overturning the new height limits had literally been built into the renovation. At the ribbon-cutting ceremony, a spokesman for the developer, Youth Force Group, told The Myanmar Times, “Recently this area was put into the restricted category for high-rise development so we changed our plans from a 14-story to a 6-story serviced apartment. However, we will develop the foundations of the building so that it can be expanded to 14 stories in the future if the rules change.”
Sule Pagoda (left) and City Hall (right), Yangon. [Eugene Phoen]
Sule Pagoda (left) and City Hall (right). [Eugene Phoen]

The Army Major Turned City Planner

Grand plans for Yangon are being formulated in an urban planning office in City Hall — an edifice that embodies the city’s cosmopolitan traditions and its hopes to reconnect with them today. Completed in 1940, the building opened just before the Japanese invasion that ended Yangon’s reign as the crossroads of Southeast Asia. Situated across the street from a notable Buddhist shrine, the shimmering golden Sule Pagoda, City Hall’s simple four-story square-around-a-courtyard structure is ornamented with details that lend it the grandeur of a palace. The front and rear entryways and all four corners are topped by traditional pyatthat roofs, with their three-tiered, spiky decorative eaves. The front entrance is flanked by a pair of cartoonishly fierce carved nagas(serpents). Inside, more nagas, these cast in bronze, hold up the light fixtures in the central stairwells, which are themselves accented with teakwood and polished marble. Even the elevator bays are decorated with dark carved stone as if they were the doorways to Burmese temples. British architects had initially proposed a fully Western-style building, but it was ornamented with indigenous details at the insistence of Burmese politician U Ba Pe and Burmese architect Sithu U Tin, who had trained in Bombay. Construction was carried out by a skilled contractor who was neither British nor Burmese but Persian.
During a half-century of stagnation — Burma attained a shaky independence in 1948 but became a one-party state in the 1962 coup — the City Hall building fell into decay. Dark patches of mildew stained the tangerine fa├žade. But in mid-2011, as the reform period began, the building was repainted a pristine white with lilac accents to highlight its ornamentation, and the interior was painstakingly restored to splendor, down to the carved wooden public message boards that still read “Corporation of Rangoon,” the official name of the colonial municipality.
On the top floor, in a large, sparsely furnished office, I met JICA senior planning advisor Suzuki Masahiko, the most important foreign expert crafting plans for Yangon’s future. Dressed in an open-collar, short-sleeve shirt, with the window curtain drawn against the tropical sunlight, the better to see his computer monitor, Masahiko projected an air of quiet competence. Masahiko told me he had first visited Myanmar in 2005, but JICA had been working in the city for decades, even keeping a skeleton crew in country through the period of isolation that followed the 1988 crackdown on Aung San Suu Kyi’s democracy movement. In the last few years, as Myanmar has rejoined the international community, the Japanese government has expanded its technical assistance to include urban planning advice.
Left: Suzuki Masahiko, JICA planner. Right: Yangon City Hall elevator. [Daniel Brook]
Left: Suzuki Masahiko, JICA planning advisor. Right: Elevator, City Hall. [Daniel Brook]
The resulting master plan, “Yangon 2040: The Peaceful and Beloved Yangon — A City of Green and Gold,” expects the city to more than double in population by that milestone year. The plan aims to accommodate this growth while still protecting green space and preserving the colonial streetscapes and landmarks of the city’s historic heart. Today, Old Yangon, which represents just 2 percent of the metropolitan area’s footprint, accounts for 10 percent of its population and roughly half of its commercial establishments. The downtown infrastructure is already groaning from this concentration. To relieve pressure on the city center, the master plan calls for enforcing strict height limits in the old city and directing growth to the outskirts.
To urbanize the surrounding area without building sprawl, the plan envisions a system of “sub-centers” (dense nodes of development) and “green isles” (blocks of preserved green space). The most important sub-center, a second central business district called Mindama, is slated to be built 10 miles north of the historic center, near the rapidly-expanding Yangon International Airport. No doubt, this will be an attractive location for the international companies that have so fiercely bid up office rents downtown and whose executives now have to factor in a long, congested trip to the airport. But as an office district, the location has a key downside: buildings can only rise 12 to 15 stories without interfering with flight paths.
The other key sub-center is Thilawa, a new port and industrial zone being built a dozen miles downriver from the current port. A joint venture between major Japanese corporations, including Mitsubishi, and Burmese concerns, including the military’s holding company, the Thilawa Special Economic Zone broke ground in November 2013. Its first electronics and automobile factories are scheduled to open in 2015.
To link all of these developments, the proposed transportation improvements are suitably ambitious, though most are far from shovel-ready. In a kind of “kitchen sink” strategy, the master plan calls for major improvements in both public and private transportation. It envisions a ring road encircling the entire region — a major engineering challenge, considering all the rivers and inlets of Yangon’s delta landscape, to say nothing of the fact that beltways have become synonymous with gridlock in much smaller cities.
Sensibly, the master plan also calls for improvements to the Circle Line, a British-built rail loop that runs through downtown Yangon, linking the center to the outskirts. Today, the decrepit line is more like a kiddie ride at an amusement park than a viable public transportation system. Taking nearly 3 hours to travel a 28.5 mile route, it moves no faster than a bicycle. Largely abandoned by riders, it accounts for just 3 percent of urban trips, compared with the 80 percent served by the overburdened bus system with its fleet of used Japanese imports. (Since the Japanese drive on the right but the Burmese on the left, the vehicles are jury-rigged to add a back door for passengers on the driver’s side.) With so few passengers, the Circle Line’s main draw is for freight transportation. When I rode it, a man got on with two giant piles of bananas balanced on what looked like a scale carried across his shoulders. He groaned audibly as he dropped the load with a thud in the center of the car. There were so few passengers, no one even had to move out of his way.
The Circle Line. [Daniel Brook]
The Circle Line. [Daniel Brook]
The circle line runs through the Mahlwagone neighborhood. [Andrew Rowat]
Daybreak along the Circle Line in the Mahlwagone neighborhood. [Andrew Rowat]
Plans to improve the rail loop with Japanese help are beginning to take shape. On a recent trip to Tokyo, Myanmar Railways officials rode that city’s circle line, the Yamanote, which was built before Yangon’s but has been consistently upgraded and now travels at 55 miles per hour. “They said they want to improve their circle line to be this fast,” Masahiko said. And Japanese industry is happy to oblige. In a recently-negotiated land-for-speed deal, a Japanese firm will gain the right to develop state-owned real estate along the tracks in exchange for upgrading the train line. The master plan envisions the improved rail loop linking up with new light rail and monorail systems at transit hubs, and raising rail’s share of urban trips to 30 percent by 2040. These connections will be particularly crucial for the success of Thilawa since, unlike Mindama, it is located far from the Circle Line.
With lucrative opportunities for Japanese industry baked into the master plan, there is some grumbling in Yangon about whose interests it really serves. But Masahiko contends that the Japanese interests are more grandly geopolitical than narrowly economic. He hinted that part of the impetus behind JICA’s involvement is countering China. (“If Japan won’t do it,” he offered, “maybe China will do it for the influence?”) Already, he noted, China has bestowed its own infrastructure improvements on Myanmar, notably a freight rail link in the north of the country that supplies China with Burmese fossil fuels. (Last month, Myanmar’s government publicly balked at China’s more ambitious plan to build a high-speed passenger rail line through Myanmar and other Southeast Asian countries to link China and Singapore.) Still, there is no doubt the ring road envisioned by the master plan will be filled with increasing numbers of cars and trucks made in Japan. And notably missing from the list of protected historic buildings in Old Yangon is the city’s central train station, a late-colonial landmark much like City Hall that clads a modern institution in traditional Burmese forms. That may have something to do with the plan to double speeds along the Yangon-Naypyitaw-Mandalay railway line, which currently takes a bumpy 15 hours to travel 400 miles, with a development loan from Japan. Transforming Yangon’s central rail terminal into the type of transit-oriented development hub common in Japan, where major train stations are retail centers, would be made easier by leveling the old station than by preserving it.
There are also questions of how comprehensively the plan will be implemented. Some projects, like Thilawa, have broken ground, while others, like the Circle Line improvements, are just ideas on paper. Building some parts without others could be a disaster. Consider, for example, the possibility that Thilawa SEZ succeeds wildly, creating thousands of manufacturing and port jobs a dozen miles from the city center, but the transportation infrastructure improvements fail. This would be a recipe for the kinds of hellish commutes typical in Dhaka, Bangladesh, where workers often log several unpaid hours a day getting to and from their sweatshop jobs.
Toe Aung, former army major, current urban planner for the city of Yangon. [Daniel Brook]
Perhaps the biggest question is who will carry out the plan after the transition to an elected government. Masahiko walked me down the hall to meet the man at whose pleasure he serves, the chief urban planning official for the Yangon City Development Committee, Toe Aung, a laconic, stone-faced man who wore a blue uniform with a chest full of ribbons over his breast pocket. I noticed that in the photo on his ID badge, he was wearing a green uniform with the same insignia, the uniform of an army major. One of the underappreciated aspects of military rule is that military men end up in positions for which their military training is irrelevant. Toe Aung was trained to suppress Yangon, not manage it.
Our urban planning office was founded only two years ago.
“This department is under construction,” he told me. “Our urban planning office was founded only two years ago.” Before then, every planning decision had come down from the national government in Naypyitaw. Starting from square one, he said, the office was busy creating the basic legal framework for rezoning Yangon. As of now, “we cannot change agricultural lands to commercial to residential,” he explained, a major impediment to urbanizing the new “sub-centers” envisioned by the JICA plan.
As Yangon grows outward into the greenfields that ring the city, the farmers who currently work that land are organizing. In the past, the junta expanded the city limits by fiat, no negotiations necessary, but today rural people are demanding fair compensation in exchange for development rights, and activist attorneys have rallied to represent them.
I wondered whether an army officer could make the transition to democratic city planner. Toe Aung had been retired from the military for nearly a decade, but he didn’t seem to have made his peace with people asserting their rights. “We’re facing many problems with the farmers [who] don’t want to move,” he complained. Democratization requires more than just a change in legal framework, or a switch from green uniforms to blue; the bureaucracy itself has to adopt a new attitude of public service.
The Shangri-la Residences under construction, October 2012. [Andrew Rowat]
The Shangri-la Residences, preparing to open, May 2014. [Andrew Rowat]
The Shangri-la Residences, under construction in 2012 and preparing to open in 2014. [Andrew Rowat]
Tight-lipped as he was, Toe Aung was the most accommodating political official I met in Myanmar. When I arrived for a scheduled interview with Dr. Than Than Thwe, the deputy director of urban and regional planning for Yangon at the national Department of Human Settlement and Housing Development, she sat me down in her teakwood-paneled, air-conditioned office. Imperious in a tailored skirt suit, she insisted I watch a PowerPoint presentation she had given at a conference in Europe. She read through the slides word-for-word, studiously ignoring my repeated prodding for additional details. Then she abruptly dismissed me, saying she was too busy to take any questions on the presentation or anything else. Her supervisor, Deputy Chief Architect Hlaing Maw Oo, who had been quite gracious when I met her at an academic lecture in Yangon, ignored my repeated attempts to schedule an interview during my trip to Naypyitaw. And she didn’t reply to basic — and repeated — requests for what should be public information: statistics on the length and cost of the lavish Naypyitaw road system.
Changing Myanmar’s haughty political culture is a big part of what Masahiko and other international advisers are up against. As Masahiko told me, he had been trying to convince Toe Aung and other government officials “that without social considerations, there’s a global understanding that you cannot implement anything. JICA has asked YCDC to pay relevant compensation fees if they move [someone’s] house. And that it must be done through negotiation [not] forced movement. Their culture was quite different in the past, so it’s hard for them to abide by international standards.” I understood what Masahiko, a Japanese public servant, meant by “international standards,” but in this region there is no standard. China, India, Vietnam, Singapore, and Australia, all have widely varying rules and practices for eminent domain. What standard practice will ultimately be in democratic Myanmar is a central question hanging over the country. And the answer is anyone’s guess.
After leaving Toe Aung’s office, I walked by the vast, ornate room where an elected city council will one day meet. It was packed to capacity with people waiting in line to get building permits from overburdened clerks. YCDC staffers paid salaries of just $80 a month often work 15-hour days, but they cannot keep up with overwhelming demand. Even if they could, the legal framework is not yet in place to guide them.
Intersection of Sule Pagoda Road and Anawratha Road. [Andrew Rowat]
Intersection of Sule Pagoda Road and Anawratha Road. [Andrew Rowat]

The First Gated Community in the Country

Out on the streets of boomtown Yangon, the best-laid master plans seemed very remote from lived experience. Just one block from City Hall, a makeshift corrugated metal fence surrounded a vacant lot abutting the Traders Hotel. When I first arrived in Yangon, I had assumed it was just another building demolition site. I later learned that, for decades, it had been a public park in the heart of the city; then it was ceded to the Traders Hotel, part of the Shangri-la chain based in Hong Kong.
“We don’t know how they got it,” Maw Lin, an architect turned journalist told me when we met me in his office at The People’s Age, the English-language newspaper where he is editor-in-chief. Wearing the long hair of a European intellectual and the plaid lungi (summer-weight kilt) of a traditional Burmese man, he recounted his paper’s crusades against what he called “the high-rise problem [and the] misuse of public space by the government.”
Now, staring down at the lot from a pedestrian overpass above a broad avenue (right-of-way being a quaint foreign concept here), I couldn’t help but wonder about the political mechanisms for implementing JICA’s master plan. Here was a public park that could have been a central link in the chain of “green isles,” and yet the nominally free press couldn’t even determine how it had ended up in the hands of private developers.
Out on the streets of boomtown Yangon, the best-laid master plans seemed very remote.
I heard stories of similar land grabs on the rural outskirts. In 2012, Myanmar enacted a new law, ostensibly to protect farmers from having their land stolen for development, which increased the maximum jail time for criminal trespassing from 3 months to 7 years. In fact, as activist Han Shu Win told me over endless tiny cups of tea, the strict new law has been used against farmers who have had their ancestral plots confiscated and are then arrested for “trespassing” on the land they have farmed for their entire lives.
Even the bona fide restrictions that have been enacted in accordance with the master plan may ultimately be undone by parties with a financial stake in unfettered development. When I spoke with Than Oo, Managing Director of Mundine Realty Company, in his cluttered downtown office, he told me he could accept the protection of certain historic buildings, but the height limits and “government regulations around the heritage buildings that don’t let you ‘detract’ — this is rubbish.” He informed me that the trade group of which he is vice chairman, the Myanmar Real Estate Services Association, was already “making our argument to the government to change this policy,” and that it hopes to elect candidates in the first free election who will overturn the height limits. “There is so much planning for the center of Yangon but it all depends on the outcome of the 2015 elections,” Than Oo told me pointedly.
To gauge Yangon’s prospects for the future, I took in its newest and most luxurious development: the Pun Hlaing Golf Estate, a gated community located across the river from the city center. After traversing an elevated expressway that had been privately built by the community’s developer, the Singapore-listed YOMA Strategic Holdings, my cab passed through a landscaped, palm-bedecked entryway. Being a foreigner entering a community whose residents hail from 27 different countries, I had little trouble talking my way past the guards at the security hut.
Outside the gates of Pun Hlaing Golf Estate. [Daniel Brook]
Outside the gates was Southeast Asia; inside, it felt more like South Florida. But it was impossible to completely separate the two worlds. In the restroom of the air-conditioned sales office, the window looked out onto a hedge. Visible behind it was village of thatch-roof huts on stilts.
As Soe Yan Paing, an eager young realtor with spiked black hair, drove me around the development, I came to understand that the “Estate” is actually several adjacent neighborhoods — Rose Garden Villas, Ivory Court, The LakeView@Evergreen — all situated within the same security envelope. One section was filled with modernist mid-rise condominiums, a popular form of high-end housing in Yangon, since Burmese law permits foreigners to own condos but not single-family homes. Another neighborhood was laid out around a Gary Player-designed golf course, featuring “villas” done up in the Spanish colonial style popular in America’s Sun Belt exurbs. Though owned by wealthy Burmese, the villas are typically rented out to expatriate businessmen and their families for around $6,000 per month. (Prices for the homes have appreciated more than 50 percent in the past two years and now top out near $1 million.) In the community clubhouse, which boasted one of the only Christmas trees I saw in Myanmar, the restaurant offered a very un-Burmese turkey with brown sauce for the very un-Burmese price of $15. Three generations of a British family sat enjoying their lunch on the restaurant’s outdoor deck, the visiting grandparents doting on their grandchildren. A campus of the English-language Yangon International School is conveniently located just outside the gates.
Somewhat surprisingly, since the development so clearly caters to foreigners, the Golf Estate is a joint venture with the Burmese government. As YOMA CEO Andrew Rickards explained, the government owns a 25 percent stake. “They owned the land,” he said in his top-floor office in one of the few Class A office buildings in Yangon, so “they wanted to share in the upside.”
Rickards was insistent that Yangon would develop smarter than other cities in the region had. “The great thing about being last to the party is you don’t have to make all the same mistakes,” he said. But the Golf Estate — with its profligate use of land, exurban location, and appeal to wealthy foreigners — seemed to undermine that point. So did his company’s claim to fame: “We built the first gated community in the country,” Rickards crowed.
A $440 million Vietnamese development on the banks of Inya Lake. [Andrew Rowat]
A $440 million Vietnamese development on the banks of Inya Lake, Yangon. [Andrew Rowat]
In its transition from authoritarianism to democracy, Yangon may get the worst of both systems rather than the best of both. While there is nothing unusual about an unelected government speculating in high-end real estate development — the practice is widespread in China as well as regional imitators, like Vietnam — the peculiarities of the democratization process in Myanmar, ironically, make the government even more brazen. Just outside the grand gate to the Pun Hlaing Golf Estate sits a shantytown — something you’ll almost never find in China. There, when the government clears peasants from their land for high-end urban development, it is, no doubt, authoritarian. But the rulers invariably rehouse the displaced in modest high-rise apartments rather than leaving them to build their own informal settlements. For the Chinese authorities, it is simply a matter of self-preservation; because the Party is worried about its legitimacy, China’s rulers feel compelled to offer some baseline improvements in its citizens’ lives. But by conceding power voluntarily, on its own terms and schedule, the Burmese government no longer claims legitimacy, so there is no need for it to even pretend to serve its people. In this unusual period when dictatorship is waning but full democracy has yet to be established, the departing dictators and their cronies can stuff their pockets with impunity.

This Is a Test for Us All

Yangon may yet develop smarter than its peer cities in the region, but this transition period will almost certainly go down as an era of lost opportunities. A more benevolent dictatorship could take advantage of the transition by imposing smart growth policies that are easier for authoritarian governments to enact than for democracies.
Like India, Burma is saddled with a rent control law, passed by British colonial rulers in 1947, that makes it impossible to raise rents in historic buildings to levels that would permit them to be maintained. Democratic India has never been able to reform its rent control laws because tenants would vote out any politician who dared tamper with them. The result is that even when individual historic buildings are successfully preserved, the vernacular architecture of historic neighborhoods is left to crumble. While democratic Myanmar will likely face India’s predicament, the unelected government has not indicated any interest in tackling rent control before it leaves office.
Similarly, authoritarian governments in places like Singapore and China cap new car registrations to limit traffic congestion — a wise urban policy but one that would be very hard to enact in a city where leaders are freely elected. As one advisor to the Burmese government, a civil engineer who worked for many years in Singapore, confided to me on condition he not be identified by name, “I spoke to the decision-makers” about capping car registrations, but “they are not thinking about that [because] wealthy [Burmese] who are close to the politicians would complain.” As an alternate solution, the advisor proposed a heavy import tax on foreign cars, at least for the second and third vehicles imported by a single owner. That, too, went unheeded. “I tried to pursue it but so far I’ve been unsuccessful,” he lamented.
Side street off Mahabandoola. [Andrew Rowat]
Side street off Mahabandoola in downtown Yangon. [Andrew Rowat]
Still, Yangon has assets that other cities in the region didn’t have during their earlier development booms. It has a decent master plan for smarter development. It has wealthy Asian neighbors happy to invest in its future. It has the goodwill of the West, eager to aide its transition to democracy. It has considerable petroleum wealth that could be used to fund infrastructure and social investments. And it has, perhaps most crucially, an educated diaspora community returning to the country for a once-in-a-lifetime opportunity to contribute. As Thiha Saw, the editor of the reformist, Burmese-language Myanma Freedom Daily newspaper, enthused when I spoke to him in his office, “We’ve been waiting for this moment for 40 years. Let’s go for it!”
It is an inspiring spirit. But inspiration may not be enough. Surveying a region full of cities that struck a devil’s bargain to grow rich by growing congested, polluted, and architecturally interchangeable, Moe Moe Lwin wondered whether Yangon could develop differently and “be the model.” What she was saying applies not just to Myanmar, but to all of us in an increasingly urbanized world. Can we learn from our mistakes and democratically and judiciously plan a sustainable city?
For decades, the world has pitied and gawked at Yangon as a frozen-in-amber vision of the past — a city without ATMs or cell phones run by a brutal holdover from the totalitarian 20th century. Today, we must look to Yangon with engagement and urgency. For better or for worse, it will offer a glimpse of our common future.


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