Home Insider Insider Analysis Preparing for an Economic Upheaval – Part I

Preparing for an Economic Upheaval – Part I

The fortune teller who correctly predicted the change of the Presidents under current administration, also foretells that there will be an upheaval in 2019, similar to those events that happed in 2007 saffron revolution. Let the fortune telling aside, we expects major economic upheaval in 2019.

We have been conducting economic confidence surveys, reviewing six monthly economic performance of the government and the country, plus import/exports, FDIs, exchange rates statistics and all indicators are pointing downwards.

Banks are riddled with bad loans, FDIs are insignificant, visitors arrivals are at new lows, major companies are postponing investments, and $ is at historic high. We are not quite sure how the team of so called “foreign experts” is managing Myanmar economy and its potential, yet a mediocre GDP growth and lackluster assurances from government are hardly boosting any confidence. Resignation of the finance minister with a fake Phd certificate and appointment of a one-foot-in-the grave senior citizen as the new finance minister did nothing but affirmed lack of qualified people within NLD to be an economic czar.

Singapore Temasak Holdings (Singapore government Investment Arm) did a due diligence on biggest bank in Myanmar with the intention of acquiring the bank, yet the enormous mountain of potential bad loans apparently put them off. Temasek would want the bank without these loans, and negotiations stalled at this point.

Since the times of Teleno, Ooredoo, Carlsberg, Nestle, etc., making sizable investments into Myanmar, we have not heard of any significant brand name FDIs in the NLD government times. FDI are so important to countries, more so for developing ones. Singapore would not have become what it is today without significant FDIs. No doubt the government is making efforts to attract more FDIs. As Ray Dalio famously puts it: Effort is good, yet outcomes matter! The so-called the key pillar of Myanmar economic growth; tourism depends on visitors arrivals. This key statistics is down year after year since 2015. Government efforts just amount to NATO (No Action Talk Only).

I have met and discussed with two corporate CEOs, one on the plane and one over lunch. One is a household name in property development, both residential and commercial, and the other another brand name conglomerate. Both of them were in the list of doners (around 20 corporate honchos), for save Rakhine event, hosted by Aung San Su Kyi last year. Their companies have decided to postpone any significant investments until 2020, i.e, after the next elections! May be they see something about the economy that we all do not see!

Budget deficits, trade deficits, inflation, lackluster FDIs are all pushing $ to historic highs reaching nearly 1,420 Kyats. In the near future, the rapid depreciation may be as a result of some speculative activity, yet we expect $ rate to reach close to 1,450 Kyats before the end of the year and to exceed 1,500 before the end of 2019. Some may have the opinion that it is due to $ appreciation globally, yet if you look at the trade weighted USD index vs global currencies, it has not increased even 1% from end of May to end of June.

We gave been conducting quarterly economic surveys for three quarters in a row now and the sentiment has been negative in every single one of them. We have also interviewed two NLD insiders, one a MP and another who is an insider within the central executive committee of the party. Both of them are very critical of their own party and government. They have given rating of 1 in a scale of 1-10 on the government management of the economy (1 being the worst!). Economic issues may not be a forefront on the government agenda, as they should be, since the government is facing major challenges on multiple fronts: the security, peace process, illegal Bengalis, international relations, floods, etc. Yet for all business people and professionals, it becomes painfully obvious by now how well this government can manage the country and make it prosper. At least there is the government’s standard solution to all My