02/17/2011, 00.00
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Yangon: gold and dollar skyrocket amid fear of political and social instability

by Yaung Ni Oo
Rumours about pending wage increases for public servants and military staff provoke spike as the government plans to issue a new 10,000-kyat bill. Strongman General Than Shwe plans to set up a special economic zone along the Chinese model. AsiaNews source says ordinary Burmese fear impact on markets and prices of basic consumer items.

Yangon (AsiaNews) – The price of gold and the value of the US dollar have taken a sudden leap in Burma in the last few days following speculation that the new government will increase salaries for civil servants and military personnel and put a new 10,000-kyat note into circulation. Strongman General Than Shwe could also order the creation of a Special Economic Zone (SEZ) along Chinese lines. However, ordinary Burmese are afraid that recent economic changes will lead to higher consumer prices, especially for basic items, as well as social instability.

According to Yangon-based business sources, businessmen and traders in the former Burmese capital are investing heavily in gold and dollars in anticipation of the moves. “The rumour going around now is that the new government will double salaries for civil servants and increase pay for military personnel fivefold,” a local source said.

It appears almost certain that a new 10,000-kyat bill (about US$ 1,500 at the official exchange rate), will be introduced, double the highest existing denomination in circulation. Many fear that this might spark an inflation spiral, pushing up consumer prices, in particular the cost of basic items.

The recent switch from a military dictatorship to a parliament and a government formally in the hands of civilians, albeit with real power still vested in military, could lead to political instability.

Some leading figures in the military junta do not appear happy with their new posts. Dissatisfied generals could lead to negative reactions in the wider society and the markets.

A Yangon economist, who asked his name be withheld, warned that higher salaries for public servants and the military could alarm the population over their possible impact on markets.

Recently, speculation in gold, the US dollar and food prices has risen, the source told AsiaNews. “Those who can afford it are buying in the expectation of price rises. However, poor people are not well placed to do anything. Many workers without connections to the government fear prices will skyrocket, whilst their wages will remain unchanged.”

In the meantime, strongman General Than Shwe appears bent on creating a Special Economic Zone (SEZ), following China’s own special zones, which he visited last year. In fact, the State Peace and Development Council (SPDC) recently promulgated a Myanmar Special Economic Zone Law to “cause further development of the economic momentum of the state.”

Experts warn however, that repressive laws and tight state control are not likely to attract foreign investors since the country remains a “high risk” investment destination.

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