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Myanmar, once the world’s largest rice exporter, is set to re-engage with the global economy in a boost to Southeast Asian growth as the U.S. prepares to ease some sanctions.
Secretary of State Hillary Clinton said yesterday the U.S. will selectively lift restrictions on investment in Myanmar, after this month’s elections allowed democracy advocate Aung San Suu Kyi to win a seat in parliament. This week, leaders from the Association of Southeast Asian Nations, or Asean, called for the U.S. and Europe to end sanctions.
The opening of Myanmar’s economy, one of Asia’s last untapped frontier markets, may give investors and neighboring countries access to its mineral wealth and a market of 64 million people after decades of military rule. The nation bordering China and India has won support for its efforts to attract investment by holding elections and overhauling its financial system, including a managed float of its currency.
“Myanmar’s opening is the creation of a whole new consumer market and that cannot be but good for the rest of the region,” Rodolfo Severino, former secretary general of Asean, said in Singapore today. “There are opportunities for investment, but we have to see if the measures are sustained. The U.S.’s lifting of sanctions may be followed by other countries and that is important.”
American sanctions banned investment in Myanmar and imports from the country, restrict money transfers, freeze assets and target jewelry with gemstones originating in the nation. The European Union bans weapons sales and mineral imports.
By easing some sanctions, lifting some travel bans and naming an ambassador to the Southeast Asian nation for the first time since 1988, the U.S. seeks to encourage further reform in the country, Clinton said yesterday.
Myanmar’s total land area, second only to Indonesia in Southeast Asia, contains deposits of gold, copper and gemstones. The nation is positioned between India and China, astride maritime trade routes between Europe and East Asia and was in British colonial times the world’s largest rice exporter -- a title now held by neighbor and one-time enemy Thailand.
France’s Total SA, Chevron Corp. of the U.S. and Malaysia’s Petroliam Nasional Bhd (PET). entered the nation years ago to tap offshore energy reserves. Even so, large swathes of its waters sit unexplored, indicating the potential is greater than the proven gas reserves that the BP Statistical Review estimates to amount to one-eighth the size of Malaysia’s.
Investor Jim Rogers, the chairman of Rogers Holdings who predicted a global commodities rally in 1999, said Feb. 22 he’d put all his money in Myanmar if he could. Standard Chartered Plc, the U.K. bank that earns more than two-thirds of its profit in Asia, has said lenders are waiting for sanctions to be lifted before considering a return.
The Central Bank of Myanmar set a reference foreign exchange rate of 821 kyat per dollar today, according to its website. It adopted a managed float for its currency on April 1, scrapping a 35-year fixed exchange rate.
Myanmar’s emergence comes as its neighbors grapple with slowing growth in China and the European debt crisis.
A Chinese services industry index showed a slower expansion in March, with the purchasing managers’ index for the sector easing to 53.3 last month from 53.9 in February, according to a statement issued by HSBC Holdings Plc and Markit Economics today. A reading above 50 indicates an expansion.
Elsewhere in the region, Taiwan’s consumer prices rose 1.32 percent last month from a year earlier, according to the median forecast in a Bloomberg News survey. The Central Bank of Sri Lanka may keep its reverse repurchase rate at 9 percent and the repurchase rate at 7.5 percent today, according to three of five economists surveyed by Bloomberg.
Initial jobless claims in the U.S. probably fell 4,000 in the week to March 31 to 355,000, according to the median forecast of economists in a Bloomberg News survey ahead of a report today.
The Bank of England is expected to hold its policy interest rate at a record-low 0.5 percent, according to economists surveyed by Bloomberg News. The Monetary Policy Committee will back finishing their 325 billion-pound ($516 billion) stimulus, economists predict.
U.K. manufacturing output probably rose 0.1 percent in February from the previous month, while overall industrial production climbed 0.4 percent, according to Bloomberg surveys. Germany’s industrial production probably decreased 0.5 percent from January, when it gained 1.6 percent, according to the median estimate of economists in a Bloomberg News survey.
The reconsideration of U.S. sanctions against Myanmar comes as the country’s lawmakers reach out to political dissidents and lift repressive measures imposed by the former military junta, creating an opening for Western companies in an economically underdeveloped country.
Bans on investing in Burmese timber and gems probably will continue, according to two senior administration officials who briefed reporters on condition of anonymity because they weren’t authorized to be named.
There will be a “targeted easing” of a U.S. ban on the export of U.S. financial services “as part of a broader effort to accelerate economic modernization and political reform,” Clinton said.
Due to European Union and U.S. sanctions, credit cards are rarely accepted in Myanmar, an impediment to commerce.
The officials declined to put a timeline on the speed with which the changes would be implemented, saying it will be a matter of days in some cases and weeks in others. Invitations to visit the U.S. have been extended to selected Burmese officials, including Foreign Minister Wunna Maung Lwin, they said.
Suu Kyi, who met with Clinton in December, this week called for a “new era” after her National League for Democracy rejoined the political system and claimed victory for 43 of 44 seats it contested in April 1 by-elections. It boycotted a 2010 election won by President Thein Sein’s army-backed party, which along with the military still controls more than 80 percent of parliamentary seats.
Still, restrictions on capital flows, lack of a developed stock exchange, an untested legal environment and rudimentary infrastructure may give investors reasons for holding off putting money in the former dictatorship.
Myanmar is “a difficult market” where people don’t have much disposable income, Luc de Waegh, founder of business- advisory company West Indochina Ltd. who helped set up British American Tobacco Plc’s Myanmar operations in 1993, said before this month’s election. “The future looks very bright, but in the meantime there isn’t much money there.”
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