Abstract
Myanmar experienced unprecedented real exchange rate appreciation in 2007–2011, while the country had two natural resource booms, one of natural gas and the other of precious stones, specifically jade. In the face of exchange restrictions, these two commodities might have affected the unofficial market rate differently. A qualitative examination of available data reveals that natural gas export revenues did not have direct impacts on the unofficial market rate, whereas jade exports were a primary cause of its extraordinary appreciation. Furthermore, tight import controls exacerbated the appreciation by blocking outlets for large inflows of export revenues in the unofficial forex market. While bringing in exchange rate instability temporarily, the relaxation of exchange restrictions since 2011 is expected to restore the self-stabilizing feature of exchange rates.
This chapter draws on Kubo (2013) with the permission of the publisher, John Wiley and Sons.
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Notes
- 1.
The U.S. dollar weakened against major currencies in this period, which partly accounted for the appreciation of the kyat. However, the kyat appreciated far more sharply than other currencies in the region.
- 2.
Egreteau (2012) attributes the rapid increase in jade exports to the entry of powerful business cronies into the extraction and trading of jade in the second half of the 2000s. Jade extraction is capital intensive.
- 3.
However, full liberalization of fuel imports by the private sector did not take place until the new government took office in March 2011.
- 4.
These figures are retrieved from CSO (various issues).
- 5.
When there are import controls, this does not hold. Here, a baseline case where there are no import controls is presumed.
- 6.
- 7.
The definition of international reserves appears to be amended in 2011. Before 2011, FCDs at the MFTB seem to have been counted as international reserves. After the amendment of the definition, the amount of international reserves in 2009 revaluated from USD 4,638 million to USD 2,809 million. Figure 5 is consistently compiled based on the previous valuation method, which allows us to see the trends of foreign asset accumulation. However, this figure is not consistent with Fig. 2 in Chap. 5.
- 8.
Supporting evidence of subsiding crowding-out is that by April 2005, the authorities abolished the import license conditionality that had required applicants to allocate 80% of the total import value for goods on the priority list.
- 9.
Author’s interview with an executive committee member of the Union of Myanmar Federation of Chambers of Commerce and Industry in March 2012.
- 10.
There are considerable discrepancies between Myanmar’s official data—Selected Monthly Economic Indicators—and the data compiled by the IMF (See Table 3 in Chap. 3). Focusing on trading of “export earning,” we proceed the analysis in this section drawing on the official data.
- 11.
The rise in private imports in 2008–2011 was due to loosening of the state monopoly of fuel imports as explained in Sect. 2.2 of this chapter.
- 12.
The mirror statistics indicate that Myanmar’s exports soared in 2014. This was mainly owing to China’s jade imports. China Customs reported that jade imports from Myanmar jumped to USD 11.6 billion in 2014 from a five-year average of USD 0.6 billion in 2009–2013. Such a rise in China’s jade imports is not consistent with Myanmar’s official data. It might represent a once-off adjustment in China’s import statistics.
- 13.
Another factor is the rise of FDI and the associated imports by foreign firms.
- 14.
According to Myanmar’s official statistics, the Selected Monthly Economic Indicators, the number of imported passenger cars in 2012 (flow) was equivalent to 27.8% of the country’s total registered passenger cars (stock), indicating enormous pent-up demand during the period of strict controls on car imports.
- 15.
These figures are calculated with data in Asian Development Bank’s Key Indicators for Asia and the Pacific 2016.
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Kubo, K. (2018). Import Controls, Natural Resource Booms, and Extraordinary Real Exchange Rate Appreciation in 2007–2011. In: Myanmar’s Foreign Exchange Market. Springer, Singapore. https://doi.org/10.1007/978-981-13-1789-7_4
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