Reshuffle puts 'right person in right place': government

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22 THE MYANMAR TIMES JULY 29 - AUGUST 4, 2013 Business Volatility likely after govt loosens grip o Domestic banks say they are ready for the arrival of an inter-bank forex market in August, a move that will result in ‘lively and dynmaic’ trading as the govt moves to curb the black-market trade in US dollars ayethidarkyaw@gmail.com AYE THIDA KYAW DOMESTIC banks say they are ready for the inter-bank foreign exchange trading market that will be launched in August as the government takes another step toward a freely traded kyat. U Zaw Lin Htut, senior general manager of international banking at Kanbawza Bank, said lenders have already installed the necessary telecom infrastructure, including extra land lines, and have developed backup plans to deal with network failures. Once the market opens, domestic banks will be able to negotiate exchange rates with each other. Rates can change in an instant rather than once a day as they do now, U Zaw Lin Htut said, referring to the central bank’s daily auction that sets the exchange rate between the kyat and the US dollar every weekday at 9am. ‘One of the critical issues facing Myanmar is how to absorb black market activity into the formal economy.’ Sean Turnell Economics professor Macquarie University He predicted that the market will be “lively and dynamic”, but said that trading should be conducted within a narrow margin so that exchange rates remain stable. The Yangon Foreign Exchange Market Committee – which comprises the 16 domestic banks given licences last November to conduct foreign-currency transactions – has been drafting regulations and a code of conduct in anticipation of the move to interbank trading. It will make these public in August. U Win Myint, a spokesperson for the Ministry of Commerce, said the exchange rate between the kyat and the US dollar will be determined by supply and demand. He added, however, that the market could possibly be manipulated by those who hold large reserves of foreign currency, such as banks and exporters, and that this could cause the kyat to depreciate. “Someone holding or selling a lot of money could have an impact on the currency trade, but the central bank can intervene in [the market] if manipulation is occurring,” U Win Myint said. The central bank plans to complete the switch from the managed-float system it has used since April 2012 to a free-floating policy within a year, deputy finance minister U Maung Maung Thein said. “When the market operates under a free-floating policy, we have to think about how far we should go,” said a spokesperson for the central bank’s foreign exchange management department. He said the new system will not be entirely free but it will be freer than the current one. Initial trades will be restricted to transactions between the kyat and the US dollar, he added. The spokesperson said the transition is being made with help from the International Monetary Fund and the Japan International Cooperation Agency. The former is providing advice while the latter has provided technical training to central bank staff as well as advice. Sean Turnell, an economics professor at Australia’s Macquarie University, described the move as “good policy”. “There are risks of course,” he said. “The banks will have to develop hedging and other strategies against exchange-rate movements and other market volatilities. But this is not ‘rocket science’,” he added. “After an initial adjustment period they should be able to cope fine.” The move could also help curb the black market. “One of the critical issues facing Myanmar is how to gradually absorb black-market and other ‘informal’ economic activity into the formal market economy. This is a step in that direction,” Mr Turnell said. He also advised that Myanmar maintain a managed float, saying that “such a system safeguards against long-term misalignments and diversions from fundamentals”. At the same time, “it gives some policy discretion”, he added. Mr Turnell also said an exchange rate of about K1000 to the dollar “sounds reasonable”. It helps the government pursue an export-led growth strategy and at the same time allows
BUSINESS EDITOR: Vincent MacIsaac | biz.news.myanmar@gmail.com Pressure mounts on U Aung Win BUSINESS 25 Row over rent could delay relocation PROPERTY 28 Exchange Rates (July 26 close) Currency Buying Selling Euro Malay Ringitt SG Dollar Thai Baht US Dollar K1285 K305 K770 K31 K975 K1303 K310 K780 K32 K978 23 n kyat Controversial pipeline to begin sending gas to China this week AUNG SHIN Photo: Staff for the accumulation of foreign reserves. “This strategy and system [has] a good track record in the context of other Southeast Asian countries pursuing export-led growth,” he added. Meanwhile, the kyat appreciated slightly against the US dollar last week. The central bank reference rate was 977 to the dollar on July 26, compared with K980 the week before. The blackmarket rate ranged from K978-982 to the dollar. koshumgtha@gmail.com THE controversial pipeline that will ship natural gas from Rakhine State to China will begin operating this week, after an official opening ceremony at a control station in Mandalay Region on the evening of July 28, local officials said on July 26. This follows several weeks of testing in which there were no malfunctions or leaks, said a representative of two Chinese companies behind the dual pipeline. Alice Pyr, a public relations representative for Southeast Asia Crude Oil Pipeline (SEAOP) and Southeast Asia Gas Pipeline (SEAGP) told The Myanmar Times on July 26 that testing had “gone well” and that health and safety inspections by Southeast Asia Gas Pipeline were completed “several days ago”. Representatives of nongovernmental organisations opposing the project said residents of villages near the pipeline in Rakhine State had reported leaks during its testing phase. They said its operation would be delayed for a month or two as a result. However, Minister of Energy U Than Htay was quoted in state-run media last week as saying testing was complete and that there were no problems with the pipeline. The dual pipeline project will ship natural gas and crude oil from Rakhine State to China. The crude will be shipped to the state while the gas will come from offshore wells. The pipelines have sparked protests over environmental and Farmers in Rakhine State examine a paddy field that is flooded near the pipeline to China. Photo: Staff safety concerns. Protesters have also said the contract, which was signed under the military regime, should be revisited and that Myanmar should not export gas when three-quarters of the population lack electricity. Daewoo announced the discovery of Shwe gas field in 2004. The then-military government BILLIONS of US$ 30 Amount of revenue the government is expected to earn over the next 30 years from the pipeline project awarded purchasing rights to China in June 2008 under a deal that will see 6.5 trillion cubic feet exported to China over 30 years. SEAGP is the operator of gas pipeline from Kyaukphyu to Muse, a Myanmar border city. The cost of the 792.5 kilometre pipeline has been estimated at US$2.01 billion. China National Petroleum Corporation has a 50.9 percent stake in the project. Two South Korean firms, Daewoo and Korean Gas Corporation, hold 25.04pc and 4.17pc respectively, while two Indian firms – Gas Authority of India Limited and Oil and Natural Gas Corporation – hold 4.17pc and 8.35pc respectively, according to a report by the Shwe Gas Movement, which opposes the pipeline. State-run Myanma Oil and Gas Enterprise owns 7.37pc of the project. The gas pipeline is designed to transmit up to 12 billion cubic feet of natural gas a year, though it will initially transmit only 5.2 billion in the first phase, according to SEAGP. The pipeline crosses Rakhine State, Magwe and Mandalay regions, and Shan State. Myanmar is set to earn revenues of US$30 billion over the next 30 years from the project, according to the Shwe Gas Movement. U Wong Aung, a representative of the advocacy group, said protests against the project will continue even after the gas starts flowing. “We are still receiving complaints from local people that land has been damaged or confiscated due to the pipelines. We have received thousands of complaint letters, but we have not received any commitment to address the complaints from the authorities,” he said. Old hand on new board AYE THIDAR KYAW WIN KO KO LATT PRESIDENT Thein Sein has appointed a new board of directors to run the Central Bank of Myanmar, according to a parliamentary announcement on July 26. The appointments follow the enactment of the Central Bank Law on July 11, which called for the creation of a new board as part of a move to make the bank independent. The board includes a chairperson, three vice chairpersons and five directors. Former central bank chairman U Kyaw Kyaw Maung was appointed chairman, while U Set Aung, U Than Nyein and Daw Khin Saw Oo were appointed as vice chairpersons. Five directors will be named soon, the announcement said. U Kyaw Kyaw Maung was in charge of the central bank during the 2003 financial crisis, when banks faced a liquidity crisis. Business leaders launch code of conduct THE Myanmar Women’s Entrepreneur Association has launched a code of conduct intended to reduce disputes and friction between employers and employees as well as promote workers’ rights. Association vice-president Daw Hnin Wai, who led the drafting of the code, told a press conference on July 26 that it covers child labour, workers’ rights and pensions for staff at private companies, among other issues. Twenty-one businesswomen signed on to the code at the event. “Company owners must know that employees have a right to demand their rights be met, and workers must know that they can protest but they have to work while they are waiting for a settlement,” said Daw Hnin Wai. Association members said the code was drafted following discussions with the International Labour Organisation and the Ministry of Social Welfare, Relief and Resettlement’s department of social welfare. The code includes sections on Members of a women’s business association examine a code of conduct designed to improve working conditions. Photo: Aung Htay Hlaing setting a basic salary, overtime, fair pay, employee health and social welfare, and pensions. “If the code is widely disseminated, I believe that the working environment and working conditions will improve,” one association member said. “As employers we seem to think that we know what workers’ rights are, but after studying various codes of conduct, I realised that we lack basic knowledge about workers’ rights,” Daw Hla Wadi said. “If company owners follow the code, I believe that communication between owners and workers will improve a great deal and successful businesses will be created.” Association members said they plan to offer pension plans to employees who have worked at their companies for than 10 years. Correction The report “Foreign banks get gradual access to market” in our July 22-28 issue attributed a quote to David Proctor, chairman of financial-services consultancy Consilium, which misrepresented his view. The quote, from another banking expert, called for foreign banks to have unrestricted access to Myanmar. Mr Proctor believes that Myanmar should restrict the entry of foreign banks until domestic banks are capable of competing with them. We regret the error.
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Reshuffle puts 'right person in right place': government

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