, 4:55, Wednesday 29 September 2010 Housewives huddle over jewellery counters in Yangon's bustling Chinatown, but fashion is not foremost on their minds. This is banking in Myanmar's dysfunctional economy.
On nearby Shwe Bontha Street, the heart of the gold market since colonial times, Nyan Tun is more than just a trader: he is an unofficial banker in the military-ruled country.
"Normally, the major buyers are farmers. They will buy gold with a little bit of extra money to sell before the next harvest," he said. "Second are the housewives, who love to buy jewellery as savings."
The global economic crisis may have reignited suspicion of banks worldwide, but in isolated Myanmar such distrust has long run deep and savers have no desire to put their money into the backward banking system.
Not that people have much to spare: decades of economic mismanagement by the country's rulers, plus international boycotts and sanctions, have generated a population struggling to get by and facing soaring consumer prices. Between 2005 and 2009 the annual inflation rate in Myanmar, formerly known as Burma, averaged 20 percent, according to the Asian Development Bank.
"If you want to catch up with inflation, you buy gold. If you save money in the bank you lose money," said Nyan Tun.
"People have much more trust in gold as a store of value," added the trader, whose name AFP has changed at his request. In military-ruled Myanmar, saying anything seen as critical of the junta can have serious consequences. Nyan Tun said the value of a gold "tical" -- about half a troy ounce -- had increased more than 30-fold in the local currency, the kyat, since his early days as a gold trader in the late 1980s.
Sean Turnell, a specialist in Myanmar's economy at Macquarie University in Sydney, said rampant increases in consumer prices were largely a result of the government's habit of simply printing more money to fund its spending. An abundance of natural treasures -- including gold, gas, teak, oil, jade and gems -- could make the country a rich nation as it once was before coming under military rule in 1962. But Myanmar remains one of the world's least developed countries, with nearly a third of the population living below the poverty line, according to World Bank figures, as the junta and its associates exploit these raw materials for their own benefit.
"The fiscal situation should be good," said Turnell, on the basis that earnings from gas supplies should fund government spending. "But they (the military rulers) don't bring money they get from gas properly into public accounts," he said. "These funds are not recorded."
Few believe Myanmar's controversial first election in 20 years, due on November 7, will bring about much-needed economic reform, as the polls are widely expected to simply cloak military rule with civilian clothing. "The ruling class will still be the same, so there will not be big changes," said Nyan Tun, now in his 50s. However there have been some shifts in the economic landscape ahead of the election, with the junta instigating a spate of privatisations of state firms and properties.
Along with these sell-offs of assets including ports, factories and cinemas, four conglomerates on international sanctions lists and run by junta-friendly tycoons have been given licences to start up new banks. Turnell said the cronyism apparent in these recent developments suggested the country was "drifting in a really strange direction away from a totalitarian system into one that works like a semi-criminal economy".
For the average Myanmar citizen, there is still no economic stability, or decent alternative to their trustworthy treasure. "Gold has been the ultimate reserve asset, the ultimate insurance against bad government policy. It goes back to the colonial era -- it's seen as being dependable and independent of the state," said Turnell.
With the precious metal playing such a key role, the regime keeps a close eye on its trade. Nyan Tun said plain-clothed special branch police lurk on Shwe Bontha Street and pressure traders to stop selling when prices go up. "Maybe the government thinks inflation is due to the price of gold, but actually it's the other way round," he said. "The gold price is the index of inflation to citizens," agreed a business editor in Yangon who did not want to be named. "People don't know how else to judge inflation. The government gives no explanation."
Myanmar's banking system has never really recovered from a major crisis in 2003, which saw three banks completely collapse and was exacerbated by the policies of the Central Bank (CBSU.PK - news) , such as recalling loans from borrowers. People have also been hit hard in the past when the authorities scrapped certain currency units as legal tender. A mass uprising against the military in 1988, which was brutally crushed, escalated from protests over a major episode of demonetisation by the regime.
"That wiped out the savings of a huge amount of people," said Turnell. "I have never come across a single Burmese person who saves money in the banks." For now gold remains the safest haven in Myanmar -- the reason why a fishmonger will wear her savings around her neck.
"Gold: this is the only thing people trust," said the business editor.
Start saving even if only 1 gram a month and you will never regret it : )
