Commerce Snarled as Burma Rules Much of Its Currency Is Worthless

Times Staff Writer

A week after Burma declared the bulk of its currency worthless, commerce in Rangoon, the capital, remained sluggish and confused, according to reports reaching here Friday.

Most food stores and small retail shops were open but there was little business at the big Scott’s Market, which specializes in clothing, or at stores dealing in big-ticket household appliances and electronic equipment.

Downtown hotels were empty, according to an American businessman returning to Bangkok.


“There were signs everywhere, at the airport and the hotels, announcing the demonetization,” he said. “Tourists just got wiped out.”

Burmese and foreigners alike were staggered by the government’s announcement Sept. 5 that bank notes of 25, 35 and 75 kyat would henceforth be of no value. This left only notes of 1, 5 and 10 kyat as legal tender. Overnight, the nation was plunged into small-change commerce.

“I saw a Burmese associate with a Samsonite suitcase,” the American said, “and I asked him if he was traveling and he said no, that he had to pick up 150,000 kyat at the bank. He figured he’d need the suitcase to carry that many 10-kyat notes.”

At the legal rate, 6.7 kyats equal $1. On Burma’s thriving black market, the rate is 40 to 1.

The government has still not disclosed the reason for the demonetization, but a similar action in 1985, which eliminated notes of 20, 50 and 100 kyat, was justified as a scheme to thwart black marketeers who had piled up large quantities of cash.

Black Marketeering

Speculation on the reason for last week’s move centered on black marketeering, but also mentioned were counterfeiting operations by anti-government guerrilla organizations. A third possibility was a government attempt to counter double-digit inflation.


In 1985, the government promised to exchange up to 5,000 kyat in demonetized bills for legal tender--a pledge it did not keep--on the assumption that black marketeers would be reluctant to try to turn in more for fear of disclosing their activities.

There has been no announcement of a similar exchange this time, but there have been rumors in the capital that the 100-kyat note will be restored, perhaps this weekend, and exchanged for a certain amount of the demonetized currency.

But because no reason has been given for the action, and there has been no promise of an exchange, the Burmese public, normally dulled by a quarter-century of iron-fisted, one-party rule, showed signs of having reached its limits.

On Sept. 5, university students in Rangoon--and reportedly in three other cities as well--went on a brief rampage after bus drivers and cab drivers refused to take their newly worthless currency.

In the capital, about 1,000 students from Rangoon University and Rangoon Institute of Technology stoned buses on campus routes. The government reacted Monday by closing universities and secondary schools. In Mandalay, according to unconfirmed reports, the protests were more violent. One report said the Mandalay house of the home affairs minister was burned. It was the largest outbreak of anti-government protest on university campuses in a decade.

Several Bangkok-based diplomats and recent visitors to Rangoon blamed the situation in part on the apparent reversal of a more open approach to Burma’s problems by Gen. Ne Win’s Burma Socialist Program Party.

Ne Win, who holds no government office but exercises nearly total political and military power in Burma, broke with precedent by convening a meeting Aug. 10 of party and Cabinet officials to demand candid reports on the economy.

“Change must come at one time or another,” he is quoted as having told the assembled leadership. “And changes will have to be made to keep in harmony with the times. . . . Leaders of government organizations must submit correct reports so that proper plans can be made to remedy the shortcomings.”

Admitting any shortcoming in leadership was a first for the former military man whose generalship of the Burmese economy has largely been a disaster. His most notable recent achievement was initial approval in getting Burma, which once boasted the strongest economy in Southeast Asia, certified as a “least-developed country,” a status that will assure the country better terms on foreign loans.

Ne Win followed up his Aug. 10 call for candor with a Sept. 2 announcement lifting 25-year-old government controls on trading in rice and other food grains. According to diplomats, the Burmese remained skeptical, but there was at least a scent of reform in the air.

“Expectations had been raised,” the American businessman said. “Now, after the demonetization, the Burmese seem more pitiful than ever. They’re just taking it on the chin, again and again.”

Overcontrol by the state and by Ne Win personally has been blamed by most economists for the country’s economic debacle. Most of the food production is now in private hands, but consumer goods are turned out by more that 1,700 state-owned industrial enterprises. For a variety of reasons--poor management, power shortages, lack of incentive--output is spotty and quality generally substandard.

The result has been a parallel black market economy making available--at triple the price or more--the goods needed for everyday living, plus luxury items.