Economists forecast on possible impact of ecomomy in the face of global financial crisis
The recent global financial crisis that originated in the United States has stricken most of the countries in the world. If the turmoil persists, the economy crisis may also have impact on Myanmar, and that timely preparedness and counter measures could reduce the shock, the economists remarked.
Economy crisis in the United States and repercussions in the world
"According to the world leaders and economists, since the monetary crisis started in the United States, other countries may have felt the impacts more or less, especially for the trading partner countries. This is the era of globalization. All the countries are interrelating with one another in the context of business, social sector and technologies. One will suffer the consequences," said Saya Maung Wun Tha, a renown author.
The current global financial crisis is the deepest and most predicament crisis beyond 1930's recession, said the economists.
"The present monetary turmoil is the worst catastrophe beyond 1930's recession. According to the experts, the volume of finance is different as well as there was no globalization phenomenum at that time. At present, the domination of American dollar is prominent among the international currencies. Its influence was not significant in 1930s. The utility of American dollar is being worldwide at present. Since the currencies are being interdependent on each other, the problem is not to be taken lightly. This dilemma may also strike Myanmar economy sectors indirectly. As the business and trade of the United States is relating with our neighboring countries, the crisis may hit Myanmar more or less," Saya Maung Wun Tha remarked.
"To take appropriate action is more crucial in this period. The situations have changed a lot compared to those of 1930s. There have been many improvements at present. I mean that every sector in this period has changed remarkably. We have to be alert to face the prevailing challenges. If the line of actions goes wrong, the situations will be worsen than those of 1930s," said Dr. Tin Latt, an economic consultant.
"The primary cause of financial crisis is that the impetus of financial control system could not manage the fast acceleration of currency flow. The situation is demanding a new financial system that can handle the acceleration of currency flow," said an economic consultant U Tin Maung Than.
"At the end of the Second World War, the world had to suffer the recession. The Bretton Woods system emerged at that time to resolve the economic problems. The concise purpose of this system is to manage the financial system and to get recovery for the global recession. As the fruits of Bretton Woods system, the financial institutions such as the International Momentary Fund (IMF), the World Bank and the Africa Development Bank (ADB) have been established. They could manage the financial system. However, the stream of information was very slow at that time. Suppose, if we regard the Bretton Woods system as a car, it could catch up the momentum of information flowing at about 50 mile per hour with the same speed.
Nevertheless, the flow of information has already reached as much as one hundred miles per hour now. The outdated financial system could not resolve the financial pains. The international banking communities are trying to find the remedy for the current crisis. In the past, for example, the currencies flowed from Bank A to Bank B, then to Bank C and then to Bank A again. However, the flows of money are blocked at Bank C in this time. It does not return to Bank A. The financial dilemma appeared as a result. As the information flow is very swift, the monetary system could not control it well. Therefore, the high speed monetary control system is needed in the era of rapid information flow. The outdated monetary system may not solve today's financial crisis. The current dilemma is more profound than that of in the past," said U Tin Maung Than.
"The prominent financial banks are collapsing in the world. The 'invisible hands' system was instrumental in the past. It emphasized on 'free market'. The government was not required to intervene in the crisis. The private companies struggled against the difficulties by their own efforts. However, this theory and practice had ended in 1930s. The United States had to introduce the "New Deal" program. The government tried to create job prospects for the people by constructing new roads to reduce the number of unemployed persons. Since the relevant government subsidized in these projects, the problems had been solved. It means adopting the New Deal program. It was the most famous program in that period. Mr. Morgan, the business tycoon, assisted in this program. When the stocks were plunging, he purchased the stocks and stabilized the market. At that time, the financial crisis was recovered not only by the New Deal program but also by Mr. Morgan. Another event was that while Adolf Hitler of Germany was preparing for the war, the military industry was being established. However the recent world financial crisis was the most severe one," said Saya Maung Su San.
Possible Impact on Myanmar
"More or less, Myanmar is possible to be affected. As the financial market is not stable, the exporters must be careful. The extent of crisis also depends on its duration. The impact on Myanmar may not be intense in the short term. If the crisis becomes prolonged for months, we could endure the strikes only by advanced preparations," said Dr. Tin Latt.
"There is no direct hit on Myanmar economy. However, some indirect affect may come to us. The export prices may be down. The foreign exchange rates would be severe. Then the local production might be affected. This may happen if the crisis persist," said U Tin Maung Than.
"Myanmar is much relieved as we have no stock market. The effect may not hit directly on Myanmar. The down trend of American dollars and gold prices is not normal in Myanmar. It is not a good sign. The rise of value in Myanmar currency means the weak in the value of American dollar," said Saya Maung Wunn Tha.
"The intense of crisis depend on its duration. In the short term, there will be only little impact on Myanmar. If the crisis is being prolonged, we have to prepare in advance to face the crisis. We have to categorize the state level and private level in the preparations. We must be vigilant on the situations. The businesspersons who are dealing with their foreign counterparts must try to complete their contracts. Only then, they could avoid possible losses," said Dr. Tin Latt.
"If the financial crisis becomes prolonged, the real estate and property market will suffer the impacts first similar to that of 1997's Asian recession. Then other short term investors should prepare to face possible troubles," said an economist expert.
What should be prepared?
"If a global recession occurred, no one can stand separately. The strike may hit everyone in various ranges. The demands will down in the international markets. The prices will sink. The production sector will decline. The fundamental commodities will encounter with price changes. High priced foodstuffs will be hit. For example, if the consumers took the food item with the value of K. 5,000 in the past, now they will choose only K. 2,000. The production of luxurious goods and clothes will noticeably be cut down. They could not avoid the reduction. For example, the order of three clothes has decreased to one. The productions may be reduced in such situations. Some jobs will be lost. If the global recession lasts long, such troubles may appear. Even this crisis could be managed for the moment; it is not the remedy for long term. The prices of commodities are likely to fall down. Preparation is necessary for the survival of producers," said Central Executive Committee Member U Hla Maung Shwe of UMFCCI.
As of now, more prosperous neighboring countries are planning to counter the potential economy crisis, and that Myanmar should carry out preparation measures for the possible economy shock, U Hla Maung Shwe remarked.
"Myanmar may suffer the economy crisis indirectly. For example, we export shrimps to EU member countries. Since the demands of these countries have declined, the prices went down. The economy on business and trade of our nation is smaller than that of neighboring countries such as China and Thailand. If the effect of recession hit our country, it will be more difficult to manage the problems. The current crisis is the worst dilemma beyond 1930. The experts remarked that it was the effects of globalization. These are the current situations in neighboring countries. Thailand had grasped the possible crisis. They have reduced the prices of rice and sold their crops. Although the price of rice was US$ 385 per ton in the international market in early October, they sold at US$ 360. This scheme is a preparation to cover further losses in the future," he continued.
The best way to solve the possible troubles is to carry out preparation measures, according to the export and import businesspersons and the experts.
"Our country should prepare for the possible crisis. The ability to compete in the market becomes crucial for the producers against their foreign counterparts. Another requirement is the easy market access. Therefore the mutual understanding between the government and the businessperson becomes essential. For example, the Bangladeshi government exempted tax on the export of commodities to EU countries. EU levied 13.7 percent import tax from our country. If we add the10 export levy of the government, we have to pay 23.7 percent in two way taxes for our export items. We cannot compete with them in the market. We should carry out some preparations. Only then, we will suffer less in the time of real crisis. The cooperation between the authorities and the businesspersons may reduce the bitterness of impact. Thailand is exporting rice in discounted prices to avoid more losses. It is a part of preparation program," said an export and import businessperson.
The scope of Myanmar's economy is modest than Thailand, China and India. Therefore, Myanmar is not in a position to resist against the strike. Even if the international entrepreneurs and the governments could solve the present dilemma, the prices of commodities are sure to fall down as a repercussion of the previous crisis. Not to bend down the production sector of the nation, the advanced preparation in the face of financial crisis and the possible creation of easy market access to exporting countries should be carried out in time, the experts and the entrepreneurs remarked.
[Source: Weekly Eleven]
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